Page 7 - LatAmOil Week 08 2021

LatAmOil MEXICO LatAmOil

The government intends to apply this support financial burdens of the NOC, which has a high
in stages, beginning in February and continuing tax burden of around $27bn per year, making it
throughout the year, he said. one of the most highly taxed oil companies in
As of press time, Pemex had not commented the world.
publicly on the matter. However, Mexican Pres- News of the stimulus helped the compa-
ident Andres Manuel Lopez Obrador confirmed ny’s euro- and dollar-denominated bonds gain
on February 25 that the government was plan- momentum last week. This was in line with
ning a capital injection for the company. The what market experts told Bloomberg at the time
NOC needs these funds in order to sustain its – namely, that they expected the Mexican gov-
upstream operations, he declared. “It will get ernment to continue supporting Pemex despite
help so it doesn’t lack funds for work on explo- its massive debt load.
ration and production at oilfields,” he said. Indeed, Finance Minister Arturo Herrera
As of press time, no details were available on told Bloomberg last week that the government
the capital injection plan. If the injection is as would take some sort of action soon with respect
large as Reuters’ source predicted, it will bring to the company’s debts.
the total value of the stimulus package up to Meanwhile, one of the largest international
about $5bn. ratings agencies, Moody’s Investor’s Service, has
The government’s plan will complement pointed out that the stimulus package will con-
a set of concessions designed to help Pemex tribute to the widening of Mexico’s fiscal defi-
– namely, adjustments in the tax regime that cit, which is set to reach the equivalent of 4.1%
lightened the company’s profit-sharing duties of GDP in 2021. In a statement, Moody’s said
from 65% in 2019 to 58% in 2020 and 54% in it expected Pemex to receive $14.7bn worth of
2021. These measures are expected to lighten the state support this year. ™

Finance minister comments on

changes in annual oil hedge deal

MEXICO’S government has revised the param-
eters of its annual oil hedge deal and may make
further changes in the future, Finance Minister
Arturo Herrera has said.
Herrera told Bloomberg in an interview last
week that Mexico had taken a different approach
to this year’s hedge deal in order to keep its plans
confidential. To this end, he said, it has been pur-
chasing put options in smaller batches over the
course of the year rather than pushing the whole
deal through over a relatively short period.
“We needed to plan a new strategy,” Herrera
said. “We needed to be more careful and spread
the hedge over time.” Finance Minister Arturo Herrera (Photo: El País)
He also stated that Mexico was willing to
arrange its hedges, which are typically worth financial instruments ahead of the government,
about $1bn per year, on shorter notice. The increasing considerably their price,” he told
government has typically worked with Wall Bloomberg.
Street financiers and oil majors to set the prices The news agency noted that Mexico’s gov-
and terms of the deal in advance, by the end of ernment had already made certain information
November for the following year, but it is now about the annual oil hedge a state secret. It did
open to doing so in the same year it is trying to so in order to bar hedge funds and other third
hedge, he explained. There is, he pointed out, parties from anticipating its moves, Bloomberg
“no legal impediment to [buying] the hedge said.
during the same year.” Mexico executed its first oil hedge deal in
Changes of this kind are necessary, the 1991 and began carrying out annual hedges reg-
finance minister said, to prevent speculators ularly in 2001. Within the last two decades, it has
from trying to trade ahead of the hedge in order spent about $15.1bn on the transaction, which
to secure the lowest price for put options. “Sev- allows it to guard against unexpected dips in oil
eral institutions outside the hedge could use prices. The hedge has paid out on four occasions,
the information to speculate, buying the same allowing the country to earn $16.5bn back. ™

Week 08 25•February•2021 www. NEWSBASE .com P7