Prelude to a Bailout
Mexico’s biggest company, state-owned oil giant Pemex, notched up 13 consecutive quarters of rising losses and now faces the toughest test of its 78-year existence: staying alive.
Pemex just published its annual results for 2015. Even with expectations already at the bottom of the barrel, so to speak, Pemex somehow managed to both shock and disappoint in equal measure with the sheer scale of its total annual loss: 522 billion pesos ($30 billion), almost double its loss in 2014.
Operating costs increased 19% to $81 billion, sales plunged by $25 billion, and daily oil production fell by 6.7%. The company also ended 2015 owing suppliers $8.2 billion.
Its total debt is expected to surpass $100 billion this year. Luckily, Pemex’s new director José Antonio González Anaya was on hand to calm investor nerves by reiterating that Pemex is not insolvent — it just has liquidity issues. The Financial Times begs to differ, arguing that if Pemex were privately owned, it would already be bankrupt.
The government’s decision last week to slash the company’s operating budget for 2016 by $5.6 billion is unlikely to help matters. According to González Anaya, most of the cuts will be felt in the firm’s loss-leading refining operations (35%) as well as its exploration and production activities (46%), its biggest source of profits. Assets will be sold off left, right, and center. Investments will be curtailed. And strategic partnerships will be sought. In other words, as the company’s debt grows, its output will continue to shrink.
Pemex’s autopsy has already begun. According to the FT, one of Pemex’s biggest problems is the size of its workforce, which is seven times as large as Norway’s state-owned Statoil and over a third larger than the world’s biggest oil majors, Shell, BP and Exxon Mobil. Certainly the firm’s 153,085 employees, together with the huge pension liabilities they entail, last estimated at over $90 billion, represent an unwieldy drain on resources.
…click on the above link to read the rest of the article…
