(Adds details of results, background)
MEXICO CITY, April 30 (Reuters) - Petroleos Mexicanos said on Friday its net loss narrowed 93% to $1.8 billion in the first quarter after higher sales, lower imports and tax cuts eased pressure on Mexico’s highly indebted state oil company.
The loss of 37.3 billion pesos was down from 562.1 billion pesos in the year-ago quarter, said Pemex, as the company is known, in a filing with the Mexican stock exchange.
Foreign exchange movements, financing costs and derivatives all racked up losses that offset its total income of 317.6 billion pesos ($15.7 billion).
Even so, income was up 12% from the year-ago quarter as sales in Mexico and to other countries grew, and prices recovered.
Edgar Cruz, head of credit research at BBVA in Mexico, said he expected income and net profits to recover this year with considerable government support.
“Starting this quarter, we could see the impact of the aid that the Mexican government will be giving Pemex this year,” said Cruz.
Lower taxes and additional financial support from President Andres Manuel Lopez Obrador’s government as well as existing credit lines with banks “will be enough” for the driller to make it through the year, added Cruz.
Financial debt at the world’s most indebted oil company rose another $700 million during the quarter to $113.9 billion. Pemex’s bonded debt, worth tens of billions of dollars, is held by investors worldwide. About $6.4 billion are due this year.
Chief Financial Officer Alberto Velazquez said Pemex would get more government support in coming months to meet its obligations but the company has no plans to tap international bond markets.
“We will continue to work with a lot of financial discipline,” Velazquez told investors during an earnings call.
Pemex produced an average of 1.75 million barrels of crude per day (bpd), excluding partners, down 1.4%. Natural gas production, also excluding partners, fell 0.4% to 3.7 billion cubic feet per day.
Pemex processed an average of 747,000 bpd during the quarter, up 38%, after rehabilitating its refining systems.
An oil nationalist who has staked his reputation on reviving Pemex, Lopez Obrador has thrown the company several financial lifelines in the form of cash injections, bond refinancing and tax cuts.
Pemex paid 11.3% less in taxes than in the 2020 first quarter. It also received 32 billion pesos in February.
The measures have weighed on the sovereign credit rating, with a Moody’s analyst citing the possibility of further support as a reason the agency has kept Mexico’s outlook negative.
Lopez Obrador has also taken a series of steps aimed at weakening the influence of Pemex’s competitors, including changes to energy legislation that strengthen its market power at the expense of private companies.
Lopez Obrador argues that the last government’s liberalization of the energy market put Pemex and state power utility the Comision Federal de Electricidad (CFE) in peril.
But investors and credit ratings agencies have said Lopez Obrador’s plans are insufficient to address Pemex’s financial and operating problems.
Prior to the first-quarter loss, Pemex had posted two consecutive quarters of net profits due to foreign exchange distortions.
Despite a rebound in the second half of 2020, Mexico’s largest state company ended last year with a net loss of some 480 billion pesos.
Julio Ruiz, a former Mexican finance ministry official who is now chief economist for Mexico at Brazilian bank Itau, said recent legislative changes will not be enough to turn the company around.
“It’s only going to buy time,” Ruiz said.
$1= 20.4200 pesos at end-March Reporting by Adriana Barrera, Stefanie Eschenbacher and Ana Isabel Martinez; Editing by Richard Chang