Pemex is getting a spending boost weighted toward increased exploration and production for 2022 from Mexico President Andres Manuel Lopez Obrador. The proposed $32-billion budget represents a 17% increase over this year, with $18 billion earmarked to boost falling hydrocarbon production, a 26% increase year-over-year.
The budget increase is aimed squarely at turning around years of depleting production from the company’s benchmark fields. The higher investment in hydrocarbons runs counter to current trends in planned global energy spending, which includes setting aside more cash for renewables projects.
In addition to a higher budget, the government has reduced Pemex’s profit-sharing duty to 40% next year, from 54% in 2021. It has also begun a process of refinancing the oil company’s debt, after the nation received a transfer of just over $12 billion from the International Monetary Fund (IMF). Obrador has suggested using these funds for Pemex debt repayment, but it is not clear if they will be used for that purpose.
“Remember the $12.5 billion that arrived that belong to the public treasury, we want that to be used to pay off debt, but it's not possible to give information on the subject because of the principles or norms that are established,” he said.
While substantial, the funds would not make much of a dent in Pemex’s $115-billion debt load, the largest of any oil company.
Pemex has said that it aims to end 2021 with a daily average production of 1.8 million B/D, up from an average of 1.685 million B/D with partners in the first 7 months of the year. The company did suffer some production setbacks this year, most recently involving the shut-in of more than 420,000 B/D related to a platform fire at its Ku-Maloob-Zaap field complex in Campeche Sound. That production has been restored, according to Pemex.
Mexico’s Finance Ministry expects Pemex’s oil production, including condensate, to reach 1.826 million B/D in 2022, up 4.2% from this year.
Earlier this week, Pemex posted a net profit of $722.5 million for the second quarter, buoyed by higher commodities prices and healthy production volumes. The company said the profit was driven by higher income from international sales, which doubled from a year earlier due to higher crude prices and a small increase in exports.
"With the trend of the results we are achieving and especially with the support of the federal government, there is no risk to meet our financial commitments," said Pemex Chief Financial Officer Alberto Velasquez in an analysts call.
Pemex’s production of crude and condensate rose to 1.736 million B/D, a 3.8% increase from second quarter 2020.