Oscar Grijalva Meza

Company: Petróleos Mexicanos (PEMEX)

Founded in 1938 in Mexico as the result of the expropiation of actives and goods from foreign oil
companies by the Mexican goverment, Petróleos Mexicanos (PEMEX) is one of the 10 largest and
most important state-owned operators worldwide, just behind big players like ExxonMobil and Saudi
Aramco [1]. Its total size of daily production ($/barrel indexed to WTI [6]) lies around 2 million 197
thousand barrels/day [4] from 454 fields onshore and offshore [5] and its assers are valued in approx.
$416 million USD [7].

Quoting its own Organic Law [2], it defines PEMEX as a „non-centralized public organism which
purposes are the exploitation, refining, transport, storaging, distribution and first-hand sales of
petroleum and natural gas resources, as well as its derivates and other primary raw materials“. From
this it is expressed that the company, which operates geographically in North America (Mexico)
controls all the supply chain of the petroleum industry and the whole of its demanded products
(Olmeca/Maya/Istmo/Altamira-type raw oil, natural gas, refined products, basic petrochemicals,
fertilizers, etc.). For this, it is divided in the following business lines, shown in Figure 1 [3]:

In Figure 1, 2 different organigrams defining PEMEX structure can be seen; this „reestructuration“
took place in 2012 as part of the recently approved Energy Reform, which now allows the
participation of private investors (both national and international) in E&P activities in Mexican basins
onshore and offshore.

Compared with other big state-owned operators in the Americas (e.g. Petrobras or PDVSA), PEMEX
has somewhat a better financial basis based on its assets and the recent discoveries in the south of
the country [7]; this is reflected in the fact of having the highest credit rating in the region according

Oil & Gas Industry Operations and Markets August 31, 2016
Oscar Grijalva Meza

to Moody´s [8]. However, and due mostly to the current drop in the oil price worldwide, its debt has
increased significatively to the point that it was forced in February 2016 to reduce its budget by
$5.30 billion USD [8] and having the Mexican goverment intervening to reduce its debt [9]. In
comparison, Petrobras faces a similar situation that has forced it to put on hold several Pre-Salt
developments offshore Brazil [8]. On the other hand, PDVSA is on the verge of not being able to pay
to its suppliers [8]; for this, it is concluded that the general situation of PEMEX has been palliated
significatively thanks to the intervention of the government and by the (yet modest) growing interest
of private investors in its Round 1 bid for deepwater and onshore assets [10] as part of Mexico´s
Energy Reform.

By analyzing the status of the company in the last 5 years in terms of production, pricing and market
status a significative decline in the amount of devengated dividends is observed. For example, the
total sales of the company suffered a drop of almost 27% during 2015 compared with the last term
(2014), being the insolvency of the company to pay its suppliers the most critical challenge observed
during the first half of 2016 [11]; being this a direct result of the current state of the oil market. After
the governmental intervention that began improving the insolvency status of PEMEX in the first
months of 2016, this situation seems to have improved; nevertheless, and comparing the volume of
exported oil crude and the evolution of its average price per barrel, it is observed that, despite of the
generalized, expected drop in exports and corresponding revenue, a rather stable increase in
exported volumes to the European and Asian markets is provided from 2015 to 2016 [12]. This
compensates somehow the current drop in revenue perceived from crude oil sales (especially the
Maya light type) [13]; this trend is also easily noticeable when analyzing the commercial balance of
the company (imports/exports), where a negative saldo of -1038 million USD is present despite of a
positive saldo of 9 million USD observed in April 2016 [14]. Internal sales and revenue show a
declining, but mor stable trend in the period between 2011-2016 [15,16]; the most sold products
were gasolines and natural gas, and petrochemicals suffered a big downturn from 2015 to 2016 [15];
this can be supposed as a product of increased competitivity with export products, especially from
the USA. Regarding production, it suffered a steep decline in production rates for both crude oil and
gas [17], with offshore assets accounting for 78% of total hydrocarbon production in Mexico [18].
The main challenges of the company rely now in the development of the „know how“ for ongoing
deepwater developments, as well as the plan to revitalize the Burgos (Shale) and Chicontepec
(Mature) basins in times of declining production rates from Cantarell offshore basin.

As a conclusion, the general state of the company is, compared with other big players in the region
like Petrobras or PDVSA quite stable, as the current drop in production and revenue from internal
and external sales can be understood as the direct consequence of the present oil price. For this, and
beyond government involvment, PEMEX is undertaking already some important action paths as part
of the already mentioned Energy Reform; one example of this is the plan of „sharing“ economic risk
with private investors for operating its 6 refineries in Mexico; with this, it is expected to compensate
years of uninvestment in the downstream sector by making the refining sector more efficient
(profitable) in the light of an expected increase in demand of refining capacities in the future as the
result of expected high production levels coming from future deepwater and mature fields [19].

Oil & Gas Industry Operations and Markets August 31, 2016
Oscar Grijalva Meza

References
[1] http://www.therichest.com/business/companies-business/the-10-largest-oil-and-gas-companies-
in-the-world/

[2] http://www.diputados.gob.mx/LeyesBiblio/abro/lopmos/LOPMOS_abro.pdf

[3] http://www.oilandgasmexico.com/wp-content/uploads/2016/02/pemex-org-before-after.jpg

[4] http://www.economiahoy.mx/economia-eAm-mexico/noticias/7783847/08/16/Produccion-
diaria-de-Pemex-durante-2016-ha-sido-de-2-millones-197000-barriles.html

[5] http://www.bnamericas.com/company-profile/en/petroleos-mexicanos-sa-de-cv-pemex

[6] http://www.pemex.com/Paginas/default.aspx

[7] https://es.wikipedia.org/wiki/Petr%C3%B3leos_Mexicanos

[8] http://gestion.pe/empresas/gigantes-petroleras-america-latina-deben-us-275000-millones-
2156265

[9] http://www.forbes.com.mx/de-donde-sacara-el-gobierno-el-dinero-que-pemex-necesita/

[10] http://www.forbes.com/sites/gauravsharma/2016/05/20/mexico-bets-on-investor-appetite-for-
44b-deepwater-oil-and-gas-drilling-round/

[11] http://www.pemex.com/ri/finanzas/Resultados%20anuales/151231_EstFin_e.pdf

[12] http://www.pemex.com/ri/Publicaciones/Indicadores%20Petroleros/evolexporta_esp.pdf

[13] http://www.pemex.com/ri/Publicaciones/Indicadores%20Petroleros/epreciopromedio_esp.pdf

[14] http://www.pemex.com/ri/Publicaciones/Indicadores%20Petroleros/ebalcomx_esp.pdf

[15] http://www.pemex.com/ri/Publicaciones/Indicadores%20Petroleros/evalorpetro_esp.pdf

[16]http://www.pemex.com/ri/Publicaciones/Indicadores%20Petroleros/evolumenventas_esp.pdf

[17]
http://www.pemex.com/ri/Publicaciones/Anuario%20Estadistico%20Archivos/2014_ae_00_vc_e.pdf

[18] http://expansion.mx/empresas/2016/05/23/pemex-registra-bajas-en-produccion-mientras-
exportaciones-suben-durante-abril

[19] http://www.businessinsider.com/r-mexicos-pemex-could-relinquish-majority-stake-in-refineries-
cfo-2016-5?IR=T

Oil & Gas Industry Operations and Markets August 31, 2016