Pemex 'needs to wait' on IPO, says CFO

Pemex 'needs to wait' on IPO, says CFO

 Hot sector: a Pemex oil refinery in Texas. Photo: Roy Luck 
An IPO of Mexico’s national oil company offers benefits but is unlikely for perhaps a decade, Pemex’s chief financial officer Mario Beauregard has told LatinFinance, as the firm evaluates the sweeping range of new opportunities and capital raising options open to it as Mexico’s energy reforms take effect.

Under Round Zero of Mexico’s energy reforms, Pemex has asked to maintain rights to over 90% of fields in production, as well as most of the less developed fields. Partly as a result, its funding needs are growing. Capital expenditure is set to increase to $29bn in 2015, from $27bn this year.

At the same time, three of the firm’s six oil refineries need rehabilitating. “If we are successful in revamping those refineries, we will be able to increase profits, but in the initial stage, you need to fund those investments to get those profits,” said Beauregard.

“We need to invest a lot of money, and here you are talking billions of dollars,” he said.

With the reform, said treasurer Rodolfo Campos, the private sector will provide more investment, particularly in deep-water fields, which will “reduce the pressure” on Pemex, including its tax obligations. But that will take time—legislators are still debating the final details.

“In the future there will be a lot of pressure to invest more and more,” said Campos.

Beauregard said a listing of Pemex or specific projects could help the firm fund that investment. But he said it would be unlikely in the short term, and perhaps for as much as 10 years.

"This is a sensitive issue here in Mexico, especially when we are approving the energy reform, ending 76 years of a monopoly. We need to wait," he told LatinFinance in a recent interview in Mexico City.

Campos said the firm has sufficient opportunities and “so many things to solve” before it embarks on an IPO, including putting Pemex’s balance sheet on a more sustainable footing. “You have to clean up the house first, take advantage of all the opportunities”, before thinking of the possibility of an IPO – “maybe in a couple of decades or more”, said Campos.

Sales of petrochemicals, distribution, storage or pipeline assets —no longer strategic to the firm — are more likely measures to bolster capital, said Beauregard. Such divestments were not allowed under previous legislation.

Working with private companies, through licensing or profit or production sharing schemes, would also alleviate funding pressures, he said.