6-K 1 d942650d6k.htm FORM 6-K Form 6-K

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 6-K

 

 

REPORT OF FOREIGN PRIVATE ISSUER

PURSUANT TO RULE 13a-16 OR 15d-16 UNDER

THE SECURITIES EXCHANGE ACT OF 1934

For the month of July, 2020

Commission File Number 0-99

 

 

PETRÓLEOS MEXICANOS

(Exact name of registrant as specified in its charter)

 

 

MEXICAN PETROLEUM

(Translation of registrant’s name into English)

United Mexican States

(Jurisdiction of incorporation or organization)

Avenida Marina Nacional No. 329

Colonia Verónica Anzures

11300 Ciudad de México, México

(Address of principal executive offices)

 

 

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.

Form 20-F  ☒     Form 40-F  ☐

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1)

Yes ☐    No  ☒

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7)

Yes ☐    No  ☒

Indicate by check mark whether the registrant by furnishing the information contained in this form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.

Yes ☐    No  ☒

 

 

 


RECENT DEVELOPMENTS

The following discussion of PEMEX’s recent results should be read in conjunction with the annual report on Form 20-F of Petróleos Mexicanos for the fiscal year ended December 31, 2019 as filed with the U.S. Securities and Exchange Commission (which we refer to as the SEC) on May 8, 2020 (which we refer to as the Form 20-F) and, in particular, “Item 4—Information on the Company” and “Item 5—Operating and Financial Review and Prospects” in the Form 20-F and with the unaudited condensed consolidated interim financial statements of PEMEX included in this report beginning on page F-1. In this document, “PEMEX” refers to Petróleos Mexicanos, the following operating subsidiaries—Pemex Exploración y Producción (Pemex Exploration and Production), Pemex Transformación Industrial (Pemex Industrial Transformation), Pemex Logística (Pemex Logistics), Pemex Fertilizantes (Pemex Fertilizers), and, for periods prior to July 1, 2019, Pemex Perforación y Servicios (Pemex Drilling and Services) and Pemex Etileno (Pemex Ethylene)(which we refer to collectively as the subsidiary entities), and the subsidiary companies listed in Note 5 to the unaudited condensed consolidated interim financial statements included herein. Petróleos Mexicanos hereby designates this report on Form 6-K as being incorporated by reference into the Offering Circular dated October 28, 2019, as supplemented on February 10, 2020, relating to its U.S. $112,000,000,000 Medium-Term Notes Program, Series C, due 1 Year or More from Date of Issue.

Exchange Rates

On June 26, 2020, the noon buying rate for cable transfers in New York reported by the Board of Governors of the Federal Reserve System was Ps. 22.9460 = U.S. $1.00.

We maintain our consolidated financial statements and accounting records in Mexican pesos (pesos or Ps.). Unless otherwise indicated, we have translated all peso amounts to U.S. dollars in this report, including all convenience translations of our unaudited condensed consolidated interim financial statements included herein, as of and for the three-months ended March 31, 2020, at an exchange rate of Ps. 23.5122 = U.S. $1.00, which is the exchange rate that the Secretaría de Hacienda y Crédito Público (Ministry of Finance and Public Credit) instructed us to use on March 31, 2020, and as of and for the year ended December 31, 2019, at an exchange rate of Ps. 18.8452 = U.S. $1.00, which is the exchange rate that the Ministry of Finance and Public Credit instructed us to use on December 31, 2019. You should not construe these translations from pesos into dollars as actually representing such U.S. dollar amounts or meaning that you could convert such amounts into U.S. dollars at the rates indicated.

Pemex Drilling and Services and Pemex Ethylene

On July 25, 2019, as a result of the merger of Pemex Drilling and Services into Pemex Exploration and Production and of Pemex Ethylene into Pemex Industrial Transformation, the Board of Directors of Petróleos Mexicanos issued the Declaratoria de Extinción de Pemex Perforación y Servicios (Declaration of Extinction of Pemex Drilling and Services) and the Declaratoria de Extinción de Pemex Etileno (Declaration of Extinction of Pemex Ethylene), both of which were published in the Official Gazette of the Federation on July 30, 2019 and became effective on July 1, 2019. As of July 1, 2019, all of the assets, liabilities, rights and obligations of Pemex Drilling and Services were assumed by, and transferred to, Pemex Exploration and Production, and Pemex Exploration and Production became, as a matter of Mexican law, the successor to Pemex Drilling and Services. As of July 1, 2019, all of the assets, liabilities, rights and obligations of Pemex Ethylene were assumed by, and transferred to, Pemex Industrial Transformation, and Pemex Industrial Transformation became, as a matter of Mexican law, the successor to Pemex Ethylene. Pemex Drilling and Services and Pemex Ethylene were in turn dissolved effective as of July 1, 2019.

Government Equity Capital Contribution

For the three-month period ended March 31, 2019, the Federal Government of Mexico, which we refer to as the Mexican Government has made equity capital contributions in the amount of Ps. 16.0 billion (U.S. $683.2 million) to Petróleos Mexicanos. From May 1, 2020 to the date hereof, PEMEX received Ps. 20.0 billion, in Certificates of Contribution “A” from the Mexican Government to help improve PEMEX’s financial position.

 

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We used these funds to reduce our overall indebtedness, manage the maturity profile of our debt and improve our financial position. For more information on other recent support measures implemented by the Mexican Government, see “Liquidity and Capital Resources—Overview—Government Support” in the Form 20-F.

Selected Financial Data

The selected financial data as of December 31, 2019 is derived from the audited consolidated financial statements of PEMEX included in the Form 20-F. The selected financial data as of March 31, 2020 and for the three-month periods ended March 31, 2020 and 2019 is derived from the unaudited condensed consolidated interim financial statements of PEMEX included in this report, which were prepared in accordance with International Accounting Standard (IAS) 34 “Interim Financial Reporting” (IAS 34).

For the year ended December 31, 2019, we recognized a net loss of Ps. 347.9 billion and had negative equity of Ps. 1,997.2 billion. We had negative working capital of Ps. 211.7 billion during the same period. Cash flows from operating activities were Ps. 85.2 billion for the year ended December 31, 2019. As of and for the three-month period ended March 31, 2020, we recognized a net loss of Ps. 562.3 billion and had negative equity of Ps. 2,323.5 billion. We had negative working capital of Ps. 240.1 billion as of March 31, 2020. We have disclosed the circumstances that have caused these negative trends and the actions we are taking to face them as noted below.

We also have substantial debt. This debt was incurred mainly to finance investments needed to carry out our operations. Due to our heavy fiscal burden resulting from the payment of hydrocarbon extraction duties and other taxes that we are required to pay to the Mexican Government, the cash flows derived from our operations in recent years have not been sufficient to fund our operations and investment programs. As a result, our indebtedness has increased significantly, and our working capital has decreased. In addition, the recent significant crude oil price drop, which started in March 2020, and the negative economic impact as a result of the current global health crisis caused by the COVID-19 pandemic, have negatively impacted our financial performance. We believe we have the capacity to comply with our payment obligations and our operating continuity; however, our future cash flows are uncertain due to circumstances outside of our control. Any adverse impact from sustained decrease in crude oil prices below the budgeted average price for 2020 and from the slow-down of the economy could have an adverse impact on our results of operation, cash flows and may require us to consider additional actions to address these shortfalls. The combined effect of the above-mentioned events indicates the existence of significant doubt about PEMEX’s ability to continue as a going concern. We continue operating as a going concern for the reasons described herein, including in our unaudited condensed consolidated interim financial statements. Accordingly, we have prepared our unaudited condensed consolidated interim financial statements on a going concern basis, which assumes that we can meet our payment obligations.

See “Item 5—Operating and Financial Review and Prospects—Overview” and “Item 5—Operating and Financial Review and Prospects—Liquidity and Capital Resources” in the Form 20-F and Note 18(f) to our unaudited condensed consolidated interim financial statements included herein.

In this report we include selected financial data from our statement of financial position as of March 31, 2020 and from our statement of comprehensive income and our statement of cash flows for the three-month period ended March 31, 2020. In addition, we include selected financial data from our statement of financial position as of December 31, 2019, as well as the statement of comprehensive income and the statement of cash flows for the three-month period ended March 31, 2019 for comparison purposes.

 

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SELECTED FINANCIAL DATA OF PEMEX

 

     As of and for the period ended(1)  
     December 31,     March 31,(2)  
     2019     2019     2020  
     (millions of pesos)  

Statement of Comprehensive Income

      

Net sales

     Ps. 1,401,971       Ps. 356,251       Ps. 284,110  

Operating income

     37,030       60,701       30,200  

Financing income

     24,484       3,901       5,699  

Financing cost

     (132,861     (29,855     (42,630

Derivative financial instruments (cost), net

     (18,512     (8,222     (25,926

Foreign exchange gain (loss), net

     86,930       30,412       (469,206

Net (loss)

     (347,911     (35,719     (562,251

Statement of Financial Position (end of period)

      

Cash and cash equivalents

     60,622       n.a.       57,150  

Total assets

     1,918,448       n.a.       1,897,868  

Long-term debt(3)

     1,738,250       n.a.       2,205,040  

Total long-term liabilities(4)

     3,363,453       n.a.       3,681,626  

Total equity (deficit)

     (1,997,208     n.a.       (2,323,535

Statement of Cash Flows

      

Depreciation and amortization

     137,187       35,679       34,112  

Acquisition of wells, pipelines, properties, plant and equipment(5)

     (109,654     (12,621     (26,985

 

Note: n.a. = Not applicable.

(1)

Includes Petróleos Mexicanos, the subsidiary entities and the subsidiary companies listed in Note 5 to the unaudited condensed consolidated interim financial statements included herein.

(2)

Unaudited.

(3)

Long-term debt does not include short-term indebtedness of Ps. 258,929 million (U.S. $11,013 million) as of March 31, 2020.

(4)

Total long-term liabilities does not include short-term liabilities of Ps. 539,777 million (U.S. $22,957 million) as of March 31, 2020.

(5)

Includes capitalized finance cost.

Source: PEMEX’s unaudited condensed consolidated interim financial statements.

 

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Capitalization of PEMEX

The following table sets forth the capitalization of PEMEX as of March 31, 2020.

 

     As of March 31, 2020 (1)  
     (millions of pesos or U.S. dollars)  

Long-term leases(2)

   Ps. 70,775      U.S. $ 3,010  

Long-term external debt

     2,018,472        85,848  

Long-term domestic debt

     186,568        7,935  
  

 

 

    

 

 

 

Total long-term debt(3)

     2,205,040        93,783  
  

 

 

    

 

 

 

Total long-term leases and long-term debt

     2,275,815        96,793  
  

 

 

    

 

 

 

Certificates of Contribution “A”(4)

     494,738        21,042  

Mexican Government contributions to Petróleos Mexicanos

     43,731        1,860  

Legal reserve

     1,002        43  

Accumulated other comprehensive result

     (20,196      (859

Accumulated deficit from prior years

     (2,280,396      (96,988

Net (loss)(5)

     (562,130      (23,908
  

 

 

    

 

 

 

Total controlling interest

     (2,323,251      (98,810

Total non-controlling interest

     (284      (12
  

 

 

    

 

 

 

Total equity (deficit)

     (2,323,535      (98,822
  

 

 

    

 

 

 

Total capitalization

   Ps. (47,720    U.S. $ 2,029  
  

 

 

    

 

 

 

 

Note: Numbers may not total due to rounding.

(1)

Unaudited. Convenience translations into U.S. dollars of amounts in pesos have been made at the established exchange rate of Ps. 23.5122 = U.S. $1.00 as of March 31, 2020. Such translations should not be construed as a representation that the peso amounts have been or could be converted into U.S. dollar amounts at the foregoing or any other rate.

(2)

Total long-term leases does not include short-term leases of Ps. 6,633 million (U.S. $282 million) as of March 31, 2020.

(3)

Total long-term debt does not include short-term indebtedness of Ps. 258,929 million (U.S. $11,013 million) as of March 31, 2020.

(4)

Equity instruments held by the Federal Government of Mexico (which we refer to as the Mexican Government).

(5)

Excluding amounts attributable to non-controlling interests of Ps. 121 million.

Source: PEMEX’s unaudited condensed consolidated interim financial statements.

Operating and Financial Review and Prospects

Results of Operations of PEMEX—For the three months ended March 31, 2020 compared to the three months ended March 31, 2019.

General

The selected consolidated interim financial information set forth below is derived from our unaudited condensed consolidated interim financial statements included elsewhere in this report. This interim financial information should be read in conjunction with the Form 20-F and, in particular, “Item 4—Information on the Company” and “Item 5—Operating and Financial Review and Prospects” in the Form 20-F, and with the unaudited condensed consolidated interim financial statements of PEMEX included in this report beginning on page F-1.

 

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     Three months ended March 31,(1)  
     2019      2020(2)  
     (millions of pesos or U.S. dollars)  

Net Sales

        

Domestic

   Ps.  198,959      Ps.  157,782      U.S. $ 6,711  

Export

     155,219        125,141        5,322  

Services income

     2,073        1,187        51  
  

 

 

    

 

 

    

 

 

 

Total of sales

     356,251        284,110        12,084  

(Reversal) impairment of wells, pipelines, properties, plant and equipment, net

     5,155        (26,316      (1,119

Cost of sales

     256,655        243,060        10,338  
  

 

 

    

 

 

    

 

 

 

Gross income

     94,441        67,366        2,865  

Other revenues

     5,324        2,881        123  

Other expenses

     (1,278      (1,750      (76

Distribution, transportation and sale expenses

     5,502        3,394        144  

Administrative expenses

     32,284        34,903        1,484  
  

 

 

    

 

 

    

 

 

 

Operating income

     60,701        30,200        1,284  

Financing income

     3,901        5,699        242  

Financing cost

     (29,855      (42,630      (1,813

Derivative financial instruments (cost), net

     (8,222      (25,926      (1,103

Foreign exchange gain (loss), net

     30,412        (469,206      (19,956

Loss (profit) sharing in joint ventures and associates

     (212      108        5  
  

 

 

    

 

 

    

 

 

 

Income (loss) before duties, taxes and other

     56,725        (501,755      (21,341

Total duties, taxes and other

     92,444        60,496        2,572  
  

 

 

    

 

 

    

 

 

 

Net (loss)

     (35,719      (562,251      (23,913

Other comprehensive results

     586        219,861        9,350  
  

 

 

    

 

 

    

 

 

 

Total comprehensive (loss)

   Ps.  (35,133    Ps.  (342,390    U.S. $ (14,563
  

 

 

    

 

 

    

 

 

 

 

Note: Numbers may not total due to rounding.

(1)

Unaudited.

(2)

Convenience translations into U.S. dollars of amounts in pesos have been made at the established exchange rate of Ps. 23.5122 = U.S. 1.00 at March 31, 2020. Such translations should not be construed as a representation that the peso amounts have been or could be converted into U.S. dollars at the foregoing or any other rate.

Source: PEMEX’s unaudited condensed consolidated interim financial statements.

Results of Operations of Petróleos Mexicanos, the Subsidiary Entities and the Subsidiary Companies—in the first three months of 2020 as compared to the first three months of 2019

Total of Sales

Total sales decreased by 20.3% or Ps. 72.1 billion in the first three months of 2020, from Ps. 356.3 billion in the first three months of 2019 to Ps. 284.1 billion in the first three months of 2020, mainly due to a decrease in the sales volume of petroleum products and the weighted average price of Mexican crude oil, as further discussed below (see “Impacts of the COVID-19 Pandemic”).

Domestic Sales

Domestic sales decreased by 20.7% in the first three months of 2020, from Ps. 199.0 billion in the first three months of 2019 to Ps. 157.8 billion in the first three months of 2020, mainly due to decreases in the sales prices of diesel, fuel oil and liquefied petroleum gas (LPG) and a decrease in the sales volume of gasoline, diesel and fuel oil. Domestic sales of petroleum products decreased by 20.5% in the first three months of 2020, from Ps. 170.9 billion in the first three months of 2019 to Ps. 135.9 billion in the first three months of 2020, mainly due to a 7.9% decrease in the average price of diesel, 44.1% decrease in the average price of fuel oil and a 30.2% decrease in the average price of LPG. The sales volume of diesel, gasoline and fuel oil decreased by 24.6%, 22.2% and 22.6%, respectively, in the first three months of 2020 as compared to the same period of 2019, as a result of decreased demand, which in turn was primarily the result of market share loss due to the entry of new competitors.

Domestic sales of natural gas decreased by 48.1% in the first three months of 2020, from Ps. 10.4 billion in the first three months of 2019 to Ps. 5.4 billion in the first three months of 2020, mainly due to a 55.6% decrease in sales volume.

Domestic sales of LPG decreased by 29.2% in the first three months of 2020, from Ps. 10.6 billion in the first three months of 2019 to Ps. 7.5 billion in the first three months of 2020, mainly as a result of 30.2% decrease in its average sales price.

