How Much Longer Can Pemex Hang On?

It lost $18 billion in Q4 on declining revenues and production, has $102 billion in debt, and now its world is changing.

During its heyday in the 1980s, Mexico’s state-owned oil empire, Petroleos de Mexico (Pemex), was the third largest oil producer in the world. That was before the rot of chronic mismanagement, unfettered corruption, and declining oil reserves began to set in. The company, now in its 80th year, excels in only two areas: accumulating massive losses — both in money and stolen oil — and clocking up new record levels of debt.

For the fourth quarter of 2017 the company posted a zinging loss of 352.3 billion pesos ($18 billion), blaming a weaker peso exchange rate, new reporting rules and higher financing costs. The loss compares to a profit of 72.6 billion pesos in the year-ago period. While the group’s sales increased by some 30% over the duration of 2017, largely due to higher oil prices, costs ballooned by 115%.

“Pemex has been roiled by external factors such as the oil crisis of 2015, but it has also been hit by the fact that there have been constant changes in the general management,” says energy analyst Arturo Carranza. The group has had three different management teams in just five years. According to the new boss, Carlos Treviño, installed at the end of 2017, the company’s financial condition is stabilising and the debt situation is now being handled much better.

Whatever Pemex’s new top management might say, the group’s vital signs are still extremely weak. Between 2016 and 2017, its production of crude oil slid 9.5%, from 2.15 million barrels per day to 1.95 million, its lowest level since 1980. Its average daily level of natural gas extraction also fell 12.5% to 5.06 billion cubic feet per day…

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