Mexico's Pemex Scores Net Profits in Fourth Quarter as Government Cuts Taxes

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Written by Amir Richani for Industrial Info Resources (Sugar Land, Texas)--Petroleos Mexicanos (Pemex) (Mexico City) registered net income of 106.9 billion Mexican pesos (US$6.2 billion) during fourth-quarter 2023, recovering from losses of 95.6 billion pesos (US$5.5 billion) experienced during the same period of 2022, and swinging back from losses of 79.1 billion pesos (US$4.6 billion) in the third quarter of 2023.

The financial results were the outcome of lower net expenses despite a decrease in total sales and a reversal of the fixed assets impairment. More importantly, Pemex obtained such net income thanks to Mexican President Andres Manuel Lopez Obrador's decree waiving Pemex's taxes for the fourth quarter.

In February, the Mexican government granted the energy company a fiscal stimulus to cover 100% of the tax credit profit-sharing duty, known as DUC, for the months of October, November and December. "The DUC, the most important duty paid by the company in terms of amount, decreased by 100.2% as compared to 4Q22," Pemex said in its quarterly report.

Since coming to power, Lopez Obrador has put the rekindling of Pemex at the heart of his agenda, making it a bastion of pride for his administration. With the end of his administration nearing, Lopez Obrador could be making sure he leaves the company in a positive status by granting it fiscal incentives.

However, such measures have triggered criticism from credit rating agencies, as the measures put pressure on Mexico's overall finances and do not solve Pemex's underlying problems.

Under Lopez Obrador's administration, Pemex has been able to arrest oil production declines experienced for years. During the fourth quarter of 2023, the energy company produced 1.85 million barrels per day (BBL/d) of oil, about 3% more than during the same period in 2022.

The higher output over the last few quarters has resulted from new oil wells in fields such as Quesqui, Tupilco, Ixachi and others.

On the other hand, natural gas production decreased by almost 1% year over year to 32 million standard cubic feet per day (MMcfd) in the last quarter.

On the downstream front, refining rates in the fourth quarter across Pemex's six refineries stood at 731,000 BBL/d, about 47,000 BBL/d lower than in the third quarter and 107,000 BBL/d less year over year. The reason behind the drop was maintenance and rehabilitation work at the Madero, Salina Cruz and Tula refineries in October and November, according to the company's report. Although Pemex has scored higher refining rates in recent years, downstream utilization in the last quarter stood only at 44.6%.

Despite several promises to start up the new 340,000 BBL/d Dos Bocas Olmeca refinery last year, Pemex could not commence commercial operations. Earlier in February, Industrial Info said that "the commercial start date is set for May 2024; however, based on recent research by IIR Energy, the commercial startup could be even further postponed due to delay on commissioning, testing and pre-start up activities."

Industrial Info Resources (IIR) is the leading provider of industrial market intelligence. Since 1983, IIR has provided comprehensive research, news and analysis on the industrial process, manufacturing and energy related industries. IIR's Global Market Intelligence (GMI) helps companies identify and pursue trends across multiple markets with access to real, qualified and validated plant and project opportunities. Across the world, IIR is tracking more than 200,000 current and future projects worth $17.8 Trillion (USD).