Updated 01:39 PM EDT, Wed, Sep 22, 2021

Mexico Economy: Pemex See Little Hope in Credit Downgrade by Moody's Investors Service

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Mexico's state oil company, Petroleos Mexicanos (PEMEX), is going to process the lowest amount of crude oil this year in at least the last 25 years, with internal refining plan documents showing plant outages and other inefficiencies affecting the market.

The decline is a double blow for the company, as it is likely to struggle to compete with other retail oil sectors. Reuters noted that the volume of crude oil could sink to as low as 63 percent this year, lagging behind their peers in the US, Brazil, and Venezuela, making PEMEX the most inefficient refiners in the world.

PEMEX has always been protected by its monopoly status, but with the historic energy reform soon to be enforced, it will have to face-off against private competitors to hold its share of the demand from Mexico's motorists. This reform will permit non-PEMEX companies to distribute gasoline beginning in 2017, and the following year will allow private firms to refine crude oil and sell the fuel at market prices, as well.

The company estimated that it will process about 1.091 million barrels per day by the end of the year, and although it seems like a large volume, it is actually their lowest level since 1990.

With this decline, Mexico's Moody's Investors Service noted that PEMEX ratings have declined to the negative and the company downgraded its global scale senior unsecured rating to Baa1 from A3. The company explained, "The negative outlook on PEMEX's ratings is based on Moody's view that the company's credit metrics, particularly its financial leverage, will deteriorate further as debt is used to fund capex and taxes remain high."

Credit Officer, Nymi Almeida, reiterated about the rating, "Moody's believes that Pemex's credit metrics will deteriorate further in the short to medium term as oil prices remain depressed, production continues to drop, taxes remain high, and the company's capex needs are financed with debt".

The Wall Street Journal reported that PEMEX itself sees little impact from the downgrade of its credit, as stated by their acting chief financial officer. In a statement via email, PEMEX defended their record low crude runs, stating that they were caused by disruptions by low-sulfur diesel plant upgrades this year. The company's domestic refineries suffered 73 non-scheduled unit outages in August alone.

Still, the company is taking steps to improve its financial situation. In a statement from the company, they said that they "will make it possible to continue taking action to improve the company's capital structure." Bloomberg Business notes that this includes spending cuts and the renegotiation of pension liabilities.

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