According to the company’s website press release on October 28, 2022, in the third quarter of 2022, PEMEX continued to strengthen its operating performance with efficiency practices and maintaining an orderly and disciplined financial policy, to support the substantive goals and objectives of the company.
Hydrocarbon exploration and production activities continued to be promoted through the incorporation of production from new developments, which is reflected in the production platform increase.. In 3Q22, PEMEX's liquids production, not considering partners, averaged 1,764 Mbd, a 24 Mbd increase as compared to 3Q21.
Pemex strengthen efforts aimed at generating increasingly clean energy, through initiatives focused on the management and use of gas. In 3Q22, stands out the progress obtained in the use of gas, which averaged 89.6%, an improvement of 2.67 percentage points as compared to the similar period in 2021.
In industrial processes, priority has been given to the rehabilitation of the National Refining System, resulting in a 112 Mbd improvement in crude oil processing, a 16.2% increase, from 695 Mbd in 3Q21 to 807 Mbd in 3Q22. These operating results, together with the increase in hydrocarbon prices, are reflected in better financial results. Operating income amounted to MXN 104 billion in the 3Q22, MXN 18 billion more than in 3Q21. In 3Q22 a net loss of MXN 65 billion was recorded, MXN 12 billion lower than the net loss of MXN 77 billion recorded in 3Q21. In the quarter, a responsible use of debt was maintained, seeking to optimize financing sources with structures that would limit direct activity in the markets while guaranteeing the timely obtaining of resources under competitive conditions, in order to address the financial needs of the company. As a result of these efforts, as of September 30, 2022, PEMEX's nominal debt decreased by USD 3.9 billion as compared to the recorded at the end of 2021.
Earnings
During 3Q22, total sales increased by 56.5%, as compared to 3Q21, mainly due to an 69.3% increase in domestic sales and an 44.5% increase in export sales. The most significant factors explaining the increase in sales are the higher hydrocarbons’ prices and volumes sold.
Cost of Sales
In 3Q22 the cost of sales, including impairment, increased by 84.1%, mainly due to a MXN 204.9 billion increase in purchases for resale. In the quarter a MXN 7.3 billion asset impairment was recorded, as compared to a MXN 6.0 billion asset impairment reversal in the same period of the previous year.
Taxes and Duties
In 3Q22, total taxes and duties amounted to MXN 103.4 billion, a 37.8% increase as compared to 3Q21, mainly due to the price increase of the Mexican crude oil mix. Profit Sharing Duty (DUC) increased by 36.4% as compared to 3Q21.
Net Result
In 3Q22 an MXN 52.0 billion net loss was recorded, as compared to a MXN 77.2 billion net loss in 3Q21. This result is mainly explained by the cost of sales increase, the asset impairment, and the foreign exchange loss caused by the depreciation of the peso against the dollar in 3Q22.
Financial Debt
Total financial debt decreased by 5.2% as compared to December of 2021, mainly due to the objective of maintaining net indebtedness close to zero, the support from the federal government and liability management operations that have been carried out.
As of September 30, 2022, the exchange rate stood at MXN 20.3058 to USD 1.00, so financial debt recorded a balance of MXN 2,132.8 billion, or USD 105.0 billion.
Liquidity Management
PEMEX group holds syndicated revolving credit facilities (RCF) for liquidity management up to an amount of USD 7.7 billion and MXN 37.0 billion.
As of October 25, 2022, USD 1.2 billion RCFs in dollars are available, and MXN 17.0 billion RCFs in pesos are available.
EBITDA
Net cost of employee benefits in the period (excluding pension payments, seniority premium, and health service, since they are cash items), depreciation, amortization and impairment of wells, pipelines, property, plants, and equipment are added to the operational income. As of 4Q19, undeveloped wells are also added since they are drilled wells that never reached the production stage thus, they do not generate cash flows. EBITDA during 3Q22 amounted to MXN 174.5 billion.
Budgetary Investment Activities
As of September 30, 2022, MXN 317.6 billion have been exercised, which represents 66.5% of the approved budget.
Hydrocarbons Production
In 3Q22, liquids production (excluding partners' production) was 1,764 Mbd, higher by 24 Mbd compared to the same period of 2021, when production was reported at 1,740 Mbd, this is a variation of 1. 4%, mainly due to the incorporation of new field strategy wells in Quesqui, Ixachi, Tupilco Profundo, Itta, Pokche, Teekit, Teca, Uchbal, Koban, Esah, and in the fields in operation Yaxche, Cibix, Teotleco and Bedel. Meanwhile, total natural gas production (excluding partner production) increased by 188 MMcfd or 5.1% compared to the same period in 2021, from 3,690 to 3,879 MMcfd.
