Mexico City — Mexico’s state-owned oil company Pemex will pursue a refinancing strategy with banks and capitalization from the Finance Ministry in order to meet its 2024 debt maturities.
Pemex plans to refinance $9 billion in revolving credit lines with banks in 2024, a person with knowledge of the matter who asked not to be identified told Bloomberg Línea.
The refinancing of the revolving credit lines will be to guarantee liquidity so that the company can pay the debt maturities of 2024, which amount to $11.2 billion, according to the latest data available from its financial report to second quarter.
The refinancing operation will be complemented with a capital injection from the treasury, the amount of which will be equivalent to what the company is unable to refinance with the banks.
On July 28, during a call with analysts and investors, Pemex’s CEO Octavio Romero Oropeza said that the government of President Andrés Manuel López Obrador will also support the payment of the oil company’s 2024 maturities, but did not offer further details.
The refinancing formula with banks and the treasury’s capitalization in 2024 will follow up on the capital injection of almost $4 billion on July 28 in order to guarantee an orderly transition towards the final part of the six-year term.
Following Pemex’s call with analysts, Bloomberg Línea consulted the treasury’s spokesperson regarding the oil company’s confirmation of the capitalization, but they did not respond to a request for comment.
Pemex’s financial strategy
AMLO’s government and Pemex signed on May 13, 2019 an agreement with HSBC, JP Morgan Mexico and Mizuho Securities to refinance part of the company’s debt and renew two revolving credit lines.
The agreement consisted of the refinancing of debt to the amount of $2.5 billion, plus the renewal of two revolving credit lines for up to $5.5 billion. Pemex and the treasury plan to refinance these two revolving credit lines in 2024.
What AMLO’s government is looking for is to improve the terms, rates and conditions of the debt in general, since from the treasury’s point of view, the debt should not necessarily be charged to a budget line, and refinancing is an important component in the face of short-term maturities.
Romero assured on the call with investors that the treasury will also cover next year’s maturities, and his financial team qualified the statements and mentioned other possibilities of assistance from the government.
Carlos Cortez, CFO of Pemex, said that they the financing does not necessarily have to be direct transfers to the oil company’s assets, but some other fiscal measure, adding that if there is an “attractive window” a potential return to the capital markets through bonds would be evaluated.
In January 2023, Pemex issued debt for $2 billion to cover debt maturities.
The need to cut costs
Pemex, which is burdened with a debt of $110.5 billion, will have to reduce its spending in exchange for the capitalization made by the treasury for 2023.
Alberto Jiménez, the company’s financing and investment manager, confirmed on the call with analysts a capital injection of 64.97 billion pesos ($3.89 billion) to cover 2023 debt maturities and ruled out cuts to capex.
But Pemex will have to reduce its spending by an amount similar to the capital injection, which is around 70 billion pesos, according to the person at the company consulted by Bloomberg Línea.
In fact, treasury statistics reflect that Pemex is already tightening its belt on spending.
The federal government’s programmable spending amounted to 2.68 trillion pesos between January and June 2023, a figure that implied an underspending of 223.58 billion pesos, as the spending approved to exercise in the first half of the year was 2.90 trillion, according to the treasury’s public finance report to second quarter.
Pemex was part of the underspending. The oil company had a programmed budget of 375.29 billion pesos to spend between January and June 2023, however, it reported an underspending of 75.08 billion pesos.
The company reported to the treasury that the underspending was due to lower expenditures in physical investment, and in personnel and general services.
Pemex’s underspending represented 33.5% of the total underspending in programmable government spending, and which is the government’s expenditure for delivering public programs, goods and services.
Crude exports halted at production platform
In a separate development, Pemex has suspended operations at its largest oil export terminal due to a leak, adding to a series of major operational headaches just as the summer season increases demand for crude oil.
The Yúum K’ak’ Náab floating production, storage and offloading (FPSO) unit in the Gulf of Mexico was shut down on Sunday, July 30 due to a crude leak in one of its hose trains, according to a shipping company report seen by Bloomberg.
Last month, Pemex suspended operations at its Salina Cruz terminal after hoses loading a ship were blown loose by strong winds, and a company gas platform suffered an explosion that killed two people.
The incidents come at a time of year when state-owned Pemex typically increases oil sales to the United States to meet demand for the busy summer season, when automobile driving increases.
The FPSO and Salina Cruz terminal are expected to resume service later this week, when Pemex will have the opportunity to clear a backlog of seven ships waiting to load eight million barrels of oil for customers in the US, South Korea, China and India.
Pemex did not return an email from Bloomberg seeking comment regarding the shutdown
Bloomberg Línea’s Arturo Solís, and Lucia Kassai of Bloomberg, contributed to this story
