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Mexican Petroleum

Filed: 29 Dec 20, 4:07pm
Table of Contents

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 6-K

 

 

REPORT OF FOREIGN PRIVATE ISSUER

PURSUANT TO RULE 13a-16 OR 15d-16 UNDER

THE SECURITIES EXCHANGE ACT OF 1934

For the month of December, 2020

Commission File Number 0-99

 

 

PETRÓLEOS MEXICANOS

(Exact name of registrant as specified in its charter)

MEXICAN PETROLEUM

(Translation of registrant’s name into English)

 

 

United Mexican States

(Jurisdiction of incorporation or organization)

Avenida Marina Nacional No. 329

Colonia Verónica Anzures

11300 Ciudad de México,

México

(Address of principal executive offices)

 

 

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.

Form 20-F  ☒            Form 40-F  

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1)

Yes  ☐            No  ☒

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7)

Yes  ☐            No  ☒

Indicate by check mark whether the registrant by furnishing the information contained in this form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.

Yes  ☐            No  ☒

 

 

 


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RECENT DEVELOPMENTS

The following discussion of PEMEX’s recent results should be read in conjunction with the annual report on Form 20-F of Petróleos Mexicanos for the fiscal year ended December 31, 2019 as filed with the U.S. Securities and Exchange Commission (which we refer to as the SEC) on May 8, 2020 (which we refer to as the Form 20-F) and, in particular, “Item 4—Information on the Company” and “Item 5—Operating and Financial Review and Prospects” in the Form 20-F and with the unaudited condensed consolidated interim financial statements of PEMEX included in this report beginning on page F-1. In this document, “PEMEX” refers to Petróleos Mexicanos, the following operating subsidiaries—Pemex Exploración y Producción (Pemex Exploration and Production), Pemex Transformación Industrial (Pemex Industrial Transformation), Pemex Logística (Pemex Logistics), Pemex Fertilizantes (Pemex Fertilizers), and, for periods prior to July 1, 2019, Pemex Perforación y Servicios (Pemex Drilling and Services) and Pemex Etileno (Pemex Ethylene) (which we refer to collectively as the subsidiary entities), and the subsidiary companies listed in Note 5 to the unaudited condensed consolidated interim financial statements included herein. Petróleos Mexicanos hereby designates this report on Form 6-K as being incorporated by reference into (i) the Offering Circular dated October 28, 2019, as supplemented on February 10, 2020, relating to its U.S. $112,000,000,000 Medium-Term Notes Program, Series C, due 1 Year or More from Date of Issue and (ii) the Prospectus dated September 21, 2020 filed pursuant to Rule 424(b)(3) (File/Film Number: 333-239722 / 201187153).

Exchange Rates

On December 18, 2020, the noon buying rate for cable transfers in New York reported by the Board of Governors of the Federal Reserve System was Ps. 19.9813 = U.S. $1.00.

We maintain our consolidated financial statements and accounting records in Mexican pesos (pesos or Ps.). Unless otherwise indicated, we have translated all peso amounts to U.S. dollars in this report, including all convenience translations of our unaudited condensed consolidated interim financial statements included herein, as of and for the nine-months ended September 30, 2020, at an exchange rate of Ps. 22.4573 = 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 September 30, 2020, and as of and for the year ended December 31, 2019, at an exchange rate of Ps. 18.8452 = U.S. $1.00, which is the exchange rate that the Ministry of Finance and Public Credit instructed us to use on December 31, 2019. 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.

Government Equity Capital Contribution

For the nine-month period ended September 30, 2020, the Federal Government of Mexico, which we refer to as the Mexican Government, has made equity capital contributions in the amount of Ps. 46.3 billion (U.S. $2.1 billion) to Petróleos Mexicanos.

We used these funds to reduce our overall indebtedness, manage the maturity profile of our debt, improve our financial position and carry out the construction of the new Dos Bocas Refinery. For more information on other recent support measures implemented by the Mexican Government, see “Liquidity and Capital Resources—Overview—Government Support” in the Form 20-F.

Selected Financial Data

The selected financial data as of December 31, 2019 is derived from the audited consolidated financial statements of PEMEX included in the Form 20-F. The selected financial data as of September 30, 2020 and for the nine-month periods ended September 30, 2020 and 2019 is derived from the unaudited condensed consolidated interim financial statements of PEMEX included in this report, which were prepared in accordance with International Accounting Standard (IAS) 34 “Interim Financial Reporting” (IAS 34).

For the year ended December 31, 2019, we recognized a net loss of Ps. 347.9 billion and had negative equity of Ps. 1,997.2 billion. We had negative working capital of Ps. 211.7 billion during the same period. Cash flows from operating activities were Ps. 85.2 billion for the year ended December 31, 2019. As of and for the nine-month period ended September 30, 2020, we recognized a net loss of Ps. 605.2 billion and had negative equity of Ps. 2,533.0 billion. We had negative working capital of Ps. 363.1 billion as of September 30, 2020 and cash flows from operating activities of Ps. 2.3 billion during the nine months ended September 30, 2020. We have disclosed the circumstances that have caused these negative trends and the actions we are taking to face them below.

 

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We also have substantial debt, including substantial short-term debt. This debt was incurred mainly to finance investments needed to carry out our operations. Due to our heavy fiscal burden resulting from the payment of hydrocarbon extraction duties and other taxes that we are required to pay to the Mexican Government, the cash flows derived from our operations in recent years have not been sufficient to fund our operations and investment programs. As a result, our indebtedness has increased significantly, and our working capital has decreased. In addition, the significant crude oil price drop, which started in March 2020, and the negative economic impact as a result of the current global health crisis caused by the COVID-19 pandemic, have negatively impacted our financial performance. During the first nine months of 2020, the weighted average Mexican crude oil price was U.S. $33.99 per barrel, a decrease of U.S. $21.06 per barrel as compared to the 2019 weighted average Mexican crude oil export price of U.S.$55.63 per barrel. As of December 18, 2020, the weighted average Mexican crude oil export price was U.S. $47.50 per barrel. While prices have begun to stabilize, any future decline in international crude oil and natural gas prices will have a similar negative impact on our results of operations and financial condition.

We believe we have the capacity to comply with our payment obligations and our operating continuity, including our ability to refinance debt; however, our future cash flows are uncertain due to circumstances outside of our control. Any adverse impact from sustained decrease in crude oil prices below the budgeted average price for 2020 and from the slow-down of the economy could have an adverse impact on our results of operation, cash flows and may require us to consider additional actions to address these shortfalls. The combined effect of the above-mentioned events indicates the existence of significant doubt about PEMEX’s ability to continue as a going concern. We continue operating as a going concern for the reasons described herein, including in our unaudited condensed consolidated interim financial statements. Accordingly, we have prepared our unaudited condensed consolidated interim financial statements on a going concern basis, which assumes that we can meet our payment obligations. See “Item 5—Operating and Financial Review and Prospects—Overview” and “Item 5—Operating and Financial Review and Prospects—Liquidity and Capital Resources” in the Form 20-F and Notes 18(f) and 20 to our unaudited condensed consolidated interim financial statements included herein.

In this report we include selected financial data from our statement of financial position as of September 30, 2020 and from our statement of comprehensive income and our statement of cash flows for the nine-month period ended September 30, 2020. In addition, we include selected financial data from our statement of financial position as of December 31, 2019, as well as the statement of comprehensive income and the statement of cash flows for the nine-month period ended September 30, 2019 for comparison purposes.

 

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SELECTED FINANCIAL DATA OF PEMEX

 

   As of and for the period ended(1) 
   December 31,  September 30,(2) 
   2019  2019  2020 
   (millions of pesos) 

Statement of Comprehensive Income

    

Net sales

  Ps.1,401,971  Ps.1,083,387  Ps.704,834 

Operating income

   37,030   182,048   25,125 

Financing income

   24,484   20,972   9,521 

Financing cost

   (132,861  (102,657  (115,152

Derivative financial instruments (cost), net

   (18,512  (24,788  (13,041

Foreign exchange gain (loss), net

   86,930   17,307   (383,467

Net (loss)

   (347,911  (176,367  (605,176

Statement of Financial Position (end of period)

    

Cash and cash equivalents

   60,622   n.a.   36,742 

Total assets

   1,918,448   n.a.   1,905,507 

Long-term debt(3)

   1,738,250   n.a.   2,064,051 

Total long-term liabilities(4)

   3,363,453   n.a.   3,768,433 

Total equity (deficit)

   (1,997,208  n.a.   (2,533,044

Statement of Cash Flows

    

Depreciation and amortization

   137,187   102,604   99,181 

Acquisition of wells, pipelines, properties, plant and equipment(5)

   (109,654  (49,406  (92,201

 

Note:

n.a. = Not applicable.

(1)

Includes Petróleos Mexicanos, the subsidiary entities and the subsidiary companies listed in Note 5 to the unaudited condensed consolidated interim financial statements included herein.

(2)

Unaudited.

(3)

Long-term debt does not include short-term indebtedness of Ps. 412,064 million (U.S. $18,349 million) as of September 30, 2020.

(4)

Total long-term liabilities do not include short-term liabilities of Ps. 670,118 million (U.S. $29,840 million) as of September 30, 2020.

(5)

Includes capitalized finance cost.

Source: PEMEX’s unaudited condensed consolidated interim financial statements.

 

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Capitalization of PEMEX

The following table sets forth the capitalization of PEMEX as of September 30, 2020.

 

   As of September 30, 2020 (1) 
   (millions of pesos or U.S. dollars) 

Long-term leases(2)

  Ps. 67,260  U.S. $2,995 

Long-term external debt

   1,885,548   83,961 

Long-term domestic debt

   178,503   7,949 
  

 

 

  

 

 

 

Total long-term debt(3)

   2,064,051   91,910 
  

 

 

  

 

 

 

Total long-term leases and long-term debt

   2,131,311   94,905 
  

 

 

  

 

 

 

Certificates of Contribution “A”(4)

   524,931   23,375 

Mexican Government contributions to Petróleos Mexicanos

   43,731   1,947 

Legal reserve

   1,002   45 

Accumulated other comprehensive result

   (217,688  (9,693

Accumulated deficit from prior years

   (2,280,396  (101,544

Net (loss)(5)

   (605,044  (26,942
  

 

 

  

 

 

 

Total controlling interest

   (2,533,464  (112,812

Total non-controlling interest

   420   19 
  

 

 

  

 

 

 

Total equity (deficit)

   (2,533,044  (112,793
  

 

 

  

 

 

 

Total capitalization

  Ps. (401,733 U.S. $(17,888
  

 

 

  

 

 

 

 

Note:

Numbers may not total due to rounding.

