Pemex Reports Biggest Loss Ever as Oil Market Rout Cuts Deeper

  • Pemex posts loss of more than $10 billion in third quarter
  • Pemex has reported losses in 12 straight quarters since 2012

Mexico’s state-owned oil producer reported the biggest quarterly loss in company history as the prolonged rout in crude prices worsened the impact of declining output.

Petroleos Mexicanos, known as Pemex, posted a loss of 167.6 billion pesos ($10.2 billion) in the third quarter. The world’s ninth-largest crude producer has now reported losses in 12 consecutive quarters dating back to 2012. Pemex reported a 60 billion-peso shortfall in the third quarter a year earlier.

Pemex’s crisis "appears to be getting deeper and deeper,” Duncan Wood, director of the Mexico Institute at the Woodrow Wilson International Center for Scholars in Washington, said in a phone interview. “All the things that are needed to begin to raise more revenue for the government and to bring in more income for the company, they’re just not happening at the moment.”

Pemex’s third-quarter loss exceeded by 31 percent the company’s previous biggest loss of 116 billion pesos in the fourth quarter last year. The company’s losses through the first three quarters of 2015 outpace total losses for the last three years combined.

“The results of the company continue to reflect a clear impact caused by the current environment of prices and foreign exchange rate,” Rodolfo Campos, Pemex’s treasurer, said on the company’s third-quarter conference call. “We continue to face an adverse environment from the supply and demand standpoint.”

Production Plan

The company’s losses worsened as U.S. benchmark oil prices fell more than 50 percent from the third quarter of 2014, and the Mexican peso declined 21 percent versus the U.S. dollar in the same time frame. Pemex had a 50 percent reduction in the number of rigs producing oil and natural gas in the third quarter versus a year earlier. Output fell 5.5 percent to 2.266 million barrels a day.

Production has declined for 10 straight years since reaching more than 3.3 million barrels a day in 2004. As part of Mexico’s efforts to open the country’s energy industry to outside firms, the next round of offshore oil exploration leases will include joint ventures between Pemex and private companies.

‘High Confidence’

“Through our new partners, we have high confidence that we can increase production,” Pemex Exploration and Production Operations Director Gustavo Hernandez said on the earnings call. Pemex hopes to sign 17 joint ventures with private entities to improve output in mature fields and areas where the company lacks the ability or capital to maximize production. The company is also in the process of migrating 22 service contracts to oil production agreements to boost output in stagnant fields.

It will be important for Pemex to get the joint ventures working quickly to increase production in the short term, Wood said.

“At the very least it helps to slow down the decline and maybe even stabilize national production to keep it from falling below 2 million barrels per day,” he said.

The bidding guidelines for the joint ventures with Pemex will be announced next month along with the Gulf of Mexico deep-water fields that will be auctioned by the government to private bidders, Energy Minister Pedro Joaquin Coldwell said Tuesday.

In one bright spot, Pemex said its financial liabilities owed to pension workers will soon be eased. The company and union employees reached an agreement that “will be applicable to all personnel,” Campos said on the conference call Wednesday. Pemex, which is the federal government’s largest source of revenue, had total liabilities of 3 trillion pesos ($181 billion) as of Sept. 30. Pemex will announce details of the agreement with the union in the coming days, Campos said.

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