Pemex is seeking to delay payments to some contractors until next year, according to the news agency Bloomberg.

People with knowledge of the state oil company’s situation said that Pemex is asking some of its contractors if they can wait until 2021 for payments they are owed now.

The unidentified sources said three contractors are being asked to agree to the postponement of payments totaling US $115 million. The total amount currently owed to contractors working across Pemex’s supply chain could easily run into the billions of dollars, the news agency said.

In an email seen by the newspaper El Financiero, Pemex middle managers acknowledged that the state-run company has cash flow problems and said that contractors working at the Cantarell and Ku-Maloob-Zaap oil fields will have to wait until 2021 to be paid.

According to the people who spoke with Bloomberg, contractors are required to enter their invoices on the Pemex website in order to receive a a confirmation number and an estimation of a payment date.

However, the sources said that invoice numbers are no longer being issued in some cases. Bloomberg said that Pemex didn’t respond to its request for comment about the matter.

Wilbur Matthews, founder of Vaquero Global Investment, a Pemex bond trader, said the extension of Pemex’s outstanding debts is concerning given the problems the state oil company, saddled with almost $105 billion in debt, already faces.

“If Pemex refuses to give you an invoice number, it doesn’t become a payable to Pemex and it doesn’t become a receivable to the [supplier], so it’s like accounting limbo land,” he told Bloomberg.

“But the reality is that Pemex owes them this money. What it means is that Pemex has a massive additional debt burden.”

President López Obrador has pledged to “rescue” Pemex, boost oil production and make Mexico self-sufficient for its fuel needs. He said in January that the government had “saved Pemex” but that assertion wasn’t backed up by the company’s first quarter result, although the coronavirus pandemic was a major factor in the poor performance.

The coronavirus crisis, low oil prices, a tumbling peso and 15 years of declining oil output all took a toll on the company between January and March, resulting in a loss of almost $23 billion.

Even before the gargantuan loss was announced, Moody’s Investor Services downgraded Pemex bonds to junk status in April, and earlier the same month Fitch ratings demoted the company even further into junk territory.

Due to its financial problems, Pemex has been forced to cut at least $1.8 billion from its 2020 exploration and production budget, and thousands of workers have lost their jobs as a result of the state oil company’s suspension of contracts with service providers and suppliers.

Ruaraidh Montgomery, research director at oil consultancy Welligence, told Bloomberg that the delay of payments to contractors shows that the situation Pemex is “is starting to bite.”

Matthews said it is possible that a company owed money by Pemex will seek legal intervention.

“I don’t know which company will go to court, where the judge says Pemex has to pay what it owes, but something bad is going to happen. At $40 a barrel things have to be run perfectly, and Pemex is not run perfectly,” he said.

Perhaps seeking to fend off the possibility of legal action, Pemex is currently negotiating with Nacional Financiera, a federal development bank, to have it pay the outstanding debts to contractors, according to a source within the state oil company.

Source: Bloomberg/El Financiero (sp)