 

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Export Sales

Export sales decreased by 19.4% in peso terms in the first three months of 2020 (with U.S. dollar-denominated export revenues translated to pesos at the exchange rate on the date of the corresponding export sale) from Ps. 155.2 billion in the first three months of 2019 to Ps. 125.1 billion in the first three months of 2020. This decrease was mainly due to a 26.8% decrease in the weighted average Mexican export crude oil price in the first three months of 2020, compared to the first three months of 2019. From January 1, 2019 to March 31, 2019, the weighted average Mexican export crude oil price was U.S. $55.85 per barrel, compared to U.S. $40.91 per barrel in the same period of 2020.

Crude oil and condensate sales decreased by 16.7%, from Ps. 113.9 billion in the first three months of 2019 to Ps. 94.9 billion in the first three months of 2020, and in U.S. dollar terms decreased by 29.5%, from U.S. $6.1 billion in the first three months of 2019 to U.S. $4.3 billion in the first three months of 2020. The weighted average price per barrel of crude oil exports in the first three months of 2020 was U.S. $40.91, a 26.8% decrease as compared to the weighted average price of U.S. $55.85 in the first three months of 2019.

Export sales of petroleum products, including products derived from natural gas and natural gas liquids decreased by 20.2%, from Ps. 8.9 billion in the first three months of 2019 to Ps. 7.1 billion in the first three months of 2020, primarily due to a decreases in the average sales price of fuel oil and sales volume of naphtha.

For the three-month period ended March 31, 2020, the average exchange rate of the U.S. dollar against the peso was Ps. 19.8655 to U.S. $1.00, compared to Ps. 19.2198 to U.S. $1.00 during the same period of 2019, representing a depreciation of the peso against the U.S. dollar of Ps. 0.6457 (or 3.36%), which had a favorable effect on our export sales of Ps. 18.9 billion.

Services Income

Services income decreased by 42.9% in the first three months of 2020, from Ps. 2.1 billion in the first three months of 2019 to Ps. 1.2 billion in the first three months of 2020, mainly as a result of a decrease in transportation services provided by Pemex Industrial Transformation and Pemex Logistics to third parties.

(Reversal) Impairment of Wells, Pipelines, Properties, Plant and Equipment, Net

Net reversal of impairment of wells, pipelines, properties, plant and equipment increased by Ps. 31.5 billion in the first three months of 2020 as compared to the first three months of 2019, from a net impairment of Ps. 5.2 billion as of March 31, 2019 to recognition of a net reversal of impairment of Ps. 26.3 billion as of March 31, 2020. This net reversal of impairment was primarily due to (1) a net reversal of impairment of Ps. 22.0 billion in the cash generating units (CGUs) of Pemex Exploration and Production, mainly due to an increase in the volume production profile of crude oil, which increases future cash flows and the appreciation of the U.S. dollar against the peso and (2) a net reversal of impairment of Ps. 4.4 billion in the CGU of Pemex Industrial Transformation, mainly due to an increase in the processing of crude oil in the refineries, which generates additional future net cash flows from its CGUs.

 

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Cost of Sales

Cost of sales decreased by 5.3%, from Ps. 256.7 billion in the first three months of 2019 to Ps. 243.1 billion in the first three months of 2020. This decrease was mainly due to (1) a decrease of Ps. 11.8 billion in import purchases, primarily Magna gasoline, diesel and natural gas, due to a decrease in the volume of imports to meet demand in the domestic market, (2) a Ps. 3.7 billion decrease in taxes and duties on exploration and extraction of hydrocarbons resulting from lower average sales prices in the first three months of 2020 compared to the first three months of 2019 and (3) a decrease of Ps. 4.9 billion in inventory variation and Ps. 1.0 billion in amortization of other assets. This decrease was partially offset by a Ps. 8.2 billion increase in operating expenses.

General Expenses

Total general expenses (including distribution, transportation and sale expenses and administrative expenses) increased by 1.3%, from Ps. 37.8 billion for the first three months of 2019 to Ps. 38.3 billion for the first three months of 2020, mainly due to an increase in amortization of rights of use assets.

Other Revenues, Net

Other revenues, net, decreased by Ps. 2.9 billion in the first three months of 2020, from net revenues of Ps. 4.0 billion in the first three months of 2019 to net revenues of Ps. 1.1 billion in the first three months of 2020. This decrease was mainly due to a decrease of Ps. 2.5 billion in income from insurance recovery as compared to the same period of 2019.

Financing Income

Financing income increased by Ps. 1.8 billion in the first three months of 2020, from Ps. 3.9 billion in the first three months of 2019 to Ps. 5.7 billion in the first three months of 2020. This increase was mainly due to effects from the liability management transactions conducted in 2020.

Financing Cost

Financing cost increased by Ps. 12.8 billion in the first three months of 2020, from Ps. 29.8 billion in the first three months of 2019 to Ps. 42.6 billion in the first three months of 2020, mainly due to an increase in interest expenses in the first three months of 2020 as a result of the effects of depreciation of the peso against the U.S. dollar.

Derivative Financial Instruments (Cost), Net

Derivative financial instruments (cost), net, increased by Ps. 7.7 billion, from a derivative financial instruments cost of Ps. 8.2 billion in the first three months of 2019 to a derivative financial instruments cost of Ps. 25.9 billion in the first three months of 2020, mainly as a result of the heightened appreciation of the U.S. dollar against other currencies in which our debt is denominated.

Foreign Exchange Gain (Loss), Net

A substantial portion of our debt (86.8%) as of March 31, 2020 is denominated in foreign currency. Foreign exchange income decreased by Ps. 499.6 billion, from a foreign exchange income of Ps. 30.4 billion in the first three months of 2019 to a foreign exchange loss of Ps. 469.2 billion in the first three months of 2020, primarily as a result of the depreciation of the peso against the U.S. dollar for the first three months of 2020 as compared to the first three months of 2019. The value of the peso in U.S. dollar terms appreciated by 1.5% from Ps. 19.6829 to U.S. $1.00 as of December 31, 2018 to Ps. 19.3793 to U.S. $1.00 as of March 31, 2019 as compared to a 24.8% depreciation of the peso in U.S. dollar terms from Ps. 18.8452 to U.S. $1.00 as of December 31, 2019 to Ps. 23.5122 to U.S. $1.00 as of March 31, 2020.

 

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Duties, Taxes and Other

The Derecho por la Utilidad Compartida (Profit-sharing Duty) and other duties and taxes paid decreased by 34.5% in the first three months of 2020, from Ps. 92.4 billion in the first three months of 2019 to Ps. 60.5 billion in the first three months of 2020, mainly due to the 26.8% decrease in the weighted average export price of Mexican crude oil, from U.S. $55.85 per barrel in the first three months of 2019 to U.S. $40.91 per barrel in the first three months of 2020, as well as a decrease in the applicable tax rate for 2020, which is 58% for 2020 as compared to 65% for 2019. Duties and taxes represented 21.3% and 25.9% of total sales in the first three months of 2020 and 2019, respectively.

Net (Loss)

In the first three months of 2020, we had a net loss of Ps. 562.3 billion, as compared to a net loss of Ps. 35.7 billion in the first three months of 2019.

This increase in net loss was mainly the result of (1) a Ps. 72.1 billion decrease in total sales, mainly due to decreases in the sales volume of petroleum products and the weighted average price of Mexican crude oil exports, (2) a Ps. 499.6 billion increase in foreign exchange loss, mainly due to the depreciation of the peso against the U.S. dollar, (3) a Ps. 12.8 billion increase in financing cost and (4) a Ps. 17.7 billion increase in derivative financial instruments cost.

These effects were partially offset by (1) a Ps. 13.6 billion decrease in the cost of sales, mainly due to a decrease in volume of purchases for resale of gasoline, diesel and natural gas imports, (2) a Ps. 31.5 billion increase in net reversal of impairment of wells, pipelines, properties, plant and equipment and (3) a Ps. 31.9 billion decrease in taxes and duties, mainly due to a decreases in hydrocarbon production and prices, as well as a decrease in the tax rate.

Other Comprehensive Results

In the first three months of 2020, we reported a net gain of Ps. 219.9 billion in other comprehensive results as compared to a gain of Ps. 0.6 billion in the first three months of 2019, mainly due to a decrease in the employee benefits reserve as a result of a higher discount rate and expected rate of return on plan assets used in the actuarial computation method from 7.5% at December 31, 2019 to 8.44% at March 31, 2020.

Changes in the Statement of Financial Position of Petróleos Mexicanos, the Subsidiary Entities and the Subsidiary Companies—from December 31, 2019 to March 31, 2020

Assets

Cash and cash equivalents decreased by Ps. 3.5 billion, or 5.8%, in the first three months of 2020, from Ps. 60.6 billion as of December 31, 2019 to Ps. 57.1 billion as of March 31, 2020, mainly due to an increase in payments to suppliers and contractors and payments on our debt instruments and taxes.

Accounts receivable, net, decreased by Ps. 16.9 billion, or 9.4%, in the first three months of 2020, from Ps. 180.5 billion as of December 31, 2019 to Ps. 163.6 billion as of March 31, 2020, mainly due to a Ps. 29.7 billion decrease in accounts receivable from sales to domestic and export customers, partially offset by a Ps. 12.8 billion increase in other accounts receivable from taxes to be recovered.

The current portion of our promissory notes increased by Ps. 1.0 billion, or 20.4%, in the first three months of 2020, from Ps. 4.9 billion as of December 31, 2019 to Ps. 5.9 billion as of March 31, 2020, mainly due to the valuation of promissory notes at March 31, 2020.

Wells, pipelines, properties, plant and equipment, net, increased by Ps. 24.7 billion, or 2.0%, in the first three months of 2020 from Ps. 1,211.7 billion as of December 31, 2019 to Ps. 1,236.5 billion as of March 31, 2020, mainly due to (1) Ps. 34.2 billion of acquisitions of wells, pipelines, properties, plant and equipment and (2) the recognition of a reversal of impairment of Ps. 26.3 billion. This increase was partially offset by (1) Ps. 34.1 billion in depreciation and (2) Ps. 1.7 billion of net disposals of wells, pipelines, properties, plant and equipment. See Note 12 to our unaudited condensed consolidated interim financial statements included herein.

Rights of use, net, decreased by Ps. 3.6 billion, or 5.1%, in the first three months of 2020, from Ps. 70.8 billion as of December 31, 2019 to Ps. 67.2 billion as of March 31, 2020, mainly due to the amortization of the period.

Derivative financial instruments increased by Ps. 7.4 billion in the first three months of 2020, from Ps. 11.5 billion as of December 31, 2019 to Ps. 18.9 billion as of March 31, 2020, mainly due to the increase in the fair value of favorable crude oil options, which was partially offset by the negative effect of the fair value of cross-currency swaps caused by the appreciation of the U.S. dollar against most of the currencies for which we are covered.

 

9


Liabilities

Total debt, including accrued interest, increased by Ps. 480.8 billion, or 24.2%, from Ps. 1,983.2 billion as of December 31, 2019 to Ps. 2,464.0 billion as of March 31, 2020, mainly due to the impact of the 24.8% depreciation of the peso against the U.S. dollar in the first three months of 2020.

Liabilities to suppliers and contractors decreased by Ps. 27.5 billion, or 13.2%, from Ps. 208.0 billion as of December 31, 2019 to Ps. 180.5 billion as of March 31, 2020, mainly due to payments made in the period.

Taxes and duties payable decreased by Ps. 21.5 billion, or 42.5%, in the first three months of 2020, from Ps. 50.7 billion as of December 31, 2019 to Ps. 29.2 billion as of March 31, 2020, mainly due to a Ps. 21.4 billion decrease in the Profit-sharing Duty.

Derivative financial instruments liabilities increased by Ps. 14.3 billion, or 86.1%, in the first three months of 2020, from Ps. 16.6 billion as of December 31, 2019 to Ps. 30.9 billion as of March 31, 2020. This increase was mainly due to the increase in the fair value of cross-currency swaps caused by the appreciation of the U.S. dollar against most of the currencies for which we are covered.

Employee benefits liabilities decreased by Ps. 179.6 billion, or 12.3%, in the first three months of 2020, from Ps. 1,456.8 billion as of December 31, 2019 to Ps. 1,277.2 billion as of March 31, 2020. This decrease was mainly due to the increase in the discount rate and expected rate of return on plan assets used in the actuarial computation method from 7.5% in 2019 to 8.44% in 2020.

Leases increased by Ps. 9.3 billion, or 85.0%, in the first three months of 2020, from Ps. 68.1 billion as of December 31, 2019 to Ps. 77.4 billion as of March 31, 2020, mainly due to the impact of the 24.8% depreciation of the peso against the U.S. dollar in the first three months of 2020.

Equity (Deficit), Net

Deficit, net, increased by Ps. 326.3 billion, or 16.3%, from a deficit of Ps. 1,997.2 billion as of December 31, 2019 to a deficit of Ps. 2,323.5 billion as of March 31, 2020. This increase in deficit was mainly due to Ps. 562.3 billion in net loss, partially offset by (1) Ps. 219.9 billion in other comprehensive results, including employee benefits actuarial gains of Ps. 191.1 billion and currency translation effect gain of Ps. 28.8 billion, and (2) a Ps. 16.1 billion increase in Certificates of Contribution “A” from the Mexican Government as of March 31, 2020.

Liquidity and Capital Resources

Overview

During the first three months of 2020, our liquidity position was adversely affected mainly due (1) the increase in short-term debt caused by the transfer from long-term debt, (2) the reduction in the value of the inventories derived from the decrease in oil prices in the first quarter of 2020 compared to oil prices in the same period of 2019 and (3) the increase in other accounts receivable, mainly taxes to be recovered and prepaid taxes. This negative impact to our liquidity position was partially offset by (1) a decrease in the balance of accounts payable to suppliers in the first three months of 2020 due to payments made by us, (2) payments made by customers and (3) a decrease in income taxes and duties payable.

 

10


Our principal uses of new funds in the first three months of 2020 were primarily the payment of debt maturities due during the same period and strengthening our cash flow through the actions listed below. We met the requirement to pay such debt maturities primarily with cash provided by cash flows from borrowings, which amounted to Ps. 383.2 billion. During the first three months of 2020, our net cash flow used in operating activities amounted to Ps. 25.3 billion and our net cash flow used in investing activities amounted Ps. 24.0 billion, which included cash flow from investing activities of Ps. 3.7 billion (other notes receivable) and cash flow used in investing activities of Ps. 27.7 billion, mainly used in the acquisition of wells, pipelines, properties, plant and equipment and intangible assets.

For 2020, we forecasted a 77.5% increase in capital expenditures as compared to the amounts spent on capital expenditures in 2019. Our budget for 2020 includes a total of Ps. 332.6 billion for capital expenditures, including Ps. 94.1 billion for non-capitalizable maintenance and Ps. 41.3 billion for the construction of our new Dos Bocas refinery, led by PTI Infraestructura de Desarrollo, S.A. de C.V. Our net capital expenditures budget is Ps. 197.2 billion. We expect to direct Ps. 175.7 billion (or 89.1%) to exploration and production programs in 2020. This investment in exploration and production activities reflects our focus on maximizing the potential of our hydrocarbon reserves and our most productive projects. As of March 31, 2020, we have applied Ps. 66.6 billion to exploration and production activities. In addition, in 2020 we expect to direct Ps. 17.0 billion (or 8.6%) to our industrial transformation segment. As of March 31, 2020, we have applied Ps. 6.3 billion to our industrial transformation activities. We continuously review our capital expenditures portfolio in accordance with our current and future business plans.

Given the recent and ongoing impact of the COVID-19 pandemic on our business and the global economy, our management expects to propose amendments to our 2020 budget to the Board of Directors of Petróleos Mexicanos. These amendments are expected to reflect the anticipated impact on our cash flows of the following developments: decreases in the prices and production of crude oil and derivatives, additional support from the Mexican Government in the form of contributions and tax benefits and changes to the U.S. dollar-peso exchange rate. The amendments are expected to represent an approximately Ps. 5.0 billion reduction in operating expenses and a Ps. 40.5 billion reduction in production capital expenditures (including non-capitalizable maintenance expenses). Once the Board of Directors of Petróleos Mexicanos approves the amendment budget, the amended budget will be required to be submitted to the Ministry of Finance and Public Credit for approval pursuant to its authority over our financial balance goal for the fiscal year.

As of March 31, 2020, we owed our suppliers Ps. 180.5 billion, as compared to Ps. 208.0 billion as of December 31, 2019. As a result of the decrease in these obligations, we believe net cash flows from our operating and financing activities, together with available cash and cash equivalents, will be sufficient to meet our working capital, debt service and capital expenditure requirements in 2020.

