Top Wall Street banks help Pemex pay outstanding bills to SLB

Wall Street legends Citigroup Inc. and Deutsche Bank AG have provided financing to Mexico’s state oil company Pemex to help pay outstanding bills to the world’s largest oil services provider. Schlumberger Limited (NYSE:SLB). In fact, SLB effectively hedged against a Pemex loan default by issuing over $1 billion of credit default swaps to the two banks. US-based SLB disclosed the exchanges in US federal filings — $550 million in July and $560 million in January — but did not name the banks.

Pemex is so saddled with debt amid persistently lower-than-forecast crude production that the company can only turn a profit with government support through tax incentives and capital injections. Indeed, Pemex has managed to turn a profit in only three of the past 14 years – 2012, 2022 and 2023. More worryingly, the company’s refining division has posted back-to-back losses between 2010 and 2023, despite high utilization rates and a favorable political environment. in more recent years. The company’s lackluster performance can largely be attributed to lower crude oil production, high debt levels and fluctuating oil prices. Mexico’s policymakers have yet to formulate a solution to optimize Pemex’s existing segments, including its refineries. Operational inefficiencies have permeated every corner of Pemex’s segments for so long that the company simply cannot capitalize on opportunities like high oil prices when they arise.

The deterioration of Pemex’s financial situation is evident in the substantial increase in the value of its total debt from $121.9 billion in 2010 to $233.4 billion in 2023. To put this in perspective, if Pemex were a country, its liabilities would be the seventh largest economy in Latin America. Pemex has also accumulated staggering financial debt and is now the world’s most indebted oil company: the company’s total financial debt rose from $53.7 billion in 2010 to $105 billion in 2018, where it remained blocked for years.

By Alex Kimani for Oilprice.com

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