Pemex Losses Accumulate as Oil Production Hits Record Low

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Pemex adds to more than three years of losses as a cash injection from the government wasn't enough to overcome the pinch of record-low crude output, refinery upsets and a petrochemical plant explosion.

(Bloomberg) - Petroleos Mexicanos added to more than three years of losses as a cash injection from the government wasn’t enough to overcome the pinch of record-low crude output, refinery upsets and a petrochemical plant explosion.

The second-quarter deficit narrowed to $4.42 billion (83.5 billion pesos), from 84.6 billion pesos during the same period a year earlier, according to a filing sent to the Mexican Stock Exchange. The result adds on to $59 billion of losses since 2012.

Crude production at Pemex, as the company is known, fell 2.2 percent from a year earlier to 2.176 million barrels a day, following a budget reduction in the first quarter that crimped the company’s exploration spending. Pemex’s refineries, which lose more than 100 billion pesos each year, continued to be hampered by outages during the quarter and had its petrochemical supply chain interrupted by an April 20 plant blast that killed at least 24 people.

The company’s number of operating wells fell 4.8 percent from a year earlier, while finished wells dropped 65 percent from the same quarter in 2015, according to a company presentation. Pemex reported two extra-light oil discoveries during the quarter in the deep water Nobilis-1 well and shallow water Teca-1 well, Gustavo Hernandez, director of prospective resources, reserves and associations at the company’s exploration and production arm, said on a conference call.

Pemex has pinned financial recovery hopes on selling stakes in assets, such as its refineries, forming new partnerships to increase crude production, and continued support from the government. Mexico announced in April that Pemex’s tax payments, which have historically accounted for as much as a third of the government’s budget, will be lowered and that the state will absorb 47 million pesos of the company’s outstanding pension liabilities. 

The company has concluded around 90 percent of its debt program for 2016 and has almost entirely paid off the 147 billion pesos in outstanding debt owed to service providers from last year, according to Chief Financial Officer Juan Pablo Newman. The company’s financial debt at the conclusion of the second quarter exceeded $96 billion, he said.

To contact the reporter on this story: Adam Williams in Mexico City at awilliams111@bloomberg.net To contact the editors responsible for this story: David Marino at dmarino4@bloomberg.net Dan Stets

Copyright 2016 Bloomberg News.

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