Pemex Faces Steepest Loss of $13.8 Billion Since the Pandemic, Signaling Challenges for Incoming Administration

Petroleos Mexicanos (Pemex) reported its most significant loss since the onset of the global pandemic over four years ago. The state oil company recorded a second-quarter loss of $13.8 billion, a stark contrast to the $1.4 billion profit reported a year earlier. This represents the steepest loss since the first quarter of 2020, a period marked by plummeting energy demand and collapsing prices due to worldwide lockdowns and economic contraction. Additionally, Pemex’s crude and condensate production fell to 1.784 million barrels per day from 1.88 million a year earlier.

Carlos Cortez, Pemex’s acting Chief Financial Officer, attributed the substantial loss primarily to the recent weakening of the Mexican peso during a conference call with investors and analysts.

As Sheinbaum prepares to take office on October 1, she has yet to announce the new leader for Pemex. Potential candidates include Jorge Islas, an academic advisor on energy issues at Mexico’s UNAM University, and Deputy Finance Minister Gabriel Yorio.

The incoming administration will inherit a company beset by financial and operational difficulties. Pemex holds the highest debt of any major oil explorer, approximately $99 billion, and has experienced a long-term decline in output. Cortez noted that Pemex is not currently considering a return to capital markets to address debt payments and has not received any directives from Sheinbaum regarding the leadership transition.

Under outgoing President Andres Manuel Lopez Obrador, Pemex prioritized investment in fuel production over crude exploration. However, the company’s refineries have struggled financially due to outdated technology and poor maintenance, resulting in Mexico remaining a net fuel importer. Next year, fuel imports are expected to decrease as Pemex’s Dos Bocas refinery in Tabasco increases production.

Pemex has also been plagued by a series of deadly accidents, oil spills, and methane leaks in recent years. These issues have led investors to demand a sustainability plan to significantly reduce greenhouse gas emissions.

Sheinbaum, who emphasized improving Pemex’s image during her campaign, faces significant pressure to resolve the company’s financial issues. In April, she stated her expectation for Pemex to refinance bonds ahead of their maturities in 2025. She has also committed to maintaining oil production at around 1.8 million barrels per day, meeting Mexico’s growing electricity demand through renewable energy sources, enhancing refinery efficiency, reducing fuel imports, and expanding Pemex’s operations to include new ventures such as lithium extraction and electric-vehicle infrastructure.

Additionally, Sheinbaum has pledged to continue state support for Pemex, echoing the current president’s policy. Lopez Obrador, commonly known as AMLO, has provided Pemex with approximately $74 billion in cash injections and tax breaks during his tenure.

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