Economics: Pemex results deliver mixed figures but bad news in general

MEXICO - Report 09 Aug 2021 by Mauricio Gonzalez and Francisco González

Pemex’s financial results for the second quarter of 2021 partially benefited from a very low comparison base given that the first wave of Covid 19 infections during the second quarter of 2020 seriously affected demand and prices for hydrocarbon value-chain products, and this came together with Mexico’s decision to roll back oil output by 100 million barrels daily in support of the OPEC+ effort to shore up the global oil market. In that context, Pemex reported higher revenues from the resulting surge in crude prices. The foregoing situation had a mixed impact on the company’s operating and financial results, effects that were further magnified by deficiencies in the way the company is being managed.

Pemex reported that it produced 1.74 billion barrels daily of crude, a volume 3.8% greater than it registered in the same period of 2020, yet its crude export volumes declined (although higher prices bolstered revenues). It achieved only a modest increase in crude processed domestically, and the production of petroleum products in general slipped slightly as the government’s focus on prioritizing a rehabilitation of the country’s refineries has yet to show any significant clear results, with the refinery system crawling at 40% of capacity. Similarly, its gas production also narrowed even as the percentage lost to flaring soared owing to technical deficiencies.

Nevertheless, Pemex reported that as of June 30 it had exhausted 53.4% of its 2021 capex budget (352.6 billion pesos), with a substantial amount once again channeled toward reviving the refinery system and improving gas processing. Meanwhile, the company remains saddled with mounting liquidity needs and another ratings downgrade announced by Moody’s just prior to the release of the company’s 2Q report. Conditions are similarly complicated at the national electric utility CFE, where growth in electric power revenues was more than offset by increased power generation costs as the national power utility’s bill for energy including fuels swelled and employee benefit costs rose substantially.

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