(1)

Unaudited. Convenience translations into U.S. dollars of amounts in pesos have been made at the established exchange rate of Ps. 22.4573 = U.S. $1.00 as of September 30, 2020. Such translations should not be construed as a representation that the peso amounts have been or could be converted into U.S. dollar amounts at the foregoing or any other rate.

(2)

Total long-term leases does not include short-term leases of Ps. 6,247 million (U.S. $278 million) as of September 30, 2020.

(3)

Total long-term debt does not include short-term indebtedness of Ps. 412,064 million (U.S. $18,349 million) as of September 30, 2020.

(4)

Equity instruments held by the Mexican Government.

(5)

Excluding amounts attributable to non-controlling interests of Ps. 132 million.

Source: PEMEX’s unaudited condensed consolidated interim financial statements.

 

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Operating and Financial Review and Prospects

Results of Operations of PEMEX—For the nine months ended September 30, 2020 compared to the nine months ended September 30, 2019.

General

The selected consolidated interim financial information set forth below is derived from our unaudited condensed consolidated interim financial statements included elsewhere in this report. This interim financial information should be read in conjunction with the Form 20-F and, in particular, “Item 4—Information on the Company” and “Item 5—Operating and Financial Review and Prospects” in the Form 20-F, and with the unaudited condensed consolidated interim financial statements of PEMEX included in this report beginning on page F-1.

 

   Nine months ended September 30,(1) 
   2019  2020(2) 
   (millions of pesos or U.S. dollars) 

Net Sales

    

Domestic

  Ps.619,052  Ps.377,063  U.S. $16,790 

Export

   456,271   324,231   14,438 

Services income

   8,065   3,541   158 
  

 

 

  

 

 

  

 

 

 

Total of sales

   1,083,388   704,835   31,386 

(Reversal) impairment of wells, pipelines, properties, plant and equipment, net

   (7,649  (16,111  (717

Cost of sales

   802,544   585,244   26,060 
  

 

 

  

 

 

  

 

 

 

Gross income

   288,493   135,702   6,043 

Other revenues

   15,498   7,823   348 

Other expenses

   (6,703  (767  (34

Distribution, transportation and sale expenses

   16,179   7,916   352 

Administrative expenses

   99,059   109,715   4,885 
  

 

 

  

 

 

  

 

 

 

Operating income

   182,050   25,127   1,120 

Financing income

   20,972   9,521   424 

Financing cost

   (102,657  (115,152  (5,128

Derivative financial instruments (cost), net

   (24,788  (13,041  (581

Foreign exchange gain (loss), net

   17,307   (383,467  (17,075

Loss (profit) sharing in joint ventures and associates

   (42  (2,215  (99
  

 

 

  

 

 

  

 

 

 

Income (loss) before duties, taxes and other

   92,842   (479,227  (21,339

Total duties, taxes and other

   269,207   125,947   5,608 
  

 

 

  

 

 

  

 

 

 

Net (loss)

   (176,365  (605,174  (26,947

Other comprehensive results

   (220,942  22,300   993 
  

 

 

  

 

 

  

 

 

 

Total comprehensive (loss)

  Ps.(397,307 Ps.(582,874 U.S. $(25,954
  

 

 

  

 

 

  

 

 

 

 

Note: Numbers may not total due to rounding.

(1)

Unaudited.

(2)

Convenience translations into U.S. dollars of amounts in pesos have been made at the established exchange rate of Ps. 22.4573 = U.S. $1.00 at September 30, 2020. Such translations should not be construed as a representation that the peso amounts have been or could be converted into U.S. dollars at the foregoing or any other rate.

Source: PEMEX’s unaudited condensed consolidated interim financial statements.

Total Sales

Total sales decreased by 34.9% or Ps. 378.5 billion in the first nine months of 2020, from Ps. 1,083.4 billion in the first nine months of 2019 to Ps. 704.8 billion in the first nine months of 2020, mainly due to a decrease in the sales volume of petroleum products and the weighted average price of Mexican crude oil, as further discussed below (see “Impacts of the COVID-19 Pandemic”).

Domestic Sales

Domestic sales decreased by 39.1% in the first nine months of 2020, from Ps. 619.1 billion in the first nine months of 2019 to Ps. 377.1 billion in the first nine months of 2020, mainly due to decreases in the sales prices of gasoline, diesel, fuel oil and jet fuel. Domestic sales of petroleum products decreased by 43.8% in the first nine months of 2020, from Ps. 551.7 billion in the first nine months of 2019 to Ps. 310.2 billion in the first nine months of 2020, mainly due to a 16.1% decrease in the average price of gasoline, 21.0% decrease in the average price of diesel, 53.3% decrease in the average price of fuel oil and 19.9% decrease in the average price of jet fuel. The sales volume of gasoline, diesel, fuel oil and jet fuel decreased by 33.2%, 31.6%, 36.5% and 53.9%, respectively, in the first nine months of 2020 as compared to the same period in 2019, as a result of decreased demand, which in turn was primarily the result of the lower economic activity caused by the COVID-19 pandemic and a drop in the international hydrocarbons and refined products prices.

 

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Domestic sales of natural gas decreased by 28.9% in the first nine months of 2020, from Ps. 23.2 billion in the first nine months of 2019 to Ps. 16.5 billion in the first nine months of 2020, mainly due to an 11.9% decrease in sales volume.

Domestic sales of liquefied petroleum gas decreased by 10.5% in the first nine months of 2020, from Ps. 23.8 billion in the first nine months of 2019 to Ps. 21.3 billion in the first nine months of 2020, mainly as a result of an 8.1% decrease in its average sales price.

Export Sales

Export sales decreased by 28.9% in peso terms in the first nine months of 2020 (with U.S. dollar-denominated export revenues translated to pesos at the exchange rate on the date of the corresponding export sale), from Ps. 456.3 billion in the first nine months of 2019 to Ps. 324.2 billion in the first nine months of 2020. This decrease was mainly due to a 40.7% decrease in the weighted average Mexican export crude oil price in the first nine months of 2020, compared to the first nine months of 2019. From January 1 to September 30, 2019, the weighted average Mexican export crude oil price was U.S. $57.10 per barrel, compared to U.S. $33.85 per barrel in the same period of 2020.

Crude oil and condensate sales decreased by 30.2%, from Ps. 332.4 billion in the first nine months of 2019 to Ps. 232.1 billion in the first nine months of 2020, and in U.S. dollar terms decreased by 40.2%, from U.S. $17.4 billion in the first nine months of 2019 to U.S. $10.4 billion in the first nine months of 2020. The weighted average price per barrel of crude oil exports in the first nine months of 2020 was U.S. $33.85, 40.7% lower than the weighted average price of U.S. $57.10 in the first nine months of 2019.

Export sales of petroleum products, including products derived from natural gas and natural gas liquids decreased by 21.0%, from Ps. 29.0 billion in the first nine months of 2019 to Ps. 22.9 billion in the first nine months of 2020, primarily due to a decrease in the sales volume of naphtha.

For the nine-month period ended September 30, 2020, the average exchange rate of the U.S. dollar against the Mexican peso was Ps. 21.7798 to U.S. $1.00, compared to Ps. 19.2548 to U.S. $1.00 during the same period of 2019, representing a depreciation of the Mexican peso against the U.S. dollar by Ps. 2.5250 (or 13.1%), which had a favorable effect on our export sales of Ps. 38.4 billion.

Service Income

Service income decreased by 56.8% in the first nine months of 2020, from Ps. 8.1 billion in the first nine months of 2019 to Ps. 3.5 billion in the first nine months of 2020, mainly as a result of a decrease in transportation services provided by Pemex Industrial Transformation and Pemex Logistics to third parties.

(Reversal) Impairment of Wells, Pipelines, Properties, Plant and Equipment, Net

Net reversal of impairment of wells, pipelines, properties, plant and equipment increased by Ps. 8.5 billion in the first nine months of 2020 as compared to the first nine months of 2019, from a net reversal of impairment of Ps. 7.6 billion as of September 30, 2019 to a net reversal of impairment of Ps. 16.1 billion as of September 30, 2020. This net reversal of impairment was primarily due to a net reversal of impairment of Ps. 32.7 billion in the cash generating units (CGUs) of Pemex Exploration and Production, mainly due to an increase in the effect of exchange rates and an increase in projected crude and oil prices, offset by an impairment of Ps. 16.5 billion in the CGU of Pemex Industrial Transformation, mainly due to a decrease in production levels of the Madero Refinery and a decrease in prices of refined products.

 

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Cost of Sales

Cost of sales decreased by 27.1%, from Ps. 802.5 billion in the first nine months of 2019 to Ps. 585.2 billion in the first nine months of 2020. This decrease was mainly due to (1) a Ps. 155.5 billion decrease in import purchases, primarily Magna gasoline, diesel and jet fuel, due to decreased demand, which in turn was primarily the result of the lower economic activity caused by the COVID-19 pandemic and a drop in the international hydrocarbons and refined products prices; (2) a Ps. 19.0 billion decrease in taxes and duties on exploration and extraction of hydrocarbons resulting from lower average sales prices in the first nine months of 2020 compared to the first nine months of 2019; (3) a decrease of Ps. 6.1 billion in inventory variation and (4) a decrease of Ps. 12.9 billion in unsuccessful wells.

General Expenses

Total general expenses (including distribution, transportation and sale expenses and administrative expenses) increased by 2.1%, from Ps. 115.2 billion for the first nine months of 2019 to Ps. 117.6 billion for the first nine months of 2020, mainly due to an increase in administrative expenses relating to the periodic cost of employee benefits.

