Government to Support PEMEX’s Debt If Needed

Due to high oil prices and an increase in crude oil production, PEMEX was able to pay off parts of its massive debt by itself at the beginning of 2022. Earlier on, the NOC had received support from the finance ministry to fulfill these debt payments. According to Bloomberg, the finance ministry expects PEMEX to continue carrying out its own payments unless it needs support during 1Q23.

Nevertheless, President Andrés Manuel López Obrador declared that the government would help the NOC to pay its debt if needed, as the company was still in "recovery.” PEMEX CEO Octavio Romero Oropeza said that the company was negotiating with the Ministry of Finance to obtain support for the payments due for 1Q23. “We fully completed the payment of the debt amortization and we covered all the taxes that PEMEX has to deliver to the state because that is its main function,” said Oropeza.

Romero reported that out of the US$105 billion debt, PEMEX only has to pay around US$6 billion for 1Q23. Oropeza also said that while the company may be qualified as the most indebted oil company in the world, it is tied closely to the government. In the past, administrations would acquire debt whenever PEMEX could not pay amortizations, he added.

On the back of a refining-focused strategy, PEMEX finds itself under pressure to sustain its debt while it decreases its exports to increase the fuel supply for national consumption. The NOC reported a US$2.67 million loss in 3Q22, according to Bloomberg. By comparison, Exxon and Chevron reported US$30 billion in profit.

During the first days of 2023, oil prices fell. By the end of 2022, the Mexican mix stood at US$69.7/b, but on Jan. 4, 2023, it fell to US$61.66/b. US oil prices stand at US$73.40/b currently. Oil prices descended over the last months of 2022 after their recent peak during the Russia-Ukraine war. A slowdown in the economy has also affected oil prices. Furthermore, in October 2022, Deputy Minister of Finance Gabriel Yorio announced that Mexico contracted?oil hedges?to shield the country’s 2023 budget. According to Yorio, the hedge may imply higher profits, yet it will cause higher spending to meet energy demand. Yorio confirmed Mexico protects the Mexican mix should it fall below the US$68.7/b mark, normally covering from 200 to 300MMb.