PEMEX Reserves Continue To Increase

PEMEX’s latest report to Congress claims the NOC has increased its 1P oil and gas reserves for the second year in a row throughout 2020. The NOC reported a total of 7,382MMboe added to its portfolio from January 1st 2020 to January 1st 2021, which represents an annual increase of 4.8 percent, reported Forbes.  PEMEX director Octavio Romero Oropeza wrote in the dossier that these numbers represented “a reserve-production relationship of 8.7 years for 1P reserves.” From a financial standpoint, 1P reserves are of the greatest importance, since they represent a 90 percent probability of being extracted, as opposed to 2P and 3P reserves, which represent a 50 and 10 percent probability, respectively. With these results, PEMEX computes a reserve replacement rate of almost 120 percent. This number goes past Moody’s predictions which claimed that it was unlikely for PEMEX to reach a reserve replacement rate of 100 percent given what it characterized as the NOC’s “lack of investment strategies and appropriate cash flow, coupled with a weak market affected by various global crises.” The majority of this increase in 1P reserves came from the Ixachi, Kayab, Pit, Onel and Xanab fields, while reductions in reserves came from the Ayatsil, Julo-Tecominoacan and Xikin fields. During 2019, 1P reserves increased by 1,019MMboe. 

Despite these successes and their very positive financial impact, the difficulties inherent to PEMEX’s balance sheet continue to be at the forefront of concerns. For example, a report from El Financiero released this week details the fact that PEMEX has  accumulated US$60 million in delayed payments to its partners. This is separate from its payment delays to suppliers and service providers, which have also been extensive. Debts include US$4 million to Hokchi and undisclosed amounts to Cheiron and Wintershall DEA, among others. 

Another report from El Financiero details the NOC’s delays in submitting its annual briefing to the Securities and Exchange Commission (SEC) in the US. PEMEX argues that it has “corrections” to make to its briefing which will result in higher reported values for its assets. Energy sector analyst Arturo Carranza noted that “all companies that trade commodities in the US are subject by law to submit this briefing. PEMEX must abide by SEC rules and submit its 20F documentation no later than April 30. It can also submit quarterly reports although these are not obligatory. If PEMEX fails to submit this, it opens itself up to penalties by US authorities.” At the time of writing PEMEX has not yet submitted this annual briefing.