Other Revenues

Other revenues decreased by Ps. 4.6 billion in the first nine months of 2020, from Ps.12.4 billion in the first nine months of 2019 to Ps. 7.8 billion in the first nine months of 2020. This decrease was mainly due to a Ps. 3.7 billion decrease in income from insurance recovery.

Other Expenses

Other expenses decreased by Ps. 2.8 billion in the first nine months of 2020, from Ps. 3.6 billion in the first nine months of 2019 to Ps. 0.8 billion in the first nine months of 2020. This decrease was mainly due to a decrease of Ps. 2.4 billion in disposal of wells, pipelines, properties, plant and equipment.

Financing Income

Financing income decreased by Ps. 11.5 billion in the first nine months of 2020, from Ps. 21.0 billion in the first nine months of 2019 to Ps. 9.5 billion in the first nine months of 2020. This decrease was mainly due to effects from the liability management transactions conducted in September 2019.

Financing Cost

Financing cost increased by Ps. 12.5 billion in the first nine months of 2020, from Ps. 102.7 billion in the first nine months of 2019 to Ps. 115.2 billion in the first nine months of 2020, mainly due to an increase in interest expenses in the first nine months of 2020 as a result of the effects of depreciation of the peso against the U.S. dollar.

Derivative Financial Instruments (Cost), Net

Derivative financial instruments (cost), net, decreased by Ps. 11.8 billion, from a derivative financial instruments cost of Ps. 24.8 billion in the first nine months of 2019 to a derivative financial instruments cost of Ps. 13.0 billion in the first nine months of 2020, due to (1) the increase in the fair value of our favorable cross-currency swaps, arising from the depreciation of the U.S. dollar against other currencies in which our debt is denominated; (2) the benefit of our crude oil options, as a result of the decrease in crude oil prices and (3) a net increase in other derivative financial instruments, such as currency options and interest rate options. These effects were offset by an increase in the cost of embedded derivatives related to our shipments of crude oil to Asia.

Foreign Exchange Gain (Loss), Net

A substantial portion of our debt (90.3%) as of September 30, 2020 is denominated in foreign currency. Foreign exchange income decreased by Ps. 400.8 billion, from a foreign exchange income of Ps. 17.3 billion in the first nine months of 2019 to a foreign exchange loss of Ps. 383.5 billion in the first nine months of 2020, primarily as a result of the depreciation of the peso against the U.S. dollar for the first nine months of 2020 as compared to the first nine months of 2019. The value of the peso in U.S. dollar terms appreciated by 0.2% from Ps. 19.6829 to U.S. $1.00 as of December 31, 2018 to Ps. 19.6363 to U.S. $1.00 as of September 30, 2019 as compared to a 19.2% depreciation of the peso in U.S. dollar terms from Ps. 18.8452 to U.S. $1.00 as of December 31, 2019 to Ps. 22.4573 to U.S. $1.00 as of September 30, 2020.

 

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Duties, Taxes and Other

The Derecho por la Utilidad Compartida (Profit-sharing Duty or DUC) and other duties and taxes paid decreased by 53.2% in the first nine months of 2020, from Ps. 269.2 billion in the first nine months of 2019 to Ps. 125.9 billion in the first nine months of 2020, mainly due to (1) the 40.7% decrease in the weighted average export price of Mexican crude oil, from U.S. $57.10 per barrel in the first nine months of 2019 to U.S. $33.85 per barrel in the first nine months of 2020; (2) a decrease in the applicable tax rate for 2020, which is 58% for 2020 as compared to 65% for 2019 and (3) the application of a tax credit to the DUC in the amount of Ps. 48.8 billion, which was granted to us by the Mexican Government through a presidential decree dated April 21, 2020. Duties and taxes represented 17.9% and 24.8% of total sales in the first nine months of 2020 and 2019, respectively.

Net (Loss)

In the first nine months of 2020, we had a net loss of Ps. 605.2 billion, as compared to a net loss of Ps. 176.4 billion in the first nine months of 2019.

This increase in net loss was mainly the result of (1) a Ps. 378.5 billion decrease in total sales, mainly due to decreases in the sales volume of petroleum products and the weighted average price of Mexican crude oil exports; (2) a Ps. 400.8 billion increase in foreign exchange loss, mainly due to the depreciation of the peso against the U.S. dollar and (3) a Ps. 16.9 billion increase in financing cost.

These effects were partially offset by (1) a Ps. 217.3 billion decrease in the cost of sales, mainly due to a decrease in volume of purchases for resale of gasoline, diesel and jet fuel imports due to decreased demand which in turn was primarily the result of the lower economic activity caused by the COVID-19 pandemic and a drop in the international hydrocarbons and refined products prices; (2) a Ps. 8.4 billion increase in net reversal of impairment of wells, pipelines, properties, plant and equipment and (3) a Ps. 143.3 billion decrease in taxes and duties, mainly due to a decreases in hydrocarbon production and prices, as well as a decrease in the tax rate for the DUC and the application of a tax credit in the DUC pursuant to the presidential decree dated April 21, 2020.

Other Comprehensive Results

In the first nine months of 2020, we reported a total comprehensive gain of Ps. 22.3 billion as compared to a total comprehensive loss of Ps. 220.9 billion in the first nine months of 2019, mainly due to a decrease in the actuarial losses for employee benefits as a result of the discount rate and expected rate of return on plan assets used in the actuarial computation method.

 

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Changes in the Statement of Financial Position of PEMEX—from December 31, 2019 to September 30, 2020

Assets

Cash and cash equivalents decreased by Ps. 23.9 billion, or 39.4%, in the first nine months of 2020, from Ps. 60.6 billion as of December 31, 2019 to Ps. 36.7 billion as of September 30, 2020, mainly due to a decrease in sales, increase in payments to suppliers and contractors and payments on our debt instruments and taxes.

Accounts receivable, net, increased by Ps. 6.4 billion, or 3.5%, in the first nine months of 2020, from Ps. 180.5 billion as of December 31, 2019 to Ps. 186.9 billion as of September 30, 2020, mainly due to a Ps. 29.9 billion increase in taxes to be recovered, partially offset by a Ps. 23.5 billion decrease in accounts receivable from sales to domestic and export customers.

The current portion of our promissory notes increased by Ps. 1.2 billion, or 24.5%, in the first nine months of 2020, from Ps. 4.9 billion as of December 31, 2019 to Ps. 6.1 billion as of September 30, 2020, mainly due to the valuation of promissory notes at September 30, 2020.

Wells, pipelines, properties, plant and equipment, net, increased by Ps. 21.6 billion, or 1.8%, in the first nine months of 2020 from Ps. 1,211.7 billion as of December 31, 2019 to Ps. 1,233.3 billion as of September 30, 2020, mainly due to (1) Ps. 106.8 billion of acquisitions of wells, pipelines, properties, plant and equipment and (2) the recognition of a reversal of impairment of Ps. 16.1 billion. This increase was partially offset by (1) Ps. 99.2 billion in depreciation and amortization and (2) Ps. 2.1 billion of net disposals of wells, pipelines, properties, plant and equipment. See Note 12 to our unaudited condensed consolidated interim financial statements included herein.

Rights of use, net, decreased by Ps. 4.7 billion, or 6.6%, in the first nine months of 2020, from Ps. 70.8 billion as of December 31, 2019 to Ps. 66.1 billion as of September 30, 2020, mainly due to the amortization of the period.

Derivative financial instruments increased by Ps. 9.0 billion in the first nine months of 2020, from Ps. 11.5 billion as of December 31, 2019 to Ps. 20.5 billion as of September 30, 2020, mainly due to the increase in the fair value of favorable cross-currency swaps and crude oil options.

Liabilities

Total debt, including accrued interest, increased by Ps. 493.0 billion, or 24.8%, from Ps. 1,983.2 billion as of December 31, 2019 to Ps. 2,476.1 billion as of September 30, 2020, mainly due to the impact of the 19.2% depreciation of the peso against the U.S. dollar in the first nine months of 2020.

Liabilities to suppliers and contractors decreased by Ps. 39.6 billion, or 19.0%, from Ps. 208.0 billion as of December 31, 2019 to Ps. 168.4 billion as of September 30, 2020, mainly due to payments made in the period.

Taxes and duties payable decreased by Ps. 19.2 billion, or 37.9%, in the first nine months of 2020, from Ps. 50.7 billion as of December 31, 2019 to Ps. 31.5 billion as of September 30, 2020, mainly due to a Ps. 14.3 billion decrease in the DUC.

Derivative financial instruments liabilities decreased by Ps. 1.4 billion, or 8.4%, in the first nine months of 2020, from Ps. 16.7 billion as of December 31, 2019 to Ps. 15.3 billion as of September 30, 2020. This decrease was mainly due to the decrease in the negative fair value of cross-currency swaps caused by the depreciation of the U.S. dollar against most of the currencies for which we are covered.

Employee benefits liabilities increased by Ps. 48.5 billion, or 3.3%, in the first nine months of 2020, from Ps. 1,456.8 billion as of December 31, 2019 to Ps. 1,505.3 billion as of September 30, 2020. This increase was mainly due to: (1) the recognition of the net periodic cost of employee benefits; (2) actuarial gains and contributions made to the Fondo Laboral Pemex (Pemex Labor Fund) trust; and (3) payments made for medical and hospital services and post-mortem benefits provided to retired employees and certain of their beneficiaries.

Leases increased by Ps. 5.4 billion, or 7.9%, in the first nine months of 2020, from Ps. 68.1 billion as of December 31, 2019 to Ps. 73.5 billion as of September 30, 2020, mainly due to the impact of the 19.2% depreciation of the peso against the U.S. dollar in the first nine months of 2020.

Equity (Deficit), Net

Deficit, net, increased by Ps. 535.8 billion, or 26.8%, from a deficit of Ps. 1,997.2 billion as of December 31, 2019 to a deficit of Ps. 2,533.0 billion as of September 30, 2020. This increase in deficit was mainly due to Ps. 605.2 billion in net loss, partially offset by (1) Ps. 22.3 billion in total other comprehensive results, including currency translation effect gain and (2) a Ps. 46.3 billion increase in Certificates of Contribution “A” from the Mexican Government.