Crude oil processing
In 3Q22, total crude oil processing averaged 807 Mbd; a 16.2% increase as compared to 3Q21, as a result of the continuity in the SNR rehabilitation program. Likewise, primary distillation utilization capacity averaged 49.2%, this is a 6.8 points increase as compared to 3Q21.
Petroleum Products Production
In 3Q22 petroleum products production averaged 802 Mbd, a 14.4% increase as compared to 3Q21. Salina Cruz, Tula, Salamanca, and Minatitlán refineries recorded the best results with an average distillates production (gasoline, diesel, and jet fuel) of 102 Mbd, 98 Mbd, 65 Mbd, and 52 Mbd, respectively.
Mexican Crude Oil Export Mix
In the third quarter of 2022, the average price of the Mexican Export Mix averaged USD 88.02 per barrel, a 28.8% increase as compared to the same period of 2021.
In the quarter, prices showed a downward trend, after central banks in various countries accelerated increases in interest rates in response to high levels of inflation, which increased the prospects related to an economic recession and its effects on the growth of global oil demand. Additionally, the perspective that crude oil demand in China could contract this year, for the first time in two decades, due to its “COVID Zero” policy, also influenced. Additionally, Russian crude oil exports proved resilient, reducing the uncertainty related to its availability.
On the other hand, prices found support in the low production capacity availability of OPEC and in the weak gains in commercial inventories of the OECD and the United States.
Gasoline
The average reference price of gasoline during the third quarter of 2022 was 34.3% higher than that observed during the same period of 2021. However, during the quarter, prices decreased due to lower crude oil prices and weak gasoline demand during the driving season in the US market.
Additionally, gasoline inventories in the United States ended the quarter below the minimum of the last five years.
Prices
Diesel
In the third quarter of 2022, the average diesel reference price was 62.7% higher than in the same period of 2021. However, prices decreased in the quarter due to the slowdown in industrial activity and in the retail sectors of the main world economies. Notwithstanding, prices remain high due to the decrease in Russian derivatives in the market, as well as a low inventories level which has remained below the minimum of the last five years in the US market.
Upstream
Natural Gas Production
During the third quarter of 2022, total natural gas production (excluding partners production) increased by 188 MMcfd or 5.1% compared to the same period in 2021, from 3,690 to 3,879 MMcfd.
In particular, associated gas increased by 59 MMcfd, compared to the same period in 2021, due to the contribution of fields with a high gas-oil ratio such as Quesqui and Tupilco Profundo.
On the other hand, non-associated gas grew by 130 MMcfd, representing a variation of 13.0% compared to the same period of 2021, due to the contribution of the Ixachi fields in the Veracruz Asset and Koban in the Litoral de Tabasco Asset, both gas and condensate producers.
Natural Gas Use
In the third quarter of 2022, natural gas use reached 90%, due to the production of gas contaminated with nitrogen in the Northeast Marine Region, the delay in the construction of infrastructure for gas conditioning in the Ixachi field, maintenance and failures of compression equipment, as well as rejections and releases from the Gas Processing Centers of Pemex Transformación Industrial.
Since 2Q21 a "Gas Utilization Strategy" has been implemented, the objective is to increase the use of this hydrocarbon by progressively reducing the gas sent to the atmosphere in Pemex Exploration and Production facilities.
This strategy includes initiatives such as the development of infrastructure construction and rehabilitation works for the handling, transportation and conditioning of gas, major maintenance programs for compression equipment and booster equipment, as well as the closure of producing wells with high gas-oil ratios, among other actions.
Infrastructure
During the third quarter of 2022, 36 development wells were completed, eight fewer wells than in the same period of 2021, due to the decrease in activity in the South and North Regions.
Regarding exploratory wells, 16 wells were completed in the third quarter of 2022, seven more compared to the same period of 2021, the difference was due to the increase of drilling rigs in the exploratory activity.
Crude Oil Processing
In 3Q22, crude oil processing at the National Refining System (NRS) averaged 807 Mbd, a 112 Mbd increase as compared to the same quarter of 2021, as a result of the continuity in the NRS rehabilitation program.
During the quarter the refineries that recorded an improved operating performance are Salina Cruz processing 200 Mbd of crude oil, Tula 187 Mbd, Salamanca 124 Mbd, and Minatitlán 115 Mbd.
Heavy crude oil process in the revamped refineries averaged 249 Mbd, this is a 48 Mbd increase as compared to the same quarter of 2021 due to higher heavy crude oil process at Minatitlán and Madero refineries by 31 Mbd, and 30 Mbd, respectively.
The atmospheric distillation capacity of the National Refining System (NRS) is 1,640 Mbd, therefore, the primary distillation capacity utilization amounted to 49.2%; this is 6.8 points above the record in 3Q21. The refineries that recorded a utilization above the system’s average are Salina Cruz, Tula, and Salamanca with an average utilization of 56.8%.
