Pemex reduces 2022 oil output forecast after platform troubles

By Amy Stillman on 9/9/2021

MEXICO CITY (Bloomberg) --Mexico cut its forecast for oil production at Pemex next year and reduced its tax burden after a string of accidents at offshore platforms signaled the highly indebted state company is struggling.

The country’s Finance Ministry lowered a preliminary estimate for crude output in 2022 to 1.826 million barrels a day, from a March 31 forecast of 1.867 million, according to a draft of next year’s budget proposal. It’s also reducing the profit-sharing duty that Pemex has to pay the government to 40% next year, from 54% in 2021.

Pemex posted a production increase last year after including a light oil known as condensate in its overall crude tally, and measuring output at a warmer temperature than government regulators. But the company continues to face output declines and reduced exports of its flagship Maya heavy crude, a problem that has been exacerbated by two offshore platform accidents in as many months, with the August explosion knocking a quarter of its output offline.

Mexican President Andres Manuel Lopez Obrador has promised to return Pemex to its former glory by scaling back the energy reforms of his predecessor, and thereby limiting competition from private companies. The measures have failed to win over international ratings agencies such as Moody’s Investors Service and Fitch Ratings, which rate Pemex bonds as junk. The company has the highest debt of any major oil company.

On Monday, Lopez Obrador said that the government has begun a process of refinancing Pemex’s debt, after the nation received a transfer of about $12 billion from the International Monetary Fund. Some observers are skeptical about whether the financial aid will be enough to move the needle on Pemex’s debt and help it revive oil production.

In February, a presidential decree gave Pemex an additional 14% credit stimulus to apply to the taxes it pays on hydrocarbons, capped at 73.3 billion pesos.

The budget draft also increased the ministry’s estimate for average oil prices next year to $55.10 a barrel, from $53.10.

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