UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM20-F

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)

for the fiscal year ended December 31, 20152016

Commission File Number0-99

PETRÓLEOS MEXICANOS

(Exact name of registrant as specified in its charter)

Avenida Marina Nacional No. 329

Colonia Verónica Anzures

11300 Ciudad de México, México

(Address of principal executive offices)

Julio Alberto Valle PereñaJaime José del Río Castillo

(5255) 1944 9700

ri@pemex.com

Avenida Marina Nacional No. 329

Torre Ejecutiva, Piso 38 Colonia Verónica Anzures

11300 Ciudad de México, México

(Name, telephone,e-mail and/or facsimile number

and address of company contact person)

Securities registered or to be registered pursuant to Section 12(b) of the Act.None

Securities registered or to be registered pursuant to Section 12(g) of the Act.None

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act.

Title of Each Class

3.500% Notes due 2018

Floating Rate Notes due 2018

9 ¹⁄₄% Guaranteed Bonds due 2018

8.00% Guaranteed Notes due 2019

6.000% Notes due 2020

4.875% Notes due 2022

3.500% Notes due 2023

4.875% Notes due 2024

4.500% Notes due 2026

9.50% Guaranteed Bonds due 2027

6.625% Guaranteed Bonds due 2038

5.50% Bonds due 2044

5.625% Bonds due 2046

9 ¹⁄₄% Global Guaranteed Bonds due 2018

5.75% Guaranteed Notes due 2018

3.125% Notes due 2019

3.500% Notes due 2020

5.50% Notes due 2021

8.625% Bonds due 2022

8.625% Guaranteed Bonds due 2023

4.250% Notes due 2025

9.50% Global Guaranteed Bonds due 2027

6.625% Guaranteed Bonds due 2035

6.500% Bonds due 2041

6.375% Bonds due 2045

Indicate by check mark if the registrant is awell-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes¨☐    Nox☒

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.

Yes¨☐    Nox☒

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yesx☒    No¨☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of RegulationS-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

N/A

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or anon-accelerated filer.filer, or an emerging growth company. See definitionthe definitions of “large accelerated filer,” “accelerated filer,” and large accelerated filer”“emerging growth company” in Rule12b-2 of the Exchange Act. (Check one):

Large accelerated filer¨Accelerated filer¨Non-accelerated filerx

If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards† provided pursuant to Section 13(a) of the Exchange Act.  ☐

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:

If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow.

Item 17¨☐                Item 18¨☐

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule12b-2 of the Exchange Act).

Yes¨☐    No  Nox☒

TABLE OF CONTENTS

i

Petróleos Mexicanos and its seven subsidiary entities, which we refer to as the subsidiary entities,Pemex Exploración y Producción (Pemex Exploration and Production),Pemex Transformación Industrial (Pemex Industrial Transformation),Pemex Perforación y Servicios(Pemex (Pemex Drilling and Services),Pemex Logística (Pemex Logistics),Pemex Cogeneración y Servicios(Pemex (Pemex Cogeneration and Services),Pemex Fertilizantes (Pemex Fertilizers) andPemex Etileno (Pemex Ethylene), comprise the state oil and gas company of the United Mexican States, which we refer to as Mexico. Petróleos Mexicanos is a productivestate-owned company of the Federal Government of Mexico, which we refer to as the Mexican Government, and each of the subsidiary entities is a productivestate-owned subsidiary of Mexico. Each of Petróleos Mexicanos and the subsidiary entities is a legal entity empowered to own property and carry on business in its own name. In addition, a number of subsidiary companies that are defined in Note 1 and listed in Note 4 to our consolidated financial statements incorporated in Item 18, which we refer to as our subsidiary companies, are incorporated into the consolidated financial statements; these subsidiary companies are also identified with their corresponding ownership percentages in “––“—Consolidated Structure of PEMEX” on page 4. As further described under “Item 4—Information on the Company—History and Development—Corporate Reorganization,” the seven new subsidiary entities assumed, on or prior to, November 1, 2015, all of the rights and obligations of the prior subsidiary entities of Petróleos Mexicanos—Pemex-Exploración y Producción(Pemex-Exploration and Production),Pemex-Refinación(Pemex-Refining),Pemex-Gas y Petroquímica Básica(Pemex-Gas and Basic Petrochemicals) andPemex-Petroquímica(Pemex-Petrochemicals). References to the subsidiary entities prior to this corporate reorganization refer toPemex-Exploration and Production,Pemex-Refining,Pemex-Gas and Basic Petrochemicals andPemex-Petrochemicals. Petróleos Mexicanos, the subsidiary entities and the subsidiary companies are collectively referred to as “PEMEX” or “we.” See “Item 4—Information on the Company—History and Development—Recent Energy Reform” for more details.

References herein to “U.S. $,” “$,” “U.S. dollars” or “dollars” are to United States dollars. References herein to “pesos” or “Ps.” are to the legal currency of Mexico. References herein to “euros” or “€” are to the legal currency of the European Economic and Monetary Union. References herein to “pounds” or “£” are to the legal currency of the United Kingdom. References herein to “Swiss francs” or “CHF” are to the legal currency of the Swiss Confederation. References herein to “Japanese yen” or “¥” are to the legal currency of Japan. References herein to “Australian dollars” or “AUD” are to the legal currency of Australia. The term “billion” as used herein means one thousand million.

Our consolidated financial statements included in this annual report were prepared in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board. We refer in this report to “International Financial Reporting Standards as issued by the International Accounting Standards Board” as IFRS. In addition, these financial statements were audited in accordance with the International Standards on Auditing, as required by theLey del Mercado de Valores (Securities Market Law) and theDisposiciones de carácter general aplicables a las emisoras de valores y a otros participantes del mercado de valores(General Provisions applicable to issuers of securities and other participants in the securities market) in each case, of Mexico, for purposes of filing with theComisiónNacional Bancaria y de Valores (National Banking and Securities Commission, or the CNBV) and theBolsa Mexicana de Valores, S.A.B. de C.V.(Mexican Stock Exchange, or the BMV), and in accordance with the standards of the Public Company Accounting Oversight Board (United States), or PCAOB, for purposes of filings with the U.S. Securities and Exchange Commission, or the SEC.

The regulations of the SEC do not require foreign private issuers that prepare their financial statements on the basis of IFRS to reconcile such financial statements to United States Generally Accepted Accounting Principles, which we refer to as U.S. GAAP. Accordingly, while we have in the past reconciled our consolidated financial statements prepared in accordance withNormas de Información Financiera Mexicanas(Mexican Financial Reporting Standards, or Mexican FRS) to U.S. GAAP, those reconciliations are no longer presented in our filings with the SEC. We do, however, continue to provide the disclosure required under the U.S. Financial Accounting Standards Board Accounting Standards Codification (ASC) Topic 932 “Extractive Activities—Oil and Gas” (which we refer to as ASC Topic 932), as this is required regardless of the basis of accounting on which we prepare our financial statements.

We maintain our consolidated financial statements and accounting records in pesos. Unless otherwise indicated, we have translated all peso amounts to U.S. dollars in this Form20-F, including all convenience translations of our consolidated financial statements included herein, at an exchange rate of Ps. 17.206520.6640 = 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 December 31, 2015.

2016. 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. Mexico has a free market for foreign exchange, and the Mexican Government allows the peso to float freely against the U.S. dollar. There can be no assurance that the Mexican Government will maintain its current policies with regard to the peso or that the peso will not depreciate or appreciate significantly in the future. Due to the volatility of the peso/U.S. dollar exchange rate, the exchange rate on any date subsequent to the date hereof could be materially different from the rate indicated above. See “Item 3—Key Information—Exchange Rates” for information regarding the rates of exchange between pesos and U.S. dollars.

PRESENTATION OF INFORMATION CONCERNING RESERVES

The proved hydrocarbon reserves included in this report for the year ended December 31, 20152016 are those that we have the right to extract and sell based on assignments granted by the Mexican Government’s assignmentsGovernment to us in August 2014 through the process commonly referred to as Round Zero. See “Item 4—Information on the Company—History and Development—Recent Energy Reform” for a description of the Round Zero process.

