Petroleos Mexicanos said on Friday its losses narrowed 93% in the first quarter after higher sales, lower imports and tax cuts eased pressure on Mexico's highly indebted state oil company.
Pemex, as the company is known, said the net loss of 37.297 billion pesos ($1.8 billion) shrank from 562.130 billion pesos in the year-ago quarter.
Foreign exchange movements, financing costs and derivatives all racked up losses that offset its total income of 317.553 billion pesos ($15.7 billion).
Edgar Cruz, head of credit research at BBVA in Mexico, said he expected income and net profits to recover this year with considerable government support.
"Starting this quarter, we could see the impact of the aid that the Mexican government will be giving Pemex this year," said Cruz, who has tracked the oil company for 15 years.
Lower taxes and additional financial support from President Andres Manuel Lopez Obrador's government as well as existing credit lines with banks "will be enough" for the driller to make it through the year, Cruz said.
Financial debt at the world's most indebted state oil company reached $113.9 billion at the end of the first quarter, including tens of billions of dollars in bonds held by investors worldwide.
Chief Financial Officer Alberto Velazquez said Pemex had no plans to tap international bond markets to meet financing needs.
"We will continue to work with a lot of financial discipline," Velazquez told investors during an earnings call.
Pemex produced an average of 1.751 million barrels per day (bpd), excluding partners, its accounts showed.
Officials said the oil company, which processed an average of 747,000 bpd during the quarter, will receive government support to pay back debt due in the coming months.
An oil nationalist who has staked his reputation on reviving Pemex, Lopez Obrador has thrown the company several financial lifelines in the form of cash injections or bond refinancing.
The measures have weighed on the sovereign credit rating, with a Moody's analyst citing the possibility of further support as a reason the agency has kept Mexico's outlook negative.
Lopez Obrador has also taken a series of steps aimed at weakening the influence of Pemex's competitors, including changes to energy legislation that strengthen its market power at the expense of private companies.
Lopez Obrador argues that the last government's liberalization of the energy market put Pemex and state power utility the Comision Federal de Electricidad (CFE) in existential peril.
But investors and credit ratings agencies have said Lopez Obrador's plans are insufficient to address Pemex's financial and operating problems.
Prior to the first-quarter loss, Pemex had posted two consecutive quarters of net profits due to foreign exchange distortions.
Despite a rebound in the second half of 2020, Mexico's largest state company ended last year with a net loss of 480.76 billion pesos.
Julio Ruiz, a former Mexican finance ministry official who is now chief economist for Mexico at Brazilian bank Itau, said recent legislative changes will not be enough to turn the company around.
"It's only going to buy time," Ruiz said.
($1= 20.4200 pesos at end-March)
(Reporting by Adriana Barrera, Stefanie Eschenbacher and Ana Isabel Martinez; Editing by Richard Chang)