Background on Petróleos Mexicanos (Pemex)
Petróleos Mexicanos, commonly known as Pemex, is Mexico’s state-owned petroleum company and a significant player in the global energy market. Established in 1938, Pemex is responsible for exploring, drilling, and producing oil and natural gas in Mexico. It is also involved in refining petroleum products, transporting fuels, and marketing them both domestically and internationally.
Fitch Ratings’ Decision
On Thursday, Fitch Ratings, a leading global rating agency, upgraded Pemex’s long-term debt ratings from “BB” to “BB+” in both local and foreign currency denominations, while maintaining a stable outlook.
The upgrade comes after Pemex successfully executed a bond buyback offer for bonds maturing between 2026 and 2029, with a maximum amount of $9.9 billion, which was completed on September 30th. The transaction covered 11 series of bonds in both US dollars and euros.
Rationale Behind the Upgrade
Fitch Ratings explained that the bond buyback transaction signifies a stronger link between Pemex and the sovereign, resulting in an improved evaluation of Supervision, Linkage, and Support (OLS) for the company.
The Mexican federal government recently launched an ambitious plan for Pemex, aiming to achieve financial self-sufficiency by 2027.
With this upgrade, Fitch now rates Pemex only one notch below Mexico’s sovereign rating instead of two notches, reflecting the company’s improved standing.
Financial Profile and Challenges
Despite the rating upgrade, Fitch acknowledged that Pemex still has a “weak financial profile” with liquidity constraints and low production levels.
The agency also warned of the risk of overinvestment in strategic assets, both in exploration and refining sectors.
Fitch’s independent credit profile for Pemex remains at “ccc,” highlighting the ongoing challenges.
As of now, Pemex’s financial debt stands at approximately $99 billion, while its debt to suppliers amounts to around $23 billion.
Key Questions and Answers
- Who is Petróleos Mexicanos (Pemex)? Pemex is Mexico’s state-owned petroleum company responsible for oil and natural gas exploration, drilling, production, refining, transportation, and marketing.
- What led to Fitch Ratings’ upgrade of Pemex’s credit rating? The successful bond buyback offer for bonds maturing between 2026 and 2029, with a maximum amount of $9.9 billion, strengthened the link between Pemex and the Mexican sovereign, leading to an improved evaluation of Supervision, Linkage, and Support (OLS).
- What does the “weak financial profile” mean for Pemex? Despite the rating upgrade, Fitch acknowledges that Pemex still faces liquidity constraints and low production levels. The agency also warns of the risk of overinvestment in strategic assets, such as exploration and refining sectors.
- What are Pemex’s current debt levels? As of now, Pemex’s financial debt is approximately $99 billion, and its debt to suppliers amounts to around $23 billion.
