
Dollar debt weighs on Pemex

Mexican national oil company Pemex ended last year with at least US$105bn in outstanding debt and a worrying US$40bn of that figure is in dollars.
The company's debts were a burden it was struggling to carry even in the relative serenity of last year and, adding to its woes, it also has at least US$77bn in pension obligations on its books.
Just in terms of the headline US$105bn figure, Pemex is the world’s most indebted oil company and its effective debt load is higher. increasingly, the company is delaying payments to contractors, which has become an open secret in Mexican energy circles.
But among these problems, it is the composition of that debt load that is stirring great concern.
“Pemex has US$40bn in dollar debt,” Damian Sassower, chief EM strategist at Bloomberg Intelligence, said Thursday. “That’s the same dollar-denominated debt as Russia and Brazil combined.”
Last month, the Mexican peso suffered its sharpest fall since the “Tequila crisis” of 1994-1995. So far this year the peso has lost 27% of its value against the greenback, even after a slight rebound in early April. And that makes servicing dollar-denominated debt even harder.
Foreign currency revenue comes largely from the sale of Mexico’s Maya crude abroad, and the heavy Maya blend has dropped from about US$55/b five weeks ago to less than US$11/b at present.
DEBT PAYMENT AND E&P
To avoid default, Pemex needs to pay out US$6bn this year alone, a tidy sum that is only a fraction of its medium-term obligations, as it has to pay out more than US$30bn by the end of 2024.
Source: Reuters
In order to help the company manage its debt load, last year the Mexican government stepped in to offer Pemex unprecedented levels of support that included trimming its tax obligations by US$1.5bn and another US$8.5bn in aid. The largest tranche of that support, provided last September, came in the form of a direct cash injection of US$5bn.
Pemex used that support to pre-pay some of its bonds, enabling it to temporarily bring down its debt load to US$99bn. That move, carried out in tandem with the help of JP Morgan, Citibank and Goldman Sachs, allowed Pemex to float yet more debt on Wall Street and find buyers.
It bolstered Pemex's debt, creating a multi-month rally in Pemex bonds, with the company's benchmark bond due in 2030 trading above 109 cents on the dollar for much of February.
Then came the global spread of COVID-19 and the Saudi-Russia price war and oil prices suddenly dropped. The Pemex 2030 bond has since crashed, trading most recently at less than 72 cents on the dollar.
Moreover, with the Mexican government facing budget constraints and increasingly dire warnings from private banks that the country will endure a dramatic recession this year, it can no longer effectively serve as a lifeline to Pemex by simply giving the company cash.
Today Bank of America, which initially forecast that Mexico’s economy could shrink by 0.1% in 2020, revised its estimate: the bank now expects Mexico’s economy to contract by a whopping 8% this year.
A MUCH-ANTICIPATED SECOND DOWNGRADE TO JUNK
In recent months, interest payments and the failure to consistently produce more than about 1.7Mb/d (million barrels per day) of oil have combined to drive Pemex’s debt level back up.
It now stands higher than at this time last year. Last summer, that debt led Fitch to become the first rating agency to downgrade Pemex credit to junk.
While many expected Moody’s to downgrade Pemex ('Baa3', with a negative outlook) to junk soon, it was actually S&P that made the first move in this direction. A week ago, it went ahead and downgraded Pemex’s credit rating from 'BBB+' to 'BBB'.
In its guidance, the agency warned that it could make another downward revision to Pemex’s credit in the coming months, which would mean a second junk rating.
Subscribe to the leading business intelligence platform in Latin America with different tools for Providers, Contractors, Operators, Government, Legal, Financial and Insurance industries.
News in: Oil & Gas (Mexico)

Low-Carbon Biofuels in Latin America and the Caribbean: A Key Strategy for the Energy Transition
The Latin American Energy Organization (OLADE) publishes its new Technical Note on the biofuels sector in the region, highlighting its role in tran...

New Report: Unlocking opportunity in Latin America's hydrogen economy
The region is well-positioned to produce low-cost, sustainable hydrogen for both domestic use and export, leveraging abundant renewable energy reso...
Subscribe to Latin America’s most trusted business intelligence platform.
Other projects in: Oil & Gas (Mexico)
Get critical information about thousands of Oil & Gas projects in Latin America: what stages they're in, capex, related companies, contacts and more.
- Project: Area 23 - Cuenca Salina
- Current stage:
- Updated:
2 months ago
- Project: Area 10 - Cordilleras Mexicanas
- Current stage:
- Updated:
2 months ago
- Project: Cuenca Salina - Area 4
- Current stage:
- Updated:
2 months ago
- Project: Area 30 - Cuencas del Sureste
- Current stage:
- Updated:
2 months ago
- Project: Han area
- Current stage:
- Updated:
2 months ago
- Project: Area 4 - Burgos (A4-BG Onshore)
- Current stage:
- Updated:
2 months ago
- Project: Arenque block
- Current stage:
- Updated:
2 months ago
- Project: Production capacity maintenance for the I. Madero refinery
- Current stage:
- Updated:
2 months ago
- Project: Huasteca Fuel Terminal
- Current stage:
- Updated:
2 months ago
- Project: Natural Gas Transportation System (STGN) Sierra Madre (Border-Puerto Libertad)
- Current stage:
- Updated:
2 months ago
Other companies in: Oil & Gas (Mexico)
Get critical information about thousands of Oil & Gas companies in Latin America: their projects, contacts, shareholders, related news and more.
- Company: COSL México, S.A. de C.V.  (COSL México)
-
The description included in this profile was taken directly from an official source and has not been modified or edited by the BNamericas’ researchers. However, it may have been...
- Company: Lingong Machinery Group, México  (LGMG México)
-
The description contained in this profile was extracted directly from an official source and has not been edited or modified by BNamericas researchers, but may have been machine...
- Company: Konoike México S.A. de C.V.  (Konoike Transport)
-
The description contained in this profile was extracted directly from an official source and has not been edited or modified by BNamericas researchers, but may have been machine...
- Company: Baker Hughes de Mexico, S. de R.L. de C.V.  (Baker Hughes de Mexico)
-
Baker Hughes of Mexico S. de R.L. de C.V. is a subsidiary of US oil company Baker Hughes Inc. The company offers services for the entire hydrocarbons development chain, from eva...
- Company: Energía Costa Azul, S. de R.L. de C.V.  (Energía Costa Azul)
-
Energía Costa Azul, S. de R.L. de C.V. (ECA) is a subsidiary of IEnova, and operates the liquefied natural gas storage and regasification terminal in Ensenada, Baja California s...
- Company: Bcysa Servicios Industriales S.A. De C.V.  (Bcysa Servicios Industriales)
-
Established in 1964, Bycsa is a Mexican engineering firm that specializes in the construction of LPG storage facilities, power generation facilities, and LPG and natural gas pip...
- Company: ICA Fluor, S. de R.L. de C.V.  (ICA Fluor)
-
ICA-Fluor Daniel, S. de R.L. de C.V. (ICA Fluor) is a JV formed in 1993 between Mexican engineering construction group ICA and US-based engineering, procurement, construction an...
- Company: Técnicas Reunidas México Ingeniería y Construcción de R.L.de C.V.  (Técnicas Reunidas México)
-
Técnicas Reunidas México Ingeniería y Construcción de R.L. de C.V., the local unit of Spanish engineering and construction firm Técnicas Reunidas S.A. (TR), provides engineering...