Casa de Bolsa Finamex – Pemex Watch: ‘2019 Financial Outlook’ is mainly anchored in Federal Government support

Ciudad de México, 10 de enero de 2019.
Yesterday, Petroleos Mexicanos (Pemex) released a presentation on its ‘2019 Financial an Operating Outlook’, revealing a financing strategy that is mainly anchored in Federal Government support and plans all across its productive chain in upstream, midstream and downstream activities.
The document outlines an overview of the firm, as well as the strategy to follow in the 2019-2024 period prepared for an investor roadshow in New York.
Pemex set as priority for the New Administration to stop and reverse the decline in crude oil production, reaching 2,450 kbd (thousand barrels daily) by 2024.
The core of the strategy is to increase the company’s capex. Capex approved by Congress in 2019 Budget is 22.3% higher than the approved for 2018, and 78% of these resources will be allocated to upstream activities.
Pemex’s upstream sector will focus on increasing drilling activity, as they will sign new agreements to increase offshore production platforms and pipelines.
Although they drew a plan to develop plays with a new exploration strategy, it is not clear yet if they will use the tool-kit available since the approval of the 2013 structural reform that allows joint operations with private sector participants.
As for midstream activities, there is a clear strategy aimed to reduce fuels’ theft with the purpose of using these resources to finance the construction of the new refinery.
On downstream, the National Refining Plan is set to increase refining capacity to reduce the domestic production-demand gap, either by the rehabilitation the existing refineries, as well as the construction of a new one located in Dos Bocas, Tabasco.
Based on the successful implementation of all these plans, estimates for the 2019 financial balance improve relative to 2018 figures. As a result, debt is expected to stabilize this year.
If accomplished as expected, Pemex’s operating results will continue improving while transferring higher pressure to federal government’s expenditures. Most of the contributions expected from the government should be neutral for public sector’s deficit and debt, however if additional revenues in the same amount are not collected, federal government will need additional efforts to meet its fiscal targets, reducing the likelihood to comply with a responsible fiscal management, and challenging its resilience to shocks if downside risks materialize during the year.
pamela delgadillo | ejecutiva de cuenta, méxico, bcw | burson cohn & wolfe
o: + 52.55.5351.6500 ext 6625 | m: +52.1.551452.01
nombrada agencia del año 2018 por the holmes report

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