The estimates of our proved reserves of crude oil and natural gas for the five years ended December 31, 20152016 included in this report have been calculated according to the technical definitions required by the SEC. DeGolyer and MacNaughton, Netherland, Sewell International, S. de R.L. de C.V. (which we refer to as Netherland Sewell) and Ryder Scott Company, L.P. (which we refer to as Ryder Scott) conducted reserves audits of our estimates of our proved hydrocarbon reserves as of December 31, 20152016 or January 1, 2016,2017, as applicable. All reserves estimates involve some degree of uncertainty. For a description of the risks relating to reserves and reserves estimates, see “Item 3—Key Information—Risk Factors—Risk Factors Related to our Relationship with the Mexican Government—Information on Mexico’s hydrocarbon reserves is based on estimates, which are uncertain and subject to revisions,” “—We must make significant capital expenditures to maintain our current production levels, and to maintain, as well as increase, the proved hydrocarbon reserves assigned to us by the Mexican Government. Reductions in our income, adjustments to our capital expenditures budget and our inability to obtain financing may limit our ability to make capital investments” and “—The Mexican nation, not us, owns the hydrocarbon reserves located in the subsoil in Mexico and our right to continue to extract these reserves is subject to the approval of the Ministry of Energy.”

FORWARD-LOOKING STATEMENTS

This Form20-F contains words, such as “believe,” “expect,” “anticipate” and similar expressions that identifyforward-looking statements, which reflect our views about future events and financial performance. We have madeforward-looking statements that address, among other things, our:

Actual results could differ materially from those projected in suchforward-looking statements as a result of various factors that may be beyond our control. These factors include, but are not limited to:

Accordingly, you should not place undue reliance on theseforward-looking statements. In any event, these statements speak only as of their dates, and we undertake no obligation to update or revise any of them, whether as a result of new information, future events or otherwise.

For a discussion of important factors that could cause actual results to differ materially from those contained in anyforward-looking statement, see “Item 3—Key Information—Risk Factors.”

PART I

Not applicable.

Not applicable.

SELECTED FINANCIAL DATA

The selected statement of comprehensive income (loss), statement of financial position and cash flows data set forth below as of and for the five years ended December 31, 20152016 have been derived from, and should be read in conjunction with, our consolidated financial statements as of December 31, 20142015 and 20152016 and for the years ended December 31, 2013, 2014, 2015 and 2015,2016, which are included in Item 18 of this report. Our consolidated financial statements for each of the fiscal yearsyear ended December 31, 2011 and 2012 were audited by KPMG Cárdenas Dosal, S.C., an independent registered public accounting firm. Our consolidated financial statements for each of the fiscal years ended December 31, 2013, 2014, 2015 and 20152016 were audited by Castillo Miranda y Compañía, S.C. (which we refer to as BDO Mexico), an independent registered public accounting firm. Certain amounts in the consolidated financial statements for the years ended December 31, 2012, 2013, 2014 and 20142015 have been reclassified to conform the presentation of the amounts in the consolidated financial statements for the year ended December 31, 2015.2016. These reclassifications are not significant to the consolidated financial statements and had no impact on our consolidated net income.income (loss).

As detailed below, for the years ended December 31, 20152016 and 2014,2015, we recognized net losses of Ps. 712.6191.1 billion and Ps. 265.5712.6 billion, respectively. In addition, we had negative equity as of December 31, 20152016 and 20142015 of Ps. 1,331.71,233.0 billion and Ps. 767.71,331.7 billion, respectively, which resulted in a negative working capital of Ps. 176.270.8 billion and Ps. 44.8176.2 billion, respectively.respectively, and negative cash flows from operating activities of Ps. 41.5 billion for the year ended December 31, 2016. This has led our independent auditors to state in their most recent audit report that there is substantialimportant uncertainty and significant doubt about our ability to continue as a going concern. We have disclosed the circumstances that have caused these negative trends and the actions we are taking to face them and have concluded that we continue to operate as a going concern. Accordingly, we have prepared our consolidated financial statements on a going concern basis, which assumes that we can meet our payment obligations. For more information on the actions that we are taking to face these negative trends, see “Item 5—Operating and Financial Review and Prospects—Overview” and “Item 5—Operating and Financial Review and Prospects—Liquidity and Capital Resources.”

Selected Financial Data of PEMEX

Source: PEMEX’s consolidated financial statements, prepared in accordance with IFRS, as it relates to the selected statements of comprehensive income, statement of financial position and statement of cash flows data; and Petróleos Mexicanos, as it relates to other financial data.

EXCHANGE RATES

The following table sets forth, for the periods indicated, the high, low, average andperiod-end exchange rates for the purchase of U.S. dollars, expressed in pesos per U.S. dollar. These rates have not been restated in constant currency units.

Source: Noon buying rate for cable transfers in New York reported by the Federal Reserve.

The noon buying rate for cable transfers in New York reported by the Federal Reserve on April 29, 201621, 2017 was Ps. 17.19018.8425 = U.S. $1.00.

RISK FACTORS

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.

International crude oil and natural gas prices are subject to global supply and demand and fluctuate due to many factors beyond our control. These factors include competition within the oil and natural gas industry, the prices and availability of alternative sources of energy, international economic trends, exchange rate fluctuations, expectations of inflation, domestic and foreign laws and government regulations, or international laws, political and other events in major oil and natural gas producing and consuming nations and actions taken by oil exporting countries, trading activity in oil and natural gas and transactions in derivative financial instruments (which we refer to as DFIs) related to oil and gas.

When international crude oil, petroleum product and/or natural gas prices are low, we generally earn less revenue and, therefore, generate lower cash flows and earn less income before taxes and duties because our costs remain roughly constant. Conversely, when crude oil, petroleum product and natural gas prices are high, we earn more revenue and our income before taxes and duties increases. Crude oil export prices, which had generally traded above U.S. $75.00 per barrel since October 2009 and traded above U.S. $100.00 per barrel as recently asof July 30, 2014, began to fall in August 2014. After a gradual decline that resulted in per barrel prices falling to U.S. $91.16 at September 30, 2014, this decline sharply accelerated in October 2014 and prices fell to U.S. $53.27 per barrel at the end of 2014, with a weighted average price for the year of 2014 of U.S. $86.00 per barrel. During 2015, the weighted average Mexican crude oil export price was approximately U.S. $44.17 per barrel and fell to U.S. $26.54 per barrel by the end of December 2015. In 2016, the weighted average Mexican crude oil export price was approximately U.S. $35.63 per barrel, falling to U.S. $18.90 per barrel on January 20, 2016, the lowest in twelve years, before rebounding to U.S. $46.53 per barrel on December 28, 2016. This decline in crude oil prices had a direct effect on our results of operations and financial condition for the year ended December 31, 2015. So far in2016. During the first three months of 2017, the weighted average Mexican crude oil price was U.S. $44.11 per barrel, an increase of U.S. $8.48 per barrel as compared to the 2016 weighted average Mexican crude oil export price. As of April 27, 2017, the weighted average Mexican crude oil export price has fallen towas U.S. $42.25 per barrel, a lowslight decrease from the first three months of 2017, but an increase of U.S. $20.70 per barrel, the lowest in twelve years, but has since rebounded to U.S. $37.58$6.62 per barrel as of April 29, 2016.compared to the 2016 weighted average Mexican crude oil export price. Future declines in international crude oil and natural gas prices will have a similar negative impact on our results of operations and financial condition. These fluctuations may also affect estimates of the amount of Mexico’s hydrocarbon reserves that we have the right to extract and sell. See “—Risk Factors Related to our Relationship with the Mexican Government—Information on Mexico’s hydrocarbon reserves is based on estimates, which are uncertain and subject to revisions” below and “Item 11—Quantitative and Qualitative Disclosures About Market Risk—Changes in Exposure to Main Risks—Market Risk—Hydrocarbon Price Risk.”

We have a substantial amount of indebtedness and other liabilities and are exposed to liquidity constraints, which could make it difficult for us to obtain financing on favorable terms and could adversely affect our financial condition, results of operations and ability to repay our debt and, ultimately, our ability to operate as a going concern.

We have a substantial amount of debt, which we have incurred primarily to finance the capital expenditures needed to carry out our capital investment projects. 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 decreased. The sharp decline in oil prices that began in late 2014 has had a negative impact on our ability to generate positive cash flows, which, together with our continued heavy tax burden and increased competition from the private sector, has further exacerbated our ability to fund our capital expenditures and other expenses from cash flow from operations. Therefore, in order to develop our hydrocarbon reserves and amortize scheduled debt maturities, we will need to raise significant amounts of financing from a broad range of funding sources.

