Economics: Marginal gains in 1Q23 fall far short of what Pemex needs, while refineries remain underutilized

MEXICO - Report 15 May 2023 by Mauricio González and Francisco González

Pemex’s first quarter results delivered signs of improvement on multiple fronts even as weaker prices for its products contributed to a 53.6% drop in net income compared to the same quarter of 2022. That result also reflected a 19.1% reduction in total sales from a year earlier, as well as an erosion of its fixed assets. The diminished sales performance reflected relatively depressed prices, including a 25.9% yoy drop in the average price paid for Mexico’s crude oil export mix and broader downward pressures on hydrocarbon prices around the world.

Crude volumes shipped abroad increased 9% at the same time as crude processing at refineries rose from an average of 822 million barrels daily during the first quarter of 2022 to 835 Mbd in the same period of 2023. The country’s network of state-owned refineries operated at 50.9% of capacity. That 8.0 pp improvement relative to 1Q22 still left installed capacity greatly underutilized, but was enough to allow for increases in the production of petroleum products (+16.2% ), fuel oil (+16.3%), jet fuel (25%) and LP gas (27.3%). More concerningly, however, production of much more widely consumed gasoline and diesel fell by 1.1% and 11.3%, respectively, prompting increased dependence on imports of both gasoline (+6.7%) and diesel (+94.7%). The report also confirmed an extension of the trend toward Pemex's contributing less and less to government coffers as the 71.8 billion pesos it paid in taxes and duties last quarter was 30 billion less than it paid in 1Q22.

Pemex’s total financial debt decreased 7.0% yoy, a performance in line with the company’s objective of maintaining net indebtedness close to zero, but also thanks to the extent to which the peso has firmed, causing a reduction in the external debt expressed in MX pesos, and to continuing support from the Federal Government. Pemex has stated that it will seek to avoid expensive capital markets, even though it faces a considerable volume of debt maturing both this year and next.

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