Pemex Hits 13th Straight Loss With $9.3 Billion Decline

  • Pemex targets more than $5 billion in 2016 spending cuts
  • Mexican producer record annual loss of about $32 billion

Petroleos Mexicanos’s financial woes continue to mount as the country’s biggest company reported a 168.9 billion pesos ($9.3 billion) loss in the fourth quarter and laid out plans for deep spending cuts this year, including delays of new offshore developments.

Pemex lost about $32 billion in all of 2015, based on the exchange rate in each quarter, as oil prices plunged and the company’s crude output fell for an 11th straight year, according to a financial report released Monday. Pemex hasn’t recorded a profit since 2012. The company had more than $87 billion in debt at the conclusion of the third quarter and owes an estimated $7 billion to service providers.

Earlier Monday, Pemex pledged to meet the government’s request that it trim its 2016 budget by 100 billion pesos. As much as $3.6 billion of the cuts will come from deferred projects, including expensive offshore wells, Jose Antonio Gonzalez Anaya, the company’s CEO, said in a conference call with investors. Pemex will pursue partners for any future deepwater development, Gonzalez Anaya said.

The cuts follow a general strategy of focusing reduced spending on the most profitable investments while increasing efficiency, according to a budget report released by the company earlier Monday. Pemex will strive to maintain crude production, despite the budget cuts, "to the extent possible," the CEO said.

Adding Strength

"These adjustments do not weaken Pemex, they strengthen it," Gonzalez Anaya said on the call.

Pemex will still be able to make its payments owed to service providers despite the reduction in the company’s budget, Gonzalez Anaya said. The company’s quarterly loss was largely due to the fall in crude prices and the depreciation of the Mexican peso, according to Treasurer Rodolfo Campos. Mexico Deputy Finance Minister Miguel Messmacher said on the same call that the budget reductions guarantee Pemex will meet its financial obliations.

Pemex’s crude production averaged 2.28 million barrels per day in the fourth quarter, a 3.5 percent decrease from a year earlier. Oil output, which dropped after an April 1 accident in the Gulf of Mexico, fell for an eleventh straight year.

The company expects the price of oil to be close to $25 a barrel this year, compared to the $50 they’d previously planned, according to the report.

Mexico announced plans to cut 100 billion pesos ($5.5 billion) from the oil giant’s budget on Feb. 17 in a move aimed at stemming the depreciation of the peso and limiting inflation in Latin America’s second-largest economy amid the slump in international crude prices.

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