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Pemex corporate outlook report

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If Pemex is able to execute a successful turnaround, the upside is material.

Norman Valentine

Director, Corporate Research

View Norman Valentine's full profile

What’s inside this report?

State-owned Mexican NOC Pemex is one of the largest oil producers in the world. But the company has one of the weakest growth outlooks in the sector.

Over the last five years, the government and Pemex have taken steps in the right direction to improve the company’s performance. But real transformation requires broader action.

We take a closer look at Pemex’s prospects and consider whether a successful turnaround is possible for the struggling oil company.

What key questions does this report answer?

Get answers to all your questions about Pemex, including:

  • Pemex can no longer afford to fund state coffers. How could it improve its finances?
  • Mature assets underpin its upstream business. Can partnerships with IOCs help accelerate upstream development?
  • Significant resource remains in Mexican waters. What role should exploration play?
  • The Dos Bocas refinery project is moving forward. Will this move backfire?

14 May 2019

Pemex corporate outlook report

Report summary

Pemex's outlook faces greater uncertainty following the election of President Obrador in December 2018. Energy Reform progress has slowed down and dented investor confidence. A government push to build a massive new refinery in Dos Bocas could lead to capital misallocation. Tough operational and financial challenges remain. Mexico's NOC is one of the largest oil producers in the world, but years of political complacency have left the company with one of the weakest growth outlooks in the sector. The fiscal regime under which the company operates does not work in a low oil price environment, forcing Pemex to increasingly turn to debt markets. Comprehensive reform, however politically unpalatable, is required to turn things around. If Pemex's financial outlook improves, they can then step up investment in upstream and capture significant upside from Mexico’s large remaining resource potential.

Table of contents

  • Overview
  • Net debt outlook, liquidity and hedging
    • 1. Fiscal change is essential to restoring financial health
    • Energy Reform brings improvement – momentum must be maintained
    • Divestments will improve finances and operational efficiency
    • 2. Sustaining the base business
    • Fully exploiting the Bay of Campeche and applying EOR
    • 3. Strategic partnerships ease budget strains and accelerate development
    • Deepwater
    • Shallow water
    • Onshore
    • 4. Exploration activity is essential to replenishing reserves
    • Deepwater could drive growth
    • Shallow water still holds prospects
    • Onshore prospects diminishing
    • Overview
    • Industrial Transformation – streamlining secondary businesses
    • National Refining Strategy takes centre stage
    • Refining ambitions could lead to capital misallocation
    • Marketing – competition on the rise
    • Midstream and other businesses
  • Wood Mackenzie base case valuation metrics
  • Wood Mackenzie base case investment and cost metrics
  • Wood Mackenzie base case production metrics
  • Wood Mackenzie base case reserves and resources metrics

Tables and charts

This report includes 52 images and tables including:

  • Key financial performance metrics
  • Net debt evolution
  • Cash flow breakeven (Brent price)
  • Post-tax cash flow outlook breakdown (base-case)
  • Total debt and debt issuance
  • Net debt outlook
  • Upstream EV vs. Upstream NPV,10
  • Upstream portfolio sensitivities vs. NPV,10
  • Current NPV,10 vs. future NPV,10
  • Base case upstream NPV,10
  • Forecast development expenditure (nominal)
  • Forecast operating expenditure (nominal)
  • New project returns
  • Reported development costs
  • Reported and WM forecasted production
  • Oil vs. gas
  • Liquid production
  • Gas production
  • Total reserves: Wood Mackenzie commercial
  • Total reserves: commercial vs. subcommercial
  • Total reserves: reported vs. Wood Mackenzie
  • Reserve life: reported vs. Wood Mackenzie
  • Base price assumptions (nominal terms)
  • Base price assumptions (nominal terms)
  • Base, high and low Brent (nominal terms)
  • High price assumptions
  • Low price assumptions
  • Valuation assumptions
  • Foreign exchange rate assumptions
  • Benchmark: net income vs. EBIT (2014-2018)
  • Benchmark: upstream cash flow per boe
  • Upstream portfolio NPV,10 - pre-tax vs. post-tax
  • Ek-Balam NPV,10: old vs. new terms
  • Pemex's well and rig count
  • Proven reserves evolution
  • Benchmark: 3-yr production CAGR evolution
  • Investment by key asset
  • Key legacy asset production declines
  • STOIIP vs. recovery factor at EOR candidates
  • Farm-out results and key upcoming opportunities
  • Trion capex & cash flow - Pemex vs. BHP
  • Production forecast net to Pemex for farm outs
  • Benchmark: reported reserves additions per exploration capex (2012-2017)
  • Benchmark: WM reserves replacement via conventional exploration (2009-2018)
  • Deepwater acreage holders in Mexico
  • YTF vs. full-cycle IRR
  • SWOT analysis
  • Realized refinery utilisation rates with WM forecast
  • Downstream operating income vs. refinery utilisation
  • Refinery supply and intake summary
  • Realized and forecasted supply-demand balances

What's included

This report contains:

  • Document

    Pemex corporate report

    ZIP 1.26 MB

  • Document


    XLSX 342.65 KB

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