Two years after Mexico passed sweeping energy reforms, the new CEO
of Petroleos Mexicanos is racing against time to bring in partners that
can revitalize its money-losing refineries and rescue it from an 11-year
slump in oil output.
"If Pemex hasn’t found partners by next
year, we are going to be in deep trouble,” Chief Executive Officer Jose
Antonio Gonzalez Anaya said in an interview Tuesday at Bloomberg’s
headquarters in New York.
Jose Antonio Gonzalez Anaya
Photographer: Michael Nagle/Bloomberg
Gonzalez
Anaya is promising investors and analysts that they’ll hear by
Thanksgiving how he plans to attract international oil companies to
partner with Mexico’s troubled oil giant. To provide short-term
financing while the company waits for alliances to be formed, Pemex will
return to the bond market to issue about $1.5 billion this year, he
said.
Pemex
has been pummeled by the worst plunge in oil prices in a generation and
a decline in production that has stretched for more than a decade.
Gonzalez Anaya is aiming for 100 billion pesos ($5.77 billion) of cost
cuts this year to stem the company’s losses, which reached $32 billion
last year and will continue in the first quarter. To do that, he is
looking for partners in the "entire line" of Pemex’s business, including
about $2 billion in deals with private equity firms KKR & Co. LP
and First Reserve Corp.
Bringing
in partners may include giving up an operating interest in some of its
refineries, which lose 100 billion pesos a year, according to Gonzalez
Anaya. Pemex still plans to modernize its refineries to improve
efficiency, though doing so will require financial and technical
assistance from a partner, he said.
"There a lot things that, within the new rules, they don’t necessarily have to be run by Pemex," Gonzalez Anaya said in an interview on Bloomberg TV with Erik Schatzker. He
said that Pemex is open to have a majority operator in upstream and
downstream areas "in the entire structure," and he’s already in talks
with some potential partners.
Pemex,
which celebrated Mexico’s opening of the country’s long-standing
government oil production monopoly in 2013, has yet to capitalize on the
legislation that allows the company to create joint ventures to boost
crude production in areas where it lacks the technical ability to do so,
such as in deepwater fields. Its six refineries have deteriorated as
the company has delayed maintenance and failed to invest enough money to
modernize the plants. That has kept Mexico dependent on fuel imports,
particularly from the U.S.
Capital Infusion
Pemex’s first
quarter earnings are likely to be "very bad" given the slump in Mexico’s
crude prices during the first three months of the year, Gonzalez Anaya
said. Pemex finished 2015 with more than $87 billion in debt, according
to the company’s fourth quarter earning statement.
Mexico
announced on April 13 that it would give Pemex a capital injection of
73.5 billion pesos to pay off outstanding debts to oil service providers
and absorb some of the company’s pension liabilities. The infusion
comes as the spread between Pemex and Mexico’s sovereign debt is the
widest between all state-owned oil companies and the countries that
control them, according to data compiled by Bloomberg.
The purpose
of the trip for Gonzalez Anaya, who was accompanied in New York by
Chief Financial Officer Juan Pablo Newman and Mexican Finance Minister
Luis Videgaray, was to explain the February budget adjustments and the
recent government aid package, he said.
Deficit Target
"The
bottom line for us is that we have taken these two big steps, in terms
of the budget adjustment and the government support, and they give us a
solid financial foundation to do the structural things," he said. "But
we need to do the structural things, otherwise it’s not going to work."
Asked
if he will be able to deliver on a financial deficit target for the
year set at 100 billion pesos, Gonzalez Anaya said "Yes. I’m going to
try really, really, really hard to do that."
The meetings held
with banks and credit rating companies marked the first time in at least
three decades that Mexico’s Finance Minister and the Pemex director
held a joint meeting with investors, Gonzalez Anaya said. The meeting
was used to "send a clear signal that the government is behind us," he
said.
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