As of December 31, 2015,2016, our total indebtedness, including accrued interest, was approximately U.S. $86.8$96.0 billion (Ps. 1,493.41,983.1 billion), in nominal terms, which represents a 11.7%10.6% increase (a 30.6%32.8% increase in peso terms) compared to our total indebtedness, including accrued interest, of approximately U.S. $77.7$86.8 billion (Ps. 1,143.31,493.4 billion) as of December 31, 2014. 26.7%2015. 23.5% of our existing debt as of December 31, 2015,2016, or U.S. $23.1$22.5 billion, is scheduled to mature in the next three years. As of December 31, 2015,2016, we had negative working capital of U.S. $10.2$3.4 billion. Our level of debt may increase further in the short or medium term and may have an adverse effect on our financial condition, results of operations and liquidity position. To service our debt and to raise funds for our capital expenditures, we have relied and may continue to rely on a combination of cash flows provided by our operations, the divestment ofnon-strategic assets, drawdowns under our available credit facilities and the incurrence of additional indebtedness. In addition, we have taken recent action to improve our financial condition, as described in more detail underSee “Item 5—Operating and Financial Review and Prospects—Liquidity and Capital Resources—Overview—Changes to Our Business Plan.”

Certain rating agencies have expressed concerns regarding: (1) our heavy tax burden, (2) the total amount of our debt; (2)(3) the significant increase in our indebtedness over the last several years; (3)(4) our negative free cash flow during 2015,2016, primarily resulting from our significant capital investment projects and the declininglow price of oil; (4)(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 U.S. $74.4$59.1 billion as of December 31, 2015;2016; and (5)(7) the resilience of our operating expenses notwithstanding the sharp decline in oil prices that began in late 2014. On January 29, 2016, Standard & Poor’s announced the downgrade of(S&P) rating agency downgraded ourstand-alone credit profile from BB+“BB+” to BB.“BB,” and on August 23, 2016 downgraded our credit outlook from stable to negative. On December 23, 2016, S&P affirmed our global foreign currency rating of “BBB+.” On March 31, 2016, Moody’s Investors Service announced the revision of our global foreign currency and local currency credit ratings from Baa1“Baa1” to Baa3“Baa3” and changed the outlook for itsour credit ratings to negative. On December 9, 2016, Fitch Ratings affirmed our “BBB+” global credit rating, but revised the outlook for our credit ratings from stable to negative.

Any further lowering of our credit ratings may have adverse consequences on our ability to access the financial markets and/or our cost of financing. If we were unable to obtain financing on favorable terms, this could hamper our ability to (1) obtain further financing, and (2) invest in projects financed through debt and impair our ability to meet our principal and interest payment obligations with our creditors. As a result, we may be exposed to liquidity constraints and may not be able to service our debt or make the capital expenditures required to maintain our current production levels and to maintain, and increase, the proved hydrocarbon reserves assigned to us by the Mexican Government, which may adversely affect our financial condition and results of operations. See “—Risk Factors Related to our Relationship with the Mexican Government—We must make significant capital expenditures to maintain our current production levels, and to maintain, as well as increase, the proved hydrocarbon reserves assigned to us by the Mexican Government. Reductions in our income, adjustments to our capital expenditures budget and our inability to obtain financing may limit our ability to make capital investments” below.

If such constraints occur at a time when our cash flow from operations is less than the resources necessary to fund our capital expenditures or 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 sell additionalnon-strategic assets in order to raise funds. 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.

Our consolidated financial statements have been prepared under the assumption that we will continue as a going concern. However, our independent auditors have stated in their most recent report that there is substantialimportant uncertainty and significant doubt aboutconcerning our ability to continue as a going concernoperating as a result of our recurring net losses, from operations and our negative working capital, negative equity and negative equity.cash flows from operating activities for the year ended December 31, 2016. Our consolidated financial statements do not include any adjustments that might result from the outcome of that uncertainty. If the actions we are taking to improve our financial condition, which are described in detail under “Item 5—Operating and Financial Review and Prospects—Liquidity and Capital

Resources—Overview—Changes to Our Business Plan,” are not successful, we may not be able to continue operating as a going concern.

We are an integrated oil and gas company and are exposed to production, equipment and transportation risks, blockades to our facilities and criminal acts and deliberate acts of terrorterror..

We are subject to several risks that are common among oil and gas companies. These risks include production risks (fluctuations in production due to operational hazards, natural disasters or weather, accidents, etc.), equipment risks (relating to the adequacy and condition of our facilities and equipment) and transportation risks (relating to the condition and vulnerability of pipelines and other modes of transportation). More specifically, our business is subject to the risks of explosions in pipelines, refineries, plants, drilling wells and other facilities, oil spills, hurricanes in the Gulf of Mexico and other natural or geological disasters and accidents, fires and mechanical failures. Criminal attempts to divert our crude oil, natural gas or refined products from our pipeline network and facilities for illegal sale have resulted in explosions, property and environmental damage, injuries and loss of life.

Our facilities are also subject to the risk of sabotage, terrorism, blockades and cyber-attacks. In July 2007, twoFor example, widespread demonstrations, including blockades, as a result of the Mexican Government’s recent increase in fuel prices, have prevented us from accessing certain of our pipelines were attacked. In September 2007, six different sites were attackedrefined products supply terminals and 12 of our pipelines were affected.caused critical gasoline shortages at retail service stations in at least three Mexican states. The occurrence of these incidents related to the production, processing and transportation of oil and oilgas products could result in personal injuries, loss of life, environmental damage from the subsequent containment,clean-up and repair expenses, equipment damage and damage to our facilities. A shutdown of the affected facilities could disrupt our production and increase our production costs. As of the date of this annual report, there have been no similar occurrences since 2007. Although we have established an information security program, which includes cybersecurity systems and procedures to protect our information technology, and have not yet suffered a cyber-attack, if the integrity of our information technology were ever compromised due to a cyber-attack, or due to the negligence or misconduct of our employees, our business operations could be disrupted and our proprietary information could be lost or stolen. As a result of these risks, we could face, among other things, regulatory action, legal liability, damage to our reputation, a significant reduction in revenues, an increase in costs, a shutdown of operations, or loss of our investments in affected areas.

We purchase comprehensive insurance policies covering most of these risks; however, these policies may not cover all liabilities, and insurance may not be available for some of the consequential risks. There can be no assurance that accidents, sabotage or acts of terror will not occur in the future, that insurance will adequately cover the entire scope or extent of our losses or that we may not be found directly liable in connection with claims arising from accidents or other similar events. See “Item 4—Information on the Company—Business Overview—PEMEX Corporate Matters—Insurance.”

Developments in the oil and gas industry and other factors may result in substantialwrite-downs of the carrying amount of certain of our assets, which could adversely affect our operating results and financial condition.

We evaluate on an annual basis, or more frequently where the circumstances require, the carrying amount of our assets for possible impairment. Our impairment tests are performed by a comparison of the carrying amount of an individual asset or acash-generating unit with its recoverable amount. Whenever the recoverable amount of an individual asset orcash-generating unit is less than its carrying amount, an impairment loss is recognized to reduce the carrying amount to the recoverable amount.

Changes in the economic, regulatory, business or political environment in Mexico or other markets where we operate, such as the recentgradual liberalization of fuel prices pursuant to energy reform and the significant decline in international crude oil and gas prices, and the devaluation of the peso against the U.S. dollar, among other factors, may result in the recognition of impairment charges in certain of our assets. Due to the continuing decline in oil prices, we have performed impairment tests of ournon-financial assets (other than inventories and deferred taxes) at the end of each quarter. As of December 31, 2015, we recognized an impairment charge of Ps. 477,945 million. As of December 31, 2016, we recognized a net reversal of impairment in the amount of Ps. 331,314 million. See Note 12(d) to our consolidated financial

statements for further information about the impairment of certain of our assets. Future developments in the economic environment, in the oil and gas industry and other factors could result in further substantial impairment charges, adversely affecting our operating results and financial condition.

Increased competition in the energy sector due to the newcurrent legal framework in Mexico could adversely affect our business and financial performance.

The Political Constitution of the United Mexican ConstitutionStates (the “Mexican Constitution”) and theLey de Hidrocarburos (Hydrocarbons Law) allows other oil and gas companies, in addition to us, to carry out certain activities related to the energy sector in Mexico, including exploration and extraction activities. Asactivities, and the import and sale of the date of this annual report, the Mexican Government has entered into production sharing contracts with other oil and gas companies following the competitive bidding processes held in July and September 2015 for shallow water blocks and in December 2015 for exploratory blocks and discovered fields in onshore areas. Additional competitive bidding processes will take place in the future, including bids for deep water fields in December of this year.

gasoline. As a result, we face competition for the right to explore and develop new oil and gas reserves in Mexico. We will also likely face competition in connection with certain refining, transportation and processing activities. In addition, increased competition could make it difficult for us to hire and retain skilled personnel. For more information, see “Item 4—Information on the Company—History and Development—Recent Energy Reform.” If we are unable to compete successfully with other oil and gas companies in the energy sector in Mexico, our results of operations and financial condition may be adversely affected.

