Pemex posted a gargantuan loss in the first quarter of the year as the coronavirus crisis, low oil prices and a tumbling peso took a heavy toll on the beleaguered state oil company.

It reported a loss of 562.25 billion pesos (US $22.8 billion) on Thursday, a result 16 times worse than the 35.7 billion-peso loss it posted in the first three months of 2019.

The notification of the loss – 62% higher than that reported for all of last year – comes just two weeks after Fitch Ratings downgraded Pemex’s credit rating deeper into junk territory and Moody’s Investors Service stripped the company of its investment grade rating.

The coronavirus pandemic was the main cause of the company’s dismal first-quarter showing: global demand for oil plummeted, causing prices to follow suit, and the peso depreciated sharply against the United States dollar as investors abandoned it in favor of safe-haven currencies, especially the greenback.

Pemex’s revenue slumped 20.3% in the first quarter compared to the same period of 2019, falling to 284.1 billion pesos from 356.3 billion pesos a year earlier. Exports fell 19.4% as demand for crude collapsed.

“The most significant variables that explain this situation are the decline in the price of the Mexican export [oil] mix … and the reduction in national and export sales volumes caused by the lockdown measures to reduce the impact of the Covid-19 pandemic,” the state company said in a report sent to the Mexican Stock Exchange.

Pemex also noted that the peso lost 24.7% of its value against the U.S. dollar in the first three months of the year. The depreciation of the currency inflicted a 469.2 billion-peso foreign exchange loss on the oil company, which has debt in excess of US $100 billion.

However, the exchange loss doesn’t threaten the economic viability of the company, Pemex chief financial officer Alberto Velázquez said in a call with analysts. The first-quarter loss was about average for international oil firms, he said.

Velázquez said that the economic impact of the coronavirus pandemic on Pemex was “serious but temporary,” adding that the company will continue with the operational and financial plans implemented since the beginning of the six-year term of the current federal government. Pemex will continue aiming to boost crude production despite the downturn in demand, he said.

President López Obrador has pledged to reduce Mexico’s reliance on imported fuel and to that end is moving to increase the country’s refining capacity even though that activity is not profitable for Pemex.

The government is building a US $8-billion refinery on the Tabasco coast and also has plans to upgrade Pemex’s six existing refineries.

Source: El Financiero (sp)