Will Pemex Investment be Impacted by Oil Price Drops?
Some of our clients have ongoing and prospective projects with Pemex. This article, published in El Economista last fall, explains overall P&L results for Pemex. What will Pemex financial difficulties mean for ongoing and upcoming Pemex investments?
As of the 3Q of 2014 (with an average exchange rate of $13.5/dollar) Pemex showed an accumulated loss of 11.3 billion Dollars. This loss represents an increase of 59.8% over 3Q Results for 2013. Pemex’s Treasury Department informed that this could delay planned investment projects.
In nine months accumulated losses reach 87.5% of what the company lost in 2013, which was 13 billion Dollars. The Mexican Stock Exchange explains that these year’s losses are because of lower amounts of exported crude and a reduction of 8.4% in the “Mexican Mix”. (This article was written before the significant drop in oil prices in the 4Q of 2014).
Rodolfo Campos, Deputy Director of the Pemex Treasury, stated that price adjustments by global oil producers negatively impacted the Mexican Mix, which went from $100/barrel in the 3Q of 2013 to $92 in 3Q of 2014 (the Mexican Mix is hovering around $40 per barrel at the beginning of 1Q 2015).
“It is possible that if current world tendencies continue large investments could be deferred,” he told a group of investors.
Daily crude exports averaged 1.12 MBD for 2014 while the average for the same period in 2013 was 1.17 MBD. This reduction is caused by lower sales to the US market.
The company is reporting a loss of 4.4B for 3Q 2014.
Our Comment. It is worth noting that Pemex has a huge loss. Why does it lose money despite having seemingly healthy profits. The answer is that Pemex was slapped with a 57% tax (calculated over income) in the first three quarters of 2014.