Page 4 - LatAmOil Week 47 2019

LatAmOil COMMENTARY LatAmOil
Trouble ahead for Pemex? (Photo: Carlos Hernandez)
Pemex may be able to avoid another downgrade, but it still faces challenges
S&P representatives have said the NOC is not in imminent danger of another ratings cut. But the company’s oil production is still falling, and its contractors are getting nervous
WHAT:
S&P does not expect to reduce state-owned Pemex’s ratings before the end of the year.
WHY:
he company’s financial position remains precar- ious, and its contractors are concerned about delayed payments.
WHAT NEXT:
Observers fear Pemex may be heading for a “train wreck.”
MEXICO’S national oil company (NOC) Pemex does not appear to be in imminent dan- ger of another credit ratings downgrade, at least not before the end of 2019. A representative of the Standard & Poor’s credit ratings agency indi- cated last week that he did not expect to revise the outlook for the company in the near term.
According to Luis Manuel Martinez, S&P’s lead analyst for Pemex, the NOC will probably not see its credit ratings fall within the next few months. “We have not identified a single factor that makes us think that we should change [the current] evaluation in the short term,” he said at an event in Mexico City last week.
Lisa Schineller, S&P’s head of Latin Ameri- can sovereign ratings, suggested that Pemex had gained some positive momentum as a result of Mexican government policies that weight invest- ment decisions in its favour. (She was referring, in part, to developments such as the cancellation or postponement of competitive bidding for oil and gas contracts, as well as the introduction of a
requirement that foreign service providers work for Mexican contractors rather than for Pemex directly.) However, she stressed that the state’s efforts to give the NOC an edge over its competi- tors might lead to a decline in private investment in Mexican oil and gas projects.
Pemex has already seen its ratings drop twice this year. In March, S&P reduced the company’s credit rating from BB- to B-. It also changed its outlook for the NOC from stable to negative, while keeping the global investment grade rat- ing at BBB+.
Then in June, Fitch Ratings took the more dramatic step of cutting Pemex’s credit rating from investment grade to speculative grade, effectively giving the company’s securities “junk” status. It also changed its outlook for the company to negative at the same time.
Production down
The two agencies’ moves have spurred concern
about the possibility of additional downgrades. 
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w w w . N E W S B A S E . c o m Week 47 28•November•2019