The Ley de Ingresos de la Federación para el Ejercicio Fiscal de 2020 (the Federal Revenue Law for the Fiscal Year 2020) applicable to us as of January 1, 2020 provides for the incurrence of up to Ps. 34.8 billion of net indebtedness through a combination of domestic and international capital markets offerings and borrowings from domestic and international financial institutions.

We have a substantial amount of debt. Due to our heavy tax burden, our cash flow from operations in recent years has not been sufficient to fund our capital expenditures and other expenses and, accordingly, our debt has significantly increased and our working capital has deteriorated. Relatively low oil prices and declining production have also had a negative impact on our ability to generate positive cash flows, which, together with our heavy tax burden, has further exacerbated our ability to fund our capital expenditures and other expenses. Despite the relatively low and fluctuating oil prices and our heavy tax burden, our cash flow from operations for the three month period ended March 31, 2020, together with our funds from financing activities, was sufficient to fund our capital expenditures and other expenses. We expect that net cash flows from our operations and financing activities will also be sufficient to meet our working capital requirements, debt service and capital expenditures for 2020. We continue to evaluate our capital expenditures needs and opportunities in light of the ongoing COVID-19 pandemic.

 

11


As of March 31, 2020, our total indebtedness, including accrued interest, was Ps. 2,464.0 billion (U.S. $104.8 billion), in nominal terms, which represents a 24.2% decrease in peso terms compared to our total indebtedness, including accrued interest, of Ps. 1,983.2 billion (U.S. $105.2 billion) as of December 31, 2019. As of March 31, 2020, 22.8% of our existing debt, or Ps. 561.9 billion (U.S. $23.9 billion), including accrued interest, is scheduled to mature in the next three years. Our working capital deteriorated from a negative working capital of Ps. 211.7 billion (U.S. $11.2 billion) as of December 31, 2019 to a negative working capital of Ps. 240.1 billion (U.S. $10.2 billion) as of March 31, 2020. Our level of debt may increase further in the short or medium term, as a result of new financing activities or future depreciation of the peso as compared to the U.S. dollar, and may have an adverse effect on our financial condition, results of operations and liquidity position. To service our debt, we have relied and may continue to rely on a combination of cash flow from operations, drawdowns under our available credit facilities and refinancing our existing indebtedness. In addition, we are taking actions to improve our financial position, as discussed above.

Certain rating agencies have expressed concerns regarding: (1) our heavy tax burden; (2) the total amount of our debt and the ratio of our debt to our proven reserves; (3) the significant increase in our indebtedness over the last several years; (4) our negative free cash flow; (5) the natural decline of certain of our oil fields and lower quality of crude oil; (6) our substantial unfunded reserve for retirement pensions and seniority premiums, which was equal to Ps. 1,456.8 billion (U.S. $77.3 billion) as of December 31, 2019; (7) the persistence of our operating expenses notwithstanding declines in oil prices; (8) our rising per barrel lifting costs; (9) the possibility that our budget for capital expenditures will be insufficient to maintain and exploit reserves, particularly given our high investment needs to maintain production and replenish reserves; (10) the possibility that the Mexican Government will not be able to continue providing the support it has provided in recent years; and (11) the involvement of the Mexican Government in our strategy, financing and management. In particular, in light of the recent downturn seen in the oil and gas industry beginning in the first quarter of 2020, certain ratings agencies have expressed concern that we lack flexibility to navigate the downturn and to finance our capital investment needs in the face of low cash flow generation and adverse financing conditions.

Ratings address our creditworthiness and the likelihood of timely payment of our long-term debt securities. Ratings are not a recommendation to purchase, hold or sell securities and may be changed, suspended or withdrawn at any time. Our current ratings and the rating outlooks depend, in part, on economic conditions and other factors that affect credit risk and are outside our control, as well as assessments of the creditworthiness of Mexico. Certain ratings agencies have recently lowered Mexico’s credit ratings and their assessment of Mexico’s creditworthiness has and may further affect our credit ratings.

Ratings actions related to us that occurred in 2020 include the following:

 

   

On March 26, 2020, Standard & Poor’s lowered our credit ratings for foreign currency long term issues and for local currency long term issues from BBB+ and A- to BBB and BBB+, respectively, maintaining a negative credit outlook on a global scale.

 

   

On April 1, 2020, HR Ratings affirmed our local credit rating at HR AAA with a stable outlook and lowered our global credit ratings to HR BBB+(G) with a negative outlook.

 

   

On April 3, 2020, Fitch Ratings lowered our credit rating from BB+ to BB in both global local and global foreign currency with a negative outlook.

 

   

On April 17, 2020, Fitch Ratings lowered our international foreign and local currency long-term ratings from BB to BB-. Fitch Ratings also revised the outlook from negative to stable.

 

   

On April 17, 2020, Moody’s lowered our credit ratings from Baa3 to Ba2, maintaining a negative credit outlook.

 

   

On April 21, 2020, Moody’s lowered our credit ratings of our outstanding notes, as well as credit ratings based on our guarantee to A2.mx/Ba2 from Aa3.mx/Baa3. Moody’s also downgraded our short-term local scale rating to MX-2 from MX-1.

These downgrades of our credit ratings, particularly those below investment grade, may have material adverse consequences on our ability to access the financial markets and/or our cost of financing. In turn, this could significantly harm our ability to meet our existing obligations, financial condition and results of operations.

If such constraints occur at a time when our cash flow from operations is less than the resources necessary to meet our debt service obligations, in order to provide additional liquidity to our operations, we could be forced to further reduce our planned capital expenditures, implement further austerity measures and/or utilize alternative financing mechanisms that do not constitute public debt. A reduction in our capital expenditure program could adversely affect our financial condition and results of operations. Additionally, such measures may not be sufficient to permit us to meet our obligations.

 

12


Going Concern

Our unaudited condensed consolidated interim financial statements have been prepared on a going concern basis, which assumes that we can meet our payment obligations as they become due. As we describe in Notes 2(b) and 18(f) to our unaudited condensed consolidated interim financial statements included herein, there are certain conditions that have generated important uncertainty and significant doubts concerning our ability to continue operating as a going concern. We discuss the circumstances that have caused these negative trends, as well our plans in regard to these matters in Notes 2(b) and 18(f) to our unaudited condensed consolidated interim financial statements included herein. We intend to continue taking actions to improve our results of operations, capital expenditure plans and financial condition. We continue operating as a going concern, and our unaudited condensed consolidated interim financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Cash Flows from Operating, Investing and Financing Activities

During the first three months of 2020, net funds used in operating activities totaled Ps. 25.3 billion, as compared to Ps. 22.1 billion in the first three months of 2019. During the first three months of 2020, our net cash flows used in investing activities totaled Ps. 24.0 billion, as compared to Ps. 9.6 billion in the first three months of 2019. During the first three months of 2020, new financings totaled Ps. 383.2 billion and payments of principal and interest totaled Ps. 375.7 billion, as compared to Ps. 203.1 billion and Ps. 218.6 billion, respectively, during the first three months of 2019. During the first three months of 2020, we applied net funds of Ps. 27.0 billion to acquisitions of wells, pipelines, properties, plant and equipment, as compared to Ps. 12.6 billion in the first three months of 2019.

As of March 31, 2020 our cash and cash equivalents totaled Ps. 57.1 billion, as compared to Ps. 60.6 billion as of December 31, 2019. See Note 8 to our unaudited condensed consolidated interim financial statements included herein for more information about our cash and cash equivalents.

 

13


Liquidity Position

We define liquidity as funds available under our lines of credit as well as cash and cash equivalents. The following table summarizes our liquidity position as of March 31, 2020 and December 31, 2019.

 

     As of  
     March 31, 2020      December 31, 2019  
     (millions of pesos)  

Borrowing base under lines of credit

   Ps.  159,856      Ps.  177,397  

Cash and cash equivalents

     57,150        60,622  
  

 

 

    

 

 

 

Liquidity

   Ps.  217,006      Ps.  238,019  
  

 

 

    

 

 

 

Our lines of credit are fully committed and accordingly available at any time.

The following table summarizes our sources and uses of cash for the three-month periods ended March 31, 2020 and 2019:

 

     For the three-month period ended
March 31,
 
     2020      2019  
     (millions of pesos)  

Net cash flows (used in) operating activities

   Ps.  (25,266    Ps.  (22,115

Net cash flows (used in) investing activities

     (23,979      (9,618

Net cash flows from financing activities

     25,630        15,382  

Effects of foreign exchange on cash balances

     20,143        949  
  

 

 

    

 

 

 

Net (decrease) in cash and cash equivalents

   Ps.  (3,472    Ps.  (15,402
  

 

 

    

 

 

 

 

Note: Numbers may not total due to rounding.

Recent Financing Activities

During the period from May 7, 2020 to July 3, 2020, Petróleos Mexicanos participated in the following financing activities:

During the period from May 7, 2020 to July 3, 2020, Holdings Holland Services, B.V. (formerly P.M.I. Holdings B.V.), as debtor, obtained U.S. $3,815 million in financing from its revolving credit lines and repaid U.S. $3,730 million. As of May 6, 2020, the outstanding amount under these revolving credit lines was U.S. $365 million. As of July 3, 2020, the outstanding amount under these revolving credit lines was U.S. $450 million.

For our financing activities for the period from January 1, 2020 to May 6, 2020, see “Item 5—Operating and Financial Review and Prospects—Liquidity and Capital Resources—Financing Activities—2020 Financing Activities” in the Form 20-F.

As of March 31, 2020, and as of the date of this report, we were not in default under any of our financing agreements.

 

14


Business Overview

Production

Set forth below are selected summary operating data relating to PEMEX.

 

     Three months ended
March 31,
    

 

    

 

 
     2019      2020      Change      %  

Operating Highlights

           

Production

           

Crude oil (tbpd)

     1,674        1,739        65        3.9  

Natural gas (mmcfpd)

     3,668        3,738        70        1.9  

Petroleum products (tbpd)

     573        562        (11      (2.0

Dry gas from plants (mmcfpd)

     2,314        2,241        (73      (3.1

Natural gas liquids (tbpd)

     223        225        (2      (0.9

Petrochemicals (tt)

     478        423        (55      (11.5

Average crude oil exports (tbpd)(1)

           

Isthmus

     n.a.        72.0        72.0        100.0  

Maya

     1,224.3        1,094.0        (130.3      (10.6
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

     1,224.3        1,166.0        (58.3      (4.8

Value of crude oil exports

(value in millions of U.S. dollars)(1)

   U.S. $ 6,236.2      U.S. $ 1,452.9        (4,783.2      (76.7

Average PEMEX crude oil export prices per barrel(2)

           

Isthmus

     n.a.        46.50        46.5        100.0  

Maya

   U.S. $ 56.61        40.72        (15.9      (28.1
  

 

 

    

 

 

    

 

 

    

 

 

 

Weighted average price(3)

   U.S. $ 56.61      U.S. $ 41.07        (15.5      (27.4

West Texas Intermediate crude oil average price per barrel(4)

   U.S. $ 54.81      U.S. $ 45.79        (9.0      (16.5

 

Notes: Numbers may not total due to rounding.

tbpd = thousands of barrels per day

mmcfpd = millions of cubic feet per day

tt = thousands of tons

n.a. not available

 

(1)

The volume and value of crude oil exports reflects customary adjustments by P.M.I. Comercio Internacional, S.A. de C.V. (which we refer to as PMI), P.M.I. Trading Designated Activity Company (formerly P.M.I. Trading, Ltd., which we refer to as P.M.I. Trading DAC), P.M.I. Norteamérica, S.A. de C.V., (which we refer to as PMI-NASA, and, together with PMI and P.M.I. Trading DAC, we collectively refer to as the PMI Subsidiaries) to reflect the percentage of water in each shipment as of March 31, 2020.

(2)

Average price during period indicated based on billed amounts.

(3)

On July 3, 2020, the weighted average price of PEMEX’s crude oil export mix was U.S. $37.35 per barrel.

(4)

On July 3, 2020, the West Texas Intermediate crude oil spot price was U.S. $40.65 per barrel.

Source: Petróleos Mexicanos and the PMI Subsidiaries.

 

15


Crude oil production increased by 3.9% in the first three months of 2020, from 1,674 thousand barrels per day in the first three months of 2019 to 1,739 thousand barrels per day in the first three months of 2020. This increase was mainly due to:

 

   

a 0.4% increase in production of extra light crude oil, primarily due to an increase in the production of the Xanab, Ek and Balam fields; and

 

   

a 6.3% increase in production of heavy crude oil, primarily due to development activities and a deceleration in the decline in field production, primarily of the Ayatsil field;

Partially offset by:

 

   

a 1.7% reduction in production of light crude oil, primarily due to oil-water contact at Kax, Homol and Sinán fields and a natural decline in production of mature fields.

During the first three months of 2020, natural gas production increased by 1.9%, from 3,668 million cubic feet per day in the first three months of 2019 to 3,738 million cubic feet per day in the same period of 2020. This increase in production was primarily a result of:

 

   

a 2.7% increase in associated gas production, primarily due to the increase in production of the Ku-Maloob-Zaap, Yaxché and Chuc business units;

Partially offset by:

 

   

a 0.4% decrease in non-associated gas production, mainly due to an accelerated decline in production at certain fields of the Burgos, Crudo Ligero Marino and Veracruz business units.

Production of petroleum products decreased by 2.0% in the first three months of 2020, from 573 thousand barrels per day in the first three months of 2019 to 562 thousand barrels per day in the first three months of 2020. This decline is primarily explained due to the fact that during the six months ended March 31, 2020, crude oil processing has been limited because of the repair and maintenance program ongoing at our refineries.

During the first three months of 2020, dry gas production decreased by 3.1%, as compared to the same period of 2019, due to lower gas production of the Cactus and La Venta gas processing complexes.

During the first three months of 2020, the production of petrochemical products decreased by 55 thousand tons, a 11.5% decrease as compared to the first three months of 2019. This decrease is mainly explained by:

 

   

a 58 thousand ton decrease in the production of ethane derivatives, mainly due to (1) a 32 thousand ton decrease in linear low density polyethylene production, due to the fact that the plant has operated intermittently because of operational problems, (2) a 19 thousand ton decrease in ethylene glycol production and (3) a 6 thousand ton decrease in ethylene oxide production, mainly due to a decrease in sales;

 

   

a 21 thousand ton decrease in propylene production, mainly due to lower oil processing levels of the Salina Cruz refinery; and

 

   

a 3 thousand ton reduction in sulfur production, mainly due to the lower production of the Cactus processing complex, due to the shutdown of two sulfur recovery plants for corrective maintenance;

Partially offset by:

 

   

a 16 thousand ton increase in aromatics and derivatives chain production, mainly due to the stable operation of the aromatics train of the Cangrejera petrochemical complex; and

 

   

an 18 thousand ton increase in ammonia production due to the restart of ammonia production at our Cosoleacaque plant VI in February 2020.

 

16


Impacts of the COVID-19 Pandemic

On March 11, 2020, the World Health Organization (WHO) declared the COVID-19 outbreak a pandemic. Governments across the world continue to institute measures to address the pandemic, including mandatory quarantines, social distancing guidelines, travel restrictions and declaration of health emergencies. The effects of the COVID-19 pandemic have led to a worldwide economic slowdown, and as a result there has been a decrease in global demand for crude oil and derivatives. For more information related to the decline in international crude oil prices and the decrease in the demand of petroleum products, see Note 20 to our unaudited condensed consolidated interim financial statements included herein.

As a result of the COVID-19 pandemic, on March 24, 2020 the Mexican Government, through the Secretaría de Salud (Mexican Ministry of Health), implemented actions to protect against COVID-19. Some of these actions include, among others, issuing directives to avoid places of work, crowded areas, public places or unnecessary social activities during this time. These preventative measures have caused a decrease in demand of certain goods and services, including petroleum products.

Likewise, in line with the recommendations of the WHO and the Ministry of Health, we announced measures to preserve the health of our employees and support the prevention of contagion in our administrative and operational areas, such as limiting our workforce’s access to our facilities, implementing alternating shifts and allowing a portion of our workforce to work remotely. In addition, we have implemented sanitizing measures to disinfect our facilities and the use of thermal cameras and other special equipment to monitor infection risks. Certain of our operations therefore remain active as of the date hereof.

In order to address the drop in crude oil prices that began in March 2020, on April 12, 2020, the Organization of the Petroleum Exporting Countries (OPEC) and other non-OPEC oil exporting countries, including, among others, Mexico and Russia, reached an agreement to reduce world crude oil supply. Pursuant to this agreement, these countries, which are known as OPEC+, agreed to reduce their overall crude oil production by 9.7 million barrels per day from May 1, 2020 through June 30, 2020, by 7.7 million barrels per day from July 1, 2020 through December 31, 2020 and by 5.8 million barrels per day from January 1, 2021 through April 30, 2022. In particular, Mexico agreed, and has begun, to reduce its crude oil production by 100,000 barrels per day for a period of two months beginning on May 1, 2020. For more information relating to the production agreement, see “Item 3—Risk Factors Related to our Relationship with the Mexican Government—The Mexican Government has entered into agreements with other nations to limit production” and “Item 4—Trade Regulation, Export Agreements and Production Agreements” in the Form 20-F.

