MEXICO CITY, Sept 9 (Reuters) - Mexican President Andres Manuel Lopez Obrador said on Monday that he sees a brighter future for state oil firm Pemex as production stabilizes, despite warnings from credit ratings agencies that the company is teetering on the verge of a downgrade.
Speaking during his regular morning news conference a day after his government presented a budget forecasting a big jump in oil output in 2020, Lopez Obrador said the ailing company was turning round after more than a decade of declines.
“We have already managed to stabilize oil production, which had not been done in 14 years,” he said. “It has been achieved in nine months.”
Finance Minister Arturo Herrera echoed Lopez Obrador’s optimism, saying that the government’s shift to shallow-water and onshore exploration, away from its predecessor’s preference for deepwater exploration, was the main reason production had level led off.
Herrera said it could take up to seven years for deepwater projects to show results.
“That’s to say, this would not produce revenue for this administration, or for the next.”
Pemex, the world’s most heavily indebted oil firm, remains a source of intense preoccupation for investors. After the Mexican government unveiled its 2020 budget proposal on Sunday, several analysts and economists warned the production estimates for Pemex were overly rosy.
Some industry experts are doubtful that Mexico can raise oil output in a sustainable way without exploring more difficult-to-reach parts of its territory.
The budget blueprint estimates Mexico’s year-end 2020 oil output at 1.95 million barrels per day (bpd), up from below 1.7 million barrels per day currently.
The document also calls for a 523.4 billion-peso ($26.8 billion) budget for Pemex, up about 9% compared with this year’s level. Herrera stressed an additional 86 billion pesos ($4.4 billion) in support for the firm, including tax breaks and a capital injection of 46 billion pesos ($2.4 billion).
Some analysts said that level of support would not be enough.
“The oil production forecast of 1.95 million barrels per day looks ambitious, while funding and tax breaks for state oil company Pemex amounting to $4.4 billion fall short of what is required,” consulting firm Teneo wrote in a note.
Pemex, the world’s most indebted oil company, is at risk of a second downgrade of its bonds to so-called junk status after Fitch did so in June, which would trigger forced selling of bonds worth billions of dollars.
In a note to investors on Monday, ratings agency Moody’s spotlighted Pemex as a firm whose rating is hovering between investment grade and speculative grade.
The government’s estimate of oil prices was more on target, analysts said.
Herrera said the price of crude in 2020 will probably be higher than the $49-per-barrel estimate included in his ministry’s budget proposal. ($1 = 19.56 pesos) (Reporting by Stefanie Eschenbacher; writing by Julia Love; editing by Jonathan Oatis)
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