Pemex reports first back-to-back
earnings in years on currency
Fourth-quarter production rose to 1.68 million barrels a day
State company will get about $5 billion in federal aid
By Amy Stillman/Bloomberg
Petroleumworld 03 01 2021
Petroleos Mexicanos had its first back-to-back quarterly gains in four years as the weakening of the peso boosted the value of its dollar-denominated crude.
Fourth-quarter net income was 123.2 billion pesos ($5.9 billion), following a profit in the previous quarter and compared with a year-earlier loss of 171.5 billion, Pemex said Friday. Its currency-related gains more than offset operational losses.
Pemex has struggled to reverse 16 years of production declines and meet a government goal to reduce imports of fuel and produce more gasoline domestically. Earlier this month, Mexico's President Andres Manuel Lopez Obrador announced a new credit stimulus that will apply to the taxes Pemex pays on hydrocarbons, capped at $3.6 billion. It will also receive a capital injection from the government of up to $1.6 billion this year
“We are in coordination with the Ministry of Finance in order to schedule additional support for the amortizations of the year,” said Pemex chief financial officer Alberto Velazquez, on an investor conference call on Friday. “We are not expecting to go to markets for refinancing since the needs of amortization for 2021 will be covered by this capital injection from the government.”
Thanks to a stronger dollar, the company booked a 254.4-billion-peso foreign exchange related gain for the quarter. Its output of crude oil and condensates rose 1% from the third quarter, to 1.676 million barrels a day. Production fell 1% compared with the same time a year ago.
Last year, the combination of oil price volatility and reduced fuel demand as a result of Covid-19 containment measures saw Pemex face “the worst crisis in its history,” according to Velazquez. The company is being helped by the measures established by the current administration to reduce its taxes and bolster new field production, he said.
Yet, that boost isn't nearly enough to help Pemex reduce debt that is currently the highest of any major oil company. Its financial debt rose to $113.2 billion by the end of last year, and Pemex was forced to cut contracts and squeeze suppliers, to whom it owes billions of dollars.
The company said it has concluded its oil hedge for the first half of 2021, and is implementing the hedge for the second half of the year. The strategy is similar to the one being used by the much larger Finance Ministry oil hedge, which aims to spread its purchases over time, even being open to buying insurance during the same year the protecting is for.
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The company's earnings before interest, taxes, depreciation, and amortization, or Ebitda, was 20.2 billion pesos in the fourth quarter, a 29% drop compared to Ebitda in the fourth quarter of 2019.
Pemex is under pressure after failing to meet last year's oil production target. Its crude oil production, including contributions from partners, declined by 1% in 2020 to 1.66 million barrels a day. But Pemex touted a 0.2% increase for the full year, after including condensate, a natural gas liquid akin to very light crude oil that's used to dilute the heaviest grades of crude.
The Mexican state driller's efforts to attract partner companies to share the burden of developing more challenging -- yet also more promising -- deep-water reservoirs has been stymied by Lopez Obrador's cancellation of oil auctions and farm-out contracts with Pemex. The leftist leader has lambasted the energy reforms of the previous administration as an attempt to privatize Mexico's oil riches.