July 25 (Bloomberg) -- Petroleos Mexicanos cut its output forecast to the lowest in at least 24 years as mature fields are shrinking faster than it had previously expected.
The forecast was lowered to 2.41 million barrels of oil a day from a prior projection of 2.5 million, said Gustavo Hernandez, Pemex’s head of exploration and production. This will be the Mexico City-based company’s lowest annual output since at least 1990, when it produced 2.55 million barrels a day, according to the oldest available government output data.
“We have been working to review the declines of each of our fields that contribute to national production,” Hernandez said today on an earnings call. “In the recent review, we obtained a better idea of the declines of the fields and have adjusted the production expectation downward.”
Pemex is counting on a landmark law enacted last year that opens Mexico’s energy industry to private competition for the first time since 1938 to help stem declining output. The entrance of foreign oil producers such as Exxon Mobil Corp. and Chevron Corp. will bring in $50 billion of annual private investment by 2020, according to Gabriel Casillas, chief economist at Grupo Financiero Banorte SAB.
“We want to reverse the decline in our oil production and need to invest more money in some of our projects,” Pemex Chief Financial Officer Mario Beauregard said in a July 9 interview in Mexico City. Pemex, which has identified potential partners, plans to move “very fast” in establishing joint ventures once additional energy legislation is approved, he said.
The passage of secondary legislation that sets a framework for oil and natural gas contracts is being debated this week by lower house committees after being approved by the Senate on July 21. The final bill will be sent to President Enrique Pena Nieto to enact it.
“We must redefine our future strategy as a value generating operator and not as a state monopoly,” Beauregard said on today’s call. “As CEO Emilio Lozoya has mentioned previously, Pemex faces the biggest challenge in its history” as the company transitions from a government monopoly to a competitive entity.
Pemex’s 2015 capital expenditures budget will be an estimated $29 billion, up from this year’s $27.7 billion, Beauregard said on the call.
The company’s net loss of 52.2 billion pesos ($4.02 billion) widened from a 49 billion-peso loss a year ago, the producer said earlier today in a statement. It is the company’s seventh consecutive quarterly loss. Sales increased 4.1 percent to 409 billion pesos.
The legislation will allow outside oil companies to help produce an estimated 113 billion barrels of untapped Mexican crude. Output from the third-largest crude exporter to the U.S. has fallen nine consecutive years because the company lacks sufficient funding and infrastructure to tap the biggest proven oil reserves in Latin America after Venezuela and Brazil.
The company produced an average 2.45 million barrels a day in the second quarter, Hernandez said on the call.
Pemex’s preliminary monthly crude production fell to 2.44 million barrels a day in June. Preliminary month-to-date output slid to 2.38 million barrels a day, below the new company’s forecast for the 2014 average.
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