On April 21, 2020, the Mexican Government, through a Presidential decree, granted us a reduction in our tax burden equal to Ps. 65.0 billion for 2020, which consists of a fiscal credit applicable to the Profit-sharing Duty up to such amount. This decrease in the Profit-sharing Duty is incremental to the one resulting from the decrease of the rate from 65% to 58% in 2020 in accordance with amendments to the Ley de Ingresos de la Federación para el Ejercicio Fiscal de 2020 (Revenue Law for 2020).

As a result of the abrupt reduction in the demand and prices of oil and fuel, we adopted a set of measures aiming at reducing costs, postponing cash outflows and optimizing our working capital, in order to ensure our financial strength and resilience of its businesses. The main measures are:

 

   

reducing our capital expenditures;

 

   

decreasing operating expenses that do not hazard our operating capabilities;

 

   

decreasing non-strategic projects and focusing instead on more profitable ones; and

 

   

developing and implementing alternative financing mechanisms that do not constitute public debt.

For further information regarding these measures, see Note 20 to the unaudited condensed consolidated interim financial statements included herein.

The ongoing effects on our business and our financial performance of the COVID-19 pandemic remain highly uncertain. If the impact of the COVID-19 pandemic continues for an extended period of time, it could adversely affect our ability to operate our business in the manner and on the timelines previously planned. Further, it could have accounting consequences, such as decreases in our revenues and the value of our inventories, foreign exchange losses, impairments of fixed assets, and affect our ability to operate effective internal control over financial reporting. For further information regarding the impact of the COVID-19 pandemic on us, see “Item 3–—Risk Factors Related to Our Operations—Crude oil and natural gas prices are volatile and low crude oil and natural gas prices adversely affect our income and cash flows and the amount of hydrocarbon reserves that we have the right to extract and sell”, “Item 3––Risk Factors—The outbreak of COVID-19 has had and may continue to have an adverse effect on our business, results of operations and financial condition” and “Item 5—Overview” in the Form 20-F.

 

17


Industrial Transformation

Dos Bocas Refinery

On December 7, 2018, the Board of Directors of Petróleos Mexicanos, in accordance with resolution CA-161/2018, authorized the construction of a new refinery in Dos Bocas in the state of Tabasco as part of our institutional strategy plan. The project is estimated to add 340 thousand barrels per day of refined Maya oil, which we expect would, in turn, increase our production of gasoline and diesel by at least 290 thousand barrels per day. This project is supported by the Mexican Government, which has announced that a goal of constructing this refinery is to decrease Mexico’s reliance on imported energy resources by increasing our refining capacity and distillates production.

On April 23, 2020, the Mexican Government published in the Official Gazette of the Federation the Decreto por el que se establecen las medidas de austeridad que deberán observar las dependencias y entidades de la Administración Pública Federal bajo los criterios que en el mismo se indican. (Decree establishing the austerity measures to be observed by the dependencies and entities of the Federal Public Administration under the criteria indicated herein). This decree sets forth several actions to face the economic impacts caused by the COVID-19 pandemic. One of these actions is to postpone actions and expenses of the Mexican Government, with the exception of 38 priority programs. The construction of our new refinery in Dos Bocas is considered a priority program, and is therefore not postponed at this time.

Directors and Executive Officers

Effective April 1, 2020, Mr. Jorge Luis Basaldúa Ramos was appointed as Acting Director General of Pemex Industrial Transformation, replacing Mr. Miguel Gerardo Breceda Lapeyre.

Subsidiary Companies

In May 2020, our subsidiary company P.M.I. Holdings, B.V. (PMI HBV), shareholder of Hijos de J. Barreras, S.A. (HJ BARRERAS), transferred to Cruise Yacht Yard Co, Ltd, a company belonging to the ship-owner of the ship in construction by HJ BARRERAS, its corporate and economic rights corresponding to its 51% share in HJ BARRERAS (through a usufruct) along with other agreements, in exchange for a total amount of € 5.1 million (Ps. 125.5 million). Hence, PMI HBV no longer controls HJ BARRERAS, and HJ BARRERAS is no longer consolidated in our consolidated financial statements as of May 31, 2020. As of March 31, 2020 and April 30, 2020, HJ BARRERAS’ total assets amounted to Ps. 1,535.5 million and Ps. 1,558.0, respectively, total liabilities amounted to Ps. 3,001.0 million and Ps. 2,945.3 million, respectively, and negative equity (of which 49% was noncontrolling interest) amounted to Ps. (1,465.5 million) and Ps. (1,387.3 million), respectively. The amount of negative equity as of April 30, 2020 includes Ps. 224.5 million of losses during the four-month period then ended (of which 49% was non-controlling interest). This transaction resulted in a profit of Ps. 833.0 million in our consolidated results of operations.

 

18


 

 

 

PETRÓLEOS MEXICANOS,

PRODUCTIVE STATE-OWNED SUBSIDIARIES

AND SUBSIDIARY COMPANIES

UNAUDITED CONDENSED CONSOLIDATED

INTERIM FINANCIAL STATEMENTS

AS OF MARCH 31, 2020 AND DECEMBER 31, 2019 AND

FOR THE THREE-MONTH PERIODS ENDED

MARCH 31, 2020 AND 2019


PETRÓLEOS MEXICANOS, PRODUCTIVE STATE-OWNED SUBSIDIARIES

AND SUBSIDIARY COMPANIES

UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

AS OF MARCH 31, 2020 AND DECEMBER 31, 2019 AND FOR THE THREE-MONTH PERIODS ENDED MARCH 31, 2020 AND 2019

Index

 

 

 

Contents

   Page  

Unaudited condensed consolidated interim financial statements of:

  

Financial position

     F-3  

Comprehensive income

     F-5  

Changes in equity (deficit)

     F-7  

Cash flows

     F-8  

Notes to the unaudited condensed consolidated interim financial statements

     F-10 to F-47  

 

F-2


PETRÓLEOS MEXICANOS, PRODUCTIVE STATE-OWNED SUBSIDIARIES AND SUBSIDIARY COMPANIES

UNDAUDITED CONDENSED CONSOLIDATED INTERIM STATEMENTS OF FINANCIAL POSITION

AS OF MARCH 31, 2020 AND DECEMBER 31, 2019

(Figures stated in thousands, except as noted)

 

 

 

     Note      March 31, 2020      December 31, 2019  

ASSETS

        

Current assets:

        

Cash and cash equivalents

     8,16      Ps. 57,149,835      Ps. 60,621,631  

Customers

     9,16        59,561,209        89,263,870  

Other receivable

     9        104,085,758        91,241,811  

Inventories

     10        53,695,298        82,672,196  

Current portion of notes receivable

     14        5,896,077        4,909,970  

Derivative financial instruments

     16        18,900,559        11,496,330  

Other current assets

     16        346,563        346,563  
     

 

 

    

 

 

 

Total current assets

        299,635,299        340,552,371  

Non-current assets:

        

Investments in joint ventures and associates

     11,16        18,571,163        14,874,579  

Wells, pipelines, properties, plant and equipment, net

     12        1,236,466,463        1,211,749,502  

Rights of use

        67,192,721        70,818,314  

Long-term notes receivable, net of current portion

     14        118,558,764        122,565,306  

Deferred income taxes and duties

        135,803,219        136,166,747  

Intangible assets, net

     13        14,465,125        14,584,524  

Other assets

     14        7,175,268        7,136,677  
     

 

 

    

 

 

 

Total non-current assets

        1,598,232,723        1,577,895,649  
     

 

 

    

 

 

 

Total assets

      Ps. 1,897,868,022      Ps. 1,918,448,020  
     

 

 

    

 

 

 

LIABILITIES

        

Current liabilities:

        

Short-term debt and current portion of long—term debt

     15,16      Ps. 258,929,286      Ps. 244,924,185  

Short-term leases

     16        6,633,010        5,847,085  

Suppliers

        180,534,568        208,034,407  

Income taxes and duties payable

        29,163,933        50,692,629  

Accounts and accrued expenses payable

     16        33,582,111        26,055,151  

Derivative financial instruments

     16        30,933,732        16,650,171  
     

 

 

    

 

 

 

Total current liabilities

        539,776,640        552,203,628  
     

 

 

    

 

 

 

Long-term liabilities:

        

Long-term debt, net of current portion

     15,16        2,205,039,965        1,738,249,903  

Long-term leases, net of current portion

     16        70,774,714        62,301,542  

Employee benefits

        1,277,194,047        1,456,815,367  

Provisions for sundry creditors

     17, 19        119,994,513        98,011,908  

Other liabilities

        4,778,185        4,397,299  

Deferred income taxes and duties

        3,844,889        3,676,735  
     

 

 

    

 

 

 

Total long-term liabilities

        3,681,626,313        3,363,452,754  
     

 

 

    

 

 

 

Total liabilities

      Ps .  4,221,402,953      Ps.   3,915,656,382  
     

 

 

    

 

 

 

 

F-3


     Note      March 31, 2020     December 31, 2019  

EQUITY (DEFICIT)

       

Controlling interest:

       

Certificates of Contribution “A”

     18      Ps. 494,738,447     Ps. 478,675,447  

Mexican Government contributions

        43,730,591       43,730,591  

Legal reserve

        1,002,130       1,002,130  

Accumulated other comprehensive result

        (20,195,996     (240,078,590

Accumulated deficit:

       

From prior years

        (2,280,396,147     (1,933,106,785

Net loss for the period

        (562,130,090     (347,289,362
     

 

 

   

 

 

 

Total controlling interest

        (2,323,251,065     (1,997,066,569

Total non-controlling interest

        (283,866     (141,793
     

 

 

   

 

 

 

Total equity (deficit)

      Ps. (2,323,534,931   Ps. (1,997,208,362
     

 

 

   

 

 

 

Total liabilities and equity (deficit)

      Ps. 1,897,868,022     Ps. 1,918,448,020  
     

 

 

   

 

 

 

The accompanying notes are an integral part of these unaudited condensed consolidated interim financial statements.

 

F-4


PETRÓLEOS MEXICANOS, PRODUCTIVE STATE-OWNED SUBSIDIARIES AND SUBSIDIARY COMPANIES

UNAUDITED CONDENSED CONSOLIDATED INTERIM STATEMENTS OF COMPREHENSIVE INCOME

FOR THE THREE-MONTH PERIODS ENDED MARCH 31, 2020 AND 2019

(Figures stated in thousands, except as noted)

 

 

 

     Note      2020     2019  

Net sales:

       

Domestic

      Ps. 157,782,420     Ps. 198,958,577  

Export

        125,140,586       155,219,477  

Services income

        1,187,108       2,073,444  
     

 

 

   

 

 

 

Total of sales

     7        284,110,114       356,251,498  

(Reversal) impairment of wells, pipelines, properties, plant and equipment, net

     12        (26,316,166     5,154,946  

Cost of sales

        243,059,556       256,654,729  
     

 

 

   

 

 

 

Gross income

        67,366,724       94,441,823  

Other revenues

        2,880,541       5,324,201  

Other expenses

        (1,750,157     (1,278,975

Distribution, transportation and sale expenses

        3,393,739       5,502,466  

Administrative expenses

        34,902,942       32,283,588  
     

 

 

   

 

 

 

Operating income

        30,200,427       60,700,995  
     

 

 

   

 

 

 

Financing income1

        5,698,577       3,901,296  

Financing (cost)2

        (42,629,648     (29,854,976

Derivative financial instruments (cost) income, net

     16        (25,925,836     (8,221,999

Foreign exchange(loss) gain, net

        (469,206,349     30,411,578  
     

 

 

   

 

 

 
        (532,063,256     (3,764,101

Loss (profit) sharing in joint ventures and associates

     11        108,443       (211,629
     

 

 

   

 

 

 

(Loss) income before duties, taxes and other

        (501,754,386     56,725,265  
     

 

 

   

 

 

 

Profit sharing duty, net3

        57,563,006       90,377,200  

Income tax expense

        2,933,231       2,067,321  
     

 

 

   

 

 

 

Total duties, taxes and other

        60,496,237       92,444,521  
     

 

 

   

 

 

 

Net (loss)

        (562,250,623     (35,719,256
     

 

 

   

 

 

 

Other comprehensive results:

       

Items that will be reclassified subsequently to profit or loss:

       

Currency translation effect

        28,737,127       586,474  

Items that will not be reclassified subsequently to profit or loss:

       

Actuarial gains—employee benefits, net of taxes

     18        191,123,923       —    
     

 

 

   

 

 

 

Total other comprehensive results

        219,861,050       586,474  
     

 

 

   

 

 

 

Total comprehensive (loss)

      Ps. (342,389,573   Ps. (35,132,781
     

 

 

   

 

 

 

 

1 

Includes financing income from investments and gain on discount rate of plugging of wells in 2020 and 2019.

2

Mainly interest on debt and interest on leases from IFRS 16 adoption.

3 

The applicable rate of this duty for 2019 was 65.00%. As of January 1, 2020, this duty was set at 58.00%.

 

F-5


     Note      2020     2019  

Net loss attributable to:

       

Controlling interest

      Ps.  (562,130,090   Ps. (35,738,623

Non-controlling interest

        (120,533     19,367  
     

 

 

   

 

 

 

Net (loss)

      Ps.  (562,250,623   Ps. (35,719,256
     

 

 

   

 

 

 

Other comprehensive results attributable to:

       

Controlling interest

      Ps. 219,882,594     Ps.       588,443  

Non-controlling interest

        (21,540     (1,968
     

 

 

   

 

 

 

Total other comprehensive results

      Ps. 219,861,054     Ps. 586,475  
     

 

 

   

 

 

 

Comprehensive (loss) income:

       

Controlling interest

      Ps. (342,247,496   Ps. (35,150,180

Non-controlling interest

        (142,073     17,399  
     

 

 

   

 

 

 

Total comprehensive (loss)

      Ps. (342,389,569   Ps. (35,132,781
     

 

 

   

 

 

 

The accompanying notes are an integral part of these unaudited condensed consolidated interim financial statements.

 

F-6


PETRÓLEOS MEXICANOS, PRODUCTIVE STATE-OWNED SUBSIDIARIES AND SUBSIDIARY COMPANIES

 

UNAUDITED CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CHANGES IN EQUITY (DEFICIT), NET

FOR THE THREE-MONTH PERIODS ENDED MARCH 31, 2020 AND 2019

(Figures stated in thousands, except as noted)

 

    Controlling interest              
   

 

   

 

   

 

    Accumulated other
comprehensive income (loss)
    Accumulated deficit                    
    Certificates of
Contribution
“A”
    Mexican
Government
contributions
    Legal reserve     Cumulative
currency
translation
effect
    Actuarial
(losses) gains on
employee
benefits effect
    For the period     From prior years     Total     Non-controlling
interest
    Total Equity
(deficit), net
 

Balances as of December 31, 2018

  Ps.  356,544,447     Ps.  43,730,591     Ps.  1,002,130     Ps.  45,920,227     Ps.  26,026,840     Ps.  (180,374,350   Ps.  (1,752,732,435   Ps.  (1,459,882,550   Ps.  477,118     Ps.  (1,459,405,432
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Transfer to accumulated deficit

    —         —         —         —         —         180,374,350       (180,374,350     —         —         —    

Increase in Mexican Government contributions

    25,000,000       —         —         —         —         —         —         25,000,000       —         25,000,000  

Total comprehensive (loss) income

    —         —         —         588,443       —         (35,738,623     —         (35,150,180     17,399       (35,132,781
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balances as of March 31, 2019

  Ps.  381,544,447     Ps.  43,730,591     Ps.  1,002,130     Ps.  46,508,670     Ps.  26,026,840     Ps.  (35,738,623   Ps.  (1,933,106,785   Ps.  (1,470,032,730   Ps.  494,517     Ps.  (1,469,538,213
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balances as of December 31, 2019

  Ps.  478,675,447     Ps.  43,730,591     Ps.  1,002,130     Ps.  43,229,070     Ps.  (283,307,660   Ps.  (347,289,362   Ps.  1,933,106,785   Ps.  (1,997,066,569   Ps.  (141,793   Ps.  (1,997,208,362
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Transfer to accumulated deficit

    —         —         —         —         —         347,289,362       (347,289,362     —         —         —    

Increase in Mexican Government contributions

    16,063,000       —         —         —         —         —         —         16,063,000       —         16,063,000  

Total comprehensive (loss) income

    —         —         —         28,758,671       191,123,923       (562,130,090         (342,247,496     (142,073     (342,389,569
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balances as of March 31, 2020

  Ps.  494,738,447     Ps.  43,730,591     Ps.  1,002,130     Ps.  71,987,741     Ps.  (92,183,737   Ps.  (562,130,090   Ps.  (2,280,396,147   Ps.  (2,323,251,065   Ps.  (283,866   Ps.  (2,323,534,931
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

The accompanying notes are an integral part of these unaudited condensed consolidated interim financial statements.

