Relevant Document:ReleasePemex CEO Octavio Romero Oropeza and CFO Alberto Velazquez Garcia issued a press release to investors and analysts last night announcing that, as a result of the Covid-19 outbreak, the company has reduced its investment budget by 40.5 billion Mexican pesos (approximately $1.7 billion). Moreover, a decree was published, in the Official Gazette of the Federation on April 21, by which the Government of Mexico granted an additional fiscal benefit to Pemex, in the amount of MXN 65 billion for the remainder of 2020.
Management highlighted in the release,
"it is important to underline that, today more than ever before, Petróleos Mexicanos has the absolute support of the Government of Mexico" (emphasis added).This fiscal benefit will reduce the payment of Pemex's profit-sharing duty, or DUC, which represents 80% of the company's direct fiscal burden. The release added that this is an additional support to the seven-point reduction in the DUC rate that took place in Jan. 2020.
Management added there is an estimated additional income of MXN 7.54 billion from the crude oil hedge contracted at the end of 2019.
All these measures, which amount to MXN 113.04 billion, are aimed at mitigating the effects on the financial balance and cash flow generation of the company, caused by the temporary decline in oil prices in the global markets.
Management ended the release by stating that the company will continue with its strategy of operational and financial improvements. The objective of stabilizing oil production was achieved, and Pemex is on a path of production growth and increasing the crude oil processing levels of its refineries.
Due to the increase in oil production from its new fields, whose production cost is less than $5 per barrel, Pemex can efficiently manage its production portfolio, giving priority to the lower cost production.