“Pemex is facing short term financial difficulties” says the CEO of Pemex as he reports that the firm lost more than $30 billion in 2015. The Titanic faced a short term problem too when crew spotted an iceberg dead ahead.
Via the FT:
“Pemex is facing short-term financial difficulties,” José González Anaya said on a conference call when he fleshed out plans for the energy company to save 100bn pesos this year. “What we have to do is to adjust to the new [oil price] reality.”
Pemex’s financial performance was also hit by a 17 per cent depreciation in the peso against the dollar last year.
Oil production averaged 2.267m barrels per day, 6.7 per cent down on 2014, while total sales dropped more than 28 per cent to 1.17tn pesos. Gross income plummeted 82 per cent to 137bn pesos.
Lower output was seen across the board. The volume of crude oil processed fell 7.8 per cent in 2015 and petrochemicals production fell 14.2 per cent.
Mr González Anaya said the austerity drive was expected to lower this year’s oil production by some 100,000 barrels to 2.13m barrels per day.
The new focus, he said, was to concentrate on projects that are profitable with oil at $25 per barrel. The price of the Mexican oil mix fell 50 per cent last year and is now at $27 per barrel.
In addition to mounting losses, tumbling income and a large pensions bill, Pemex ended 2015 owing 147bn pesos to its suppliers. It has since reduced that by 20bn pesos. “We are working with the finance ministry to see ways in which we can accelerate those (savings),” Mr González Anaya said.
Though he stressed the cash crunch was hitting all oil companies, he said: “This is an enormous adjustment for Pemex, that’s the reality. It sounds easy, but it won’t be.”
Analysts said the oil price was not the only reason for Pemex’s weak performance. Nearly a third of the 100bn pesos it needs to save this year is targeted to come from cost cuts and efficiencies, said Mr González Anaya.
Pemex plans to save 27.5bn pesos from deferring projects or seeking partnerships in exploration and production. The upstream division will save 46.8bn pesos overall, Mr González Anaya added.
Some analysts have suggested that projects to upgrade Pemex’s lossmaking refineries and plans to produce low sulphur fuel will be among those put on hold. It has already announced plans to sell stakes in three of its refineries.
The government of Mexico has pledged financial support for Pemex and Miguel Messmacher, income undersecretary at the finance ministry, called the cost-cutting plans “commendable”.
He said discussions on how the government would provide financial support would now begin and were expected to take some weeks.
Mr González Anaya did not immediately spell out which projects were being delayed, though he did say it made “no sense” for Pemex to do deepwater exploration alone rather than in partnerships.
Mexico, which is opening its energy sector to foreign investors, is holding an auction of deepwater fields on December 5 that is considered the real prize of the government’s energy reforms.
Under the reforms, Pemex can partner up with other companies and monetise assets, for example through Fibra E vehicles, the Mexican equivalent of master limited partnerships.
Pemex said a historic deal with the company’s union to stop its $90.5bn pensions liabilities from spiralling had made a positive effect on its 2015 results. It estimated pensions savings last year at 186bn pesos.