Mexican Petroleum (Pemex) registered a slight gain in the first quarter of 2024, as government support helped shore up the indebted company.
The state oil company recorded a profit of 4.7 billion pesos compared to 56.7 billion a year ago, the company reported this Friday. The crude oil production and condensate fell to 1.82 million barrels per day, compared to 1.853 million in the same quarter of the previous year.
Pemex is one of the biggest challenges that the next president of Mexico will inherit. Trim your debt load —the largest among the world’s oil companies— is key to boosting production, as money that could be spent fixing aging infrastructure is instead used to cover interest payments. Production has fallen to less than half of what it was two decades ago.
As of March 31, The company’s debt load amounted to about 101.5 billion dollars, according to a company document. Pemex’s $4 billion in outstanding bonds due 2027 rose 0.4 cents to around 94 cents on the dollar, at 12 p.m. in New York.
The administration of the outgoing president Andrés Manuel López Obrador (AMLO) promised to cover most of this year’s maturities. During the current mandate, Pemex has relied on tax breaks and cash injections from the Government, which has allocated up to 1.37 trillion pesos, or about 80 billion dollars to support the oil company.
Pemex debt, a challenge for the next president of Mexico
It is expected that the Morena candidate, Claudia Sheinbaumcontinue on the path of state support for the company, although it recently presented a plan for Pemex changes its focus towards cleaner technologies, including an investment of up to $13.6 billion in new renewable projects while building more gas power plants.
Sheinbaum, former head of government of Mexico City, also said that she expects the oil company to refinance its bonds before the next maturities in 2025, and that she hopes that the outgoing administration will leave a long-term plan to reverse the company’s financial decline.
Even so, refinance Pemex debt could be a challenge. The company’s debt load is so large that it has hampered its access to the market, and refinancing the bonds could prove costly as global rates remain high.
Earlier this year, Moody’s Investors Service downgraded the company further into speculative territory and maintained its negative outlook, arguing that the ratings cut reflected its assumption of a likely change in the government’s willingness to support full service of Pemex’s debt in the coming years.
For her part, the main opposition candidate, Xochitl Galvezwhich according to recent polls trails Sheinbaum by almost 30 percentage points, has said that Pemex should pursue a model like that of the Brazilian Petrobras: sell assets to pay debt.