 

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Liquidity and Capital Resources

Overview

During the first nine months of 2020, our liquidity position was adversely affected mainly due to (1) the increase in short-term debt caused by the depreciation of the peso against de U.S. dollar; (2) the reduction in the value of the inventories derived from the decrease in oil prices in the first nine months of 2020 compared to oil prices in the same period of 2019 and (3) the increase in other accounts receivable, mainly sundry debtors. This negative impact to our liquidity position was partially offset by (1) a decrease in the balance of accounts payable to suppliers in the first nine months of 2020 due to payments made by us; (2) payments made by customers and (3) a decrease in income taxes and duties payable.

Our principal uses of new funds in the first nine months of 2020 were primarily the payment of debt maturities due during the same period and strengthening our cash flow through the actions listed below. We met the requirement to pay such debt maturities primarily with cash provided by cash flows from borrowings, which amounted to Ps. 940.5 billion. During the first nine months of 2020, our net cash flow from operating activities amounted to Ps. 2.3 billion and our net cash flow used in investing activities amounted Ps. 108.8 billion, which included Ps. 90.8 billion used in the acquisition of wells, pipelines, properties, plant and equipment and intangible assets.

For 2020, we had forecasted a 77.5% increase in capital expenditures as compared to the amounts spent on capital expenditures in 2019. Our approved budget for 2020 included a total of Ps. 332.6 billion for capital expenditures, including Ps. 94.1 billion for non-capitalizable maintenance and Ps. 41.3 billion for the construction of our new Dos Bocas Refinery, led by PTI Infraestructura de Desarrollo, S.A. de C.V. However, given the recent and ongoing impact of the COVID-19 pandemic on our business and the global economy, on July 14, 2020, the Board of Directors of Petróleos Mexicanos authorized the amendment of the 2020 budget for Petróleos Mexicanos and the subsidiary entities, which considers a decrease in income of Ps. 4.5 billion that is offset by a net decrease in expenses by Ps. 21.0 billion, consisting of (i) a decrease in investment expenditure by Ps. 28.0 billion (including non-capitalizable maintenance), (ii) an increase in operating expense of Ps. 7.0 billion and (iii) an increase in financing cost of Ps. 16.5 billion, such that our budgeted balance sheet target for the 2020 fiscal year has not changed. These amendments contributed to a new capital expenditures budget of Ps. 154.1 billion, which was subsequently adjusted to Ps. 167.7 billion during September 2020.

The following table shows (1) the approved capital expenditures for 2020 of Ps. 197.2 billion; (2) the adjusted amendments to the capital expenditures budget of Ps. 29.5 billion; (3) the as adjusted current capital expenditures budget for 2020 of Ps. 167.7 billion, which is a 50.9% increase over the Ps. 111.1 billion spent in capital expenditures in 2019 and (4) the amount spent in capital expenditures during the first nine months of 2020.

 

     2020 Approved
Capital
Expenditures
Budget
     Capital
Expenditures
Budget
Amendment
     2020 Amended
Capital
Expenditures
Budget
     Capital Expenditures
Spending
During the First
Nine Months of 2020
 

Exploration and Production

    Ps.175,743     Ps.(40,356    Ps.135,387     Ps.95,343 

Industrial Transformation

     16,952      11,267      28,219      9,339 

Logistics

     3,135      326      3,461      2,099 

Fertilizers

     1,069      (869     200      163 

Corporate

     332      81      413      149 
    

 

 

     

 

 

     

 

 

     

 

 

 

Total

    Ps. 197,231     Ps. (29,551    Ps. 167,680     Ps. 107,093 
    

 

 

     

 

 

     

 

 

     

 

 

 

 

Note: Numbers may not total due to rounding.

Our amended capital expenditures budget for fiscal year 2020 is Ps. 167.7 billion. We expect to direct Ps. 135.4 billion, or 80.7%, to exploration and production programs in 2020. This investment in exploration and production activities reflects our focus on maximizing the potential of our hydrocarbon reserves and our most productive projects. As of September 30, 2020, we have applied Ps. 95.3 billion to exploration and production activities. In addition, in 2020 we expect to direct Ps. 28.2 billion, or 16.8 %, to our industrial transformation segment, mainly towards our refineries rehabilitation program. As of September 30, 2020, we have applied Ps. 9.3 billion to our industrial transformation activities. We continuously review our capital expenditures portfolio in accordance with our current and future business plans.

 

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Our 2020 budget also includes Ps. 41.3 billion, which is classified as financial investment, rather than capital expenditures, related to capital contributions for our subsidiary company PTI Infraestructura de Desarrollo, which is developing the construction of the Dos Bocas Refinery.

On April 23, 2020, the Mexican Government published in the Official Gazette of the Federation the Decreto por el que se establecen las medidas de austeridad que deberán observar las dependencias y entidades de la Administración Pública Federal bajo los criterios que en el mismo se indican (Decree establishing the austerity measures to be observed by the dependencies and entities of the Federal Public Administration under the criteria indicated herein). This decree sets forth several actions to face the economic impacts caused by the COVID-19 pandemic. One of these actions is to postpone actions and expenses of the Mexican Government, with the exception of 38 priority programs. The construction of our new refinery in Dos Bocas is considered a priority program, and is therefore not postponed at this time. During the first nine months of 2020, works in progress related to the Dos Bocas Refinery, including payments made in advance to contractors, have increased by Ps. 21.4 billion from Ps. 7.7 billion as of December 31, 2019 to Ps. 29.1 billion as of September 30, 2020.

As of September 30, 2020, we owed our suppliers Ps. 168.4 billion, as compared to Ps. 208.0 billion as of December 31, 2019. As a result of the decrease in these obligations, we believe net cash flows from our operating and financing activities during the next twelve months, together with available cash and cash equivalents, will be sufficient to meet our working capital, debt service and capital expenditure requirements in such period.

The Ley de Ingresos de la Federación para el Ejercicio Fiscal de 2020 (the Federal Revenue Law for the Fiscal Year 2020) applicable to us as of January 1, 2020 provides for the incurrence of up to Ps. 34.8 billion of net indebtedness through a combination of domestic and international capital markets offerings and borrowings from domestic and international financial institutions.

We have a substantial amount of debt, including a substantial amount of short-term debt. 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 deteriorated. Relatively low oil prices and declining production have also had a negative impact on our ability to generate positive cash flows, which, together with our heavy tax burden, has further exacerbated our ability to fund our capital expenditures and other expenses. Despite the relatively low and fluctuating oil prices and our heavy tax burden, our cash flow from operations for the nine-month period ended September 30, 2020, together with our funds from financing activities, was sufficient to fund our capital expenditures and other expenses. We expect that net cash flows from our operations and financing activities will also be sufficient to meet our working capital requirements, debt service and capital expenditures for the remainder of 2020. We continue to evaluate our capital expenditures needs and opportunities in light of the ongoing COVID-19 pandemic.

As of September 30, 2020, our total indebtedness, including accrued interest, was Ps. 2,476.1 billion (U.S. $110.3 billion), in nominal terms, which represents a 24.9% increase in peso terms compared to our total indebtedness, including accrued interest, of Ps. 1,983.2 billion (U.S. $105.2 billion) as of December 31, 2019. As of September 30, 2020, 28.0% of our existing debt, or Ps. 693.3 billion (U.S. $30.9 billion), including accrued interest, is scheduled to mature in the next three years. Our working capital deteriorated from a negative working capital of Ps. 211.7 billion (U.S. $11.2 billion) as of December 31, 2019 to a negative working capital of Ps. 363.1 billion (U.S. $16.7 billion) as of September 30, 2020. Our level of debt may increase further in the short or medium term, as a result of new financing activities or future depreciation of the peso as compared to the U.S. dollar, and may have an adverse effect on our financial condition, results of operations and liquidity position. To service our debt, we have relied and may continue to rely on a combination of cash flow from operations, drawdowns under our available credit facilities, refinancing our existing indebtedness and repurchase transactions. In addition, we are taking actions to improve our financial position, as discussed above.

 

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We currently have a substantial amount of employee benefits liabilities. Benefits to employees were approximately 33.9% of our total liabilities as of September 30, 2020 and any adjustments recorded will affect our net income and/or comprehensive net income during the corresponding period. As of September 30, 2020, our substantial unfunded reserve for retirement pensions and seniority premiums, is approximately Ps. 1,505.3 billion. For more information on our Employee Benefits and Benefit Pension Plan, see “Item 5—Operating and Financial Review and Prospects—Critical Accounting Policies—Employee Benefits” and “Item 5—Operating and Financial Review and Prospects—Critical Accounting Policies—Benefit Pension Plan” in the Form 20-F.

Certain rating agencies have expressed concerns regarding: (1) our heavy tax burden; (2) the total amount of our debt and the ratio of our debt to our proven reserves; (3) the significant increase in our indebtedness over the last several years; (4) our negative free cash flow; (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 Ps. 1,456.8 billion (U.S. $77.3 billion) as of December 31, 2019; (7) the persistence of our operating expenses notwithstanding declines in oil prices; (8) our rising per barrel lifting costs; (9) the possibility that our budget for capital expenditures will be insufficient to maintain and exploit reserves, particularly given our high investment needs to maintain production and replenish reserves; (10) the possibility that the Mexican Government will not be able to continue providing the support it has provided in recent years; and (11) the involvement of the Mexican Government in our strategy, financing and management. In particular, in light of the recent downturn seen in the oil and gas industry beginning in the first quarter of 2020, certain ratings agencies have expressed concern that we lack flexibility to navigate the downturn and to finance our capital investment needs in the face of low cash flow generation and adverse financing conditions.

Ratings address our creditworthiness and the likelihood of timely payment of our long-term debt securities. Ratings are not a recommendation to purchase, hold or sell securities and may be changed, suspended or withdrawn at any time. Our current ratings and the rating outlooks depend, in part, on economic conditions and other factors that affect credit risk and are outside our control, as well as assessments of the creditworthiness of Mexico. Certain ratings agencies have recently lowered Mexico’s credit ratings and their assessment of Mexico’s creditworthiness has and may further affect our credit ratings.

