Mexico's PEMEX Chief Says Debt Level is Not Sustainable

Source: Reuters 2/23/2016, Location: South America

Mexico's state-run oil company PEMEX is working on solutions to reduce debts owed to service providers and is also open to cutting its workforce if necessary to adjust to a lower price environment, the firm's new Chief Executive Jose Antonio Gonzalez said.

"We have to do something faster and deeper. The level of debt we have is not sustainable and not correct," he said at IHS CERAWeek in Houston.

In the middle of a deep energy reform that is occurring while lower revenue hurts cash flow, PEMEX is trying to increase efficiency to compete with rivals while securing mandatory payments to the government.

Gonzalez suggested that a program in which development banks could discount PEMEX's pending invoices could help the company, which is facing "financial issues" in the short term.

PEMEX's pension system, which Gonzalez called "a very important burden," will be changed as well, modifying the retirement age and limiting some financial benefits to new recruits.

Gonzalez also said staff cuts could be necessary if other measures are not enough. The PEMEX board of directors will discuss the cuts at a meeting later this week, he said.

PEMEX cut its workforce by 7.5 percent in 2015 to 145,741 direct employees, according to preliminary data.

"PEMEX workers have led the company for decades, but if we have to make adjustments we will do it," said Gonzalez at IHS CERAWeek in Houston.

The executive, who previously worked in finance for the government of Mexico, said the company plans to comply with expected tax payments for 2016 that support a large portion of the country's public budget.

To make its operations more profitable, PEMEX is looking for partners interested in providing technology solutions and optimization, especially to its downstream business.

"We are certainly in need for financial resources, but if we can get efficiency gains through operations, through technology, it's even more profitable. We're more interested in that", he said.


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