We are subject to Mexican and internationalanti-corruption,anti-bribery andanti-money laundering laws. Our failure to comply with these laws could result in penalties, which could harm our reputation, prevent us from obtaining governmental authorizations needed to carry out our operations and have an adverse effect on our business, results of operations and financial condition.

We are subject to Mexican and internationalanti-corruption,anti-bribery andanti-money laundering laws. See “Item 4—Information on the Company—General Regulatory Framework.” Although we maintain policies and processes intended to comply with these laws, including the review of our internal control over financial reporting, we are subject to the risk that our employees, contractors or any person doing business with us may engage in fraudulent activity, corruption or bribery, circumvent or override our internal controls and procedures or misappropriate or manipulate our assets for their personal or business advantage to our detriment. We have in place a number of systems for identifying, monitoring and mitigating these risks, but our systems may not be effective and we cannot ensure that these compliance policies and processes will prevent intentional, reckless or negligent acts committed by our officers or employees.

If we fail to comply with any applicableanti-corruption,anti-bribery oranti-money laundering laws, we and our officers and employees may be subject to criminal, administrative or civil penalties and other remedial measures, which could have material adverse effects on our business, financial condition and results of operations. Any investigation of potential violations ofanti-corruption,anti-bribery oranti-money laundering laws by governmental authorities in Mexico or other jurisdictions could result in an inability to prepare our consolidated financial statements in a timely manner. This could adversely impact our reputation, ability to access the financial markets and ability to obtain contracts, assignments, permits and other government authorizations necessary to participate in our industry, which, in turn, could have adverse effects on our business, results of operations and financial condition.

Our compliance with environmental regulations in Mexico could result in material adverse effects on our results of operations.

A wide range of general andindustry-specific Mexican federal and state environmental laws and regulations apply to our operations; these laws and regulations are often difficult and costly to comply with and carry substantial penalties fornon-compliance. This regulatory burden increases our costs because it requires us to make significant capital expenditures and limits our ability to extract hydrocarbons, resulting in lower revenues. For an estimate of our accrued environmental liabilities, see “Item 4—Information on the Company—Environmental Regulation—Environmental Liabilities.” However, growingGrowing international concern over greenhouse gas emissions and climate change could result in new laws and regulations that could adversely affect our results of

operations and financial condition. International agreements, including the recent Paris Agreement approved by the Mexican Government, contemplate coordinated efforts to combat climate change. While it is still too early to know how these new agreements will be implemented, weWe may become subject to market changes, including carbon taxes, efficiency standards,cap-and-trade and emission allowances and credits. These measures could increase our operating and maintenance costs, increase the price of our hydrocarbon products and possibly shift consumer demand tolower-carbon sources. See “Item 4—Environmental Regulation—Global Climate Change and Carbon Dioxide Emissions Reduction”Change” for more information on the Mexican Government’s current legal and regulatory framework for combatting climate change.

Risk Factors Related to Mexico

Economic conditions and government policies in Mexico and elsewhere may have a material impact on our operations.

A deterioration in Mexico’s economic condition, social instability, political unrest or other adverse social developments in Mexico could adversely affect our business and financial condition. Those events could also lead to increased volatility in the foreign exchange and financial markets, thereby affecting our ability to obtain new financing and service our debt. Additionally, the Mexican Government announced budget cuts in November 2015, February 2016, and FebruarySeptember 2016 in response to the recent declinedeclines in international crude oil prices, and it may cut spending in the future.

See “—Risk Factors Related to our Relationship with the Mexican Government—The Mexican Government controls us and it could limit our ability to satisfy our external debt obligations or could reorganize or transfer us or our assets” below. These cuts could adversely affect the Mexican economy and, consequently, our business, financial condition, operating results and prospects.

In the past, Mexico has experienced several periods of slow or negative economic growth, high inflation, high interest rates, currency devaluation and other economic problems. These problems may worsen or reemerge, as applicable, in the future and could adversely affect our business and ability to service our debt. A worsening of international financial or economic conditions, such as a slowdown in growth or recessionary conditions in Mexico’s trading partners, including the United States, or the emergence of a new financial crisis, could have adverse effects on the Mexican economy, our financial condition and our ability to service our debt.

Changes in Mexico’s exchange control laws may hamper our ability to service our foreign currency debt.

The Mexican Government does not currently restrict the ability of Mexican companies or individuals to convert pesos into other currencies. However, we cannot provide assurances that the Mexican Government will maintain its current policies with regard to the peso. In the future, the Mexican Government could impose a restrictive exchange control policy, as it has done in the past. Mexican Government policies preventing us from exchanging pesos into U.S. dollars could hamper our ability to service our foreign currency obligations, including our debt, the majority of which is denominated in currencies other than pesos.

Political conditions in Mexico could materially and adversely affect Mexican economic policy and, in turn, our operations.

Political events in Mexico may significantly affect Mexican economic policy and, consequently, our operations. On December 1, 2012, Mr. Enrique Peña Nieto, a member of thePartido Revolucionario Institucional(Institutional Revolutionary Party or PRI), formally assumed office for asix-year term as thewas elected President of Mexico.Mexico and took office on December 1, 2012. As of the date of this annual report, no political party holds a simple majority in either house of the Mexican Congress.

Presidential and federal congressional elections in Mexico will be held in July 2018. The Mexican presidential election will result in a change in administration, as presidential reelection is not permitted in Mexico. As a result, we cannot predict whether changes in Mexican governmental policy will result from the change in administration. Political events in Mexico could adversely affect economic conditions and/or the oil and gas industry and, by extension, our results of operations and financial position.

Mexico has experienced a period of increasing criminal activity, which could affect our operations.

In recent years, Mexico has experienced a period of increasing criminal activity, primarily due to the activities of drug cartels and related criminal organizations. In addition, the development of the illicit market in fuels in Mexico has led to increases in theft and illegal trade in the fuels that we produce. In response, the Mexican Government has implemented various security measures and has strengthened its military and police forces, and we have also established various strategic measures aimed at decreasing incidents of theft and other criminal activity directed at our facilities and products. See “Item 8—Financial Information—Legal Proceedings—Actions Against the Illicit Market in Fuels.” Despite these efforts, criminal activity continues to exist in Mexico, some of which may target our facilities and products. These activities, their possible escalation and the violence associated with them, in an extreme case, may have a negative impact on our financial condition and results of operations.

Economic and political developments in the United States may adversely affect PEMEX.

Changes in economic, political and regulatory conditions in the United States or in U.S. laws and policies governing foreign trade and foreign relations could create uncertainty in the international markets and could have a negative impact on the Mexican economy. Economic conditions in Mexico are highly correlated with economic conditions in the United States due to the high degree of economic activity between the two countries generally, including the trade facilitated by the North American Free Trade Agreement (“NAFTA”). In addition, political developments in the United States, including changes in the administration and governmental policies, can also have an impact on the exchange rate between the U.S. dollar and the Mexican peso, economic conditions in Mexico and the global capital markets.

Following the U.S. elections in November 2016 and the change in the U.S. administration, there is uncertainty regarding future U.S. policies with respect to matters of importance to Mexico and its economy. In particular, the U.S. administration has raised the possibility ofre-negotiating, or withdrawing from, NAFTA and taking actions related to trade, tariffs, immigration and taxation that could affect Mexico.

Since 2003, exports of petrochemical products from Mexico to the United States have enjoyed azero-tariff rate under NAFTA and, subject to limited exceptions, exports of crude oil and petroleum products have also been free or exempt from tariffs. During 2016, our export sales to the United States amounted to Ps. 138.2 billion, representing 12.8% of total sales and 35.0% of export sales for the year. Any increase of import tariffs could make it economically unsustainable for U.S. companies to import our petrochemical, crude oil and petroleum products if they are unable to transfer those additional costs onto consumers, which would increase our expenses and decrease our revenues, even if domestic and international prices for our products remain constant. Higher tariffs on products that we export to the United States could also require us to renegotiate our contracts or lose business resulting in a material adverse impact on our business and results of operations.

