March 13, 2019 / 3:35 PM / 2 months ago

UPDATE 2-Mexican president open to issuing Pemex instrument on exchange

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By David Alire Garcia

MEXICO CITY, March 13 (Reuters) - The finances of Mexico's national oil company Pemex are strong, the country's president said Wednesday, but added he is open to issuing some form of instrument on the local stock exchange that could provide the firm with more investment capacity.

Teasing the possibility of a such an experiment, President Andres Manuel Lopez Obrador said he did not "rule out" activity in the local market for wholly government-owned Pemex, such as issuing some form of financial instrument, but added such a move to boost the firm's available capital is not necessary.

Lopez Obrador, who won a landslide election last year on promises that included strengthening Pemex, has favored public spending for the highly indebted company such as the recent authorization for a $3.9 billion capital injection from the government that included new tax relief.

Ratings agencies say that is not enough to stabilize Pemex, creaking under $106 billion of debt, and have put its credit rating at one notch above junk, increasing fears of a downgrade that could raise Mexico's sovereign borrowing costs.

Responding to a question at his regular morning press conference on Wednesday about whether he would consider some form of Pemex listing on the local stock exchange to allow Mexicans to invest in the state-owned oil producer, Lopez Obrador offered a small surprise.

"We have healthy public finances, but we do not rule out other options, other alternatives, such as what you asked about, the possibility of investor participation bonds in the stock market," said the veteran leftist. "We won't rule that out, but there's no need for (additional) financing, Pemex has enough budget."

It was not immediately clear whether the president was referring to profit participation certificates, a means of raising capital issued by companies without having to take on new owners by selling their stock.

In the past, Pemex has issued local debt notes known as Cebures that are traded on the Mexican stock exchange.

The government is expected to unveil additional measures next week to support the company.

Without giving details, Lopez Obrador said new plans for the company would be announced on March 18, a national holiday in Mexico that commemorates the 1938 nationalization of the country's oil industry and the birth of Pemex.

Analyst Jesus Lopez of Monterrey-based Banco Base said the president's plans for Pemex "for now" do not include any future dividend payments to would-be investors, but he appeared to be flirting with new tools for Pemex.

"He is leaving a door open for the future," said Lopez.

Lopez Obrador has doubled down on criticism of a major oil reform championed by his predecessor that ended Pemex's decades-long monopoly and paved the way for private oil companies to operate oil and gas fields on their own, deriding it as a give-away that has yet to show positive results.

His energy minister said Wednesday on the sidelines of an energy conference in Houston that to date private oil firms have invested too little and moved too slowly on projects they have won at auction since the 2013-2014 reform.

The finance ministry said earlier this week that $2.5 billion earmarked for a new oil refinery could be spent this year on Pemex exploration and production, comments that were later rebuffed by Lopez Obrador.

Petroleos Mexicanos, as Pemex is formally known, has seen its crude production fall each year since hitting a peak of nearly 3.4 million barrels per day in 2004. Oil output currently stands at about half that, or less than 1.7 million bpd.

As well as its financial debt, the 100 percent state-owned company also shoulders some $70 billion in unfunded pension liabilities. (Additional reporting by Adriana Barrera and Miguel Angel Gutierrez; Editing by Frank Jack Daniel, Susan Thomas and James Dalgleish)

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