Due to the low oil prices heard around the world, Mexico’s Pemex is cutting its budget by a massive US$5.52 billion ($100 billion pesos) to help meets its financial goal by deferring and dropping less-urgent projects.
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Undersecretary of Revenue of the Ministry of Finance, Miguel Messmacher, and Pemex CEO José Antonio González Anaya, during Pemex's conference call in February. Image from Pemex. |
Pemex’s board of directors has approved a prioritized adjustment program that will see reductions made throughout the company.
Leading the way, new chief executive Jose Antonio Gonzalez Anaya will cut out an estimated $1.6 billion ($29 billion pesos) to create efficiencies and reduce costs, aimed at increasing operation productivity. Anaya mentioned the budget cuts last week at IHS CERAWeek, held in Houston.
A total of $3.6 billion ($65 billion pesos) will be taken from projects that show the least promise, based on profitability and resource availability.
Since the price per barrel is anticipated to drop to $25/bbl this year, according to the Revenue Act of 2016, Pemex is stripping about $342 billion ($6.2 billion pesos) to defer investments that are not profitable at current oil prices, and that do not affect projects that are already in production this year.
Pemex said that the $5.52 billion reduction program will help the company take full advantage of the Energy Reform, and to establish strategic alliances with other companies.
In addition, the Mexican national company anticipates to have additional resources to invest in exploration and production areas that are not profitable at current oil prices, with a focus on deepwater.
“Pemex has a problem of liquidity and not solvency. This setting does not weaken the company, strengthens its long-term prospects. The measures to be implemented in the coming months will allow Pemex to overcome the current difficult situation to consolidate future as a truly productive enterprise of the State and remain, as it has been for almost 80 years, the flagship company of Mexico,” Pemex said.
The company also posted more than a $30 billion loss in 2015 that the company said was due to higher taxes. Oil production also took a hit, and fell 6.7% to 2.27 MMb/d last year, compared to 2014’s 2.43 MMb/d.
Read more:
CERAWeek: New Pemex CEO details road ahead
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