 

F-7


PETRÓLEOS MEXICANOS, PRODUCTIVE STATE-OWNED SUBSIDIARIES

AND SUBSIDIARY COMPANIES

UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS OF

CASH FLOWS

FOR THE THREE-MONTH PERIODS ENDED MARCH 31, 2020 AND 2019

(Figures stated in thousands, except as noted)

 

 

 

     2020     2019  

Operating activities

    

Net (loss)

   Ps.  (562,250,623   Ps.  (35,719,256

Items related to investment activities

    

Income taxes and duties

     60,496,237       88,461,745  

Depreciation and amortization

     34,112,199       35,678,916  

Amortization of intangible assets

     100,268       144,240  

(Reversal) impairment of wells, pipelines, properties, plant and equipment

     (26,316,166     5,154,946  

Unsuccessful wells

     —         864,411  

Exploration costs

     709,713       —    

Loss from derecognition of disposal of wells, pipelines, properties, plant and equipment

     1,727,260       345,332  

Depreciation of rights of use

     1,991,548       683,648  

Unrealized foreign exchange loss (income) of reserve for plugging of wells

     891,325       (196,016

(Loss) profit sharing in joint ventures and associates

     (108,443     211,629  

Items related to financing activities

    

Unrealized foreign exchange (income) loss

     442,841,234       (32,819,216

Interest expense

     42,629,648       29,854,976  

Interest income

     (5,698,577     (3,901,296
  

 

 

   

 

 

 
     (8,874,377     88,764,059  

Income taxes and duties paid

     (51,585,318     (88,571,281

Derivative financial instruments

     6,879,332       6,922,484  

Accounts receivable

     16,858,714       (16,687,289

Inventories

     28,976,898       6,936,281  

Accounts payable and accrued expenses

     7,526,960       7,590,885  

Suppliers

     (27,499,839     (28,825,478

Provisions for sundry creditors

     20,857,404       (2,121,503

Employee benefits

     11,502,603       17,245,997  

Other taxes and duties

     (29,907,932     (13,369,293
  

 

 

   

 

 

 

Net cash flows (used in) operating activities

     (25,265,555     (22,115,138
  

 

 

   

 

 

 

Investing activities

    

Other notes receivable

     37,401       1,595,435  

Interest received

     3,697,941       —    

Other assets

     (38,591     (140,593

Acquisition of wells, pipelines, properties, plant and equipment

     (26,985,485     (12,620,952

Intangible assets

     (690,582     1,547,759  
  

 

 

   

 

 

 

Net cash flows (used in) investing activities

     (23,979,316     (9,618,351
  

 

 

   

 

 

 

Cash deficit in financing activities

     (49,244,871     (31,733,489

 

F-8


     2020     2019  

Financing activities

    

Increase in equity due to Certificates of Contribution “A”

   Ps.  16,063,000     Ps.  10,000,000  

Long-term receivables from the Mexican Government

     4,080,544       17,978,161  

Interest received for long-term receivable from the Mexican Government

     903,126       3,553,383  

Lease payments

     (2,891,562     (741,951

Loans obtained from financial institutions

     383,162,749       203,211,833  

Debt payments, principal only

     (325,429,547     (177,476,025

Interest paid

     (50,258,263     (41,142,967
  

 

 

   

 

 

 

Net cash flows from financing activities

     25,630,047       15,382,434  
  

 

 

   

 

 

 

Net (decrease) in cash and cash equivalents

     (23,614,824     (16,351,055

Effects of foreign exchange on cash balances

     20,143,028       949,488  

Cash and cash equivalents at the beginning of the period

     60,621,631       81,912,409  
  

 

 

   

 

 

 

Cash and cash equivalents at the end of the period (Note 8)

   Ps.  57,149,835     Ps.  66,510,842  
  

 

 

   

 

 

 

The accompanying notes are an integral part of these unaudited condensed consolidated interim financial statements.

 

F-9


PETRÓLEOS MEXICANOS, PRODUCTIVE STATE-OWNED SUBSIDIARIES AND SUBSIDIARY COMPANIES

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

AS OF MARCH 31, 2020 AND DECEMBER 31, 2019 AND

FOR THE THREE-MONTH PERIODS ENDED MARCH 31, 2020 AND 2019

( Figures stated in thousands, except as noted )

NOTE 1. STRUCTURE AND BUSINESS OPERATIONS OF PETRÓLEOS MEXICANOS, SUBSIDIARY ENTITIES AND SUBSIDIARY COMPANIES

Petróleos Mexicanos was created by a decree issued by the Mexican Congress on June 7, 1938. The decree was published in the Diario Oficial de la Federación (Official Gazette of the Federation) on July 20, 1938 and came into effect on that date. On December 20, 2013, the Decreto por el que se reforman y adicionan diversas disposiciones de la Constitución Política de los Estados Unidos Mexicanos, en Materia de Energía (Decree that amends and supplements various provisions of the Mexican Constitution relating to energy matters), was published in the Official Gazette of the Federation. This Decree came into effect on December 21, 2013 and includes transitional articles setting forth the general framework and timeline for implementing legislation relating to the energy sector.

On August 11, 2014, the Ley de Petróleos Mexicanos (Petróleos Mexicanos Law) was published in the Official Gazette of the Federation. The Petróleos Mexicanos Law became effective on October 7, 2014, except for certain provisions. On December 2, 2014, the Secretaría de Energía (Ministry of Energy) published in the Official Gazette of the Federation the declaration pursuant to which the special regime governing Petróleos Mexicanos’ activities relating to productive state-owned subsidiaries, affiliates, compensation, assets, administrative liabilities, state dividend, budget and debt came into effect. On June 10, 2015, the Disposiciones Generales de Contratación para Petróleos Mexicanos y sus Empresas Productivas Subsidiarias (General Contracting Provisions for Petróleos Mexicanos and its productive state-owned subsidiaries) was published in the Official Gazette of the Federation and the following day the special regime for acquisitions, leases, services and public works matters came into effect.

Once the Petróleos Mexicanos Law came into effect, Petróleos Mexicanos was transformed from a decentralized public entity to a productive state-owned company. Petróleos Mexicanos is a legal entity empowered to own property and carry on business in its own name with the purpose of carrying out exploration and extraction of crude oil and other hydrocarbons in the United Mexican States (“Mexico”). In addition, Petróleos Mexicanos performs activities related to refining, gas processing and engineering and research projects to create economic value and to increase the income of the Mexican Government, as its owner, while adhering to principles of equity and social and environmental responsibility.

The Subsidiary Entities, Pemex Exploración y Producción (Pemex Exploration and Production), Pemex Transformación Industrial (Pemex Industrial Transformation), Pemex Logística (Pemex Logistics) and Pemex Fertilizantes (Pemex Fertilizers) are productive state-owned subsidiaries empowered to own property and carry on business in their own name, subject to the direction and coordination of Petróleos Mexicanos (the “Subsidiary Entities”).

The Subsidiary Entities of Petróleos Mexicanos prior to the Corporate Reorganization (defined below) were Pemex-Exploración y Producción, Pemex-Refinación (Pemex-Refining), Pemex-Gas and Petroquímica Básica (Pemex-Gas and Basic Petrochemicals) and Pemex-Petroquímica (Pemex-Petrochemicals), which were decentralized public entities with a technical, industrial and commercial nature with their own corporate identity and equity, with the legal authority to own property and conduct business in their own names, and were 100% owned by Petróleos Mexicanos and controlled by the Mexican Government; they had been consolidated into and had the characteristics of subsidiaries of Petróleos Mexicanos.

 

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The Board of Directors of Petróleos Mexicanos, in its meeting held on November 18, 2014, approved the Corporate Reorganization proposed by the Chief Executive Officer of Petróleos Mexicanos. Pursuant to the corporate reorganization, the existing four Subsidiary Entities were transformed into two new productive state-owned subsidiaries, which have assumed all of the rights and obligations of the existing Subsidiary Entities. Pemex-Exploration and Production was transformed into Pemex Exploration and Production, a productive state-owned subsidiary, and Pemex-Refining, Pemex-Gas and Basic Petrochemicals and Pemex- Petrochemicals were transformed into the productive state-owned subsidiary Pemex Industrial Transformation. The Board of Directors of Petróleos Mexicanos also approved the creation of the following Subsidiary Entities: Pemex Perforación y Servicios (Pemex Drilling and Services), Pemex Logistics, Pemex Cogeneración y Servicios (Pemex Cogeneration and Services), Pemex Fertilizers and Pemex Etileno (Pemex Ethylene) (the “Corporate Reorganization”).

On March 27, 2015, the Board of Directors of Petróleos Mexicanos approved the acuerdos de creación (creation resolutions) of each productive state-owned subsidiary. On April 28, 2015 the creation resolutions of the seven productive state-owned subsidiaries were published in the Official Gazette of the Federation.

On May 29, 2015 the statements related to the creation resolution of the productive state-owned subsidiary Pemex Exploration and Production and the productive state-owned subsidiary Pemex Cogeneration and Services issued by the Board of Directors of Petróleos Mexicanos were published in the Official Gazette of the Federation and, accordingly, these creation resolutions came into effect on June 1, 2015.

On December 29, 2015 and May 12, 2016, modifications to the creation resolution of the productive state-owned subsidiary Pemex Exploration and Production were published in the Official Gazette of the Federation and became effective that same date, respectively.

On July 31, 2015, the statements related to the creation resolution of the productive state-owned subsidiary Pemex Drilling and Services, the productive state-owned subsidiary Pemex Fertilizers and the productive state-owned subsidiary Pemex Ethylene issued by the Board of Directors of Petróleos Mexicanos were published in the Official Gazette of the Federation and, accordingly, these creation resolutions came into effect on August 1, 2015.

On October 1, 2015, the statement related to the creation resolution of the productive state-owned subsidiary Pemex Logistics issued by the Board of Directors of Petróleos Mexicanos was published in the Official Gazette of the Federation and, accordingly, these creation resolutions came into effect on October 1, 2015.

On October 6, 2015, the statement related to the creation resolution of the productive state-owned subsidiary Pemex Industrial Transformation issued by the Board of Directors of Petróleos Mexicanos was published in the Official Gazette of the Federation and, accordingly, these creation resolutions came into effect on November 1, 2015.

On July 13, 2018, the Board of Directors of Petróleos Mexicanos issued the Declaratoria de Liquidación y Extinción de Pemex Cogeneración y Servicios (Declaration of Liquidation and Extinction of Pemex Cogeneration and Services), which was published in the Official Gazette of the Federation and became effective on July 27, 2018. Pemex Industrial Transformation is subrogated in any obligation contracted or right acquired previously, in Mexico and abroad, by Pemex Cogeneration and Services that was in force on July 27, 2018.

On June 24, 2019, the Board of Directors of Petróleos Mexicanos approved the merger of Pemex Exploration and Production and Pemex Drilling and Services, as well as the merger of Pemex Industrial Transformation and Pemex Ethylene, both became effective on July 1, 2019. Pemex Exploration and Production and Pemex Industrial Transformation will remain as merging companies and Pemex Drilling and Services and Pemex Ethylene will become extinct as merged companies.

 

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On June 28, 2019, modifications to the Creation Resolutions of Pemex Exploration and Production, Pemex Industrial Transformation, Pemex Logistics and Pemex Fertilizers, which came into effect on July 1, 2019, were published in the Official Gazette of the Federation.

On July 30, 2019, the Declarations of Extinction of Pemex Drilling and Services and Pemex Ethylene, respectively, resulting from their merger with Pemex Exploration and Production and Pemex Industrial Transformation, respectively, issued by the Board of Directors of Petróleos Mexicanos and effective on July 1, 2019, were published in the Official Gazette of the Federation.

The Subsidiary Entities, and their primary purposes, are as follows:

 

 

Pemex Exploration and Production: This entity is in charge of exploration and extraction of crude oil and solid, liquid or gaseous hydrocarbons in Mexico, in the exclusive economic zone of Mexico and abroad, as well as drilling services and repair and services of wells

 

 

Pemex Industrial Transformation: This entity performs activities related to refining, processing, importing, exporting, trading and the sale of hydrocarbons, as well as commercializes, distributes and trades methane, ethane and propylene, directly or through others.

 

 

Pemex Logistics: This entity provides transportation, storage and related services for crude oil, petroleum products and petrochemicals to PEMEX (as defined below) and other companies, through pipelines and maritime and terrestrial means, and provides guard and management services.

 

 

Pemex Fertilizers: This entity produces, distributes and commercializes ammonia, fertilizers and its derivatives, as well as provides related services.

The principal distinction between the Subsidiary Entities and the Subsidiary Companies (as defined below) is that the Subsidiary Entities are productive state-owned entities, whereas the Subsidiary Companies are affiliate companies that were formed in accordance with the applicable laws of each of the respective jurisdictions in which they were incorporated.

The “Subsidiary Companies” are defined as those companies which are controlled, directly or indirectly, by Petróleos Mexicanos (see Note 3-A).

“Associates,” as used herein, means those companies in which Petróleos Mexicanos has significant influence but not control or joint control over its financial and operating policies. Petróleos Mexicanos, the Subsidiary Entities and the Subsidiary Companies are referred to collectively herein as “PEMEX.”

PEMEX’s address and its principal place of business is: Av. Marina Nacional No. 329, Col. Veronica Anzures, Alcaldía Miguel Hidalgo, 11300, Ciudad de México, México.

NOTE 2. AUTHORIZATION AND BASIS OF PREPARATION

Authorization –

On July 3, 2020, these unaudited condensed consolidated interim financial statements under IFRS and the notes hereto were authorized for issuance by the following officers: Mr. Octavio Romero Oropeza, Chief Executive Officer, Mr. Alberto Velázquez García, Chief Financial Officer, Mr. Carlos Fernando Cortez González, Deputy Director of Budgeting and Accounting, and Mr. Oscar René Orozco Piliado, Associate Managing Director of Accounting.

Statement of compliance –

PEMEX prepared its unaudited condensed consolidated interim financial statements as of March 31, 2020 and December 31, 2019, and for the three-month periods ended March 31, 2020 and 2019, in accordance with IAS 34, “Interim Financial Reporting” (“IAS 34”) of the International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”).

 

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These unaudited condensed consolidated interim financial statements do not include all the information and disclosures required for full annual consolidated financial statements and should be read in conjunction with PEMEX’s audited consolidated financial statements for the year ended December 31, 2019. PEMEX estimates that there is no significant impact on its unaudited condensed consolidated interim financial statements due to the seasonality of operations. These unaudited condensed consolidated interim financial statements follow the same accounting policies and methods of computation as the most recent annual financial statements.

 

A.

Basis of accounting

These unaudited condensed consolidated interim financial statements have been prepared using the historical cost basis method, except for the following items, which have been measured using an alternative basis.

 

Item

  

Basis of measurement

Derivative Financial Instruments (“DFIs”)    Fair Value
Employee Benefits    Fair Value of plan assets less present value of the obligation (defined benefit plan)

 

B.

Going concern

The unaudited condensed consolidated interim financial statements have been prepared on a going concern basis, which assumes that PEMEX will be able to continue its operations and can meet its payment obligations for a reasonable period. (See Note 18).

 

C.

Functional and reporting currency

These consolidated financial statements are presented in Mexican pesos, which is both PEMEX’s functional currency and reporting currency, due to the following:

 

i.

The economic environment in which PEMEX operates is Mexico, where the legal currency is the Mexican peso;

 

ii.

The budget through which Petróleos Mexicanos and its Subsidiary Entities operate as entities of the Mexican Government, including the ceiling for personnel services, is elaborated, approved and exercised in Mexican pesos.

 

ii.

Employee benefits provision was approximately 30% and 37% of PEMEX’s total liabilities as of each of March 31, 2020 and December 31, 2019, respectively. This provision is computed, denominated and payable in Mexican pesos; and

 

iv.

Cash flows for payment of general expenses, taxes and duties are realized in Mexican pesos.

Although the sales prices of certain products are based on international U.S. dollar-indices, final domestic selling prices are governed by the economic and financial policies established by the Mexican Government. Accordingly, cash flows from domestic sales are generated and received in Mexican pesos.

Mexico’s monetary policy regulator, the Banco de México, requires that Mexican Government entities other than financial entities sell their foreign currency to the Banco de México in accordance with its terms, receiving Mexican pesos in exchange, which is the currency of legal tender in Mexico.

