Primer on Pemex Business Plan: general overview is not promising

MEXICO - In Brief 16 Jul 2019 by Mauricio Gonzalez
This morning the head of Pemex (Octavio Romero), made some general remarks about Pemex Business Plan, that was yesterday unanimously approved by Pemex Board (in absence, but with representation of new Finance Minister A. Herrera). We’ll analyze the full document as soon as it is available, however some of the official statements made this morning are relevant for comment: Current management recognizes that Pemex is affected by three main problems: high fiscal burden, high debt and low CAPEX.Pemex strategy will be carried out in two three year stages: the first one will span from 2019-2021 and will rely on significant Federal Government financial support; the second one, will run from 2022 to 2024 with a financially self sufficient Pemex supported by a significant increase in crude oil and other oil derivatives production.Starting in 2020 the Federal Government will reduce Pemex fiscal burden by approximately Mex $58 billion pesos (approximately US $3 billion dollars).Pemex will be capitalized by the Federal Government in 2019-2022. The amounts were not announced so far, but presumably they’ll improve Pemex debt/capital ratio significantly.By 2021 Pemex should show a balanced budget and remain financially self sufficient afterwards.Pemex will focus on exploring and extracting oil and gas from land and shallow waters fields, and rest deep sea water exploration.Pemex expects to increase production gradually by about 1 million barrels per day, from a current level of 1.7 mbd to 2.6 mbd in 2024. In order to achieve this Pemex CAPEX will reach US $11 billion in 2019, US 17$ billion in 2020 and US $20 billion afterwards.Pemex will rely on service contracts with private busine...

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