Because the Mexican economy is heavily influenced by the U.S. economy, there-negotiation, or even termination, of NAFTA and/or other U.S. government policies that may be adopted by the U.S. administration may adversely affect economic conditions in Mexico. These developments could in turn have an adverse effect on our financial condition, results of operations and ability to repay our debt.

Risk Factors Related to our Relationship with the Mexican Government

The Mexican Government controls us and it could limit our ability to satisfy our external debt obligations or could reorganize or transfer us or our assets.

We are controlled by the Mexican Government and our annual budget may be adjusted by the Mexican Government in certain respects. Pursuant to the Petróleos Mexicanos Law, Petróleos Mexicanos was transformed from a decentralized public entity to a productivestate-owned company on October 7, 2014. The Petróleos Mexicanos Law establishes a special regime governing, among other things, our budget, debt levels,

administrative liabilities, acquisitions, leases, services and public works. This special regime provides Petróleos Mexicanos with additional technical and managerial autonomy and, subject to certain restrictions, with additional autonomy with respect to our budget. Notwithstanding this increased autonomy, the Mexican Government still controls us and has the power to adjust our financial balance goal, which represents our targeted net cash flow for the fiscal year based on our projected revenues and expenses, and our annual wage and salary expenditures, subject to the approval of theCámara de Diputados (Chamber of Deputies).

The adjustments to our annual budget mentioned above may compromise our ability to develop the reserves assigned to us by the Mexican Government and to successfully compete with other oil and gas companies that enter the Mexican energy sector. See “Item 4—Information on the Company—History and Development—Capital Expenditures and Investments—Capital Expenditures Budget”Expenditures” for more information about our February 2015 and February 2016 budget adjustmentsadjustment and “—General Regulatory Framework” for more information about the Mexican Government’s authority with respect to our budget. In addition, the Mexican Government’s control over us could adversely affect our ability to make payments under any securities issued by Petróleos Mexicanos. Although Petróleos Mexicanos is wholly owned by the Mexican Government, our financing obligations do not constitute obligations of and are not guaranteed by the Mexican Government.

The Mexican Government’s agreements with international creditors may affect our external debt obligations. In certain past debt restructurings of the Mexican Government, Petróleos Mexicanos’ external indebtedness was treated on the same terms as the debt of the Mexican Government and other public sector entities, and it may be treated on similar terms in any future debt restructuring. In addition, Mexico has entered into agreements with official bilateral creditors to reschedule public sector external debt. Mexico has not requested restructuring of bonds or debt owed to multilateral agencies.

The Mexican Government has the power, if the Mexican Constitution and federal law were further amended, to further reorganize our corporate structure, including a transfer of all or a portion of our assets to an entity not controlled, directly or indirectly, by the Mexican Government. See “—Risk Factors Related to Mexico” above.

We pay significant special taxes and duties to the Mexican Government, and, if certain conditions are met, to pay a state dividend, which may limit our capacity to expand our investment program or negatively impact our financial condition generally.

We are required to make significant payments to the Mexican Government, including in the form of taxes and duties, which may limit our ability to make capital investments. In 2015,2016, approximately 37.5%32.0% of our sales revenues was used for payments to the Mexican Government in the form of taxes and duties, which constituted a substantial portion of the Mexican Government’s revenues.

The Secondary Legislation includes changes to the fiscal regime applicable to us, particularly with respect to the exploration and extraction activities that we carry out in Mexico. Beginning inAs of 2016, we have the obligation, subject to the conditions set forth in the Petróleos Mexicanos Law, to pay a state dividend in lieu of certain payments that we paid at the discretion ofto the Mexican Government. This state dividend will be calculated by the Ministry of Finance and Public Credit as a percentage of the net income that we generate through activities subject to theLey de Ingresos sobre Hidrocarburos (Hydrocarbons Revenue Law) on an annual basis and approved by the Mexican Congress in accordance with the terms of the Petróleos Mexicanos Law. The amount we pay each year under this state dividend will decrease in subsequent years, reaching 0% by 2026. The Mexican Government has announced that we willWe were not be required to pay a state dividend in 2016.2016 and are not required to do so in 2017. See “Item 8—Financial Information—Dividends” for more information. Although the changes to the fiscal regime applicable to us are designed in part to reduce the Mexican Government’s reliance on payments made by us, we cannot provide assurances that we will not be required to continue to pay a large proportion of our sales revenue to the Mexican Government. See “Item 4—Information on the Company—Taxes, Duties and Other Payments to the Mexican Government—Fiscal Regime.” As of the date of this annual report, we are assessing the impact that these changes may have on us. In addition, the Mexican Government may change the applicable rules in the future.

The Mexican Government has historically imposed price controls in the domestic market on our products.

The Mexican Government has from time to time imposed price controls on the sales of natural gas, liquefied petroleum gas, gasoline, diesel, gas oil intended for domestic use, fuel oil and other products. As a result of these

price controls, we have not been able to pass on all of the increases in the prices of our product purchases to our customers in the domestic market when the peso depreciates in relation to the U.S. dollar. A depreciation of the peso increases our cost of imported oil and oilpetroleum products, without a corresponding increase in our revenues unless we are able to increase the price at which we sell products in Mexico. In accordance with theLey de Ingresos de la Federación para el Ejerecicio Fiscal de 2017 (2017 Federal Revenue Law), the Mexican Government will gradually remove price controls on gasoline and diesel over the course of 2017 and 2018 as part of the liberalization of fuel prices in Mexico. On December 27, 2016, the Ministry of Finance and Public Credit announced maximum gasoline and diesel prices to be applied in each of the regions of Mexico where prices are not determined based on market conditions. For more information, see “Item 4—Information on the Company—Business Overview—Industrial Transformation.”

We do not control the Mexican Government’s domestic policies and the Mexican Government could impose additional price controls on the domestic market in the future. The imposition of such price controls would adversely affect our results of operations. For more information, see “Item 4—Information on the Company—Business Overview—Refining—Pricing Decrees”Pricing” and “Item 4—Information on the Company—Business Overview—Gas and Basic Petrochemicals—Pricing Decrees.Pricing.”

The Mexican nation, not us, owns the hydrocarbon reserves located in the subsoil in Mexico and our right to continue to extract these reserves is subject to the approval of the Ministry of Energy.

The Mexican Constitution provides that the Mexican nation, not us, owns all petroleum and other hydrocarbon reserves located in the subsoil in Mexico.

Article 27 of the Mexican Constitution provides that the Mexican Government will carry out exploration and production activities through agreements with third parties and through assignments to and agreements with us. The Secondary Legislation allows us and other oil and gas companies to explore and extract the petroleum and other hydrocarbon reserves located in Mexico, subject to assignment of rights by the Ministry of Energy and entry into agreements pursuant to a competitive bidding process.

Access to crude oil and natural gas reserves is essential to an oil and gas company’s sustained production and generation of income, and our ability to generate income would be materially and adversely affected if the Mexican Government were to restrict or prevent us from exploring or extracting any of the crude oil and natural gas reserves that it has assigned to us or if we are unable to compete effectively with other oil and gas companies in future bidding rounds for additional exploration and production rights in Mexico. For more information, see “—We must make significant capital expenditures to maintain our current production levels, and to maintain, as well as increase, the proved hydrocarbon reserves assigned to us by the Mexican Government. Reductions in our income, adjustments to our capital expenditures budget and our inability to obtain financing may limit our ability to make capital investments” below.

Information on Mexico’s hydrocarbon reserves is based on estimates, which are uncertain and subject to revisions.

The information on oil, gas and other reserves set forth in this annual report is based on estimates. Reserves valuation is a subjective process of estimating underground accumulations of crude oil and natural gas that cannot be measured in an exact manner; the accuracy of any reserves estimate depends on the quality and reliability of available data, engineering and geological interpretation and subjective judgment. Additionally, estimates may be revised based on subsequent results of drilling, testing and production. These estimates are also subject to certain adjustments based on changes in variables, including crude oil prices. Therefore, proved reserves estimates may differ materially from the ultimately recoverable quantities of crude oil and natural gas. Downward revisions in our reserve estimates could lead to lower future production, which could have an adverse effect on our results of operations and financial condition. See “—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” above. We revise annually our estimates of hydrocarbon reserves that we are entitled to extract and sell, which may result in material revisions to these estimates. Our ability to maintain ourlong-term growth objectives for oil production depends on our ability to successfully develop our reserves, and failure to do so could prevent us from achieving ourlong-term goals for growth in production.

