In a move to bolster Mexico’s state-owned oil giant, Pemex, the finance ministry has provided a substantial capital injection of $4.16 billion (70 billion Mexican pesos), according to sources familiar with the matter.
Pemex, facing the burden of being the world’s most indebted oil company with outstanding debts exceeding $107 billion as of March 2023, is receiving support from President Andrés Manuel López Obrador and the Mexican government to alleviate its financial strains.
Pemex’s Chief Executive, Octavio Romero, highlighted that refinancing the debt through the government would be more cost-effective than seeking market-based solutions independently.
Romero emphasized the interconnection of Pemex’s debt with the country’s overall financial well-being and criticized the notion of diverting funds to financial institutions and banks instead of consolidating efforts to tackle the issue.
President López Obrador has taken a decisive stance, directing that bond issuances and refinancing be managed by the Finance Ministry, aligning them with the sovereign’s financial costs, resulting in substantial savings for the nation.
However, Pemex’s precarious financial situation and subpar environmental and safety track record have raised concerns among credit rating agencies.
Fitch Ratings recently downgraded Pemex to junk status following a series of accidents and weak operating performance, spotlighting the company’s safety practices that could hinder access to financing from banks and investors.
Moody’s also revised its outlook for Pemex to ‘negative’ from ‘stable’, signaling that without fundamental changes in the company’s business strategy, it faces escalating credit risks due to liquidity constraints impacting capital investments and financial and operational performance.
Nonetheless, Moody’s anticipates continued robust support from Mexico’s government for Pemex throughout 2023 and 2024.
The capital infusion aims to strengthen Pemex’s financial position and underscores the government’s commitment to address the challenges faced by the oil behemoth, seeking to ensure its sustained contribution to Mexico’s energy landscape.
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