PEMEX Struggles With Debt and Dropping Production

Gabriel Yorio, Mexico’s Minister of Finance, reported Mexico’s 2022 financial results and discussed financial tools to support PEMEX, which reached record revenues despite a drop in oil production and exports. In addition, President López Obrador announced the government will support PEMEX to meet its financial obligations.

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PEMEX Crude Exports Hit New Low in 2022 Despite Record Revenue

PEMEX experienced a 6.3% drop in crude oil exports in 2022, reaching a new low of 953Mb/d. and marking the first time that the exports fell below 1MMb/d. However, driven by President López Obrador’s refining strategy, the NOC initially planned to export much less. The relatively low reduction in exports was also incentivized by high oil prices, which led to record revenues despite a drop in production.
 

Mexico's Financial Performance in 2022 Marked by Oil Subsidies

Yorio reported the country’s financial results for 2022 and discussed financial tools to support PEMEX as well as fuel subsidies. According to the Ministry of Finance (SHCP), fuel subsidies reached MX$396.61 billion (US$21.01 billion) in 2022. Although the government had previously stated that these subsidies would be covered by oil income surpluses, this extra income only reached MX$394.51 billion (US$20.98 billion). The oil income surplus fell MX$2.1 billion (US$111.66 million) short to cover the subsidies granted by SHCP.

Government to Provide Support to PEMEX´s Billions of Debt

President López Obrador announced that Mexico’s government will support PEMEX in paying off its billions of debt for 1Q23. In the past week, it was announced that PEMEX was on the lookout for options to fund its 1Q23 amortizations. In 2022, Moody’s Investors Service downgraded PEMEX’s credit rating based on its economic prospects due to a negative debt record and economic outlook. According to experts, Moody’s downgrade for PEMEX shows that the oil company will need to depend further on the government to gain much-needed liquidity.

PEMEX Looks for Options to Pay Off Debt

Since PEMEX has to pay off US$6 billion of debt in 1Q23, the company is on the lookout for options to gain liquidity. Despite the government's support for debt payments, it has not announced support to help the NOC pay the next amortizations. Experts believed that while PEMEX was able to pay off parts of its massive debt in 2022 due to high oil prices, it appears that the government expects the company to continue paying its debt.