(Pemex, 25.Aug.2015) – Moody’s Investors Service placed Pemex’s global foreign currency and global local currency A3 ratings under review for a possible downgrade. In this regard, Pemex makes the following remarks:
Pemex, along the entire oil and gas industry has been affected by the substantial decline in international oil prices that began in Jun.2014. Particularly, the Mexican Mix recorded its lowest level since 18.Feb.2008 ($33.71/bbl). In this regard, during that past twelve months, eight of the main global oil and gas companies have either been put to review for downgrade in their credit ratings or on negative watch.
In response to an environment of lower oil prices, Pemex announced in Feb.2015 a MXN 62 bln cut to its 2015 budget, always committed on minimizing the potential effects on production and reserves replacement. And as an example, on 10.Jun.2015, Pemex announced the discovery of new oil deposits, with estimated reserves of 350 MMboe.
Additionally, the company has also been working on several fronts to contain and reduce costs, including the renegotiation of contracts with suppliers, and reductions in costs of personnel services.
Furthermore, and regarding our pension liability, Pemex and the Union met in a timely manner the requirements set forth in the Third Transitory Article of the decree by which several provisions of the Federal Law of Budget and Fiscal Accountability, and the General Law of Public Debt are amended, supplemented and abrogated, having reached an administrative agreement with the Union on 11.Aug.2015, that sets forth the foundations to reduce the pension liability of the company within a period not exceeding 90 calendar days.
Savings generated due to these changes will represent a substantial improvement in the capital structure of the company, not only due to the result of the modifications to the pension scheme, but also by the amount of said liability that will be covered by the Federal Government, in accordance with the Third Transitory article referred to above.
It is important to highlight that Pemex will address the decrease in its revenues with the different instruments made available by the Energy Reform, and with the responsible use of its debt. In particular, the Reform allows the company to associate with third-parties in several ways to carry out its investment projects while maintaining control and ownership of the associated operations.
As part of this strategy, we are working with the Federal Government to carry out the migration of assignments to contracts, and partnerships with third-parties in the areas of exploration and production (farm-outs), as well as new incentivized contracts for the development of fields. Similarly, there are important partnership projects in other areas of the value chain, such as industrial transformation and logistics, which will be disclosed in the upcoming months.
To address the challenges associated with the fall in oil prices and the uncertainty of its duration, Pemex will use every tool available by means of the Energy Reform to improve the financial condition of the company, minimize the effect of current adverse conditions, and reaffirm itself as a pillar of national development.
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