Mexico’s state oil company Petróleos Mexicanos (Pemex) posted a rare 14 billion-peso ($719 million) profit in the second quarter thanks to higher sales revenue. The oil giant had posted a $2 billion loss in the year-ago quarter. 

pemex flaring

Oil production rose to 1.736 million b/d in the second quarter compared with 1.673 million b/d in the second quarter of 2020. 

During an earnings call Wednesday, company executives attributed the production gains to recovery efforts at mature fields, in addition to growing production from 20 “priority” or new fields.

Priority field production rose to 216,000 b/d at the end of June, compared to 57,500 b/d last June.

Executives said that the strategy to focus on shallow water and onshore fields instead of on deepwater has been “a great success for the company.” Reserves now stand at 7.8 billion boe, compared to 7.4 billion boe at the end of 2020.

Production was up 2.4% in the first half, “which we haven’t seen in two decades,” executives said. Pemex sees oil production hitting 2.186 million b/d in 2024.

Pemex also gained from higher oil prices. The average price fetched for its export barrel rose to $63.81/bbl in 2Q21 from $24.40/bbl in 2Q20. Lifting costs also are coming down. They fell to $11.15/d in 2020, down 20% from 2019.

Gas production was 3.658 Bcf/d in the quarter, compared to 3.528 Bcf/d in last year’s second quarter. Associated gas accounted for 73% of total production.

Executives singled out production from the southeastern Ixachi and Quesqui  priority fields. In June, gas-rich Ixachi in Veracruz state was the third-largest producing field in Mexico, with output of 201 MMcf/d. This was up from 70 MMcf/d in the same month a year ago. Nearby Quesqui produced 196 MMcf/d in June, up from 29 MMcf/d in June 2020.

Flaring Nearly Doubles

Natural gas flaring was again high at 608 MMcf/d in the second quarter, almost double what it was in the comparable period last year. Only 86.9% of the natural gas produced in the second quarter made it to the marketplace. Gas flaring is explained by the lack of natural gas infrastructure, insufficient maintenance, and high nitrogen content in natural gas, executives said.

CEO Octavio Romero said during the call that a downgrade by ratings agency Moody’s Investors Service just hours before results were released showed a lack of professionalism and was “shameful.”

Moody’s said the latest rating downgrade was because of “high liquidity risk and increasing business risk as the company faces high debt maturities while it expands its refining capacity and production.”

While executives said Pemex will “continue getting government support,” including a cash injection of 36 billion pesos, or $1.8 billion, in August, overall debt swelled to $115 billion in 2Q2021.

Crude oil processing improved to 666,000 b/d from 631,000 b/d in the year-ago period, but it was still significantly below national needs. During the quarter, Pemex added more refining capacity to its portfolio with the purchase of Royal Dutch Shell plc’s share in the partnership that owns the Deer Park, TX, refinery southeast of Houston.

Meanwhile, for the first time ever, Pemex included an environmental, social and governance section in its earnings presentation. It plans to continue to expand on this in future earnings presentations. Executives said they did so at the behest of investors.