High Oil Prices Help Pemex to US$463mn Q1 Profit

Mexico's state oil company Pemex posted first quarter net profits of 5.1bn pesos (US$463mn), turning around net losses of 1bn pesos in 1Q04 on the back of high global oil prices and the adoption of new accounting rules, the company said in its Q1 earnings statement.

Total sales increased 14% to 196bn pesos on the back of a 26% increase in crude oil export sales, helping first quarter Ebitda to increase 26% year-on-year to 137bn pesos. First quarter after-tax operating income increased 14% to 120bn pesos, the statement said.

The "other income" category increased 69% to 3.9bn pesos, mainly due to higher income from the company's 50% interest in the Deer Park refinery in Texas, Pemex CFO Juan José Suárez said in a conference call Tuesday to discuss Q1 results.

Operating costs rose 14% to 75.7bn pesos largely due to an increase in imports. Transportation and distribution costs increased 8% to 4.7bn pesos, while administration costs increased 17% to 10.6bn pesos.

At March 31 2005, the company's total assets increased 11% to 1tn pesos (US$90bn) and total liabilities increased 12% to 967bn pesos. Equity fell 21% to 38.5bn pesos on March 31 from the same date in 2004.


Total hydrocarbons liquid production fell 2% to 3.75Mbd in the first quarter. Crude production, which represented 73% of total hydrocarbons production, also fell 2% to 3.32Mb/d. Pemex attributed this decline to planned maintenance and installation works at the Ku-Maloob-Zaap field, natural production decline at the Abkatún-Pol-Chuc field and problems arising from adverse weather conditions.

Not all the decline will be reversed in the second quarter but production should pick up throughout the year when maintenance wraps up at the Ku-Maloob-Zaap field and with better weather conditions forecast, Suárez said.

Pemex drilled 25 exploration wells in the first quarter, three less than in 1Q04, and 154 development wells, two more than in the same year-ago period.

First quarter crude exports increased 2% to 1.86 million barrels a day (Mb/d). Some 78% of exports went to the US, while the rest went to Europe (9%), East Asia and Africa (4%), and rest of the Americas (9%).

The average export basket price for the quarter was US$34.12/b up from US$26.77/b in the same period of 2004. Approximately 87% of the exports were heavy Maya crude, with the remainder Istmo and Olmeca light and super light crude.


Natural gas production increased 2% to 4.64 million cubic feet a day (Mf3/d) in the first quarter compared to 1Q04. Non-associated gas production rose 15% due to new wells in the Burgos and Veracruz basins. Associated gas production fell 5% due to maintenance works in the Ku-Maloob-Zaap field and natural decline on the Muspac and Abkatún-Pol-Chuc fields.

Gas release into the atmosphere represented 2.8% of the company's total natural gas production, which is an improvement on the 4% figure from 1Q04, due to higher volumes of gas processed at the Akal-C 8 treatment plant and re-injected into the Cantarell field, the statement said.

Pemex imported an average of 691Mf3/d of natural gas in the first quarter, down 6% from 1Q04 due to higher average winter temperatures and maintenance and consumers' plants.


Pemex Refining processed a total of 1.31Mb/d of crude in 1Q05, constant from 1Q04. Processing of heavy crude increased 6% to 553,000b/d, while light crude fell 3% to 764,000b/d. Gasoline production increased 5% to 481,000b/d, while fuel oil production dropped 1% to 321,000b/d and diesel output fell 8% to 356,000b/d. Suárez attributed the reduction in diesel production to scheduled maintenance at some plants.

Higher oil and refined product prices helped Pemex's refining margin increase 46% in 1Q05 to US$5.04 a barrel from US$3.46/b in 1Q04, the statement said.

Also in the first quarter, Pemex awarded the remaining three packages in the six-package Minatitlán refinery tender designed to improve the quantity and quality of fuel production.

Exports of refined products fell 5% to 167Mb/d due to decreased gasoline and diesel production and imports increased 25% to 296Mb/d due to higher gasoline demand during the Easter holidays, the statement said. At March 31, Pemex had 6,826 service stations, an 8% increase year-on-year.


Total petrochemical production was up 4% to 2.66 million tons (Mt) in the first quarter. Ethylene production rose 15% to 276Mt, while ammonium production fell 9% to 140Mt. Petrochemical exports fell 14% to 220Mt and imports increased 91% to 88Mt.


Pemex has budgeted about US$1bn a month for investments in 2005, Suárez said. However, only about US$2bn had been spent by March 31 as budgetary considerations have slowed down the pace. The company's 2005 capex budget is US$11.2bn, of which US$9.5bn will come from taking on new debt, Suárez added.

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