Natural gas production at Petróleos Mexicanos (Pemex) was 3.639 Bcf/d in 2020, down marginally from the 3.690 Bcf/d produced in 2019.
Natural gas utilization, however, suffered in 2020, executives said in the fourth quarter earnings call. Because of high nitrogen content in the gas and other processing issues, 513 MMcf/d was flared from production in 2020, versus 305 MMcf/d in 2019.
Production in the fourth quarter was 3.636 Bcf/d, down by 132 MMcf/d from the same period last year.
President Andrés Manuel López Obrador said after the Texas energy crisis left swaths of Mexico without power that he would seek self-sufficiency in natural gas. Yet his administration has stopped new oil and gas rounds and has banned hydraulic fracturing, leaving much of the heavy work to be done by the state firm and in conventional fields.
To meet growing natural gas demand needs, Mexican pipeline imports from the United States grew last year and hit almost 6 Bcf/d in October when a pipeline system connecting Waha in West Texas to Guadalajara came online.
Executives on the call hailed financial results in a terrible 12 months for the oil industry. To exemplify the bad year, the Mexican crude oil mix averaged $35.82/bbl last year, down 36% from 2019, they said.
Net income was 121 billion pesos, or $5.9 billion, in the fourth quarter, compared with a loss of $9 billion in the same period in 2019. Pemex reported a net loss for 2020 of 480 billion pesos, or $23 billion, compared with a loss of $18 billion in 2019.
“It was a year of great complexity,” said CFO Alberto Velazquez, who attributed the improved fourth quarter results to foreign exchange gains. But, “it has been more than four years since Pemex has achieved two consecutive quarters of net profit.”
Pemex posted a slim profit of $65 million in 3Q2020, after posting a $2 billion loss in the second quarter and a $22 billion loss in the first quarter.
On the plus side for Pemex, nonassociated gas in the fourth quarter was up 20 MMcf/d year/year thanks mainly to output from the southeastern gas-rich Ixachi field.
Ixachi is one of 20 “priority fields” the Mexican government is backing to help increase oil and gas production. The new shallow water and onshore fields added 146,000 b/d of crude by the end of 2020, executives said.
Oil production in 2020 rose slightly by 4,000 b/d to 1.705 million b/d. Mexico’s government originally said it would hit oil production of 1.8 million in 2020.
The company has a lofty goal of increasing oil output by 14% to reach 1.944 million b/d in 2021.
Mexico’s government meanwhile has continued to do all it can to strengthen Pemex, including tax breaks and direct cash injections to pay off debt and boost exploration and production.
“To address the complex situation in 2020 Pemex received significant support from the federal government” said budgeting director Carlos Cortes, showing the government’s “commitment to strengthen the financial position of the company.”
Capital expenditures in 2020 were 116 billion pesos, or $5.6 billion, compared with 111 billion pesos, or $5.3 billion, in 2019.
The government has granted 73 billion pesos, or $3.5 billion, in tax benefits to Pemex, in addition to reducing the profit-sharing duty, or DUC by its Spanish acronym, which accounts for 80% of the company’s direct fiscal burden. The DUC rate fell from 65% in 2019 to 58% in 2020 and is expected to fall to 54% in 2021.
The company is also receiving “equity contributions” aligned to its maturity profile of short-term debt.
Mexico’s oil hedging strategy also paid dividends. It was worth around $220 million in 2019 and $200 million in 2020.
The government will also help Pemex handle upcoming debt maturities, management said, and will not need to go to the markets for financing in 2021.
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