Pemex Swings to Highest Profit in 18 Years Amid Oil Rally

(Bloomberg) -- Petroleos Mexicanos swung to a first-quarter profit of $6 billion, the highest in at least 18 years, as the company benefited from rallying oil prices and stabilizing crude output.

Pemex, as the state-run company is known, posted net income of 122.7 billion pesos ($6 billion), the most since at least the first quarter of 2004, when Bloomberg began collecting the data.

The company will pay its own debt amortizations in the short-term due to higher oil prices and improved cash flow, Pemex's acting chief financial officer Antonio Lopez-Velarde said in a call to investors on Monday.

“With respect to the debt maturing in 2022 and 2023, there's the potential for federal government support,” said Lopez-Velarde. “The requirement for this support is completely dynamic. Pemex has improved its cash flow expectations in the current year and the plan is that much of these maturities can be paid with our own resources.”

President Andres Manuel Lopez Obrador has promised to return Pemex to its former glory by reducing the involvement of private companies in Mexico's oil sector. He is seeking to make Mexico self-sufficient in gasoline and diesel by having Pemex increase its crude processing to sell fuel domestically. To ensure the country has enough crude to make fuel, Mexico plans to discontinue exports over time.

Last month, Finance Minister Rogelio Ramirez de la O told Bloomberg that the government has stopped paying off Pemex's debt amortizations due to the oil price rally. Mexico's gains from oil exports have been offset by the increased cost of imported fuel, which the government is subsidizing to avoid higher prices for consumers.

Pemex Bonds Hit New Low With Company Resuming Debt Payments (1)

Pemex had the highest debt of any oil major at $108.1 billion by the end of March. It faces growing costs as it seeks to incorporate two new plants into the national refining system -- the Dos Bocas refinery in the state of Tabasco and the Deer Park facility in Houston, Texas, that it purchased from Shell Plc a year ago.

The state driller expects capital expenditure to rise more than 40% this year to 227 billion pesos. It is also implementing strategies to accelerate payment to its suppliers, which reached 370.7 billion pesos last year and 72.6 billion in the first quarter of 2022.

Lopez-Velarde noted that Pemex could issue a bond to cover late payments to its service contractors and suppliers. “There are diverse mechanisms being implemented by Petroleos Mexicanos, one of these implies the issue of a bond, however, I can't go into much detail,” he said.

Pemex has stabilized oil production with increased extraction in shallow-water and offshore fields. First-quarter oil and condensate output rose by 0.23% compared to the previous quarter, to 1.755 million barrels a day. Output compared to the same period a year ago rose 2.3%.