Petroleos Mexicanos posted a $18.3 billion net loss for 2019 on Thursday, nearly doubling the previous year’s loss and dealing a major blow to the Mexican president’s quest to revive the heavily-indebted state oil company.
The company known as Pemex [PEMX.UL] said it had racked up a $9 billion loss in the fourth quarter, or about half the year’s total losses, as it struggled to reverse a 15-year streak of declining crude output.
When last year’s actuarial losses from employee benefits are added, the total 2019 loss rises to some $35 billion, according to a statement filed with the Mexican stock exchange.
The dismal results mark one of Pemex’s worst annual financial performances not primarily attributable to an outside factor, such as a sudden plunge in international oil prices.
“It’s not even possible to put into words how bad these results are for the company,” independent oil analyst Gonzalo Monroy said, later describing them as “really terrible.”
Pemex’s search for the “easiest barrels” and its large refining losses were especially problematic, he said.
Mexican President Andres Manuel Lopez Obrador took office in December 2018 pledging to boost Pemex’s oil output by about half by the end of his six-year term and ease its punishing debt load.
Instead, oil production declined last year compared to 2018 and the government struggled to make headway in reducing its debt, despite some hefty capital injections.
Pemex’s total financial debt stood at $105.2 billion last year, down just 0.6% compared to $105.8 billion in red ink posted at the end of 2018.
Credit ratings agencies have warned of Pemex’s extremely high debt load, Lopez Obrador’s decision to spend more on the money-losing refining business while eschewing new investment opportunities for foreign and private oil companies.
Last year, Fitch Ratings downgraded Pemex debt to junk status, and if another major ratings agency does the same this year, some funds would likely be forced to sell billions of dollars in Pemex bonds.
The company’s debts to its service providers in 2019, meanwhile, rose on the year by almost a quarter to $9.8 billion.
But in a conference call with analysts, Chief Financial Officer Alberto Velazquez argued things were going well.
“We have registered significant improvements in many of our indicators, confirming that the company is on the right track,” he said, touting more spending on exploration and production and dramatically less fuel theft last year.
In a break with years of practice, Pemex executives did not take any questions on the call.
Under Lopez Obrador, Pemex’s engineers have pledged to discover and develop 20 new oil and gas fields each year, targets viewed as extremely optimistic by industry analysts.
Only three of the 20 priority projects selected last year reported crude production as of December, according to data from Mexican oil regulator CNH.
Lopez Obrador, a leftist who has pursued a state-centric energy model, has pushed back against overtures from business groups to boost production via oil auctions open to private producers that were championed by his centrist predecessor.
Pemex’s 2019 crude production averaged 1.68 million barrels per day (bpd), less than half the 3.4 million bpd the company pumped in 2004 and down by about 7% compared to 2018 levels.
The company pointed to a 9% drop in the average price of its crude exports in 2019 as a factor in its falling revenue, which slid about 16% during the year to $74.3 billion. The volume of Pemex’s crude exports also fell by about 80,000 bpd.
It also pointed to an uptick in crude production of 40,000 bpd in January as proof it is recovering.
($1 = 18.8869 pesos at end-December)