Mexico | Recommendations for Pemex to face a cutback in production

Summary

Pemex should take advantage of the 100,000 barrels a day cutback to reduce capex in E&P in 2020. This policy action would boost its liquidity, improve chances of meeting its financial balance approved by Congress and avoid increasing its financial debt.

Key points

• Key points:
• Given the significant increase in Pemex bonds yields, it is not recommendable that Pemex issues more debt from the perspective of its financial balance
• Processing more oil barrels in Pemex refining activities does not appear to be an economically viable solution to the replacement of gasoline and diesel imports, given Pemex's ongoing structural problems, namely obsolete plants, low levels of maintenance and labor inefficiencies
• The collapse of oil prices in recent weeks has had a significant impact on the public sector. We anticipate that oil revenues (including estimated profits from the 2020 oil hedges) will be 20% lower than the amount approved by Congress for this year

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