Petroleum Products
Production In the third quarter of 2022, petroleum products production increased by 14.4% as compared to 3Q21, averaging 802 Mbd: 242 Mbd were gasoline, 137 Mbd diesel, 36 Mbd jet fuel, and 387 Mbd other petroleum products and LPG.
As compared to 3Q21, distillate production (gasoline, diesel, and jet fuel) increased by 12.7%, mainly due to its higher production at the following refineries: Salina Cruz 102 Mbd, Tula 98 Mbd, Salamanca 65 Mbd, and Minatitlán 53 Mbd.
Natural Gas Processing and Production
In 3Q22, natural gas processing averaged 2,795 MMcfd, a 176 MMcfd increase, equivalent to 6.7%, as compared to 3Q21, due to the higher availability of wet gas because of the sour wet gas production increase in the Southeastern region of Pemex Exploration and Production (PEP).
As a result, dry gas production averaged 2,278 MMcfd, a 150 MMcfd increase as compared to the same quarter of 2021, mainly explained by the higher production at Nuevo Pemex, Cactus, and Arenque gas processing complexes.
On the other hand, liquids production averaged 167 Mbd, a 3.7% decrease as compared to the same quarter of 2021. The condensate process averaged 15 Mbd, 14.0% Mbd higher than the record of the 3Q21, mainly due to higher delivery of sour condensates from PEP.
Financial Results
Taxes and Duties
In 3Q22, total taxes and duties amounted to MXN 103.9 billion, a 37.8% increase as compared to 3Q21. This increase was mainly due to the higher prices of the Mexican Mix Export, despite the reduction in the Profit-Sharing Duty applicable rate from 54% to 40% in 2022. Profit-Sharing Duty, being the most important duty paid by the company, in terms of amount, increased by 36.4% as compared to 3Q21.
Evolution of Net Income (Loss)
In 3Q22 PEMEX recorded a MXN 52.0 billion net loss, as compared to a MXN 77.2 billion net loss in 3Q21. Among the factors that drove this result were the increase in the impairment, the increase in cost of sales and the foreign exchange loss due to the depreciation from the Mexican peso against de US dollar recorded in 3Q22.
A foreign exchange loss by MXN 9.3 billion was recorded, as compared to an MXN 47.0 billion foreign exchange loss in 3Q21. This change was due to a depreciation of the Mexican peso against the U.S. dollar in 3Q22 as compared to 3Q21. The exchange rate went from MXN 19.9847 per USD 1.00 at June 30, 2022, to MXN 20.3058 per USD 1.00 at September 30, 2022, a 1.6% decrease. This is considered a virtual item since most of it does not represent cash flows.
In 3Q22, other revenues by MXN 41.4 billion were recorded, compared to MXN 6.9 billion in the same period of the previous year, mainly due to the decree for the tax credit of the Special Tax on Production and Services recognition. A MXN 13.0 billion financial derivatives cost was recorded, compared to a MXN 9.3 billion financial derivatives cost in 3Q21. This increase is mainly explained by the variation in the fair value of crosscurrency swaps.
Additionally, a higher fixed asset impairment of MXN 13.3 billion was recognized in 3Q22 compared to the same period of the previous year.
Working Capital
As of September 30, 2022, negative working capital amounted to MXN 321.4 billion, compared to a negative working capital of MXN 464.3 billion as of December 31, 2021. This improve by MXN 142.9 billion is mainly explained by:
- a MXN 10.9 billion increase in clients and other financial and nonfinancial accounts receivable;
- a MXN 84.7 billion increase in inventories;
- a MXN 30,9 billion increase in short term Federal Government Bonds.;
- a MXN 2.0 billion decrease in derivative financial instruments;
- a MXN 72.0 billion decrease in short-term financial debt;
- a MXN 1.4 billion decrease in suppliers;
- a MXN 20.8 billion decrease in taxes and duties payable; and
- a MXN 64.5 billion increase in accounts and accrued expenses payable and derivative financial instruments.
Debt
Financial resources
As of 3Q22, Petróleos Mexicanos, its Productive Subsidiary Companies and subsidiaries carried out financing activities (including short-term bank loans) for a total of MXN 760.2 billion or USD 37.4 billion. Total amortizations recorded were MXN 799.1 billion or USD 39.4 billion.
Approximately 85% of the debt is denominated in non-peso currencies, mainly in U.S. dollars, and for recording purposes, it is translated into pesos at the closing exchange rate.
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Published on November 1, 2022 5:17 PM (GMT+8)Last Updated on November 22, 2022 2:13 PM (GMT+8)