We must make significant capital expenditures to maintain our current production levels, and to maintain, as well as increase, the proved hydrocarbon reserves assigned to us by the Mexican Government. Reductions in our income, adjustments to our capital expenditures budget and our inability to obtain financing may limit our ability to make capital investments.

Because our ability to maintain, as well as increase, our oil production levels is highly dependent upon our ability to successfully develop existing hydrocarbon reserves and, in the long term, upon our ability to obtain the right to develop additional reserves, we continually invest capital to enhance our hydrocarbon recovery ratio and improve the reliability and productivity of our infrastructure. During 2015,2016, our exploratory activity led to the incorporation tototal proved reserves had a net increase of approximately 12040 million barrels of oil equivalent.equivalent after accounting for discoveries, extensions, revisions, and delimitations. This amount, however, was less than the reductions made due to revisions, delimitations and decreased development and production in 2015.2016. Accordingly, our total proved reserves decreased by 22.1%11.1%, from 12,3809,632 million barrels of crude oil equivalent as of December 31, 20142015 to 9,6328,562.8 million barrels of crude oil as of December 31, 2015.

2016. See “Item 4—Information on the Company—Business Overview—Exploration and Production—Reserves” for more information about the factors leading to this decline, including the results of Round Zero. Our crude oil production decreased by 1.0% from 2012 to 2013, by 3.7% from 2013 to 2014 and by 6.7% from 2014 to 2015 and by 5.0% from 2015 to 2016 primarily as a result of the decline of production in the Cantarell, Aceite Terciario del Golfo (which we refer to as ATG), Delta del Grijalva,Tsimín-Xux, Antonio J. Bermúdez, Chuc and Crudo Ligero Marino andIxtal-Manikprojects.

The recentPursuant to energy reform in Mexico, the Mexican Government outlined a process, commonly referred to as Round Zero, for the determination of our initial allocation of rights to continue to carry out exploration and production activities in Mexico. On August 13, 2014, the Ministry of Energy granted us the right to continue to explore and develop areas that together contain 95.9% of Mexico’s estimated proved reserves of crude oil and natural gas. The development of the reserves that were assigned to us pursuant to Round Zero, particularly the reserves in the deep waters of the Gulf of Mexico and in shale oil and gas fields in the Burgos basin, will demand significant capital investments and will pose significant operational challenges. Our right to develop the reserves assigned to us through Round Zero is conditioned on our ability to develop such reserves in accordance with our development plans, which were based on our technical, financial and operational capabilities at the time. See “Item 4—History and Development—Recent Energy Reform—Assignment of Exploration and Production Rights.” We cannot provide assurances that we will have or will be able to obtain, in the time frame that we expect, sufficient resources or the technical capacity necessary to explore and extract the reserves that the Mexican Government assigned to us as part of Round Zero, or that it may grant to us in the future. The decline in oil prices has forced us to make adjustments to our budget, including a significant reduction of our capital expenditures. Unless we are able to increase our capital expenditures, we may not be able to develop the reserves assigned to us in accordance with our development plans. We would lose the right to continue to extract these reserves if we fail to develop them in accordance with our development plans, which could adversely affect our operating results and financial condition. In addition, increased competition in the oil and gas sector in Mexico may increase the costs of obtaining additional acreage in bidding rounds for the rights to new reserves.

Our ability to make capital expenditures is limited by the substantial taxes and duties that we pay to the Mexican Government, the ability of the Mexican Government to adjust certain aspects of our annual budget, cyclical decreases in our revenues primarily related to lower oil prices and any constraints on our liquidity. The availability of financing may limit our ability to make capital investments that are necessary to maintain current production levels and increase the proved hydrocarbon reserves that we are entitled to extract. Nevertheless, the recentThe energy reform has provided us with opportunities to enter into strategic alliances and partnerships, which may reduce our capital commitments and allow us to participate in projects for which we are more competitive. However, no assurance can be provided that these strategic alliances and partnerships will be successful or reduce our capital commitments. For more information, see “Item 4—Information on the Company—History and Development—

Capital Expenditures and Investments”Expenditures” and “—Recent Energy Reform.” For more information on the liquidity constraints we are exposed to, see “—We have a substantial amount of indebtedness and other liabilities and are exposed to liquidity constraints, which could make it difficult for us to obtain financing on favorable terms and could adversely affect our financial condition, results of operations and ability to repay our debt”debt and, ultimately, our ability to operate as a going concern” above.

We may claim some immunities under the Foreign Sovereign Immunities Act and Mexican law, and your ability to sue or recover may be limited.

We arepublic-sector entities of the Mexican Government. Accordingly, you may not be able to obtain a judgment in a U.S. court against us unless the U.S. court determines that we are not entitled to sovereign immunity with respect to that action. Under certain circumstances, Mexican law may limit your ability to enforce judgments against us in the courts of Mexico. We also do not know whether Mexican courts would enforce judgments of U.S. courts based on the civil liability provisions of the U.S. federal securities laws. Therefore, even if you were able to obtain a U.S. judgment against us, you might not be able to obtain a judgment in Mexico that is based on that U.S. judgment. Moreover, you may not be able to enforce a judgment against our property in the United States except under the limited circumstances specified in the Foreign Sovereign Immunities Act of 1976, as amended. Finally, if you were to bring an action in Mexico seeking to enforce our obligations under any securities issued by Petróleos Mexicanos, satisfaction of those obligations may be made in pesos, pursuant to the laws of Mexico.

Our directors and officers, as well as some of the experts named in this annual report, reside outside the United States. Substantially all of our assets and those of most of our directors, officers and experts are located outside the United States. As a result, investors may not be able to effect service of process on our directors or officers or those experts within the United States.

Item 4.

Information on the Company

HISTORY AND DEVELOPMENT

We are the largest company in Mexico according to the June 20152016 special edition ofExpansiónmagazine, and according to the November 17, 201521, 2016 issue ofPetroleum Intelligence Weekly,we were the eighthlargest crude oil producer and the fifteentheighteenth largestoil and gas company in the world based on data from the year 2014.2015.

Our executive offices are located at Avenida Marina Nacional No. 329, Colonia Verónica Anzures, Ciudad de México 11300, México. Our telephone number is(52-55) 1944-2500.

In March 1938, President Lázaro Cárdenas del Río nationalized the foreign-owned oil companies that were then operating in Mexico, and the Mexican Congress established Petróleos Mexicanos through theDecreto que crea la Institución Petróleos Mexicanos (Decree that creates the entity Petróleos Mexicanos), which was published in the Official Gazette of the Federation and took effect on July 20, 1938.

In July 1992, theLey Orgánica de Petróleos Mexicanos y Organismos Subsidiarios (Organic Law of Petróleos Mexicanos and Subsidiary Entities) took effect and, among other things, created Pemex-Exploration and Production, Pemex-Refining,Pemex-Gas and Basic Petrochemicals and Pemex-Petrochemicals as decentralized public entities of the Mexican Government with the legal authority to own property and conduct business in their own names. Each of the subsidiary entities had the characteristics of a subsidiary of Petróleos Mexicanos. The principal lines of business of those subsidiary entities were as follows:

Recent Energy Reform

Energy Reform Decree

On December 20, 2013, amendments to Articles 25, 27 and 28 of the Mexican Constitution were signed into law by President Enrique Peña Nieto and published in the Official Gazette of the Federation. We refer to this as the Energy Reform Decree. The Energy Reform Decree, which includes transitional articles setting forth the general framework and timeline for the related secondary legislation, took effect on December 21, 2013.

The key features of the Energy Reform Decree are:

On March 21, 2014, we submitted to the Ministry of Energy a request that we retain rights that we believed would allow us to maintain our production and provide sufficient exploration opportunities to increase our production in the future. On August 13, 2014, the Ministry of Energy published the results of Round Zero, through which we were assigned rights to 95.9% of the proved reserves that we requested. The Ministry of Energy may assign, on an exceptional basis, additional exploration and extraction areas to Petróleos Mexicanos or other productive state-owned companies in accordance with the terms set forth in the Hydrocarbons Law. See “—Assignment of Exploration and Production Rights” below in this Item 4.

