PEMEX Refinances Debt

PEMEX is set to refinance its revolving credit lines, aiming to raise up to US$9 billion in 2024. The move comes as the company faces maturing debt of up to US$11.2 billion for that same year, according to Bloomberg. This refinancing initiative will be complemented by an injection of capital from the government.

PEMEX's CEO, Octavio Romero, disclosed on July 28, 2023, that the Mexican government would provide support for the payment of the upcoming debt maturities. This move is part of the government's commitment to ensuring a smooth and orderly transition toward the latter part of the current administration's term, said Romero.

The refinancing strategy with banks and capitalization from the Ministry of Finance in 2024 follows a nearly US$4 billion capital injection that was finalized on July 28th. The Ministry of Finance conditioned this injection to the company, requiring it to implement cuts in both operational expenses and capital expenditures. While Romero reassured investors that the Ministry of Finance would cover next year's debt maturities, as well, PEMEX's financial team provided some clarifications and mentioned other possible forms of government assistance. Carlos Cortez, CFO, PEMEX, highlighted that government support does not necessarily involve direct transfers to the company's equity. Other fiscal measures could also be considered. Furthermore, Cortez mentioned the possibility of evaluating a potential return to the capital markets through issuing bonds, if favorable market conditions arise.

The Mexican government has previously provided significant financial support to PEMEX, which is currently one of the most heavily indebted oil companies, globally. According to the NOC, the government contributed MX$720 billion between 2019 and 2Q23.

México Evalúa reports that PEMEX's debt has decreased by 5.9%, but this reduction has come at the expense of public finances. Despite injecting MX$720 billion into the company, the overall impact on the debt amount has been limited, according to the organization.