Pemex banks on high oil prices to pay off debt, after costly bond issue
After the market imposed a sky-high rate on bonds Pemex issued in January, Mexico’s state oil company is preparing to pay its debts on its own this year and will turn to the government – rather than the market – for help if oil prices plunge, two sources told Reuters.
The strategy comes after a lengthy back and forth between Pemex and the finance ministry over who will pay the company’s mountain of debt, which at $105 billion makes Pemex the world’s most indebted oil company.
President Andres Manuel Lopez Obrador’s administration had committed in 2021 to help Pemex with its debt payments to free up company funds for investment in exploration and production with the aim of ultimately boosting output – a core goal of the government.
But as crude oil prices soared following Russia’s invasion of Ukraine, the finance ministry argued Pemex should tap unusually high profits – $9.6 billion for the first nine months of 2022 – to meet debt payments on its own.
Prices then dropped, however, changing the panorama. Pemex Chief Executive Octavio Romero warned in December that there had been talks with the treasury about fresh support.
That support was not forthcoming in January, forcing Pemex to tap the market. But the market, concerned by the apparent pull of government support, whacked a 10.375% premium on the $2 billion of issued 10-year bonds.
This report’s information was first seen on REUTERS; to read more, click this link.
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