Secondary Legislation

On August 6,11, 2014, the Mexican Congress completed the process of approving the related secondary legislation which was signed into law by President Enrique Peña Nieto and published pursuant to the Energy Reform Decree in the Official Gazette of the Federation on August 11, 2014.Federation. We refer in this annual report to this legislation as the Secondary Legislation. The Secondary Legislation includes nine new laws, of which the following are most relevant to our operations:

Together, the Hydrocarbons Law and the Hydrocarbons Revenue Law establish the legal framework for the exploration and production of oil and gas through assignments and contracts, as well as the new fiscal regime through which the Mexican Government will collect revenues from participants in the Mexican oil and gas industry. The Hydrocarbons Law empowers the Ministry of Energy to determine the appropriate contract model for each area that is subject to a competitive bidding process, while the Ministry of Finance and Public Credit is responsible for determining the economic and fiscal terms of each contract. The following arrangements comprise the new contractual regime established by the Secondary Legislation also includes amendments to several laws, including the following:for upstream activities:

•

Ley de Obras Públicas y Servicios Relacionados con las Mismas (Law of Public Works and Related Services); and

On October 31, 2014,For midstream and downstream activities, including oil refining and natural gas processing, the regulationsHydrocarbons Law establishes a permit regime that is granted by the Ministry of Energy and the Energy Regulatory Commission, as applicable. The Hydrocarbons Law also sets forth the process by which entities may apply for these permits. The Energy Regulatory Commission began issuing permits for the retail sale of gasoline and diesel fuel in 2016. During 2017 and 2018, the Energy Regulatory Commission, with the opinion of theComisión Federal de Competencia Económica (Federal Economic Antitrust Commission), will issue guidelines and schedules for different regions in Mexico relating to the Secondary Legislation, includingprocesses to be used by theReglamento de la Ley de Petróleos Mexicanos(Regulations Ministry of Finance and Public Credit to determine prices of gasoline and diesel, which will take into account, among other things, transportation costs and volatility in international prices. Beginning in 2018, the Petróleos Mexicanos Law), were published in the Official Gazetteprices of the Federation. Subsequent modifications to the Regulations to the Petróleos Mexicanos Law took effect on February 9, 2015.gasoline and diesel fuel will be freely determined by market conditions.

Legal Regime for Petróleos Mexicanos

As part of this recent energy reform, Petróleos Mexicanos was transformed from a decentralized public entity into a productive state-owned company on October 7, 2014—the day on which the new Petróleos Mexicanos Law took effect, with the exception of certain provisions. As a productive state-owned company, Petróleos Mexicanos remains wholly owned by the Mexican Government and has the corporate purpose of generating economic value and increasing the income of the Mexican nation while adhering to principles of equity, as well as a social and environmental responsibility.

On December 2, 2014, upon its determination that the new Board of Directors of Petróleos Mexicanos was performing its duties and the mechanisms for our oversight, transparency and accountability had been implemented, the Ministry of Energy formally announced in the Official Gazette of the Federation that the

special regime provided for in the Petróleos Mexicanos Law, which governs Petróleos Mexicanos’ activities relating to productive state-owned subsidiaries, affiliates, compensation, assets, administrative liabilities, budget, debt levels and the state dividend, had taken effect. On June 10, 2015, theDisposiciones Generales de ContratacióContratación para PetróPetróleos Mexicanos y Sus Empresas Productivas Subsidiarias (General Provisions for Contracting for Petróleos Mexicanos and its Productive State-Owned Subsidiaries) were published in the Official Gazette of the Federation, and on June 11, 2015, the special regime for acquisitions, leases, services and public works became effective.

Corporate Reorganization

In accordance with the transitional articles of the Petróleos Mexicanos Law, on November 18, 2014, the Board of Directors of Petróleos Mexicanos approved the Director General’s proposal for our corporate reorganization. In our corporate reorganization, the four existing subsidiary entities of Petróleos Mexicanos were transformed into two new productive state-owned subsidiaries—Pemex Exploration and Production and Pemex Industrial Transformation—and five new productive state-owned subsidiaries—Pemex Drilling and Services, Pemex Logistics, Pemex Cogeneration and Services, Pemex Fertilizers and Pemex Ethylene—were created. Each of these productive state-owned subsidiaries is a legal entity empowered to own property and carry on business in its own name and has technical and operational autonomy, subject to the central coordination and strategic direction of Petróleos Mexicanos.

On March 27, 2015, the Board of Directors of Petróleos Mexicanos adoptedacuerdos de creación (creation resolutions) for each of the new productive state-owned subsidiaries, all of which were subsequently published in the Official Gazette of the Federation on April 28, 2015.

On June 1, 2015, Pemex Exploration and Production and Pemex Cogeneration and Services were formed in accordance with the May 22, 2015 resolution of the Board of Directors of Petróleos Mexicanos that was published in the Official Gazette of the Federation on May 29, 2015. Effective as of June 1, 2015, Pemex Exploration and Production became, as a matter of Mexican law, the successor to Pemex-Exploration and Production, the decentralized public entity and former subsidiary of Petróleos Mexicanos that was dissolved as of that date. On August 1, 2015, Pemex Drilling and Services, Pemex Fertilizers and Pemex Ethylene were formed in accordance with the July 29, 2015 resolution of the Board of Directors of Petróleos Mexicanos that was published in the Official Gazette of the Federation on July 31, 2015. On October 1, 2015, Pemex Logistics was formed in accordance with the September 24, 2015 resolution of the Board of Directors of Petróleos Mexicanos that was published in the Official Gazette of the Federation on October 1, 2015. On November 1, 2015, Pemex Industrial Transformation was formed in accordance with the September 24, 2015 resolution of the Board of Directors of Petróleos Mexicanos that was published in the Official Gazette of the Federation on October 6, 2015. Each of Pemex-Refining, Pemex-Gas and Basic Petrochemicals and Pemex-Petrochemicals were dissolved effective as of November 1, 2015.

The principal lines of business of the new productive state-owned subsidiaries are as follows:

Capital Expenditures

The following table shows our capital expenditures, excludingnon-capitalizable maintenance, for each of the three years ended December 31, 2016, and the budget for these expenditures for 2017. Capital expenditure amounts are derived from our budgetary records, which are prepared on a cash basis. Accordingly, these capital expenditure amounts do not correspond to capital expenditure amounts included in our consolidated financial

statements prepared in accordance with IFRS. The following table presents our capital expenditures by subsidiary. For the year ended December 31, 2015, we have included capital expenditures made by the subsidiary entities prior to our recent corporate reorganization, and for the new productive state-owned subsidiaries, capital expenditures made after their creation. For the year ended December 31, 2016 and for the 2017 budget, we have included capital expenditures made by, or expected to be made by, the new productive state-owned subsidiaries.

Capital Expenditures and Budget by Subsidiary

Proved reserves estimates as of December 31, 2016 were prepared by our exploration and production segment and were reviewed by the Independent Engineering Firms (as defined below), which audit its estimates of our oil and gas reserves. In addition, pursuant to theReglamento de la Ley de Hidrocarburos(Regulations to the Hydrocarbons SectorLaw), the NHC reviewed and approved the proved reserves reports estimates as of December 31, 2016 that we provided on March 31, 2017.

We describe belowestimate reserves based on generally accepted petroleum engineering and evaluation methods and procedures, which are based primarily on applicable SEC regulations and, as necessary, the key featuresSociety of Petroleum Engineers’ (which we refer to as the SPE) publication entitledStandards Pertaining to the Estimating and Auditingof Oil and Gas Reserves Information, dated February 19, 2007 and other SPE publications, including the SPE’s publication entitledPetroleum Resources Management System, as well as other technical sources, includingEstimation and Classification of Reserves of Crude Oil, Natural Gas, and Condensate, by Chapman Cronquist, andDetermination of Oil and Gas Reserves, Petroleum Society Monograph Number 1, published by the Canadian Institute of Mining and Metallurgy & Petroleum. The choice of method or combination of methods employed in the analysis of each reservoir is determined by:

Reserves data set forth herein represent only estimates. Reserves valuation is a subjective process of estimating underground accumulations of crude oil and natural gas that cannot be measured in an exact manner. The accuracy of any reserves estimate depends on the quality of available data, engineering and geological interpretation and professional judgment. As a result, estimates of different engineers may vary. In addition, the results of drilling, testing and producing subsequent to the date of an estimate may lead to the revision of an estimate.

During 2016, we did not record any material increase in our proved oil and gas reserves as a result of the Secondary Legislationuse of new technologies.

