Pemex receives stable outlook from Fitch due to government support

Fitch Ratings assigned a stable outlook to the state oil company Petróleos Mexicansciting the support of the Mexican Government.

Pemexrated four levels below investment grade by Fitchwas also removed from the firm’s negative rating watch list after the government committed to allocating $8.5 billion in funds for the company to meet upcoming debt maturities, according to a statement sent Wednesday. .

“The inclusion of Pemex in the annual budget, for the first time, is positive for credit and resolves short-term concerns of Fitch with respect to the capacity and willingness of the Government to materially support Pemex”wrote analysts Adriana Eraso and Erick Pastrana.

Although on other occasions the Government has helped Pemex with cash injections to pay down debt, it has traditionally not allocated money up front. Government funds will cover most of Pemex’s US$10.9 billion in maturities in 2024, according to Fitch.

The remainder will be covered by reducing the company’s tax liability under its profit-sharing agreement with the Government and is expected to be refinanced, they wrote.

The Pemex bonds have given investors a 10% return this year, behind gains of 11% and 14% respectively from Brazilian drilling company Petrobras and Colombian drilling company Ecopetrolaccording to data compiled by Bloomberg.

Pemex did not immediately respond to a request for comment.