Pemex's sales in the first half were M$304bn (US$28.2bn). This was 30% up on the same period of 2002, thanks to higher exports and domestic sales. There is a virtual 60:40 split between domestic and export sales (61.2%: 38.2%). The company's tax payments in the first half were M$182bn (US$16.9bn). This was up by a third on the same period of 2002.
The problem the company faces is that its losses are eroding its capital base. The company's capital is now down to M$92.3bn. This represents a fall of 24% in a year. Depreciation is taking its toll. The company has also charged off against capital the provisions it is making against (failed) explorations and a downward adjustment in the likely production from exploitable fields. Previously the company had capitalised exploration costs.
The company's tottering capital structure is the result of the crazy way it has been made (by successive governments) to run its business. The company borrows to develop its fields, so it now has liabilities of M$678bn (US$63bn). The borrowing is split 85% long-term and 15% short term (less than a year to maturity). The company's managers, some politicians and most of the commentariat are demanding that the government change the way the company is financed. In particular, they want the government to stop swiping 60% of the company's income. Changing this means that the government will have to find another way of financing itself. The government of President Vicente Fox did have a go at fiscal reform in 2001, without much success. Its initial idea of extending VAT to food and medicine was knocked out by congress. Congress's populist alternative, luxury goods taxes, was a spectacular disappointment. The Fox government's financial viability has depended on the strength of oil prices. These have provided extra revenues that have enabled the government to maintain its spending plans in the face of a sluggish economy. The actual export price for the first seven months was US$24.8 rather than the US$18.35 budgeted. The average daily export volume is 1.85m.
What Pemex needs is a financial structure which allows it to retain some of its vast profits to fund its business, rather than use debt. The company is moving into an expansionary phase. Between 2003 and 2006 it expects to spend M$517bn (US$47.8bn). The overwhelming bulk of this spending (72%) will go on exploration. Another 18% will go on refining projects, and 10% will be spent on gas, petrochemicals and administrative investments. As a result of this investment programme the company hopes to be able to stop running down its reserves (in recent years it has been producing more oil than it discovers). The company also wants to increase its production capacity from its current level of 3.3m bpd to 4m bpd. The company also wants to increase gas production from its current level of 4.45bn cubic feet a day to 7bn. Its target for condensates is to increase production from 1.3m bpd to 1.6m bpd.
By any measure, Pemex is a sizeable operation. The company has 4,590 wells, 186 offshore rigs and 309 fields. It also owns six refineries, eight petrochemical complexes, 77 storage terminals, and manages 57,000km of oil pipelines. It has 19 tankers and 93 smaller vessels. It is easily Mexico's biggest company and its president, Raúl Muñoz Leos, claims that it is the seventh-biggest oil company in the world in terms of revenues; the third-biggest in terms of production; the sixth in assets and seventh in terms of oil reserves.
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