Terms definition –

References in these unaudited condensed consolidated interim financial statements and the related notes to “pesos” or “Ps.” refers to Mexican pesos, “U.S. dollars” or “US$” refers to dollars of the United States of America, “yen” or “¥” refers to Japanese yen, “euro” or “€” refers to the legal currency of the European Economic and Monetary Union, “Pounds sterling” or “£” refers to the legal currency of the United Kingdom and “Swiss francs” or “CHF” refers to the legal currency of the Swiss Confederation. Figures in all currencies are presented in thousands of the relevant currency unit, except exchange rates and product and share prices.

 

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D.

Use of judgments and estimates

The preparation of the unaudited condensed consolidated interim financial statements in accordance with IFRS requires the use of estimates and assumptions made by PEMEX’s management that affect the recorded amounts of assets and liabilities and the disclosures of contingent assets and liabilities as of the date of these unaudited condensed consolidated interim financial statements, as well as the recorded amounts of income, costs and expenses during the period. Actual results may differ from these estimates.

Significant estimates and underlying assumptions are reviewed, and the effects of such revisions are recognized in the periods in which any estimates are revised and in any future periods affected by such revision.

The significant judgements made by management in applying Pemex’s accounting policies and the key sources of estimation uncertainty were the same as those described in the last annual financial statements.

 

i.

Measurement of fair values

Some of PEMEX’s accounting policies and disclosures require the measurement of the fair values of financial assets and liabilities, as well as non-financial assets and liabilities.

PEMEX has an established control framework with respect to the measurement of fair values. This includes a valuation team that has overall responsibility for overseeing all significant fair value measurements, including Level 3 fair values.

The valuation team regularly reviews significant unobservable inputs and valuation adjustments. If third party information, such as broker quotes or pricing services, is used to measure fair values, then the valuation team assesses the evidence obtained from the third parties to support the conclusion that these valuations meet the requirements of IFRS, including the level in the fair value hierarchy in which the valuations should be classified.

When measuring the fair value of an asset or a liability, PEMEX uses market observable data as far as possible. Fair values are categorized into different levels in a fair value hierarchy based on the inputs used in the valuation techniques as follows.

 

 

Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities.

 

 

Level 2: inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).

 

 

Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).

If the inputs used to measure the fair value of an asset or a liability might be categorized in different levels of the fair value hierarchy, then the fair value measurement is categorized in its entirety in the same level of the fair value hierarchy as the lowest level input that is significant to the entire measurement.

PEMEX recognizes transfers between levels of the fair value hierarchy at the end of the reporting period during which the change has occurred.

NOTE 3. SIGNIFICANT ACCOUNTING POLICIES

The accounting policies applied in the preparation of these unaudited condensed consolidated interim financial statements are consistent with those applied in the preparation of PEMEX’s annual consolidated financial statements as at and for the year ended December 31, 2019. PEMEX has not early adopted new or amended standards in preparing these unaudited condensed consolidated interim financial statements.

 

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NOTE 4. STANDARDS ISSUED BUT NOT YET EFFECTIVE

A number of new standards and amendments to standards are effective for annual periods beginning after January 1, 2021 and earlier application is permitted; however, PEMEX has not early adopted any of the forthcoming new or amended standards in preparing these condensed consolidated interim financial statements.

NOTE 5. SUBSIDIARY ENTITIES AND SUBSIDIARY COMPANIES

As of March 31, 2020 and December 31, 2019, the Subsidiary Entities consolidated in these financial statements include Pemex Exploration and Production, Pemex Industrial Transformation, Pemex Logistics and Pemex Fertilizers. Former Subsidiary Entities Pemex Drilling and Services and Pemex Ethylene were also consolidated in these financial statements until June 30, 2019 (see Note 1).

As of March 31, 2020 and December 31, 2019, the consolidated Subsidiary Companies are as follows:

 

 

PEP Marine, DAC. (“PEP DAC”) (v)

 

 

P.M.I. Services, B.V. (“PMI SHO”) (i)(iv)

 

 

P.M.I. Holdings, B.V. (“PMI HBV”) (i)

 

 

P.M.I. Trading DAC (“PMI Trading”) (i)

 

 

P.M.I. Holdings Petróleos España, S. L. (“HPE”) (i)

 

 

P.M.I. Services North America, Inc. (“PMI SUS”) (i)

 

 

P.M.I. Norteamérica, S. A. de C. V. (“PMI NASA”) (i)

 

 

P.M.I. Comercio Internacional, S. A. de C. V. (“PMI CIM”) (i)(ii)

 

 

P.M.I. Campos Maduros SANMA, S. de R. L. de C. V. (“SANMA”)

 

 

Pro-Agroindustria, S. A. de C. V. (“AGRO”)

 

 

P.T.I. Infraestructura de Desarrollo, S. A. de C. V. (“PTI ID”)(iii)

 

 

P.M.I. Cinturón Transoceánico Gas Natural, S. A. de C. V. (“PMI CT”) (i)(v)

 

 

P.M.I. Transoceánico Gas LP, S. A. de C. V. (“PMI TG”) (i)(v)

 

 

P.M.I. Servicios Portuarios Transoceánicos, S. A. de C. V. (“PMI SP”) (i)

 

 

P.M.I. Midstream del Centro, S. A. de C. V. (“PMI MC”) (i)

 

 

PEMEX Procurement International, Inc. (“PPI”)

 

 

Hijos de J. Barreras, S. A. (“HJ BARRERAS”) (ii)

 

 

PEMEX Finance, Ltd. (“FIN”)

 

 

Mex Gas Internacional, S. L. (“MGAS”)

 

 

Pemex Desarrollo e Inversión Inmobiliaria, S. A. de C. V. (“PDII”)

 

 

Kot Insurance Company, AG. (“KOT”)

 

 

PPQ Cadena Productiva, S.L. (“PPQCP”)

 

 

III Servicios, S. A. de C. V. (“III Servicios”)

 

 

PM.I. Ducto de Juárez, S. de R.L. de C.V. (“PMI DJ”) (i)

 

 

PMX Fertilizantes Holding, S.A de C.V. (“PMX FH”)

 

 

PMX Fertilizantes Pacífico, S.A. de C.V. (“PMX FP”)

 

F-15


 

Grupo Fertinal (“GP FER”)

 

 

Compañía Mexicana de Exploraciones, S.A. de C.V. (“COMESA”) (ii)

 

 

P.M.I. Trading Mexico, S.A. de C.V. (“TRDMX”) (i)

 

 

Holdings Holanda Services, B.V. (“HHS”)

 

i.    Member Company of the “PMI Subsidiaries”.
ii.    Non-controlling interest company.
iii.    Formerly PMI Infraestructura de Desarrollo, S.A. de C.V. until March 2019. On May 30, 2019 these shares were transferred to Pemex Industrial Transformation.
iv.    This company was liquidated in 2019.
v.    These companies were merged into PMI NASA during the first quarter of 2020.

NOTE 6. Segment financial information

PEMEX’s primary business is the exploration and production of crude oil and natural gas, as well as the production, processing, marketing and distribution of petroleum and petrochemical products. As of March 31, 2020, PEMEX’s operations were conducted through six business segments: Exploration and Production, Industrial Transformation, Logistics, Fertilizers, the Trading Companies and Corporate and Other Operating Subsidiary Companies. Until June 30, 2019, PEMEX’s operations were also conducted through the additional two business segments: Drilling and Services (merged into Pemex Exploration and Production as of July 1, 2019, see Note 1) and Ethylene (merged into Pemex Industrial Transformation as of July 1, 2019, see Note 1). Due to PEMEX’s structure, there are significant amounts of inter-segment sales among the reporting segments, which are made at internal transfer prices established by PEMEX that are intended to reflect international market prices.

The primary sources of revenue for PEMEX’s business segments are as described below:

 

 

The exploration and production segment earns revenues from domestic sales of crude oil and natural gas, and from exporting crude oil through certain of the Trading Companies. Crude oil export sales are made through the agent subsidiary company PMI CIM, to 23 major customers in various foreign markets. Approximately half of PEMEX’s crude oil is sold to Pemex Industrial Transformation.

 

 

The industrial transformation segment earns revenues from sales of refined petroleum products and derivatives, mainly to third parties within the domestic market. This segment also sells a significant portion of the fuel oil it produces to the Comisión Federal de Electricidad (Federal Eletricity Commission, or “CFE”) and a significant portion of jet fuel produced to the Aeropuertos y Servicios Auxiliares (Airports and Auxiliary Services Agency). The refining segment’s most important products are different types of gasoline and diesel.

 

 

The industrial transformation segment also earns revenues from domestic sources generated by sales of natural gas, liquefied petroleum gas, naphtha, butane and ethane and certain other petrochemicals such as methane derivatives, ethane derivatives, aromatics and derivatives.

 

 

The logistics segment earns income from transportation and storage of crude oil, petroleum products and petrochemicals, as well as related services, which it provides by employing pipelines and offshore and onshore resources, and from providing services related to the maintenance, handling, guarding and management of these products.

 

 

The fertilizers segment earns revenues from trading ammonia, fertilizers and its derivatives, mostly in the domestic market.

 

 

The trading companies segment, which consist of PMI CIM, PMI NASA, PMI Trading and MGAS (the “Trading Companies”), earns revenues from trading crude oil, natural gas and petroleum and petrochemical products in international markets.

 

 

The segment related to corporate and other operating Subsidiary Companies provides administrative, financing, consulting and logistical services, as well as economic, tax and legal advice and re-insurance services to PEMEX’s entities and companies.

 

 

The drilling segment receives income from drilling services, and servicing and repairing wells. This entity was merged into Pemex Exploration and Production on July 1, 2019 (see Note 1).

 

 

The ethylene segment earns revenues from the distribution and trade of methane, ethane and propylene in the domestic market. This entity was merged into Pemex Industrial Transformation on July 1, 2019 (see Note 1).

The following tables present the condensed financial information of these segments, after elimination of unrealized intersegment gain (loss), and include only select line items. As a result, the line items presented below may not total. The columns before intersegment eliminations include unconsolidated figures. These reporting segments are those which PEMEX’s management evaluates in its analysis of PEMEX and on which it bases its decision-making. These reporting segments are presented in PEMEX’s reporting currency.

 

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As of/for the three-month period ended March 31, 2020

        Exploration and
Production
    Industrial
Transformation
    Logistics     Fertilizers     Trading
Companies
    Corporate
and Other
Operating
Subsidiary
Companies
    Intersegment
eliminations
    Total  

Sales:

                 

Trade

    Ps. 90,573,346       152,783,341       —         687,221       37,211,940       1,667,158       —         282,923,006  

Intersegment

      65,659,289       20,114,978       22,602,244       174,968       105,405,694       22,087,370       (236,044,543     —    

Services income

      18,567       28,394       1,161,589       208       21,720       (43,370     —         1,187,108  

(Impairment) reversal of wells pipelines, properties, plant and equipment, net

      (21,972,888     (4,345,644     —         —         2,366       —         —         (26,316,166

Cost of sales

      86,428,374       211,323,526       8,355,638       1,215,367       148,162,300       9,480,834       (221,906,483     243,059,556  
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Gross income (loss)

      91,795,716       (34,051,169     15,408,195       (352,970     (5,525,312     14,230,324       (14,138,060     67,366,724  

Other revenue

      139,213       1,369,682       28,657       5,716       156,786       1,180,487             2,880,541  

Other expenses

      (1,806,429     (49,314     (8,447     6,272       (31,810     (133,039     272,610       (1,750,157

Distribution, transportation and sales expenses

      43,742       3,516,155       118,176       52,472       292,461       65,944       (695,211     3,393,739  

Administrative expenses

      14,349,763       11,664,629       2,974,537       159,293       528,221       18,392,596       (13,166,097     34,902,942  
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating income (loss)

      75,734,995       (47,911,585     12,335,692       (552,747     (6,221,018     (3,180,768     (4,142     30,200,427  

Financing income

      20,483,841       71,442       563,580       62,845       84,749       51,111,620       (66,679,500     5,698,577  

Financing cost

      (44,723,671     (2,240,518     (69,753     (202,363     (280,921     (61,796,060     66,683,638       (42,629,648

Derivative financial instruments (cost) income, net

      (37,351,434     (19,977     —         —         2,020,971       9,424,604       —         (25,925,836

Foreign exchange (loss) income, net

      (413,371,816     (30,362,166     (1,069,926     (244,411     (571,693     (23,586,337     —         (469,206,349

Profit (loss) sharing in joint ventures and associates

      2,147       432,555       5,469       (3,237,831     (1,589,816     (546,516,585     551,012,504       108,443  

Taxes, duties and other

      57,541,829       —         1,032,319       —         1,856,598       65,491       —         60,496,237  
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net (loss) income

    Ps. (456,767,767     (80,030,249     10,732,743       (4,174,507     (8,414,326     (574,609,017     551,012,500       (562,250,623
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total current assets

      996,308,500       200,579,463       143,464,307       8,057,674       111,610,354       828,662,561       (1,989,047,560     299,635,299  

Total non-current assets

      779,806,443       393,639,324       159,007,146       3,467,963       50,306,000       1,103,718,409       (891,712,562     1,598,232,723  

Total current liabilities

      386,010,276       338,064,885       48,097,192       13,956,409       74,752,346       1,664,930,891       (1,986,035,359     539,776,640  

Total non-current liabilities

      2,640,718,177       619,883,604       69,613,146       5,367,725       3,339,727       2,497,228,919       (2,154,524,985     3,681,626,313  

Equity (deficit), net

      (1,250,613,510     (363,729,702     184,761,115       (7,798,497     83,824,281       (2,229,778,840     1,259,800,222       (2,323,534,931

Depreciation and amortization

      27,415,620       4,701,752       1,438,295       (85,726     79,371       562,887       —         34,112,199  

Net periodic cost of employee benefits excluding items recognized in other comprehensive income

      8,355,687       13,128,622       60,275       3,882       —         6,537,930       —         28,086,396  

 

F-17


As of/ for the period ended March 31, 2019

  Exploration
And
Production
    Industrial
Transformation
    Drilling
and
Services(1)
    Logistics     Fertilizers     Ethylene(2)     Trading
companies
    Corporate
and other
Operating
Subsidiary
Companies
    Intersegment
eliminations
    Total  

Sales:

                   

Trade

  Ps. 107,815,192       194,473,939       —         —         910,428       2,553,534       46,041,893       2,383,068       —         354,178,054  

Intersegment

    79,471,926       32,303,101       1,769,674       21,646,546       115,203       372,364       116,808,631       23,884,377       (276,371,822     —    

Services income

    24,302       144,177       20,297       1,139,168       597       1,308       12,788       730,807       —         2,073,444  

Impairment (reversal) of wells, pipelines, properties, plants and equipment

    16,870,308       (2,532,405     —         (9,182,957     —         —         —         —         —         5,154,946  

Cost of sales

    95,086,427       239,914,203       (213,829     8,165,749       1,273,327       4,112,177       156,489,469       12,310,243       (260,483,037     256,654,729  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Gross income (loss)

    75,354,685       (10,460,581     2,003,800       23,802,922       (247,099     (1,184,971     6,373,843       14,688,009       (15,888,785     94,441,823  

Other revenue

    3,164,883       507,255       7,491       104,013       186       29,383       427,092       1,398,066       (314,168     5,324,201  

Other expenses

    (871,359     (946,156     (12,811     (686,060     (401     —         —         (240,953     1,478,765       (1,278,975

Distribution, transportation and sales expenses

    56,634       5,775,718       —         9,201       93,303       63,067       336,128       21,962       (853,547     5,502,466  

Administration expenses

    14,207,556       12,279,040       170,037       2,033,362       150,679       352,515       575,111       16,547,914       (14,032,626     32,283,588  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating income

    63,384,019       (28,954,240     1,828,443       21,178,312       (491,296     (1,571,170     5,889,696       (724,754     161,985       60,700,995  

Financing income

    18,365,138       491,458       120,686       49,072       804       7,429       205,621       34,076,837       (49,415,749     3,901,296  

Financing cost

    (30,871,917     (832,167     (193,163     (114,515     (162,933     (80,706     (236,537     (46,616,768     49,253,730       (29,854,976

Derivative financial instruments (cost) income, net

    (7,279,825     (7,013     —         —         —         —         (1,073,807     138,612       34       (8,221,999

Foreign exchange (loss) income, net

    31,136,074       (1,994,768     72,748       52,328       28,308       (39,099     (47,140     1,203,127       —         30,411,578  

Profit (loss) sharing in joint ventures and associates

    —         —         —         (32     —         —         (236,322     (23,482,988     23,507,713       (211,629

Tax, duties and other

    90,376,814       —         (16,372     2,263,723       —         (1,446,202     1,983,704       (717,146     —         92,444,521  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net (loss) income

  Ps. (15,643,325     (31,296,730     1,845,086       18,901,442       (625,117     (237,344     2,517,807       (34,688,788     23,507,713       (35,719,256
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total current assets

    1,007,916,797       220,286,356       13,323,149       19,163,914       2,676,175       7,662,414       146,016,682       750,998,287       (1,786,822,552     381,221,222  

Total non-current assets

    983,766,062       329,980,044       15,025,486       107,878,435       4,392,593       19,132,935       30,031,613       1,493,897,468       (1,285,000,584     1,699,104,052  

Total current liabilities

    309,540,251       158,109,265       3,097,362       23,053,307       10,222,724       7,542,144       102,841,015       1,674,320,588       (1,785,572,563     503,154,093  

Total non-current liabilities

    2,153,968,715       587,051,048       10,372,643       10,556,273       112,751       241,570       5,422,545       2,014,387,536       (1,735,403,687     3,046,709,394  

Equity (deficit), net

    (471,826,107     (194,893,913     14,878,630       93,432,769       (3,266,707     19,011,635       67,784,735       (1,443,812,369     449,153,114       (1,469,538,213

Depreciation and amortization

    28,531,520       5,044,568       353,604       810,738       (85,690     303,507       220,191       500,478       —         35,678,916  

Net periodic cost of employee benefits excluding items recognized in other comprehensive income

    8,349,659       13,074,530       6,028       60,275       3,882       3,941       —         6,538,410       50,162       28,086,887  

 

(1)

This company was merged on July 1, 2019. All operations for periods subsequent to the merger were transferred to Pemex Exploration and Production (See Note 1). Therefore, these amounts are not comparable with 2020 figures.

