Wednesday, June 12, 2024

Pemex scrambles to cover multi-billion-dollar debt payments due this year

Pemex is searching for funds to make almost US $10 billion in bond payments this year, Bloomberg reported Monday.

Citing unnamed people with knowledge of the situation, the news agency reported last week that the Finance Ministry (SHCP) expects the state oil company to pay debt due this quarter without government help.

Pemex CEO Octavio Romero said last Wednesday that the state oil company needs to make debt payments of between $5.5 billion and $6 billion in the January-March quarter. He also said that he’s been in talks with the SHCP since the final quarter of 2022 to find a way for Pemex to pay the debt because the amortizations aren’t included in the federal budget.

Romero added that high oil prices could help Pemex — which with total debt of $105 billion is the world’s most indebted oil company — find alternatives to service its debt.

Bloomberg reported Monday that the federal government stopped paying Pemex’s debt amortizations in the second half of last year. Investors, it added, are questioning whether the state-owned firm will seek funding in international markets, attempt to sell unpaid oil-product invoices or seek other ways to get the funding it requires to meet its repayments.

The news agency noted that Pemex secured cash last year by selling unpaid oil and oil-product invoices to banks. Via that means — known as monetizing receivables with factoring — the company received at least $1 billion from HSBC and Goldman Sachs.

Bloomberg said that Pemex’s “most-recent debt maneuver in June — which paid oil suppliers with notes to be exchanged later — was deemed a flop due to weak demand.”

It added that the financing solutions Pemex has turned to may be insufficient as the company owes as much as $9.8 billion in 2023.

Patrik Kauffman, an investor at Aquila Asset Management in Zurich, said that Pemex could seek financing via a liability management exercise or a receivables-backed issuance. 

“It depends very much on the rate they need to pay,” Kaufmann said.

“And if too high, the government is there and said it clearly. I believe the most viable way is the government.”

Although the SHCP expects Pemex to pay the required debt payments in the first quarter, President López Obrador “promises his government would step in to help the company if necessary,” Bloomberg said. 

The news agency also said that “if forced, the beleaguered company may tap into its 2023 budget to pay down debts, a move that would further strain its struggling oil operations.”

Pemex — whose oil production has declined almost every year since 2004 — recorded a net loss of 52 billion pesos (US $2.7 billion) in the third quarter of 2023, while U.S. oil companies ExxonMobil and Chevron had a bumper three-month period due to a rally in international oil prices.

With reports from Bloomberg 

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