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Mexico’s state oil company Pemex has issued a $1.5-billion bond to raise funds necessary to refinance existing debt, Reuters reported, quoting a source in the know that remained unnamed.
According to the report, this is the first time the Mexican giant has raised new debt after it lost its investment-grade rating from Moody’s. Fitch has a BBB- rating on Pemex, which is still in investment-grade.
Regardless of credit ratings, however, Pemex has become the most indebted energy company in the world and that’s despite efforts by the Lopez Obrador to strengthen the company, including through tax relief and a reversal of liberalization measures taken by the previous government.
Yet, according to the Reuters source, the new Pemex bond was substantially oversubscribed: the 6.875-percent coupon incentivized investors to bid a total $10 billion for the bond.
In addition to its swollen debt pile, which has reached some $100 billion, Pemex has also been fighting a steady production decline that most recently forced it to revise down its output projections for 2021. Last month, the country’s finance ministry said it expected Pemex to produce 1.857 million bpd on average next year down from a previous forecast for 2.027 million bpd.
The projected output for this year may also need to be revised down. The daily average is seen at 1.83 million bpd, but with natural depletion and lack of new exploration at sufficient levels, it may be difficult to achieve despite government support.
It was actually the government that may have contributed to the decline: all contracts with foreign oil field operators have been put under review for possible evidence of corruption and no new tenders for exploration blocks have been planned for the duration of this review. Between January and July, Pemex produced an average of 1.692 million bpd of crude oil, much below its forecast for the year.
By Irina Slav for Oilprice.com
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Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.