(2)

This company was merged on July 1, 2019. All operations for periods subsequent to the merger were transferred to Pemex Industrial Transformation (See Note 1). Therefore, these amounts are not comparable with 2020 figures.

 

 

F-18


As of/for the year ended December 31, 2019

  Exploration
and
Production
    Industrial
Transformation
    Drilling
and
Services(1)
    Logistics     Fertilizers     Ethylene(2)     Trading
Companies
    Corporate
and Other
Operating
Subsidiary
Companies
    Intersegment
eliminations
    Total  

Total current assets

    985,938,224       220,597,465       —         111,583,417       7,773,098       —         161,300,389       718,345,361       (1,864,985,583     340,552,371  

Total non-current assets

    769,244,352       385,462,326       —         160,374,484       1,720,770       —         43,127,474       1,001,402,395       (783,436,152     1,577,895,649  

Total current liabilities

    393,129,182       290,128,797       —         28,995,291       12,648,563       —         125,341,872       1,564,317,345       (1,862,357,422     552,203,628  

Total non-current liabilities

    2,210,050,053       682,521,743       —         78,111,581       6,121,684       —         3,382,236       2,080,349,970       (1,697,084,513     3,363,452,754  

Equity (deficit), net

    (847,996,659     (366,590,749     —         164,851,029       (9,276,379     —         75,703,755       (1,924,919,559     911,020,200       (1,997,208,362

Depreciation and amortization

    102,959,025       24,653,730       369,636       6,521,380       (323,902     607,016       93,193       2,306,932       —         137,187,010  

Net periodic cost of employee benefits excluding items recognized in other comprehensive income

    34,522,749       54,339,969       12,056       243,330       (6,361     7,860       37,512       27,019,834       —         116,176,949  

 

(1)

This company was merged on July 1, 2019. All operations for periods subsequent to the merger were transferred to Pemex Exploration and Production (See Note 1).

(2)

This company was merged on July 1, 2019. All operations for periods subsequent to the merger were transferred to Pemex Industrial Transformation (See Note 1).

 

F-19


NOTE 7. REVENUE

As of March 31, 2020 and 2019, the revenues were as follows:

 

  A.

Revenue disaggregation

 

For the
period ended
March 31,
  Exploration
and
Production
    Industrial
Transformation
    Drilling
and
Services(1)
    Logistics     Fertilizers     Ethylene(2)     Trading
Companies
    Corporate
and Other
Operating
Subsidiary
Companies
    Total  

Geographical market

                 

2020

                 

United States

  Ps. 51,173,088       —         —         —         —         —         31,915,307       —         83,088,395  

Other

    8,727,269       —         —         —         —         —         1,743,524       800,466       11,271,259  

Europe

    30,611,366       —         —         —         —         —         1,761       (41,031     30,572,096  

Local

    80,190       152,811,735       —         1,161,589       687,429       —         3,573,068       864,353       159,178,364  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

  Ps. 90,591,913       152,811,735       —         1,161,589       687,429       —         37,233,660       1,623,788       284,110,114  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

2019*

                 

United States

  Ps. 62,407,353       —         —         —         —         —         37,291,926       —         99,699,279  

Other

    9,441,568       —         —         —         —         —         7,462,419       1,421,995       18,325,982  

Europe

    35,906,668       —         —         —         —         —         979,635       579,306       37,465,609  

Local

    83,905       194,618,116       20,297       1,139,168       911,025       2,554,842       320,701       1,112,574       200,760,628  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

  Ps. 107,839,494       194,618,116       20,297       1,139,168       911,025       2,554,842       46,054,681       3,113,875       356,251,498  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Major products and services

                 

2020

                 

Crude oil

  Ps. 90,511,724       —         —         —         —         —         —         —         90,511,724  

Gas

    61,622       13,398,264       —         —         —         —         8,932,860       —         22,392,746  

Refined petroleum products

    —         136,571,418       —         —         —         —         27,976,244       1,151       164,548,813  

Oher

    —         2,813,659       —         —         687,221       —         302,836       1,666,007       5,469,723  

Services

    18,567       28,394       —         1,161,589       208       —         21,720       (43,370     1,187,108  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

  Ps. 90,591,913       152,811,735       —         1,161,589       687,429       —         37,233,660       1,623,788       284,110,114  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

2019

                 

Crude oil

  Ps. 107,755,589       —         —         —         —         —         —         —         107,755,589  

Gas

    59,603       19,745,504       —         —         —         —         12,056,896       —         31,862,003  

Refined petroleum products

    —         150,289,836       —         —         —         —         33,656,384       —         183,946,220  

Oher

    —         24,438,599       —         —         910,428       2,553,534       328,613       2,383,068       30,614,242  

Services

    24,302       144,177       20,297       1,139,168       597       1,308       12,788       730,807       2,073,444  

Total

  Ps. 107,839,494       194,618,116       20,297       1,139,168       911,025       2,554,842       46,054,681       3,113,875       356,251,498  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

F-20


For the period
ended
March 31,
  Exploration
and
Production
    Industrial
Transformation
    Drilling
and
Services(1)
    Logistics     Fertilizers     Ethylene(2)     Trading
Companies
    Corporate
and Other
Operating
Subsidiary
Companies
    Total  

Timing of revenue recognition

                 

2020

                 

Products transferred at a point in time

  Ps. 90,573,346       152,783,341       —         —         687,221       —         37,211,940       1,667,158       282,923,006  

Products and services transferred over the time

    18,567       28,394       —         1,161,589       208       —         21,720       (43,370     1,187,108  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

  Ps. 90,591,913       152,811,735       —         1,161,589       687,429       —         37,233,660       1,623,788       284,110,114  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

2019

                 

Products transferred at a point in time

  Ps. 107,815,192       194,473,939       —         —         910,428       2,553,534       46,041,893       2,383,068       354,178,054  

Products and services transferred over the time

    24,302       144,177       20,297       1,139,168       597       1,308       12,788       730,807       2,073,444  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

  Ps. 107,839,494       194,618,116       20,297       1,139,168       911,025       2,554,842       46,054,681       3,113,875       356,251,498  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(1)

This company was merged on July 1, 2019. All operations for periods subsequent to the merger were transferred to Pemex Exploration and Production (See Note 1). Therefore, these amounts are not comparable with 2020 figures.

(2)

This company was merged on July 1, 2019. All operations for periods subsequent to the merger were transferred to Pemex Industrial Transformation (See Note 1). Therefore, these amounts are not comparable with 2020 figures.

 

B.

Accounts receivable in the statement of financial position

As of March 31, 2020 and December 31, 2019, PEMEX had accounts receivable derived from customer contracts in the amounts of Ps. 59,561,209 and Ps. 89,263,870, respectively (see Note 9).

 

C.

Practical expedients

 

  i.

Expiration of contracts

PEMEX has no outstanding performance obligations to disclose as of March 31, 2020 and December 31, 2019 due to the nature of its operations.

 

  ii.

Significant financial component, less than one year

PEMEX does not need to adjust the amount committed in consideration for goods and services to account for the effects of a significant financing component, since the transfer and the time of payment of a good or service committed to the customer is less than one year.

 

F-21


  iii.

Practical expedient

PEMEX applied the practical expedient, so disclosure about remaining performance obligations that conclude in less than one year is not needed.

When PEMEX is entitled to consideration for an amount that directly corresponds to the value of the performance that PEMEX has completed, it may recognize an income from ordinary activities for the amount to which it has the right to invoice.

NOTE 8. CASH AND CASH EQUIVALENTS

a. As of March 31, 2020 and December 31, 2019, cash and cash equivalents were as follows:

 

     March 31, 2020      December 31, 2019  

Cash on hand and in banks(i)

   Ps.  34,897,701      Ps. 27,502,675  

Highly liquid investments(ii)

     22,252,134        33,118,956  
  

 

 

    

 

 

 
   Ps.  57,149,835      Ps.  60,621,631  
  

 

 

    

 

 

 

 

(i)

Cash on hand and in banks is primarily composed of cash in banks.

(ii)

Mainly composed of short-term Mexican Government investments.

NOTE 9. CUSTOMERS AND OTHER ACCOUNTS RECEIVABLE

As of March 31, 2020 and December 31, 2019, accounts receivable and other receivables were as follows:

a. Customers

 

     March 31, 2020      December 31, 2019  

Domestic customers, net

   Ps. 37,152,267      Ps. 46,792,824  

Export customers, net

     22,408,942        42,471,046  
  

 

 

    

 

 

 

Total customers

   Ps. 59,561,209      Ps. 89,263,870  
  

 

 

    

 

 

 

b. Other accounts receivable

 

     March 31, 2020      December 31, 2019  

Financial assets:

     

Sundry debtors

   Ps. 28,363,780      Ps. 27,748,849  

Employees and officers

     3,909,108        3,667,242  
  

 

 

    

 

 

 

Total financial assets

     32,272,888        31,416,091  

Non-financial assets:

     

Special Tax on Production and Services

     33,002,188        31,587,018  

Taxes to be recovered and prepaid taxes

     36,907,076        26,162,225  

Other accounts receivable

     1,903,606        2,076,477  
  

 

 

    

 

 

 

Total non-financial assets:

   Ps. 71,812,870      Ps. 59,825,720  
  

 

 

    

 

 

 

Total other account receivable

   Ps. 104,085,758      Ps. 91,241,811  
  

 

 

    

 

 

 

 

F-22


NOTE 10. INVENTORIES

As of March 31, 2020 and December 31, 2019, inventories were as follows:

 

     March 31, 2020      December 31,
2019
 

Refined and petrochemicals products

   Ps. 36,984,069      Ps. 41,211,837  

Products in transit

     5,268,904        22,719,635  

Crude oil

     6,966,951        14,087,218  

Materials and products in stock

     4,327,899        4,381,628  

Materials in transit

     1,711        127,594  

Gas and condensate products

     145,764        144,284  
  

 

 

    

 

 

 
   Ps. 53,695,298      Ps. 82,672,196  
  

 

 

    

 

 

 

NOTE 11. INVESTMENTS IN JOINT VENTURES AND ASSOCIATES

The investments in joint ventures and associates as of March 31, 2020 and December 31, 2019, were as follows:

 

     Percentage
of investment
    March 31,
2020
     December 31,
2019
 

Deer Park Refining Limited

     49.99   Ps. 15,860,909      Ps. 12,652,599  

Sierrita Gas Pipeline LLC

     35.00     1,491,665        1,171,593  

Frontera Brownsville, LLC.

     50.00     557,541        446,202  

Texas Frontera, LLC.

     50.00     252,361        199,923  

CH 4 Energía, S. A.

     50.00     196,282        192,614  

Administración Portuaria Integral de Dos Bocas, S. A. de C.V.

     40.00     153,064        165,370  

Ductos el Peninsular, S. A. P. I. de C. V.

     30.00     5,107        —    

Other-net

     Various       54,234        46,278  
    

 

 

    

 

 

 
     Ps. 18,571,163      Ps. 14,874,579  
    

 

 

    

 

 

 

Profit (loss) sharing in joint ventures and associates:

 

     March 31,  
     2020      2019  

Deer Park Refining Limited

   Ps. 63,471      Ps. (282,856

Sierrita Gas Pipeline LLC

     24,857        47,743  

Frontera Brownsville, LLC.

     11,972        12,099  

Texas Frontera, LLC.

     11,313        12,627  

Administración Portuaria Integral de Dos Bocas, S.A. de C.V.

     (12,306      —    

CH4 Energía S.A. de C.V.

     3,668        (1,210

Ductos el Peninsular, S. A. P. I. de C. V.

     5,468        (32
  

 

 

    

 

 

 

Profit sharing in joint ventures and associates, net

   Ps. 108,443      Ps. (211,629
  

 

 

    

 

 

 

 

F-23


Additional information about the significant investments in joint ventures and associates is presented below:

 

 

Deer Park Refining Limited. On March 31, 1993, PMI NASA acquired 49.99% of the Deer Park Refinery. In its capacity as general partner of Deer Park Refining Limited Partnership, Shell is responsible for the operation and management of the refinery (installed capacity of approximately 340,000 barrels per day of crude oil). Management decisions are made jointly with respect to investment in or disposal of assets, distribution of dividends, indebtedness and equity operations. In accordance with the investment contract and the operation of the agreement, the participants have the rights to the net assets in the proportion of their participation. This joint venture is recorded under the equity method.

 

 

Sierrita Gas Pipeline LLC. This company was created on June 24, 2013. Its main activity is the developing of projects related to the transportation infrastructure of gas in the United States. This investment is recorded under the equity method.

 

 

Frontera Brownsville, LLC. Effective April 1, 2011, PMI SUS entered into a joint venture with TransMontaigne Operating Company L.P. to create Frontera Brownsville, LLC. Frontera Brownsville, LLC was incorporated in Delaware, United States, and has the corporate power to own and operate certain facilities for the storage and treatment of clean petroleum products. This investment is recorded under the equity method.

 

 

Texas Frontera, LLC. This company was constituted on July 27, 2010, and its principal activity is the lease of tanks for the storage of refined product. PMI SUS, which owns 50% interest in Texas Frontera, entered into a joint venture with Magellan OLP, L.P., and together they are entitled to the results in proportion of their respective investment. The company has seven tanks with a capacity of 120,000 barrels per tank. This joint venture is recorded under the equity method.

 

 

CH4 Energía, S.A. This company was constituted on December 21, 2000. CH4 Energía engages in the purchase and sale of natural gas and in activities related to the trading of natural gas, such as transport and distribution in Valle de Toluca, Mexico. This joint venture is recorded under the equity method.

 

 

Administración Portuaria Integral de Dos Bocas, S.A. de C.V. This company was constituted on August 12, 1999. Its primary activity is administrating the Dos Bocas port, which is in Mexico’s public domain, promoting the port’s infrastructure and providing related port services. This investment is recorded under the equity method.

 

 

Ductos el Peninsular S.A.P.I. de C.V. This company was created on September 22, 2014. Its primary activity is the construction and operation of an integral transportation system and storage of petroleum products in the Peninsula of Yucatán.

