Payment defaults hit Mexican state energy company Pemex’s oil production

Mexico City — Mexican state energy company Pemex had its crude oil production hit because it keeps accumulating debt with its service providers, two sources said, a situation that has forced it to publicly reiterate twice last week that the debts would be paid.

While Pemex has not published its latest figures for crude oil and condensate output, data from the hydrocarbon regulator showed last week that production for both fell 6% year on year in April to 1.75-million barrels per day (bpd).

Crude oil production alone was 1.47-million bpd, the lowest output for the company in 45 years.

One of the sources said that Pemex not paying its service providers was one of the main reasons that affected output over the past few months, followed by an accident on an offshore platform in April.

Pemex never gave details of the accident though Reuters reported an initial decline of 20,000 bpd.

In its latest debt report, Pemex listed pending payments worth about $8.82bn by end-April. The number does not include taxes, amounts in litigation or those in settlement talks.

In its first-quarter results, Pemex had listed $21.9bn in pending payments. It later reported that it had meanwhile paid $6bn.

None of these numbers include the $101.5bn financial debt, which is largely held in the form of bonds.

One of the sources said that due to not getting paid for their services, some companies stopped working for Pemex partially or completely. The source did not disclose names.

It was also unclear which companies Pemex owed the most.

Pemex did not respond to a request for comment.

Payments scheduled

In public documents it has listed Dowell Schlumberger, Halliburton, Baker Hughes, Weatherford and Sinopec as some of the hundreds of companies it owes.

While the second source confirmed this, they added that some payments would be scheduled and once companies receive it they would return to work and production would pick up in May.

Earlier this year, several industry groups representing service providers as well as private producers sounded alarm that production, investment and in some cases even the survival of companies were at risk.

Pemex had resumed some payments in February, favouring larger companies at the expense of others.

On Wednesday, Pemex issued a statement pledging to pay its debts and highlighting that it had been paying between 39-billion pesos ($2.34bn) and 70-billion pesos per month since the start of the year.

On Thursday, Pemex doubled down with another statement in which it pledged to pay 70-billion pesos in May.

Mexico holds a general election on June 2, and President Andres Manuel Lopez Obrador has been keen to show that his policies have helped the ailing state company over almost six years in office, and that his successor would continue to do so.

Claudia Sheinbaum, the candidate from Lopez Obrador’s ruling National Regeneration Movement, has been leading most polls by a substantial margin.

Under Lopez Obrador, Pemex received financial lifelines in the form of cash injections and tax cuts of about $90bn.

Reuters