Mexico Backs State Oil Giant Pemex With $4 Billion Capital Injection

Mexico's state-owned oil giant Pemex, the world's most indebted oil company, has received a capital injection of $4.16 billion (70 billion Mexican pesos) from the finance ministry, sources with knowledge of the matter told Bloomberg on Friday.

The Mexican government and President Andrés Manuel López Obrador are looking to support the company and help it pay off its huge debt, which was more than $107 billion as at the end of March 2023.    

Earlier this week, Pemex's chief executive Octavio Romero said that it would be cheaper if the government refinanced the debt than Petroleos Mexicanos, as Pemex is officially known, going to the market to do it itself. 

"Pemex's debt is the country's debt, they go together. It doesn't make any sense that Pemex would give away money to big financial companies, to big banks," Romero said at a news conference earlier this week, as carried by Bloomberg.

"The president of the republic has determined that now the bond issuances or refinancings be done by the Finance Ministry according to the financial costs of the sovereign, and this will save the country a lot of money."

Due to its huge debts and poor environmental and safety record, Pemex has come under increased scrutiny by credit rating agencies in recent weeks.

Two weeks ago, Fitch Ratings downgraded Pemex squarely into junk territory after several accidents and "weak operating performance". Fitch slammed the company's safety record, which it said would prevent Pemex from securing financing from banks and investors.  

Last week, Moody's changed the outlook on Pemex to 'negative' from 'stable', to reflect the rating agency's view that "absent fundamental changes in PEMEX's business strategy the company is likely to face increased credit risks, given the inability of the company to increase capital investments and improve its financial and operating performance as a result of liquidity constrains."

Moody's assumes that the support for Pemex from Mexico's government will continue to be very high in 2023 and 2024.   

By Tsvetana Paraskova for Oilprice.com

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