Mexico | Underinvestment in E&P prompts Fitch to downgrade Pemex’s bonds to junk status

Fitch downgrades Pemex’s bonds to junk status as the company keeps facing serious underinvestment in E&P because of its relatively high fiscal burden.

Key points

• Key points:
• Fitch also has a negative outlook on Pemex’s credit rating because the company’s current tax bill significantly pressures its cash flow generation and reinvestment capabilities.
• Arguably, the lack of government action on several fronts to allocate more resources to E&P capex this year could have been the trigger for the downgrade decision.
• We recommend that the government should cancel its new refinery project, reactivate the farmouts business model and accelerate the development of 20 new O&G fields.

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