Pemex Posts Fourth Consecutive Loss as Debt Crisis Mounts

Petróleos Mexicanos (Pemex), Mexico’s state-owned oil giant, has entered a precarious phase. The company reported a net loss of $9 billion (USD) for the fourth quarter of 2024—the fourth consecutive quarterly loss—marking a stark reversal from its 2023 profitability. This decline, driven by a combination of currency volatility, declining production, and rising operational costs, has intensified concerns about its ability to manage $97.6 billion in total debt, a figure that remains stubbornly high despite a modest reduction in 2024.

The Financial Strain: Currency, Costs, and Cash Flow

Pemex’s Q4 loss was amplified by the 19.8% depreciation of the Mexican peso against the U.S. dollar in 2024. This weakened currency inflated the peso-denominated value of its $97.6 billion debt, which is largely dollar-denominated. Accounting for this currency impact alone, Pemex incurred a MX$543 billion (≈$26.3 billion USD) loss in 2024 due to exchange rate fluctuations. While this was a non-cash charge, it underscored the fragility of its balance sheet.

Operational challenges further compounded the issue. Sales costs rose by 4.4% in 2024, while total sales fell by 2.6%, squeezing margins. Meanwhile, crude production plummeted to 1.65 million barrels per day (mbd) in Q4 2024—a 10% year-on-year decline—as aging offshore fields like Maloob and Zaap faced declining output. This forced Pemex to prioritize high-value fuels like gasoline and diesel over crude exports, a strategy that risks long-term revenue sustainability.

Debt Crisis: The Numbers and Government Lifelines

Pemex’s debt profile remains its most pressing concern. With $9 billion in bond repayments due in 2025, the company relies heavily on government support. Mexico’s 2025 Federal Expenditure Budget allocated MX$136 billion (≈$6.5 billion USD) to help service Pemex’s market debt, building on MX$156.5 billion (≈$7.5 billion USD) provided in 2024. This support, however, comes with strings attached: nearly all funds must go directly to debt repayment, leaving Pemex with little flexibility for operational investments.

The company also faces a MX$400 billion (≈$19.3 billion USD) backlog in payments to suppliers, which it pledged to clear by March 2025. Partial payments in late 2024 covered urgent obligations like payroll and taxes, but full resolution hinges on disciplined cash management.

Operational and Structural Challenges

Pemex’s declining production is a critical vulnerability. Crude output has fallen by 116,000 bpd year-on-year, with aging infrastructure and a lack of new exploration projects stifling growth. While refinery throughput increased to 906,000 bpd in 2024—a 12% rise—this reflects efforts to achieve fuel self-sufficiency rather than revenue growth.

Structural reforms, such as consolidating subsidiaries under a unified board and simplifying governance, aim to improve efficiency. However, progress has been slow, and political interference remains a risk. For instance, the 2025 Federal Revenue Act introduced a 30% “Oil and Gas Revenue for Wellbeing Duty”, replacing prior taxes. If made permanent, this could stabilize Pemex’s fiscal framework, but constitutional approval is pending.

Sustainability and ESG Priorities

Pemex has emphasized ESG goals, reporting a 6.6% reduction in CO₂ emissions to 57 million tons in 2024 through energy efficiency projects. While this aligns with global trends, its heavy reliance on fossil fuels and lack of significant renewable investments limit its appeal to ESG-focused investors.

Outlook: Recovery or Continued Struggle?

Pemex’s path forward hinges on three factors:
1. Debt Management: The $136 billion government support package and supplier debt repayment plan could stabilize liquidity in 2025. However, without new revenue streams or production growth, debt levels will remain unsustainable.
2. Production Revival: A revival in crude output, particularly from new fields or partnerships, is critical. Pemex’s reluctance to form equity alliances with private firms, however, limits its access to capital and expertise.
3. Structural Reforms: The success of tax reforms and governance overhauls will determine whether Pemex can transition from a government-backed entity to a self-sustaining corporation.

Conclusion

Pemex’s fourth consecutive loss and $9 billion debt repayment burden underscore its precarious position. While government support and operational adjustments provide short-term relief, long-term survival requires addressing systemic issues: aging infrastructure, declining production, and overreliance on fiscal handouts. Investors should weigh Pemex’s potential recovery against its structural risks. Key metrics to watch include crude production trends, supplier debt resolution progress, and the fate of Mexico’s 2025 tax reforms. Without meaningful improvements in these areas, Pemex’s debt crisis will remain a looming threat to Mexico’s energy sector and its investors alike.