Ratings actions related to us that occurred in 2020 include the following:

 

  

On March 26, 2020, Standard & Poor’s lowered our credit ratings for foreign currency long term issues and for local currency long term issues from BBB+ and A- to BBB and BBB+, respectively, maintaining a negative credit outlook on a global scale.

 

  

On April 1, 2020, HR Ratings affirmed our local credit rating at HR AAA with a stable outlook and lowered our global credit ratings to HR BBB+(G) with a negative outlook.

 

  

On April 3, 2020, Fitch Ratings lowered our credit rating from BB+ to BB in both global local and global foreign currency with a negative outlook.

 

  

On April 17, 2020, Fitch Ratings lowered our international foreign and local currency long-term ratings from BB to BB-. Fitch Ratings also revised the outlook from negative to stable.

 

  

On April 17, 2020, Moody’s lowered our credit ratings from Baa3 to Ba2, maintaining a negative credit outlook.

 

  

On April 21, 2020, Moody’s lowered our credit ratings of our outstanding notes, as well as credit ratings based on our guarantee to A2.mx/Ba2 from Aa3.mx/Baa3. Moody’s also downgraded our short-term local scale rating to MX-2 from MX-1.

 

  

On December 4, 2020, Standard & Poor’s Global Ratings affirmed our credit rating for foreign currency long term issues and for local currency long term issues of BBB and BBB+, respectively, maintaining a negative credit outlook.

These downgrades of our credit ratings, particularly those below investment grade, may have material adverse consequences on our ability to access the financial markets and/or our cost of financing. In turn, this could significantly harm our ability to meet our existing obligations, financial condition and results of operations.

 

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If such constraints occur at a time when our cash flow from operations is less than the resources necessary 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 utilize alternative financing mechanisms that do not constitute public debt. 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.

Going Concern

Our unaudited condensed consolidated interim financial statements have been prepared on a going concern basis, which assumes that we can meet our payment obligations as they become due. As we describe in Notes 2(b) and 18(f) to our unaudited condensed consolidated interim financial statements included herein, there are certain conditions that have generated important uncertainty and significant doubts concerning our ability to continue operating as a going concern. We discuss the circumstances that have caused these negative trends, as well our plans in regard to these matters in Notes 2(b) and 18(f) to our unaudited condensed consolidated interim financial statements included herein. We intend to continue taking actions to improve our results of operations, capital expenditure plans and financial condition. We continue operating as a going concern, and our unaudited condensed consolidated interim financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Cash Flows from Operating, Investing and Financing Activities

During the first nine months of 2020, net cash flows from operating activities totaled Ps. 2.3 billion, as compared to Ps. 62.2 billion in the first nine months of 2019. During the first nine months of 2020, our net cash flows used in investing activities totaled Ps. 108.8 billion, as compared to Ps. 60.3 billion in the first nine months of 2019. During the first nine months of 2020, new financings totaled Ps. 940.5 billion and payments of principal and interest totaled Ps. 913.7 billion, as compared to Ps. 893.2 billion and Ps. 1,061.2 billion, respectively, during the first nine months of 2019. During the first nine months of 2020, we applied net funds of Ps. 90.8 billion to acquisitions of wells, pipelines, properties, plant and equipment, as compared to Ps. 49.4 billion in the first nine months of 2019.

As of September 30, 2020, our cash and cash equivalents totaled Ps. 36.7 billion, as compared to Ps. 60.6 billion as of December 31, 2019. See Note 8 to our unaudited condensed consolidated interim financial statements included herein for more information about our cash and cash equivalents.

Liquidity Position

We define liquidity as funds available under our lines of credit as well as cash and cash equivalents. The following table summarizes our liquidity position as of September 30, 2020 and December 31, 2019.

 

   As of 
   September 30, 2020   December 31, 2019 
   (millions of pesos) 

Amounts available under existing credit facilities

  Ps. 204,307   Ps. 177,397 

Cash and cash equivalents

   36,742    60,622 
  

 

 

   

 

 

 

Liquidity

  Ps. 241,049   Ps. 238,019 
  

 

 

   

 

 

 

 

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Our lines of credit are fully committed and accordingly available at any time. We have a total amount of Ps. 204,306.9 million (U.S.$7,450.0 million and Ps. 37,000 million) in credit lines in order to provide liquidity, subject to the authorized net indebtedness. As of September 30, 2020, we had withdrawn U.S.$6,800.0 million (Ps. 152,709.6 million) and Ps. 35,000 million from these credit lines and had available U.S.$650.0 million (Ps. 14,597.2 million) and Ps. 2,000.0 million. As of December 18, 2020, PEMEX had withdrawn U.S.$5,500 million (Ps. 109,732 million) and Ps. 37,000 million from these credit lines and had available U.S. $1,170 million (Ps. 23,343 million) and Ps. 9,500 million.

The following table summarizes our sources and uses of cash for the nine-month periods ended September 30, 2020 and 2019:

 

   For the nine-month period ended
September 30,
 
   2020   2019 
   (millions of pesos) 

Net cash flows from operating activities

  Ps. 2,297   Ps. 62,229 

Net cash flows (used in) investing activities

   (108,784   (60,347

Net cash flows from (used in) financing activities

   68,596    (17,752

Effects of foreign exchange on cash balances

   14,011    9,161 
  

 

 

   

 

 

 

Net (decrease) in cash and cash equivalents

  Ps. (23,880  Ps. (6,710
  

 

 

   

 

 

 

 

Note: Numbers may not total due to rounding.

Recent Financing Activities

During the period from May 7, 2020 to December 18, 2020, Petróleos Mexicanos participated in the following financing activities:

 

  

On May 26, 2020, Petróleos Mexicanos partially renewed a credit line of U.S. $400,000,000 maturing in May 2020 for U.S. $200,000,000 maturing in 2021, which bears interest at a floating rate linked to the London Interbank Offered Rate (or LIBOR) plus 350 basis points.

 

  

On June 22, 2020, Petróleos Mexicanos entered into a Ps. 2,000,000,000 term loan due September 2020, which bears interest at a floating rate linked to TIIE plus 230 basis points.

 

  

On August 24, 2020, Petróleos Mexicanos entered into a U.S. $150,000,000 term loan due August 2022, which bears interest at a floating rate linked to LIBOR plus 425 basis points.

 

  

On October 16, 2020, Petróleos Mexicanos issued U.S.$1,500,000,000 of its 6.875% Notes due October 2025 under its U.S. $112,000,000,000 Medium Term Notes Program, Series C. All debt securities issued under this program are guaranteed by Pemex Exploration and Production, Pemex Industrial Transformation and Pemex Logistics and their respective successors and assignees.

 

  

On November 19, 2020, Petróleos Mexicanos and the Ministry of Finance and Public Credit agreed to exchange 16 promissory notes in favor of Petróleos Mexicanos (notes 5 to 20) in a total amount of Ps. 128,656.2 million for 18 series of Mexican Government local bonds (the “New Government Bonds”). All of the New Government Bonds were issued by the Mexican Government. Petróleos Mexicanos recognized the New Government Bonds as long-term financial assets, and the short-term and long-term promissory notes receivable from the Mexican Government were written-off the accounting records.

 

  

On November 20, 2020, Petróleos Mexicanos monetized the New Government Bonds by entering into a three-year financial arrangement to raise Ps. 95,597.6 million at a rate of 8.56275% per annum, with a maturity of November 24, 2023, using the New Government Bonds as the underlying assets. Petróleos Mexicanos retains the economic rights of New Government Bonds, accordingly Petróleos Mexicanos accounts for them as restricted assets and recognizes debt for this transaction.

 

  

On December 7, 2020, P.M.I. Trading, as borrower, and Petróleos Mexicanos, as guarantor, entered into a U.S. $1,500,000,000 revolving credit facility maturing in 2023, which bears interest at a floating rate linked to LIBOR plus 300 to 475 basis points.

During the period from May 7, 2020 to December 18, 2020, Holdings Holanda Services, B.V., as debtor, obtained U.S. $19,296 million in financing from its revolving credit lines and repaid U.S. $17,961 million. As of May 7, 2020, the outstanding amount under these revolving credit lines was U.S. $365 million. As of December 18, 2020, the outstanding amount under these revolving credit lines was U.S. $1,700 million.

For our financing activities for the period from January 1, 2020 to May 6, 2020, see “Item 5—Operating and Financial Review and Prospects—Liquidity and Capital Resources—Financing Activities—2020 Financing Activities” in the Form 20-F.

As of September 30, 2020, and as of the date of this report, we were not in default under any of our financing agreements.

 

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Business Overview

Production

Set forth below are selected summary operating data relating to PEMEX.

 

   Nine months ended
September 30,
        
   2019   2020   Change  % 

Operating Highlights

       

Production

       

Crude oil (tbpd) (1)(3)

   1,681    1,690    9   0.5 

Natural gas (mmcfpd) (2)(3)

   3,664    3,641    (23  (0.6

Petroleum products (tbpd)

   622    599    (23  (3.7

Dry gas from units (mmcfpd)

   2,300    2,257    (43  (1.9

Natural gas liquids (tbpd)

   222    215    (7  (3.2

Petrochemicals (tt)

   1,283    1,014    (269  (21.0

Average crude oil exports (tbpd)(4)

       

Isthmus

   n.a.    129    129   100 

Maya

   1,052    996    (56  (5.3
  

 

 

   

 

 

   

 

 

  

 

 

 

Total

   1,052    1,124    72   6.9 

Value of crude oil exports

        (value in millions of U.S. dollars)(4)

  U.S. $5,236.25   U.S. $10,485.10   U.S. $5,248.90   100 

Average PEMEX crude oil export prices per barrel(5)

       

Isthmus

   n.a.   U.S. $35.07   U.S. $35.1   100.0 

Maya

  U.S. $54.13   U.S. $34.47   U.S. $(19.7  (36.3
  

 

 

   

 

 

   

 

 

  

 

 

 

Weighted average price(6)

  U.S. $54.13   U.S. $34.03   U.S. $(20.1  (37.1

West Texas Intermediate crude oil average price per barrel(4)

  U.S. $56.86   U.S. $38.65   U.S. $(18.2  (32.0

 

Notes: Numbers may not total due to rounding.

tbpd = thousands of barrels per day

mmcfpd = millions of cubic feet per day

tt = thousands of tons

n.a. not available

(1)

Crude production includes condensates.

