Petroleos Mexicanos’s profits fell in the second quarter as the company struggles with soaring debt.
(Bloomberg) — Petroleos Mexicanos’s profits fell in the second quarter as the company struggles with soaring debt.
Pemex also confirmed it received fresh funds from the government in a capital injection worth 64.97 billion peso ($3.9 billion), said Alberto Jimenez, associate managing director of finance at the company, on a conference call with investors on Friday. In total, support under Lopez Obrador has amounted to nearly $49 billion in capitalizations, tax breaks and other assistance.
“The amount of the contribution for 64.97 billion pesos is confirmed,” he said. Pemex is evaluating whether to return to the market this year or next, and will coordinate with the Finance Ministry, he added.
The company’s bonds soared after Bloomberg News reported late Thursday that it received about $4 billion from the Finance Ministry in a capital injection. The Ministry asked Pemex to make spending cuts to capital expenses and operating expenses this year for an equivalent amount to the injection as a condition to receive the funds, marking the first time that it has required spending cuts, according to a person with direct knowledge of the matter.
Read More: AMLO’s $4 Billion Pemex Lifeline Spurs Rally on Driller’s Debt
Pemex’s net income fell to 25.44 billion pesos ($1.5 billion) in the second quarter vs 56.75 billion pesos the previous quarter, the company reported earlier Friday. The company’s crude and condensate production rose slightly to 1.88 million barrels a day in the second quarter vs 1.85 million barrels a day previously.
Government Support
On Wednesday, Chief Executive Officer Octavio Romero Oropeza said that the government would issue new debt and carry out refinancing on the company’s behalf. President Andres Manuel Lopez Obrador echoed the comments in his morning press conference the following day, noting that Pemex’s and Mexico’s debt shouldn’t be separate.
Read More: Pemex Chief Says Mexico to Refinance Its Debt to Avoid High Cost
Yet there is lingering uncertainty over whether the capital injection will move the needle on Pemex’s worsening financial situation. Pemex’s debt is the highest of any major oil company, its oil production has declined for the better part of two decades, and its refineries operations lose money the harder the plants are run, due to a lack of technology and upkeep.
Its operational woes are becoming increasingly evident following a deadly gas platform explosion in the Cantarell field complex this month, an oil leak nearby the site of the blast several days earlier, and a spate of fires this year at half of its refineries. Pemex’s debt rose to $110.5 billion by the end of June, from $107.4b at the end of March.
Fitch Ratings Inc. cut the company deeper into junk territory on July 14, while Moody’s Investors Service Inc. put Pemex on a negative outlook for a potential downgrade last week, citing increased credit risks.
(Updates second and third paragraphs with comments from Pemex conference call)
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