S&P Shifts PEMEX Outlook to Negative as Structural Losses Persist

S&P Global Ratings has shifted its outlook for PEMEX and its core subsidiaries from stable to negative, mirroring a recent revision to Mexico’s sovereign outlook and signaling a potential downgrade within 12 to 24 months. While the agency maintained its BBB rating, PEMEX’s last remaining investment-grade assessment, it warned that the company’s "unsustainable" standalone credit profile of CCC+ and its continuous reliance on multibillion-dollar federal transfers are straining national fiscal stability.

S&P Global Ratings revised PEMEX's credit outlook from stable to negative, maintaining the NOC's BBB rating but signaling that a downgrade could follow within 12 to 24 months. The action came one day after the agency applied the same revision to Mexico's sovereign outlook, and S&P was explicit that the two are directly linked. The agency also extended the negative outlook to four PEMEX subsidiaries: PMI Trading DAC, PMI Norteamérica, Mex Gas Supply, and Deer Park Refining, given their operational integration within the company's consolidated structure.

S&P's rating on PEMEX has long moved in tandem with Mexico's sovereign. The agency has previously stated that it views the likelihood of the federal government providing support to PEMEX as almost certain, and that PEMEX's ratings would continue to reflect that sovereign backing. That logic now cuts both ways: the same support that keeps the NOC in investment-grade territory is contributing to the fiscal rigidities that prompted the sovereign revision in the first place.

S&P warned that PEMEX's weak operational performance could compel the Sheinbaum administration to provide additional funding to cover financial losses, and that the materialization of these contingent liabilities would widen the fiscal deficit and place additional pressure on the sovereign rating.

S&P's BBB rating is the most favorable assessment PEMEX currently holds across the three major agencies, and the only one that places it in investment-grade territory. The distance between S&P and its peers is considerable.

Fitch upgraded PEMEX to BB+ in 2025 after the Sheinbaum administration executed a US$9.9 billion tender offer across eight bond series, financed directly by the federal government. Fitch now rates the NOC one notch below Mexico's sovereign, reflecting what it describes as "very strong" government direction over the company's financial policy. Moody's upgraded PEMEX to B1 in September 2025, citing a stronger government commitment to supporting the company through 2027 under the Strategic Plan 2025–2035, while confirming its baseline credit assessment at Ca, the lowest level on Moody's scale.

The Standalone Picture: CCC+ and Structurally Insolvent

Stripped away from government support, S&P describes PEMEX's standalone credit profile (SACP) as CCC+, deep in speculative territory. The agency characterizes the company's capital structure as "unsustainable," citing weak liquidity and high leverage as core structural problems that years of transfers have not resolved.

PEMEX recorded a net loss of MX$46 billion (US$2.646 billion) in 1Q26, a 6.1% deterioration compared to the MX$43.3 billion loss in the same period of 2025. The net loss was driven primarily by a 25.3% decline in the value of oil exports, the result of a 38.8% contraction in the volume of crude exported during the quarter. The company reported a debt-to-EBITDA ratio of 5.8 times and negative free operating cash flow for the period.

Between January 2019 and March 2026, total government support to PEMEX reached MX$1.8 trillion, of which 78.9% consisted of capital contributions, 17.7% of fiscal incentives, and 3.4% of other instruments, not including additional liquidity operations promoted by the SHCP in 2025. In 1Q26 alone, the federal government provided MX$58.3 billion in capital contributions, down from MX$80 billion in the same quarter of 2025.

Debt Reduction Continues But Remains Structurally Elevated

The headline debt figure shows continued progress on PEMEX's balance sheet repair. The company's gross financial debt stood at MX$1.43 trillion at the close of 1Q26, equivalent to 3.8% of Mexico's estimated 2026 GDP of MX$37.3 trillion, and 30.5% below the MX$2.05 trillion recorded in the same period of 2025. Both short-term debt, which fell 58.3%, from MX$561.8 billion to MX$234.5 billion, and long-term debt, which declined 20.0% from MX$1.49 trillion to MX$1.19 trillion, contributed to the reduction.

The financial cost of the debt also declined, falling 24.7% from MX$41.4 billion in 1Q25 to MX$31.2 billion in 1Q26, in line with the lower outstanding balance. The debt maturity profile shows that 14.4% of total financial debt, equivalent to MX$204.8 billion, will come due between April and December 2026, and 44.5% of the total (MX$634.9 billion) must be amortized before 2030.

Despite the improvement, IMCO notes that the debt load remains elevated and continues to represent a structural financial burden. PEMEX's net equity stood at negative MX$1.89 trillion as of March 31, a 7.4% improvement compared to year-end 2025, but reflecting a company whose total liabilities of MX$4.1 trillion are 86.4% larger than its total assets of MX$2.2 trillion. Net equity has been negative continuously since 2013.

Debt owed to suppliers and contractors stood at MX$375.1 billion, down 7.2% from MX$404.4 billion in 1Q25, but still the second-highest level recorded for a first quarter in the 16-year series.

What a Downgrade Would Mean

A downgrade of Mexico's sovereign rating, which is itself now under a 12-to-24-month negative watch, would automatically trigger a corresponding cut to PEMEX. Financial analysts at Banco Base have warned that a downgrade by two of the three major rating agencies could trigger mandatory sell-offs by institutional fund managers, potentially leading to capital outflows and sharply higher financing costs for both public and private borrowers.

For PEMEX specifically, losing S&P's investment-grade designation would close off a significant segment of the institutional debt market, raise refinancing costs, and increase pressure on a federal budget already stretched by the company's ongoing support requirements. Fitch has noted that any weakening of government backing, a sovereign downgrade, or failure to address supplier liabilities would likely trigger a negative rating action on its own assessment as well.