(2)

Gas production does not include nitrogen.

(3)

Does not consider the production of oil and gas corresponding to the partner.

(4)

The volume and value of crude oil exports reflects customary adjustments by P.M.I. Comercio Internacional, S.A. de C.V. (which we refer to as PMI), P.M.I. Trading Designated Activity Company (formerly P.M.I. Trading, Ltd., which we refer to as P.M.I. Trading DAC), P.M.I. Norteamérica, S.A. de C.V., (which we refer to as PMI-NASA, and, together with PMI and P.M.I. Trading DAC, we collectively refer to as the PMI Subsidiaries) to reflect the percentage of water in each shipment as of September 30, 2020.

(5)

Average price during period indicated based on billed amounts.

(6)

On December 18, 2020, the weighted average price of PEMEX’s crude oil export mix was U.S. $47.50 per barrel.

(7)

On December 18, 2020, the West Texas Intermediate crude oil spot price was U.S. $49.10 per barrel.

Source: Petróleos Mexicanos and the PMI Subsidiaries.

 

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Crude oil production increased by 0.5% in the first nine months of 2020, from 1,681 thousand barrels per day in the first nine months of 2019 to 1,690 thousand barrels per day in the first nine months of 2020. This increase was mainly due to:

 

  

a 1.7% increase in production of heavy crude oil, primarily due to development activities and a deceleration in the decline in field production at certain fields of the Ku-Maloob-Zaap business unit. This increase occurred despite Mexico’s adherence to the OPEC+ agreement to reduce the global crude oil supply in order to help mitigate the decrease in oil prices and demand that has taken place as a result of the COVID-19 pandemic and the suspension of production in some mature fields due to the increase in inventories caused by the closure of ports due to tropical storms Amanda and Cristóbal.

Partially offset by:

 

  

a 6.7% decrease in production of extra light crude oil, primarily due to a decrease in the production of the Homol, Kax and Xux fields and a natural decline in production and increased fractional water flow of some mature fields.

 

  

a 4.3% reduction in production of light crude oil, primarily due to a decrease in the production of the Ixtal, Kab, Sinán fields and a natural decline in production of mature fields.

 

  

Additionally, during the third quarter of 2020 our production was impacted by a suspension of production of 59 thousand barrels per day in July due to the activation of the emergency shutdown system of the Yuum K’ak Naab Floating Production, Storage and Offloading (FPSO) facility due a collision with the Olympic Future tanker and by the partial operation of the FPSO due a COVID-19 health contingency in its facilities, which caused an adverse impact on production of 9 thousand barrels per day in August.

During the first nine months of 2020, natural gas production decreased by 0.6%, from 3,664 million cubic feet per day in the first nine months of 2019 to 3,641 million cubic feet per day in the same period of 2020. This decrease in production was primarily a result of:

 

  

a 2.5% decrease in associated gas production, primarily due to the decrease in production of the Cantarell, Crudo Ligero Marino and Tsimín-Xux business units and Mexico’s adherence to the OPEC+ agreement to reduce the global crude oil supply in order to help mitigate the decrease in oil prices and demand that has taken place as a result of the COVID-19 pandemic and the suspension of production in some mature fields due to the increase in inventories caused by the closure of ports due to tropical storms Amanda and Cristóbal.

Partially offset by:

 

  

a 5.1% increase in non-associated gas production, mainly due to the incorporation of production of the Ixachi field and the reclassification of the Tizón field from crude oil and associated gas to gas and condensate (non-associated gas).

Production of petroleum products decreased by 3.7% in the first nine months of 2020, from 622 thousand barrels per day in the first nine months of 2019 to 599 thousand barrels per day in the first nine months of 2020. This decrease in production is mainly due to a decrease in crude oil process at the Tula Refinery of 28.2 thousand barrels per day and at the Minatitlán Refinery of 14.6 thousand barrels per day. In the first nine months of 2020, the production of distillates (gasoline, diesel and jet fuel) at the Madero Refinery increased by 17.8 thousand barrels per day as compared to the same period of 2019.

During the first nine months of 2020, dry gas production decreased by 1.9%, as compared to the same period of 2019, due to lower gas production in the Cactus Gas Processing Complex.

During the first nine months of 2020, natural gas liquids production decreased by 3.2%, as compared to the same period of 2019 as a result of lower production of liquefied gas, mainly in the Gas Processing Complex Ciudad Pemex.

During the first nine months of 2020, the production of petrochemical products decreased by 269 thousand tons, a 21.0% decrease as compared to the first nine months of 2019. This decrease is mainly explained by:

 

  

a 178 thousand ton decrease in the production of ethane derivatives, due to the swing unit at the Morelos Petrochemical Complex’s operational problems, as well as a reduction in the commercialization of monoethylene glycol.

 

  

a 70 thousand ton decrease in the production of aromatics and derivatives, due to decreased production at the Cangrejera Petrochemical Complex primarily because the CCR unit has remained out of operation since April 25, 2020 due to problems in a compressor at the CCR unit and in the distributed control system.

This decrease was partially offset by:

 

  

a 51 thousand ton increase in the production of ammonia, mainly due to the reactivation of the ammonia plant VI at the Cosoleacaque Petrochemical Complex as of February 2020.

 

  

an 8 thousand ton increase in the production of methanol at the Independencia Petrochemical Complex, due to the stable operation of the methanol unit during the first nine months of 2020.

 

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Impacts of the COVID-19 Pandemic

On March 11, 2020, the World Health Organization (WHO) declared the COVID-19 outbreak a pandemic. Governments across the world continue to institute measures to address the pandemic, including mandatory quarantines, social distancing guidelines, travel restrictions and declaration of health emergencies. The effects of the COVID-19 pandemic have led to a worldwide economic slowdown, and as a result there has been a decrease in global demand for crude oil and derivatives. For more information related to the decline in international crude oil prices and the decrease in the demand of petroleum products, see Note 20 to our unaudited condensed consolidated interim financial statements included herein.

As a result of the COVID-19 pandemic, on March 24, 2020 the Mexican Government, through the Secretaría de Salud (Mexican Ministry of Health), implemented actions to protect against COVID-19. Some of these actions include, among others, issuing directives to avoid places of work, crowded areas, public places or unnecessary social activities during this time. While as of June 1, 2020 the Mexican Government began to lift some of these preventative measures and introduced the use of an epidemiological traffic light that indicates which non-essential activities are permitted based on the color indicated for each state of Mexico, these preventative measures have caused a decrease in demand of certain goods and services, including petroleum products.

Likewise, in line with the recommendations of the WHO and the Ministry of Health, we announced measures to preserve the health of our employees and support the prevention of contagion in our administrative and operational areas, such as limiting our workforce’s access to our facilities, implementing alternating shifts and allowing a portion of our workforce to work remotely. In addition, we have implemented sanitizing measures to disinfect our facilities and the use of thermal cameras and other special equipment to monitor infection risks. Certain of our operations therefore remain active as of the date hereof.

While we continue to undertake precautionary measures in response to the COVID-19 pandemic to protect the health and safety of our employees, their families and the local communities, we have struggled to prevent the spread of COVID-19 among out personnel. As of December 18, 2020, approximately 15,698 of our employees and persons covered by our medical benefits have been confirmed as having contracted COVID-19, of which approximately 13,226 have recovered and approximately 446 are current active cases. Regrettably, 385 of our employees, 866 of our retired employees, 615 relatives of our employees and eight of our external contractors are confirmed to have passed away as a result of COVID-19.

In order to address the drop in crude oil prices that began in March 2020, on April 12, 2020, the Organization of the Petroleum Exporting Countries (OPEC) and other non-OPEC oil exporting countries, including, among others, Mexico and Russia, reached an agreement to reduce world crude oil supply. Pursuant to this agreement, these countries, which are known as OPEC+, agreed to reduce their overall crude oil production by 9.7 million barrels per day from May 1, 2020 through June 30, 2020, by 7.7 million barrels per day from July 1, 2020 through December 31, 2020 and by 5.8 million barrels per day from January 1, 2021 through April 30, 2022. In particular, Mexico agreed, and reduced its crude oil production by 100,000 barrels per day for a period of two months beginning on May 1, 2020. During May, June, July, August, September and October 2020, we decreased our crude oil production to 1,676.6, 1,654.7, 1,647.3, 1,668.6, 1,654.7 and 1,680.2 thousand barrels per day, respectively. Further, as a result of the reduction in the demand and prices of oil and fuel caused by the COVID-19 pandemic, we revised our production target for the year 2021 from approximately 2.03 million barrels per day to 1.88 million barrels per day. For more information relating to the production agreement, see “Item 3—Risk Factors Related to our Relationship with the Mexican Government—The Mexican Government has entered into agreements with other nations to limit production” and “Item 4—Trade Regulation, Export Agreements and Production Agreements” in the Form 20-F.

 

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On April 21, 2020, the Mexican Government, through a Presidential decree, granted us a reduction in our tax burden equal to Ps. 65.0 billion for 2020, which consists of a fiscal credit applicable to the DUC up to such amount. This decrease in the DUC is incremental to the one resulting from the decrease of the rate from 65% to 58% in 2020 in accordance with amendments to the Federal Revenue Law for the Fiscal Year 2020.

As a result of the abrupt reduction in the demand and prices of oil and fuel, we adopted a set of measures aiming at reducing costs, postponing cash outflows and optimizing our working capital, in order to ensure our financial strength and resilience of its businesses. The main measures are:

 

  

reducing our capital expenditures;

 

  

decreasing operating expenses that do not hazard our operating capabilities;

 

  

decreasing non-strategic projects and focusing instead on more profitable ones; and

 

  

developing and implementing alternative financing mechanisms that do not constitute public debt.

For further information regarding these measures, see Note 20 to the unaudited condensed consolidated interim financial statements included herein.

