UPDATE 3-Mexico's Pemex posts wider Q2 loss, sees lower crude output

Fri Jul 25, 2014 5:04pm EDT

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(Recasts lead to include downwardly revised crude projection for 2014)

By David Alire Garcia

MEXICO CITY, July 25 (Reuters) - State-owned Mexican oil company Pemex reported a wider second-quarter loss on Friday and said average crude oil output this year will fall to its lowest level in more than two decades.

Losses for the quarter totaled 52.226 billion pesos ($4.02 billion), led by losses at the company's refining unit, compared with a loss of 49 billion pesos in the year-earlier period.

The company said the losses were caused by higher sales costs, a decline in asset values and a bigger tax bill.

Revenue rose 4.1 percent to 409 billion pesos, mainly because of higher domestic sales and exports, compared with revenue of 393 billion pesos in the second quarter last year.

Sales costs jumped 13.2 percent, or by 24.4 billion pesos, as a result of preexisting obligations and higher production costs, the company said.

Pemex also reported an 8.7 billion-peso decline in the value of its Burgos natural gas asset in northern Mexico.

"Inside and outside the company, the environment has grown more complex," Pemex's chief financial officer, Mario Beauregard, said in a call with analysts.

Gustavo Hernandez, Pemex's exploration and production chief, said on the call that the company now expects crude output this year to average 2.441 million barrels per day (bpd), down 3 percent compared with the previous estimate of 2.520 million bpd.

The new estimate would mark the lowest annual average crude output in over two decades, according to Energy Ministry data.

Hernandez said the downward revision is due to a steeper-than-expected decline at several oil fields.

The company's crude output during the second quarter averaged 2.468 million barrels per day, down nearly 2 percent from the year-earlier period. The drop was led by an almost 6 percent drop in heavy crude output, as well as a slight drop in production of extra light crude.

Since hitting peak production of 3.38 million bpd in 2004, Mexican crude output slid to 2.52 million bpd last year. Mexico's government relies on oil revenues to fund about a third of the federal budget.

"In the short and medium term, Pemex will continue to be the most important fiscal contributor to the Mexican government," Beauregard said.

He added that he expects the government's energy reforms to gradually lessen taxes levied on Pemex. The company's tax burden during the second quarter rose about 5 percent to nearly 218 billion pesos.

Late last year, Mexico's Congress passed landmark energy reform legislation that ended Pemex's 75-year monopoly on oil production and that aims to lure significant new streams of private investment via new contracts to boost output.

Mexico is the world's 10th-biggest crude producer and the third-largest oil exporter to the United States. (Reporting by David Alire Garcia; Editing by Grant McCool and Paul Simao)

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