Moody’s downgrades Pemex to Ba3; maintains negative outlook

July 27, 2021 | 8:44 pm

Moody’s cut Pemex’s rating from ‘Ba2’ to ‘Ba3’ due to the oil company’s high liquidity risk and its growing business risk due to its high levels of debt maturity.

The rating agency considered that the high indebtedness as it expands its refining and production capacity will generate higher operating losses in the short and medium term in the refining business.

Between 2018 and 2020, the operating losses of this segment amounted to almost 17,000 million dollars, he noted in a note.

The outlook remains negative, mainly due to Moody’s similar outlook on Mexico.

The rating agency acknowledged that Pemex has been successful in reversing the drop in production and reserves in the last two years and expects this to continue in 2021.

However, it expects its cash flow generation and credit metrics to continue to deteriorate over the next three years, as it ramps up its gasoline production while facing limited investment capacity, high debt maturities, and volatile oil and gas prices fuels.

The firm highlights that since 2016, the government has supported Pemex in various ways and estimates that this will continue so that the company can meet its debt commitments in the coming years.

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