The ongoing effects on our business and our financial performance of the COVID-19 pandemic remain highly uncertain. If the impact of the COVID-19 pandemic continues for an extended period of time, it could adversely affect our ability to operate our business in the manner and on the timelines previously planned. Further, it could have accounting consequences, such as decreases in our revenues and the value of our inventories, foreign exchange losses, impairments of fixed assets, and affect our ability to operate effective internal control over financial reporting. For further information regarding the impact of the COVID-19 pandemic on us, see “Item 3–—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”, “Item 3––Risk Factors—The outbreak of COVID-19 has had and may continue to have an adverse effect on our business, results of operations and financial condition” and “Item 5—Overview” in the Form 20-F.

Industrial Transformation

Retail Service Stations

As of September 30, 2020, there were a total of 7,750 Pemex franchise gas stations, a decrease of 9.8% as compared to 8,593 Pemex gas stations as of December 31, 2019. As of September 30, 2020, 7,705 of these Pemex franchise gas stations were privately owned and operated as franchises, a decrease of 9.9% as compared to 8,548 privately-owned franchises as of December 31, 2019, while the remaining 45 were owned by Pemex Industrial Transformation, which was the same as of December 31, 2019. This decrease was mainly due to ongoing increased competition in the open market. In addition, as of September 30, 2020, Pemex Industrial Transformation supplied oil products to 3,460 gas stations outside of the Pemex franchise program, an increase of 15.6% as compared to 2,992 gas stations as of December 31, 2019. As of September 30, 2020, 745 of these gas stations outside the Pemex franchise model operate under a sublicenses of the Pemex brand, an increase of 31.2% as compared to 568 gas stations at December 31, 2019, and 2,715 use third party brands, an increase of 12.0% as compared to 2,424 gas stations at December 31, 2019. For more information regarding our gas stations, see “Item 4—Information on the Company—Industrial Transformation—Refining—Domestic Sales” and Item 4—Information on the Company—International Trading—Gas Stations in the United States” in the Form 20-F.

 

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Legal Proceedings

On December 12, 2017, Pemex Exploration and Production was summoned about an arbitration claim (no. 23217/JPA) filed by SUBSEA 7 de México, S. de R. L. de C.V. (SUBSEA 7) related to additional expenses in connection with pipelines construction contracts (No. 420832856 and 420833820). On July 28, 2020, a final award was issued, which was notified to Pemex Exploration and Production on July 30, 2020. Pemex Exploration and Production was ordered to make certain payments. As of the date of this report, Pemex Exploration and Production is evaluating its next steps in connection with this legal proceeding.

Directors and Senior Management

Effective as of April 1, 2020, Mr. Jorge Luis Basaldúa Ramos was appointed as Acting Director General of Pemex Industrial Transformation, replacing Mr. Miguel Gerardo Breceda Lapeyre.

Employees

Effective as of August 1, 2020, Petróleos Mexicanos and the Sindicato de Trabajadores de la República Mexicana (the Petroleum Workers’ Union of the Mexican Republic) amended their collective bargaining agreement. The amended agreement provides for a 3.37% increase in wages and a 1.80% increase in benefits, and will regulate their labor relations until July 31, 2021.

Board Practices

On June 23, 2020, the Board of Directors of Petróleos Mexicanos approved the creation of a new Comité de Negocios Externos (External Businesses Committee) to support its work. The External Businesses Committee is chaired by an independent member of the Board of Directors of Petróleos Mexicanos. The duties of the External Businesses Committee include, among others, recommending corporate strategies based on its analysis of the economic and financial environment of the oil sector and assisting the Board of Directors of Petróleos Mexicanos to issue guidelines, policies, procedures and other provisions related to the operation, surveillance, performance evaluation and monitoring of the operating and business results of the subsidiary companies and those companies in which Pemex or its subsidiary entities participate in its equity. The External Business Committee consists of the following members:

 

  

Mr. José Eduardo Beltrán Hernández, independent member of the Board of Directors of Petróleos Mexicanos and Chairperson of the External Business Committee;

 

  

Mr. Rafael Espino de la Peña, independent member of the Board of Directors of Petróleos Mexicanos;

 

  

Mr. Juan José Paullada Figueroa, independent member of the Board of Directors of Petróleos Mexicanos;

 

  

Ms. Norma Rocío Nahle García, member of the Board of Directors of Petróleos Mexicanos; and

 

  

Mr. Arturo Herrera Gutiérrez, member of the Board of Directors of Petróleos Mexicanos.

Subsidiary Companies

In May 2020, our subsidiary company P.M.I. Holdings, B.V. (PMI HBV), shareholder of Hijos de J. Barreras, S.A. (HJ BARRERAS), transferred to Cruise Yacht Yard Co, Ltd, a company belonging to the ship-owner of the ship in construction by HJ BARRERAS, its corporate and economic rights corresponding to its 51% share in HJ BARRERAS (through a usufruct) along with other agreements, in exchange for a total amount of € 5.1 million (Ps. 125.5 million). Hence, PMI HBV no longer controls HJ BARRERAS, and HJ BARRERAS is no longer consolidated in our consolidated financial statements beginning as of May 31, 2020. As of March 31, 2020 and April 30, 2020, HJ BARRERAS’ total assets amounted to Ps. 1,535.5 million and Ps. 1,558.0, respectively, total liabilities amounted to Ps. 3,001.0 million and Ps. 2,945.3 million, respectively, and negative equity (of which 49% was non-controlling interest) amounted to Ps. (1,465.5 million) and Ps. (1,387.3 million), respectively. The amount of negative equity as of April 30, 2020 includes Ps. 224.5 million of losses during the four-month period then ended (of which 49% was non-controlling interest). This transaction resulted in a profit of Ps. 833.0 million in our consolidated results of operations.

On July 31, 2020, Cruise Yacht Yard Co, Ltd exercised its purchase and sale option.

Transportation and Distribution

On July 1, 2020, the Yuum K’ak Naab FPSO facility collided with the Olympic Future tanker due to bad weather. There were no reported injuries or deaths as a result of this collision. The FPSO facility halted loading of vessels for exports due to the collision but resumed its operations on July 27, 2020.

On November 2, 2020, a gas pipeline exploded in the State of Nuevo Leon, near the city of Monterrey. As of the date of this report, no injuries or deaths were reported as a result of the explosion.

 

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PETRÓLEOS MEXICANOS,

PRODUCTIVE STATE-OWNED SUBSIDIARIES

AND SUBSIDIARY COMPANIES

UNAUDITED CONDENSED CONSOLIDATED

INTERIM FINANCIAL STATEMENTS

AS OF SEPTEMBER 30, 2020 AND DECEMBER 31, 2019 AND

FOR THE THREE AND NINE-MONTH PERIODS ENDED

SEPTEMBER 30, 2020 AND 2019


Table of Contents

PETRÓLEOS MEXICANOS, PRODUCTIVE STATE-OWNED SUBSIDIARIES

AND SUBSIDIARY COMPANIES

UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

AS OF SEPTEMBER 30, 2020 AND DECEMBER 31, 2019 AND FOR THE THREE AND NINE-MONTH PERIODS ENDED SEPTEMBER 30, 2020 AND 2019

Index

 

Contents

  Page 

Unaudited condensed consolidated interim financial statements of:

  

Financial position

   F-3 

Comprehensive income

   F-4 

Changes in equity (deficit)

   F-6 

Cash flows

   F-7 

Notes to the unaudited condensed consolidated interim financial statements

   F-8 to F-41 

 

F-2


Table of Contents

PETRÓLEOS MEXICANOS, PRODUCTIVE STATE-OWNED SUBSIDIARIES AND SUBSIDIARY COMPANIES

UNDAUDITED CONDENSED CONSOLIDATED INTERIM STATEMENTS OF FINANCIAL POSITION

AS OF SEPTEMBER 30, 2020 AND DECEMBER 31, 2019

(Figures stated in thousands, except as noted)

 

   Note   September 30, 2020  December 31, 2019 

ASSETS

     

Current assets:

     

Cash and cash equivalents

   8,16   Ps. 36,741,990  Ps. 60,621,631 

Customers

   9,16    65,746,413   89,263,870 

Other receivable

   9    121,140,745   91,241,811 

Inventories

   10    56,447,504   82,672,196 

Current portion of notes receivable

   14    6,076,065   4,909,970 

Derivative financial instruments

   16    20,517,676   11,496,330 

Other current assets

   16    346,563   346,563 
    

 

 

  

 

 

 

Total current assets

     307,016,956   340,552,371 

Non-current assets:

     

Investments in joint ventures and associates

   11,16    15,111,620   14,874,579 

Wells, pipelines, properties, plant and equipment, net

   12    1,233,345,835   1,211,749,502 

Rights of use

     66,064,754   70,818,314 

Long-term notes receivable, net of current portion

   14    122,351,669   122,565,306 

Deferred income taxes and duties

     128,050,070   136,166,747 

Intangible assets, net

   13    18,691,581   14,584,524 

Other assets

   14    14,874,146   7,136,677 
    

 

 

  

 

 

 

Total non-current assets

     1,598,489,675   1,577,895,649 
    

 

 

  

 

 

 

Total assets

    Ps. 1,905,506,631  Ps. 1,918,448,020 
    

 

 

  

 

 

 

LIABILITIES

     

Current liabilities:

     

Short-term debt and current portion of long—term debt

   15,16   Ps. 412,064,410  Ps. 244,924,185 

Short-term leases

   16    6,247,008   5,847,085 

Suppliers

     168,407,314   208,034,407 

Income taxes and duties payable

     31,495,143   50,692,629 

Accounts and accrued expenses payable

   16    36,604,772   26,055,151 

Derivative financial instruments

   16    15,298,982   16,650,171 
    

 

 

  

 

 

 

Total current liabilities

     670,117,629   552,203,628 
    

 

 

  

 

 

 

Long-term liabilities:

     

Long-term debt, net of current portion

   15,16    2,064,051,108   1,738,249,903 

Long-term leases, net of current portion

   16    67,260,117   62,301,542 

Employee benefits

     1,505,286,454   1,456,815,367 

Provisions for sundry creditors

   17, 19    121,035,598   98,011,908 

Other liabilities

     5,940,720   4,397,299 

Deferred income taxes and duties

     4,859,355   3,676,735 
    

 

 

  

 

 

 

Total long-term liabilities

     3,768,433,352   3,363,452,754 
    

 

 

  

 

 

 

Total liabilities

    Ps. 4,438,550,981  Ps. 3,915,656,382 
    

 

 

  

 

 

 

EQUITY (DEFICIT)

     

Controlling interest:

     

Certificates of Contribution “A”

   18   Ps. 524,931,447  Ps. 478,675,447 

Mexican Government contributions

     43,730,591   43,730,591 

Legal reserve

     1,002,130   1,002,130 

Accumulated other comprehensive result

     (217,687,816  (240,078,590

Accumulated deficit:

     

From prior years

     (2,280,396,147  (1,933,106,785

Net loss for the period

     (605,044,201  (347,289,362
    

 

 

  

 

 

 

Total controlling interest

     (2,533,463,996  (1,997,066,569

Total non-controlling interest

     419,646   (141,793
    

 

 

  

 

 

 

Total equity (deficit)

    Ps. (2,533,044,350 Ps. (1,997,208,362
    

 

 

  

 

 

 

Total liabilities and equity (deficit)

    Ps. 1,905,506,631  Ps. 1,918,448,020 
    

 

 

  

 

 

 

The accompanying notes are an integral part of these unaudited condensed consolidated interim financial statements.

