After announcing his exit, the present Mexican president has done everything to pave way for Pemex national oil company and save them from imminent financial distress, which the latest steps would only delay, according to three sources for a Reuters’ report.
Last week, Andres Manuel Lopez Obrador as the President rolled out fresh support for Pemex, which is his age-old goal to make Mexico completely self-sufficient in the production of motor fuels by unveiling a new tax break with the value of about $6.4 billion.
The boost follows the incredible $90 billions government support that Pemex has hyped up since Lopez Obrador took office at end of 2018, which comprises of tax cuts and capital injections most of them used by the debt service of total $106 billion.
The current Mexico City mayor and favorite in the polls, Claudia Sheinbaum, has been appointed the successor and official candidate of Lopez Obrador and who will, likely, continue the previous government’s woes.
Mexico will have a new president come October.
A Sheinbaum presidency would seek to reduce the company’s dependence on state resources by cutting taxes that would provide the financing, which would be a source of funding for the company in other places, a person close to her team told Reuters.
The Sheinbaum administration has also pledged to push all the way on the so-called sovereignty of energy, a frequent claim of Lopez Obrador’s.
The spokesman of Pemex, though, mentioned that this time the money would be used to cover this $17.2 billion of debt to service providers like Halliburton (HAL.N) and Baker Hughes (BKR.O).
“All this is one part of the plan to lead to an orderly transition of the future government in the manner of soft-landing,” said the high-ranking Pemex source speaking anonymously.
The FP essential said that anything that already has Lopez Obrador’s symbol of approval may limit his successor.
The incumbent president of the country issued a statement this week claiming that his pewex policy had terrorized.
“I think we have rescued Pemex”, Lopez Obrador has said, referring to a cut in the entity’s financial debt compared to six years ago.
Alejandro Díaz-Silveyra, an expert at the IMCO, noted that if Pemex holds the current debt-to-capital structure, the company will have to make 724 billion Mexican pesos in regular debt payments between October of this year and September of 2027. Debt repayments this year arms for more than $10 billion.
Pemex has the added debt maturities coming up to 2030 with an outstanding debt amount of some $35 billion, which mostly consists of bonds.
“In spite of all the measures applied, the pressure for the debt due in 2024 and 2025 will be very high” said IMCO economist Jesus Carrillo.
“Pemex has been…a salvation that never came; Pemex has fallen” is how he put it.
None of these officials (including “Pemex”, the President’s office or the Finance Ministry) answered our phone calls for this story.
While some sources conceded that success criteria have been scaled down a tad, it was also mentioned that there were still some progress.
That is the idea of going out of Pemex better than we inherited it, one source at the company confessed, adding that “most problems are still not resolved.”
The agent of the Sheinbaum team mentioned it where the company proceeded to gradually reduce its DUC tax’s profit sharing rate on which the government heavily depends, from 65% to 30%
The source reported that the purpose of the tax-cuts is to make sure that Pemex could earn more on its own behalf, instead of a liability, hence a burden, on the state finances.
He has, however, failed to turn around the company’s crude production – its major source of income – which has continued to dwindle from the 1.8 million barrels per day (bpd) that it was/how much it was within Lopez Obrador’s term to 1.6 million bpd in spite of his pledge to grow it.
Yet, as condensate production surges, the downfall is somewhat stemmed, but the president’s chief objective-to refine more oil at home- is short of the initial target.
Domestic refining at the moment is 791,000bpd, but this is not yet anywhere close to his ambitions of even 1m bpd of refining.
“Within Pemex itself there is understanding that the targets will not be met this year,” according to one company source.
“However, an election year is such, that promises of delivery are aplenty.”