In order to ensure the reliability of our reserves estimation efforts, we have undertaken the internal certification of our estimates of reserves since 1996. We have established certain internal controls in connection with the preparation of our proved reserves estimates. Initially, teams of geoscientists from our exploration and production business units (with each of these units covering several projects) prepare the reserves estimates, using distinct estimation processes for valuations relating to new discoveries and developed fields, respectively. Subsequently, the regional reserves offices collect these reserves estimates from the units and request that relatetheGerencia de Recursos y Certificación de Reservas (Office of Resources and Certification of Reserves), the central hydrocarbon reserves management body of Pemex Exploration and Production, review and certify such valuations and the booking of the related reserves. This internal certification process is undertaken in accordance with internal guidelines for estimating and classifying proved reserves, which are based on the SEC’s rules and definitions. The Office of Resources and Certification of Reserves, which additionally oversees and conducts an internal audit of the process described above, consists entirely of professionals with geological, geophysical, petrophysical and reservoir engineering backgrounds. The engineers who participate in our reserves estimation process are experienced in: reservoir numerical simulation; well drilling and completion; pressure, volume and temperature (PVT) and analytical tools used in forecasting the performance of the various elements comprising the production system; and design strategies in petroleum field development. Furthermore, all of our personnel have been certified by theSecretaría de Educación Pública(Ministry of Public Education), most have earned master’s degrees in areas of study such as petroleum engineering, geology and geophysical engineering and they possess an average of over fifteen years of professional experience.

In addition to this internal review process, our exploration and production segment’s final reserves estimates are audited by independent engineering firms. Three independent engineering firms audited our estimates of proved reserves as of December 31, 2016: Netherland Sewell; DeGolyer and MacNaughton; and Ryder Scott (we refer to these firms together as the Independent Engineering Firms). The reserves estimates reviewed by the Independent Engineering Firms totaled 97.6% of our estimated proved reserves. The remaining 2.4% of our estimated proved reserves consisted of reserves located in certain areas in which third parties provide us with drilling services. Under such agreements, the corresponding third party is responsible for assessing the volume of reserves. Netherland Sewell audited the reserves in the Aceite Terciario de Golfo, Poza Rica-Altamira and the Litoral de Tabasco business units. DeGolyer and MacNaughton audited reserves in the Burgos and Veracruz business units and Ryder Scott audited the reserves in the Bellota-Jujo, Cinco Presidentes, Macuspana-Muspac, Samaria-Luna,Abkatún-Pol-Chuc, Cantarell andKu-Maloob-Zaap business units. The audits conducted by the Independent Engineering Firms consisted primarily of: (1) analysis of historical static and dynamic reservoir data that we have provided; (2) construction or updating of the Independent Engineering Firms’ own static and dynamic reservoir characterization models of some of our fields; (3) economic analysis of fields; and (4) review of our production forecasts and reserves estimates.

Since reserves estimates are, by definition, only estimates, they cannot be reviewed for the purpose of verifying exactness. Instead, the Independent Engineering Firms conducted a detailed review of our reserves estimates so that they could express an opinion as to whether, in the aggregate, the reserves estimates we furnished were reasonable and had been estimated and presented in conformity with generally accepted petroleum engineering and evaluation methods and procedures.

All questions, including any suggested modifications to proved reserves estimates, that arose during the Independent Engineering Firms’ review process were resolved by our exploration and production segment to the satisfaction of the Independent Engineering Firms. The Independent Engineering Firms have concluded that our estimated total proved oil and natural gas reserve volumes set forth in this report are, in the aggregate, reasonable and have been prepared in accordance with Rule4-10(a) of RegulationS-X of the SEC, as amended (which we refer to as Rule4-10(a)), are consistent with international reserves reporting practice and are in accordance with the revised oil and gas reserves disclosure provisions of ASC Topic 932.

Our total proved developed and undeveloped reserves of crude oil, condensates and liquefiable hydrocarbons sectorrecoverable from field processing plants decreased by 9.5% in Mexico:2016, from 7,977 million barrels at

December 31, 2015 to 7,219 million barrels at December 31, 2016. Our proved developed reserves of crude oil, condensates and liquefiable hydrocarbons recoverable from processing plants decreased by 14.7% in 2016, from 5,725 million barrels at December 31, 2015 to 4,886 million barrels at December 31, 2016.These decreases were principally due to a decrease in oil production in 2016, lower prices of hydrocarbons, a decrease in field development activities and field behavior. The amount of crude oil, condensate and liquefiable hydrocarbon reserves added in 2016 was insufficient to offset the level of production in 2016, which amounted to 891 million barrels of crude oil, condensates and liquefiable hydrocarbons.

Our total proved developed and undeveloped dry gas reserves decreased by 18.9% in 2016, from 8,610 billion cubic feet at December 31, 2015 to 6,984 billion cubic feet at December 31, 2016. Our proved developed dry gas reserves decreased by 24.9% in 2016, from 6,012 billion cubic feet at December 31, 2015 to 4,513 billion cubic feet at December 31, 2016. These decreases were principally due to a decrease in oil production in 2016, lower prices of oil and gas, a decrease in field development activities and field behavior. The amount of dry gas reserves added in 2016 was insufficient to offset the level of production in 2016, which amounted to 1,134 billion cubic feet of dry gas. Our proved undeveloped dry gas reserves decreased by 4.9% in 2016, from 2,598 billion cubic feet at December 31, 2015 to 2,471 billion cubic feet at December 31, 2016.

During 2016, proved reserves increased by 40 million barrels of oil equivalent due to reclassifications, development, revisions and discoveries.

During 2016, exploratory activity in shallow waters incorporated approximately 57 million barrels of oil equivalent in one new field located close to our existing facilities. We also maintained exploratory work in shallow waters in order to incorporate proved reserves that support future new production in the short term.

The following three tables of crude oil and dry gas reserves set forth our estimates of our proved reserves determined in accordance with Rule4-10(a).

Summary of Oil and Gas⁽¹⁾ Proved Reserves as of December 31, 2016 Based on Average Fiscal Year Prices

Crude Oil and Condensate Reserves

(including natural gas liquids)⁽¹⁾

Note: Numbers may not total due to rounding.

Source: Pemex Exploration and Production.

Dry Gas Reserves

Note: Numbers may not total due to rounding.

Source: Pemex Exploration and Production.

The following table sets forth, as of December 31, 2016, the volumes of proved developed and undeveloped reserves, the number of producing wells and the number of proved undeveloped locations for the fields that contained 95.1% of our proved reserves.

		Reserves
Field		Proved(1)				Developed(1)				Undeveloped(1)				Number of Producing Wells				Number of Undeveloped Locations(2)
		(in millions of barrels of oil equivalent)
Rabasa			27.2				25.4				1.8				48				1
Teotleco			25.3				25.3				—				6				—
Bellota			24.7				18.7				6				5				2
Sen			24.5				18.9				5.6				12				1
Madrefil			24.2				21.4				2.8				5				1
Lum			23.1				17.6				5.5				3				3
Cárdenas			22.9				11.2				11.7				8				4
Etkal			22.6				10.5				12.1				1				2
Cuitláhuac			22.3				13				9.3				182				54
Tetl			20.4				—				20.4				—				3
Caparroso-Pijije-Escuintle			20.1				16.4				3.8				16				1
Cinco Presidentes			19.8				18.3				1.5				34				3
Tupilco			19.8				17.9				1.9				30				1
Nejo			19.5				14.6				4.9				198				35
Ixtoc			19.1				19.1				—				10				—
Edén-Jolote			19.1				14.1				5				7				2
Cauchy			18.6				18.6				—				23				—
Los Soldados			17.6				16				1.6				22				1
Jaatsul			17.1				—				17.1				—				2
Magallanes-Tucán-Pajonal			15.3				12.8				2.4				42				5
Paredón			15				15				—				2				—
San Ramón			15				13.9				1				50				3
Nohoch			14.4				14.4				—				7				—
Ayocote			14.4				10.1				4.3				15				2
Taratunich			13.7				13.7				—				7				—
Guaricho			13.5				13.1				0.4				14				1
Uech			13.5				13.5				—				2				—
Jacinto			13.4				13.4				—				3				—
Sinán			13				13				—				7				—
Mora			12.8				9.4				3.4				5				2
Bacab			12.8				12.8				—				6				—
Tintal			12.4				8.5				3.9				6				8
Takín			12.3				12.3				—				4				—
Sunuapa			12.2				10.2				2.1				10				2
Esah			11.6				—				11.6				—				2
Bedel			11.3				5.6				5.6				6				8
Sini			11.1				8.3				2.8				6				1
Total			8,142.3				5,419.7				2,722.6				4,456				5,142
Our proved reserves			8,562.8				5,753.4				2,808.4
Percentage			95.1	%			94.2	%			96.9	%