Pemex gets US$4bn federal injection to help with debt

The Andrés Manuel López Obrador administration transferred 64.9bn pesos (US$4bn) to Mexico’s federal oil company Pemex to help it deal with its US$111bn debt.

Associate finance managing director Alberto Jiménez confirmed the transaction during the company's Q2 results call, adding that Pemex has not yet determined if it will issue debt in the coming years. 

“Regarding the plans to go on the market in 2023 and 2024 … the market situation will be evaluated and only with the coordination of the finance ministry will an orderly return to the capital market be evaluated,” he said. 

On July 26, CEO Octavio Romero Oropeza told reporters that the government would help because “Pemex's debt is the country's debt, they go together. It doesn't make any sense for Pemex to give money to the big finance companies, to the big banks” in the form of higher interest rates.

The next day, López Obrador said if necessary, the government would acquire debt to bail Pemex out. 

Finance director Carlos Cortez told the call that more government help in the form of “other tax measures” is being mulled. 

“At this time, the possibility of making transfers to our capital stock was considered, and as we confirmed, in effect, in these days we saw an important contribution in cash, which will serve to continue strengthening our financial situation, make short-term commitments regarding some debt maturities that we’ll see in the coming weeks,” he said.

In 2021, Pemex received US$3.5bn and US$5bn in 2019. In 2018, when López Obrador assumed office, the company’s debt stood at US$106bn in nominal terms, compared to US$65bn five years earlier. Pemex is the most indebted oil company in the world. 

Bloomberg reported that the latest injection came with strings attached, however. 

“The ministry asked Pemex to make spending cuts to capital expenses and operating expenses this year for an equivalent amount to the injection as a condition to receive the funds … It was the first time that the ministry required spending cuts as a condition to receive funds,” the report said. 

Pemex reported a Q2 net profit of 25.4bn pesos, down 80% year-on-year. 

Revenue dropped 42.5% to 414bn pesos “due to a 45.1% decrease in national sales and of 39.4% in export sales for lower crude oil and oil prices registered worldwide,” according to the financial report.

Earlier this month, Moody’s lowered its outlook on Pemex's credit ratings to negative from stable. Pemex bonds are rated speculative grade by two of the three biggest ratings agencies. 

Fitch Ratings further downgraded the company's rating earlier this month.

“Pemex rejects the actions taken by these agencies. These agencies continue to lie about the lack of government support and the lack of actions on sustainability despite the positive results obtained in this administration,” Romero said. 

Moody's, Fitch and S&P have repeatedly said that Pemex's financial situation is unsustainable.