Petroleos Mexicanos posted a fifth consecutive quarterly loss as production at the country’s state oil monopoly heads toward a decade of declining output.
A net loss of 76.5 billion pesos ($5.8 billion) in the fourth quarter widened from a 28.7 billion-peso loss a year earlier, the Mexico City-based company known as Pemex said Feb. 27 in a statement. Sales at the world’s fifth-largest crude producer fell 2.6% to 409 billion pesos.
President Enrique Peña Nieto enacted a law Dec. 20 that will end Pemex’s 76-year state oil monopoly by allowing private investment. By opening the door for foreign companies such as Exxon Mobil Corp. and Chevron Corp. to produce oil, the new law could boost foreign investment by as much as $20 billion a year, according to Carlos Capistran, chief Mexico economist at Bank of America Corp.
“We are already having important discussions with players, not only in deepwater, but in mature fields and other areas in Mexico,” Pemex CEO Emilio Lozoya said in a Feb. 17 interview. “We hope to be announcing some deals” with other companies by the end of this year or early 2015, he said.
Pemex’s daily crude production of 2.52 million barrels slid 1.5% from the same period a year ago. Output at Pemex, the third-largest crude exporter to the U.S., has fallen nine consecutive years as the company lacks sufficient funding and infrastructure to tap the biggest proven oil reserves in Latin America after Venezuela and Brazil.
Debt Sales
Pemex plans to spend $27.7 billion this year, of which 85 % will be earmarked for exploration and production, chief financial officer Mario Beauregard said Feb. 27 on an earnings conference call. The company will sell $14.7 billion of debt in 2014 and expects an annual debt payment of $5 billion, he said.
Pemex has confidence in the bond markets after energy reform and Mexico’s increased credit rating, he said. Moody’s Investors Service raised the nation’s credit grade by one level to A3 on Feb. 5, citing constitutional changes, including opening up the oil industry to private investment.
Booking Reserves
Opening up the energy market may allow Mexico to double production, Ed Morse, the New York-based head of commodities research at Citigroup, said in a Dec. 10 phone interview. That would put Mexican output at 5 million barrels a day, among the top five of world oil producers.
Under the revised law, oil companies will be offered ownership of the pumped oil and allowed to book crude reserves for accounting purposes.
Pemex reported a find of 150 million to 200 million barrels of oil in a deepwater well in the Perdido area east of the Texas-Mexico border last month. Lozoya said it will be able to partner with private companies to co-develop deepwater fields in the Gulf of Mexico.
“In some shale plays, where liquid is involved, we will be present to a lesser degree, with the objective to make some money and learn the technologies,” Lozoya said. Mexico has an estimated 13.87 billion barrels of reserves with shale gas resources that may be as much as 460 trillion cubic feet, according to data compiled by Pemex.
Mexico’s shale reserves are the sixth-largest deposits in the world, Lozoya said.
The company will need an estimated $1 trillion of investment to extract prospective reserves in the next 50 years, according to Lozoya. To do so, current annual investment must be increased to $62 billion from $25 billion.
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