Economics: Pemex and CFE back in the black on strong prices and forex effect but problems loom
This month both the CFE and Pemex presented their results for the first quarter, which at first glance may appear strong. Just three months after a negative 4Q21 marked a 13th consecutive year of losses at the NOC, Pemex posted a 122.5 billion peso net profit, which is its best bottom line for a first quarter since 2011. The company’s operating performance was highlighted by a slight yoy increase in crude oil production, and, above all, higher oil prices.
The price of Mexico’s crude oil export mix was up 57.4% yoy to an average 88.91 dollars per barrel (+) and were even stronger heading into 2Q as the average price broke above 100 USD/b in March and remained there through April. Moreover, production of crude and condensate rose as the company incorporated more wells and added rigs to its drilling efforts. Refinery capacity inside Mexico broke above 50%, and there were double-digit gains in the production of every major category of refinery product including LP gas, diesel and gasoline.
The company also benefited from continuing growth in domestic sales in response to stronger fuel prices. All of these factors also translated into improved financial indicators.
First quarter numbers tell a similar story at the CFE. Following two years of losses, the national electric power utility’s income statement for January-March 2022 shows an 8.7 billion peso net profit in contrast to the 37.5 billion loss recorded for the same period of last year.
Its electric power grew by roughly 9 billion pesos and, perhaps more strikingly, at a time of much higher fuel costs, the company lowered its power generation costs by more than 20 billion pesos, an achievement facilitated by the comparison against a 1Q21 marked by the famous spike in gas prices when a powerful mid February storm swept Texas and northern Mexico. But that comparison is only one part of the equation, and there is something of a statistical mirage behind those numbers given that without considering the forex effects, the CFE would have reported a 10.1 billion peso loss for 1Q2022. And yet more basic problems that have long been obvious at both companies and government policy cloud the outlook going forward.
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