Pemex Posts Profit in Positive Sign for Debt-Saddled Firm
(Bloomberg) -- Pemex swung to a profit in the fourth quarter as government support relieved pressure on the state-owned company saddled with a $106 billion debt burden.
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Petroleos Mexicanos posted net income of 106.9 billion pesos ($6.3 billion), from a 79.13 billion peso loss in the previous quarter, the company reported Tuesday. Crude and condensate production edged up to 1.86 million barrels a day compared with 1.85 million in the prior period.
The results show support from President Andres Manuel Lopez Obrador’s administration is keeping the oil major afloat after its finances worsened in recent years because of accidents and slowing production.
Pemex has received approximately 870 billion pesos in capital injections from the government since 2019, while tax breaks have given it more than 500 billion pesos in relief, company executives said in an earnings call Tuesday.
Earlier this month, Mexico’s government granted the company billions of dollars in tax relief, days after Moody’s Investors Service downgraded Pemex’s debt rating further into junk territory. The credit rating company said its action reflected its assumption of a probable shift in the government’s willingness to support the full service of Pemex’s debt in the next few years.
Pemex Chief Executive Officer Octavio Romero Oropeza said in the call that the downgrade was based on assumptions that were “invented” by Moody’s, and that the downgrade was “irresponsible” given that government support was set to continue.
Read More: Pemex Rating Cut at Moody’s on Government Reliance
Pemex’s peso-denominated maturities in 2024 will be covered through capital injections from the government, and it has no immediate plans to issue bonds in the US market to support its finances, Carlos Cortez, acting chief financial officer, said on the call.
The company has about $8.8 billion in debt payments remaining this year, according to a company presentation. The government of the outgoing president, known as AMLO, has promised to cover the majority of those payments, but hasn’t released a comprehensive plan on how to reduce the debt burden over the long term. That has investors searching for clues for how the government will address the debt ahead of June’s presidential vote.
Read More: Mexico’s Next Leader Will Inherit Oil Giant’s $106 Billion Debt
Leading candidate Claudia Sheinbaum is widely expected to continue on a path of state support for the company, although she has signaled a need for Mexico to shift its attention to renewables. Runner-up opposition candidate Xochitl Galvez has said Pemex should pursue a model like Brazil’s Petrobras: selling assets to pay down debt.
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