Pemex will meet all of its debt obligations, President López Obrador said today, explaining that he will present a plan tomorrow to strengthen the state oil company’s finances.
“Pemex will never fail to fulfill a debt obligation, we will pay all of the obligations punctually,” López Obrador declared at his early morning press conference.
The president’s assertion follows Fitch Ratings’ downgrading of Pemex’s credit rating late last month to just above junk status.
The ratings agency cited the company’s high leverage and substantial tax burden as reasons for the downgrading to BBB- – the lowest investment-grade rating – and maintained its outlook for Pemex at negative, meaning that another cut could be in the cards.
Pemex is the most indebted oil company in the world, owing in excess of US $100 billion.
Further complicating the company’s position is that the quantity of oil it produces is at its lowest level in decades, mainly due to a lack of investment.
The plan to improve Pemex’s financial situation is expected to include a cash injection into the company as well as tax breaks.
López Obrador explained that one source of funding for the beleaguered company would be savings generated by the government’s crackdown on fuel theft, a crime that has cost Pemex billions of pesos annually.
A US $1.25-billion injection into Pemex is anticipated, which the president has said will help boost crude production, but analysts say that the target of 2.4 million barrels per day (bpd) by 2024, compared to 1.73 million bpd in December, is unrealistic.
Tax breaks could free up an additional US $3.5 billion for Pemex to invest more in oil exploration and production but Graham Stock, senior emerging markets strategist at asset manager BlueBay, believes that “Pemex needs $10 billion to $15 billion of relief per year.”
López Obrador stressed this morning that the government would not take on additional debt in order to help Pemex, amid increasing speculation that the company’s position could contribute to a downgrading of Mexico’s sovereign credit rating.
“We will not resort to debt,” he said before reiterating, “we will have no problems resolving our obligations.”
Source: Reuters (sp)