 

F-24


NOTE 12. WELLS, PIPELINES, PROPERTIES, PLANT AND EQUIPMENT, NET

 

    Plants     Drilling
equipment
    Pipelines     Wells     Buildings     Offshore
platforms
    Furniture
and
equipment
    Transportation
equipment
    Construction
in progress
(1)
    Land     Unproductive
fixed assets
    Other
fixed
assets
    Total fixed
assets
 

Investment

                         

Balances as of December 31, 2018

    Ps.811,270,391       20,080,965       421,235,950       1,379,323,723       64,845,163       326,482,265       52,020,042       15,159,952       129,352,513       44,351,625       —         32,659       3,264,155,248  

Acquisitions

    1,358,935       73,399       72,270       3,400,667       70       582,248       34,455       521,195       6,791,460       37,958       —         —         12,872,657  

Reclassifications

    26,287       —         110,030       —         (4,046     (264,700     (58,190     49,455       (314,703     91,514       34,134       —         (330,219

Capitalization

    2,376,325       —         2,498,628       11,671,797       —         1,595,244       —         —         (18,141,994     —         —         —         —    

(Impairment) reversal of impairment

    (10,504,145     —         23,851,922       (5,698,711     (273,685     (11,370,063     —         (536,849     (623,415     —         —         —         (5,154,946

Disposals

    (2,545,290     (30,579     (254,904     —         (3,285     —         (912,063     (46,313     (715     (17,650     (34,134     —         (3,844,933
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balances as of March 31, 2019

    Ps.801,982,503       20,123,785       447,513,896       1,388,697,476       64,564,217       317,024,994       51,084,244       15,147,440       117,063,146       44,463,447       —         32,659       3,267,697,807  
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balances as of January 1, 2019

    Ps.811,270,391       20,080,965       421,235,950       1,379,323,723       64,845,163       326,482,265       52,020,042       15,159,952       129,352,513       44,351,625       —         32,659       3,264,155,248  

Transfers to rights of use

    —         (7,005,141     —         —         —         —         —         —         —         —         —         —         (7,005,141

Acquisitions

    8,337,019       252,382       1,251,488       29,072,723       316,499       5,436,425       184,863       1,735,581       82,520,111       182,563       —         —         129,289,654  

Reclassifications

    (1,381,310     —         428,738       —         (51,885     (614,430     (234,643     47,110       (106,429     (16,161     35,403       —         (1,893,607

Unsuccessful wells

    —         —         —         (69,231,587     —         —         —         —         (7,922,365     —         —         —         (77,153,952

Capitalization

    6,830,064       —         6,538,540       35,251,706       143,312       13,013,199       2,566       955,134       (62,722,409     (12,112     —         —         —    

(Impairment) reversal of impairment

    24,464,081       —         (4,008,680     (83,730,351     (499,722     (31,991,592     —         (1,430,077     114,127       —         —         —         (97,082,214

Disposals

    (3,396,366     (235,382     (301,359     (151,405     (1,435,140     —         (1,565,266     (112,482     (1,310,108     (356,379     (35,403     (32,659     (8,931,949
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balances as of December 31, 2019

    Ps.846,123,879       13,092,824       425,144,677       1,290,534,809       63,318,227       312,325,867       50,407,562       16,355,218       139,925,440       44,149,536       —         —         3,201,378,039  
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Acquisitions

    3,870,275       16,599       371,768       7,959,238       1,436,594       829,076       45,946       1,035,007       18,311,773       363,978       —         —         34,240,254  

Reclassifications

    (2,090,040     —         85,461       —         176,696       —         226,534       (37,787     76,707       95,930       7       —         (1,466,492

Capitalization

    320,578       —         1,191,150       15,597,289       —         —         150       —         (17,109,167     —         —         —         —    

 

F-25


          Plants     Drilling
equipment
    Pipelines     Wells     Buildings     Offshore
platforms
    Furniture
and
equipment
    Transportation
equipment
    Construction
in progress
(1)
    Land     Unproductive
fixed assets
    Other
fixed
assets
    Total fixed
assets
 

Reversal (impairment) of impairment

      1,518,005       —         (5,700,184     27,883,684       429,790       2,669,274       —         —         (484,403     —         —         —         26,316,166  

Disposals

      (1,134,412     (50,166     (831,123     (151,405     (185,850     —         (91,473     (5,209     (13,160     (152,150     (7     (32,562     (2,647,517
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balances as of March 31, 2020

    Ps.  848,608,285       13,059,257       420,261,749       1,341,823,615       65,175,457       315,824,217       50,588,719       17,347,229       140,707,190       44,457,294       —         (32,562     3,257,820,450  
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Accumulated depreciation and amortization

                           

Balances as of December 31, 2018

      (436,603,123     (5,998,481     (173,264,040     (973,467,746     (42,924,256     (179,831,090     (42,161,378     (7,419,050     —         —         —         —         (1,861,669,164

Depreciation and amortization

      (11,800,076     (328,658     (3,279,368     (15,321,702     (495,219     (3,662,314     (651,170     (140,409     —         —         —         —         (35,678,916

Reclassifications

      (63,956     —         245,272       —         20,630       73,182       56,262       230       (1,401     —         —         —         330,219  

Disposals

      1,607,761       20,800       916,830       —         11,766       —         901,618       40,826       —         —         —         —         3,499,601  
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balances as of March 31, 2019

    Ps.  (446,859,394     (6,306,339     (175,381,306     (988,789,448     (43,387,079     (183,420,222     (41,854,668     (7,518,403     (1,401     —         —         —         (1,893,518,260
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balances as of January 1, 2019

    Ps.  (436,603,123     (5,998,481     (173,264,040     (973,467,746     (42,924,256     (179,831,090     (42,161,378     (7,419,050     —         —         —         —         (1,861,669,164

Transfers to rights of use

      —         943,639       —         —         —         —         —         —         —         —         —         —         943,639  

Depreciation and amortization

      (49,473,592     (591,168     (16,380,653     (51,574,532     (2,131,913     (13,820,275     (2,556,539     (658,338     —         —         —         —         (137,187,010

Reclassifications

      1,303,186       —         41,225       —         205,661       116,278       220,301       6,956       —         —         —         —         1,893,607  

Disposals

      3,308,366       128,561       184,172       817       1,226,345       —         1,449,659       92,471       —         —         —         —         6,390,391  
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balances as of December 31, 2019

    Ps.  (481,465,163     (5,517,449     (189,419,296     (1,025,041,461     (43,624,163     (193,535,087     (43,047,957     (7,977,961     —         —         —         —         (1,989,628,537
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

F-26


          Plants     Drilling
equipment
    Pipelines     Wells     Buildings     Offshore
platforms
    Furniture
and
equipment
    Transportation
equipment
    Construction
in progress
(1)
    Land     Unproductive
fixed assets
    Other
fixed
assets
    Total fixed
assets
 

Depreciation and amortization

      (10,907,082     (65,273     (3,695,477     (14,273,287     (448,450     (4,033,066     (485,305     (204,259     —         —         —         —         (34,112,199

Reclassifications

      2,022,081       —         (257,348     —         (132,789     —         (134,515     (30,937     —         —         —         —         1,466,492  

Disposals

      676,078       —         17,912       —         147,090       —         70,482       8,695       —         —         —         —         920,257  
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balances as of March 31, 2020

    Ps.  (489,674,086     (5,582,722     (193,354,209     (1,039,314,748     (44,058,312     (197,568,153     (43,597,295     (8,204,462     —         —         —         —         (2,021,353,987
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Wells, pipelines, properties, plant and equipment—net as of March 31, 2019

    Ps.  355,123,109       13,817,446       272,132,590       399,908,028       21,177,138       133,604,772       9,229,576       7,629,037       117,061,745       44,463,447       —         32,659       1,374,179,547  
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Wells, pipelines, properties, plant and equipment—net as of December 31, 2019

    Ps.  364,658,716       7,575,375       235,725,381       265,493,348       19,694,064       118,790,780       7,359,605       8,377,257       139,925,440       44,149,536       —         —         1,211,749,502  
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Wells, pipelines, properties, plant and equipment—net as of March 31, 2020

    Ps.  358,934,199       7,476,535       226,907,540       302,508,867       21,117,145       118,256,064       6,991,424       9,142,767       140,707,190       44,457,294       —         (32,562     1,236,466,463  
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Depreciation rates

      3 to 5     5     2 to 7     —         3 to 7     4     3 to 10     4 to 20     —         —         —         —         —    

Estimated useful lives

      20 to 35       20       15 to 45       —         33 to 35       25       3 to 10       5 to 25       —         —         —         —         —    

 

(1)

Mainly wells, pipelines and plants.

 

F-27


A.

As of March 31, 2020 and December 31, 2019, the financing cost identified with fixed assets in the construction or installation stage, capitalized as part of the value of such fixed assets, was Ps. 942,036, and Ps. 2,959,025, respectively.

 

B.

The combined depreciation of fixed assets and amortization of wells for the periods ended March 31, 2020 and 2019, recognized in operating costs and expenses, was Ps. 34,112,199, and Ps. 35,678,916, respectively, which includes costs related to plugging and abandonment of wells for the periods ended March 31, 2020 and 2019, of Ps. 731,155, and Ps. 1,879,852, respectively.

 

C.

As of March 31, 2020 and December 31, 2019, provisions relating to future plugging of wells costs amounted to Ps. 102,459,790 and Ps. 80,849,900, respectively, and are presented in the “Provisions for plugging of wells” (see Note 17).

 

D.

As of March 31, 2020 and 2019, PEMEX recognized a reversal of impairment of Ps. 26,316,166, and a net impairment of Ps. (5,154,946), respectively, which is presented as a separate line item in the consolidated statement of comprehensive income as follows:

 

          2020           2019  
          (Impairment)     Reversal of
impairment
     Reversal of
impairment /
(Impairment), net
          (Impairment)     Reversal of
impairment
     (Impairment)/
Reversal of
impairment, net
 

Pemex Exploration and Production

    Ps.  (91,835,000     113,807,888        21,972,888       Ps.  (19,868,242     2,997,934        (16,870,308

Pemex Industrial Transformation

      (1,151,281     5,496,925        4,345,644         (10,676,984     13,209,389        2,532,405  

AGRO

      (2,366     —          (2,366       —         —          —    

Pemex Logistics

      —         —          —           —         9,182,957        9,182,957  
     

 

 

    

 

 

       

 

 

    

 

 

 

Total

    Ps.  (92,988,647     119,304,813        26,316,166       Ps.  (30,545,226     25,390,280        (5,154,946
   

 

 

   

 

 

    

 

 

     

 

 

   

 

 

    

 

 

 

Cash Generating Unit of Pemex Exploration and Production

As March 31, 2020, Pemex Exploration and Production recognized a net reversal of impairment of Ps. 21,972,888 mainly due to: (i) a positive exchange rate effect of Ps. 74,623,888 mainly in Cantarell, Yaxché, Aceite Terciario del Golfo (“ATG”), Chuc, Tsimin Xux and Burgos cash generating units (CGUs); (ii) an increase in future net cash flows from an increase in volume production profiles that increase future revenues, generating a positive effect of Ps. 39,184,000, mainly in the Cantarell, Burgos, Yaxché and Crudo Ligero marino CGUs. There were increases in the volume production profiles of new fields Ixachi, Xikin, Uchbal, Tetl, Teekit, Suuk, pokche and Mulach. These increases were partially offset by (iii) a decrease in crude oil and gas prices, generating a negative effect of Ps. (49,112,000) mainly in Chuc, Yaxché, Tsimin Xux and Crudo Ligero Marino CGUs; (iv) an impact from discounting future cash flows of Ps. (32,788,000), mainly in the Cantarell and ATG CGUs; and (v) higher taxes of Ps. (9,935,000) mainly in Cantarell and ATG CGUs due to higher income from production profiles.

As of March 31, 2019, Pemex Exploration and Production recognized a net impairment of Ps. 16,870,308 mainly due to: (i) natural declining in production of Ps. 19,200,350 in Cantarell, Chuc and Tsimin Xux Projects; (ii) Ps. 667,892 of impairment in Yaxche project, due to the operating impacts related directly to production; these effects were partially offset by a reversal of impairment of Ps. 2,997,934 in Burgos and Crudo Ligero Marino Projects, due to the re-evaluation of major production maintenance with an economic horizon of 25 years.

 

F-28


The cash generating units of Pemex Exploration and Production are investment projects in productive fields with hydrocarbon reserves associated with proved reserves. These productive hydrocarbon fields contain varying degrees of heating power consisting of a set of wells and are supported by fixed assets associated directly with production, such as pipelines, production facilities, offshore platforms, specialized equipment and machinery.

Each project represents the smallest unit which can concentrate the core revenues, with clear costs and expenses that enable future cash flows (value in use) to be determined.

Pemex Exploration and Production determines the recoverable amount of fixed assets based on the long-term estimated prices for Pemex Exploration and Production’s proved reserves. The recoverable amount on each asset is the value in use.

To determine the value in use of long-lived assets associated to hydrocarbon extraction, the net present value of reserves is determined based on the following assumptions:

 

     March 31, 2020    March 31, 2019

Average crude oil price

   49.57 USD/bl    58.02 USD/bl

Average gas price

   5.14 USD/mpc    4.89 USD/mpc

Average condensates price

   55.78 USD/bl    43.21 USD/bl

Discount rate

   6.17% annual    7.19% annual

For 2020 and 2019 the total forecast production, calculated with a horizon of 25 years was 6,914 and 6,002 million barrels of crude oil equivalent, respectively.

Pemex Exploration and Production, in compliance with practices observed in the industry, estimates the recovery value of asset by determining its value in use, based on cash flows associated with proved reserves after taxes and using a discount rate, also after taxes.

Cash Generating Units of Pemex Industrial Transformation

As of March 31, 2020 and 2019, Pemex Industrial Transformation recognized a net reversal of impairment of Ps. 4,345,644, and Ps. 2,532,405, respectively.

The net reversal of impairment was in the following cash generating units:

 

     March 31, 2020      March 31, 2019  

Tula Refinery

   Ps. 2,919,561      Ps. —    

Minatitlán Refinery

     2,577,364        —    

Salina Cruz Refinery

     —          8,224,483  

Madero Refinery

     —          4,984,906  
  

 

 

    

 

 

 

Reversal of impairment

   Ps. 5,496,925      Ps. 13,209,389  
  

 

 

    

 

 

 

Madero Refinery

   Ps. (1,151,281    Ps. —    

Tula Refinery

     —          (4,560,911

Minatitlán Refinery

     —          (6,116,073
  

 

 

    

 

 

 

Impairment

   Ps.  (1,151,281    Ps.  (10,676,984
  

 

 

    

 

 

 

Net reversal of impairment

   Ps. 4,345,644      Ps. 2,532,405  
  

 

 

    

 

 

 

In 2020, the net reversal of impairment was mainly due to (i) important maintenance plans to recover assets use levels; (ii) a greater supply of light crude oil by Pemex Exploration and Production improving the quality of refined products such as gasoline, turbosines and decreasing residual products such as fuel oil; (iii) a decrease in the discount rate of cash generating units of refined products and gas by 0.07% and 2.8%, respectively, and an increase in petrochemicals and ethylene by 1.7%, and 1.2% respectively, due to the effect of weighting of elements with which the references are determined; and (iv) the depreciation of the peso against the U.S. dollar, from a peso/U.S. dollar exchange rate of Ps. 18.8452 = U.S. $1.00 as of December 31, 2019 to Ps. 23.5122 = U.S. $1.00 as of March 31, 2020, which are used as cash flows when U.S. dollars are taken as reference.

 

F-29


In 2019, the net reversal of impairment was mainly due to (i) an increase in processing of refined products due to higher prices projections; (ii) a decrease in the discount rate of cash generating units of refined products and petrochemicals by 0.3% and 1.3%, respectively, and an increase in gas by 1.7%; and (iii) a decrease in auto-consumption in refineries (oil gas and natural gas).

To determine the value in use of long-lived assets associated with the cash-generating units of Pemex Industrial Transformation, the net present value of cash flows was determined based on the following assumptions:

 

    As of March 31,
    2020   2019   2020   2019   2020   2019   2020
    Refining   Gas   Petrochemicals   Ethylene

Average crude oil Price per barrel

  U.S $37.50   U.S. $58.64   N.A.   N.A.   N.A.

Processed volume

  827 mbd   725 mbd   2,239
mmpcd of
humid gas
  2,961
mmpcd of
humid gas
  Variable because the load inputs are diverse

Rate of Ps./U.S. dollar

  23.51   19.3793   23.51   19.3793   23.51   19.3793   23.51

Useful lives of the cash generating units (year average)

  12   14   7   8   7   7   6

Discount rate (% annual) Period*

  11.39%

2020-2032

  11.48%

2020-2035

  9.93%

2020-2027

  10.39%

2020-2028

  8.76%

2020-2027

  8.80%

2020-2027

  8.13%

2020-2026

* The first 5 years are projected and stabilize at year 6.

Cash-generating units in Pemex Industrial Transformation are processing centers grouped according to their types of processes as refineries, gas complex processors, and petrochemical centers. These centers produce various finished products for direct sale to customers or intermediate products that can be processed in another of its cash generating units or by a third party. Each processing center of Pemex Industrial Transformation represents the smallest unit that has distinguishable revenues, with clear costs and expenses that enable future cash flows (value in use) to be determined.

Cash flow determinations are made based on PEMEX’s business plans, operating financial programs, forecasts of future prices of products related to the processes of the cash generating units, budget programs and various statistical models that consider historical information of processes and the capacity of various processing centers.

The recoverable amount of assets is based on each asset’s value in use. The value in use for each asset is calculated based on cash flows, taking into consideration the volumes to be produced and sales to be carried out. As of March 31, 2020 and 2019, the value in use for the impairment of fixed assets was as follows:

 

           March 31,  
           2020      2019  

Minatitlán Refinery

     Ps. 81,375,715      Ps.  47,990,885  

Salina Cruz Refinery

       65,744,744        —    

Tula Refinery

       66,380,723        32,358,642