Mexico’s government readying roughly $5 billion Pemex lifeline, source says

(Reuters) – Mexico’s government will inject between $1.3 billion and $1.6 billion into state oil company Petroleos Mexicanos (Pemex) this year and offer a tax break of 75 billion Mexican pesos ($3.68 billion), a senior official told Reuters on Thursday.

The world’s most indebted oil company, Pemex had more than $110 billion in financial debt at the end of the third quarter last year while its liabilities far exceeded its assets.

In the past two years, the government of President Andres Manuel Lopez Obrador has injected billions of dollars in capital in the loss-making company and reduced its tax burden.

The source, who has direct knowledge of the matter but declined to be identified, said the tax reduction will be applied on a monthly basis and be separate from the profit sharing rate (DUC) that was already reduced from 58% to 54% for this year.

Neither Pemex nor the finance ministry immediately responded to a request for comment. Earlier on Thursday, Lopez Obrador said a new agreement will come into force to further reduce the tax burden on Pemex, but he gave no details.

Last year, the government reduced the DUC, the largest payment Pemex makes to state coffers, from 65% to 58%.

The source also said the first of several capital injections, scheduled within the next two weeks, will be used to pay down debt, and that it is unlikely Pemex will issue bonds on the international market this year.

Pemex has carried out liability management of different types, including bond refinancing and bank line extensions, totaling more than $30 billion between 2019 and 2020.

($1 = 20.3594 Mexican pesos)

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