Mexico’s state-owned oil company is taking deepwater development off its plate for now. Driven to rip $5.5 billion out of its budget this year to cope with a lengthening market downturn, it makes sense that Petroleos Mexicanos would look first to its riskiest and most expensive operations. The company reported its 13th quarterly loss, bringing its total losses for 2015 to $32 billion.
By delaying offshore development, Pemex joins major producers around the world in canceling or postponing their most expensive projects until prices rebound. But for Pemex, which has seen its production decline for 11 straight years and faces another 5 percent drop this year, it could be an especially perilous strategy.
“It’s very possible that Pemex’s production will fall this year and, when you go into 2017 after not investing in 2016, declines could snowball and fall more,” Pablo Medina, oil and energy analyst at Wood Mackenzie Ltd., said in a phone interview from Houston.
Mexico’s biggest company reported a $9.3 billion loss in the fourth quarter. It hasn’t recorded a profit since 2012. The company had more than $87 billion in debt at the conclusion of the third quarter and owes an estimated $7 billion to service providers.
Pemex pledged to meet the government’s demand that it trim its 2016 budget by 100 billion pesos ($5.5 billion) by increasing efficiency and focusing on its most profitable projects. The producer will strive to maintain crude production, despite the budget cuts, “to the extent possible,” said Jose Antonio Gonzalez Anaya, the company’s new chief executive officer, in a call with investors.
Pemex plans to shave $2.6 billion from its oil exploration and production budget this year, which includes deferring investment in deepwater, Gonzalez Anaya said.