 

F-3


Table of Contents

PETRÓLEOS MEXICANOS, PRODUCTIVE STATE-OWNED SUBSIDIARIES AND SUBSIDIARY COMPANIES

UNAUDITED CONDENSED CONSOLIDATED INTERIM STATEMENTS OF COMPREHENSIVE INCOME

FOR THE NINE-MONTH PERIODS ENDED SEPTEMBER 30, 2020 AND 2019

(Figures stated in thousands, except as noted)

 

   Note   2020  2019 

Net sales:

     

Domestic

    Ps. 377,062,572  Ps. 619,051,930 

Export

     324,230,709   456,270,691 

Services income

     3,541,055   8,064,815 
    

 

 

  

 

 

 

Total of sales

   7    704,834,336   1,083,387,436 

(Reversal) impairment of wells, pipelines, properties, plant and equipment, net

   12    (16,110,579  (7,649,092

Cost of sales

     585,244,228   802,544,430 
    

 

 

  

 

 

 

Gross income

     135,700,687   288,492,098 

Other revenues

     7,822,823   12,366,390 

Other expenses

     (767,123  (3,571,880

Distribution, transportation and sale expenses

     7,916,255   16,179,271 

Administrative expenses

     109,715,148   99,059,136 
    

 

 

  

 

 

 

Operating income

     25,124,984   182,048,201 
    

 

 

  

 

 

 

Financing income

     9,521,018   20,972,064 

Financing (cost)

     (115,152,079  (102,657,224

Derivative financial instruments (cost), net

     (13,041,267  (24,787,956

Foreign exchange (loss) gain, net

     (383,467,068  17,306,721 
    

 

 

  

 

 

 

Sum of financing (costs) net, derivative instruments (cost) net and foreign exchange (loss) gains, net

     (502,139,396  (89,166,395

(Loss) profit sharing in joint ventures and associates

   11    (2,214,544  (42,126
    

 

 

  

 

 

 

(Loss) income before duties, taxes and other

     (479,228,956  92,839,680 
    

 

 

  

 

 

 

Profit-sharing duty, net(1)

     112,585,930   270,537,957 

Income tax expense

     13,361,215   (1,330,971
    

 

 

  

 

 

 

Total duties, taxes and other

     125,947,145   269,206,986 
    

 

 

  

 

 

 

Net (loss)

     (605,176,101  (176,367,306
    

 

 

  

 

 

 

Other comprehensive results:

     

Items that will be reclassified subsequently to profit or loss:

     

Currency translation effect

     22,354,520   2,101,982 

Items that will not be reclassified subsequently to profit or loss:

     

Actuarial losses - employee benefits, net of taxes

   18    (54,156  (223,043,975
    

 

 

  

 

 

 

Total other comprehensive results

     22,300,364   (220,941,993
    

 

 

  

 

 

 

Total comprehensive (loss)

     (582,875,737  (397,309,299
    

 

 

  

 

 

 

Net loss attributable to:

     

Controlling interest

     (605,044,201  (175,764,518

Non-controlling interest

     (131,900  (602,788
    

 

 

  

 

 

 

Net (loss)

     (605,176,101  (176,367,306
    

 

 

  

 

 

 

Other comprehensive results attributable to:

     

Controlling interest

     22,390,774   (220,942,740

Non-controlling interest

     (90,410  747 
    

 

 

  

 

 

 

Total other comprehensive results

     22,300,364   (220,941,993
    

 

 

  

 

 

 

Comprehensive (loss) income:

     

Controlling interest

     (582,653,427  (396,707,258

Non-controlling interest

     (222,310  (602,041
    

 

 

  

 

 

 

Total comprehensive (loss)

    Ps. (582,875,737 Ps. (397,309,299
    

 

 

  

 

 

 

 

(1) 

The applicable rate of the Derecho por la Utilidad Compartida (Profit-sharing Duty, or “DUC”) was 65.00% for fiscal year 2019. The applicable rate of the DUC was reduced to 58.00% for fiscal year 2020. For a further description of the Profit-sharing Duty, see Note 20-B.

The accompanying notes are an integral part of these unaudited condensed consolidated interim financial statements.

 

F-4


Table of Contents

PETRÓLEOS MEXICANOS, PRODUCTIVE STATE-OWNED SUBSIDIARIES AND SUBSIDIARY COMPANIES

UNAUDITED CONDENSED CONSOLIDATED INTERIM STATEMENTS OF COMPREHENSIVE INCOME

FOR THE THREE-MONTH PERIODS ENDED SEPTEMBER 30, 2020 AND 2019

(Figures stated in thousands, except as noted)

 

   Note  2020  2019 

Net sales:

     

Domestic

    Ps. 120,081,045  Ps. 202,520,497 

Export

     117,829,287   144,801,583 

Services income

     1,120,829   3,165,535 
    

 

 

  

 

 

 

Total of sales

  7   239,031,161   350,487,615 

(Reversal) impairment of wells, pipelines, properties, plant and equipment, net

     (8,186,003  (17,247,133

Cost of sales

     189,044,970   263,813,702 
    

 

 

  

 

 

 

Gross income

     58,172,194   103,921,046 

Other revenues

     1,587,937   3,229,061 

Other expenses

     936,954   (288,256

Distribution, transportation and sale expenses

     (652,161  5,135,931 

Administrative expenses

     36,839,902   33,165,066 
    

 

 

  

 

 

 

Operating (loss) income

     24,509,344   68,560,854 
    

 

 

  

 

 

 

Financing income

     2,500,387   13,893,272 

Financing (cost)

     (36,040,080  (41,359,750

Derivative financial instruments (cost) income, net

     17,477,308   (19,807,551

Foreign exchange(loss) gain, net

     36,193,847   (35,520,227
    

 

 

  

 

 

 

Sum of financing (costs) net, derivative instruments (cost) income, net and foreign exchange gains, net

     20,131,462   (82,794,256

(Loss) profit sharing in joint ventures and associates

  11   (1,403,920  (26,981
    

 

 

  

 

 

 

(Loss) income before duties, taxes and other

     43,236,886   (14,260,383
    

 

 

  

 

 

 

Profit-sharing duty, net1

     40,275,201   76,256,242 

Income tax expense (benefit)

     1,550,463   (2,658,472
    

 

 

  

 

 

 

Total duties, taxes and other

     41,825,664   73,597,770 
    

 

 

  

 

 

 

Net (loss)

     1,411,222   (87,858,153
    

 

 

  

 

 

 

Other comprehensive results:

     

Items that will be reclassified subsequently to profit or loss:

     

Currency translation effect

     (3,271,070  3,227,824 

Items that will not be reclassified subsequently to profit or loss:

     

Actuarial losses - employee benefits, net of taxes

     —     (74,075,873
    

 

 

  

 

 

 

Total other comprehensive results

     (3,271,070  (70,848,049
    

 

 

  

 

 

 

Total comprehensive (loss)

     (1,859,848  (158,706,202
    

 

 

  

 

 

 

Net loss attributable to:

     

Controlling interest

     1,417,009   (87,359,134

Non-controlling interest

     (5,787  (499,019
    

 

 

  

 

 

 

Net (loss)

     1,411,222   (87,858,153
    

 

 

  

 

 

 

Other comprehensive results attributable to:

     

Controlling interest

     (3,270,025  (70,851,745

Non-controlling interest

     (1,045  3,696 
    

 

 

  

 

 

 

Total other comprehensive results

    Ps. (3,271,070 Ps. (70,848,049
    

 

 

  

 

 

 

Comprehensive (loss) income:

     

Controlling interest

     (1,853,016  (158,210,879

Non-controlling interest

     (6,832  (495,323
    

 

 

  

 

 

 

Total comprehensive (loss)

    Ps. (1,859,848 Ps. (158,706,202
    

 

 

  

 

 

 

 

1 

The applicable rate of the DUC was 65.00% for fiscal year 2019. The applicable rate of the DUC was reduced to 58.00% for fiscal year 2020. For a further description of the Profit-sharing Duty, see Note 20-B.

The accompanying notes are an integral part of these unaudited condensed consolidated interim financial statements.

 

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PETRÓLEOS MEXICANOS, PRODUCTIVE STATE-OWNED SUBSIDIARIES AND SUBSIDIARY COMPANIES

UNAUDITED CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CHANGES IN EQUITY (DEFICIT), NET

FOR THE NINE-MONTH PERIODS ENDED SEPTEMBER 30, 2020 AND 2019

(Figures stated in thousands, except as noted)

 

  Controlling interest       
           Accumulated other comprehensive income
(loss)
  Accumulated deficit          
  Certificates of
Contribution “A”
  Mexican
Government
contributions
  Legal reserve  Cumulative
currency
translation effect
  Actuarial
(losses) gains on
employee
benefits effect
  For the period  From prior years  Total  Non-controlling
interest
  Total Equity
(deficit), net
 

Balances as of December 31, 2018

 Ps. 356,544,447  Ps. 43,730,591  Ps. 1,002,130  Ps. 45,920,227  Ps. 26,026,840  Ps. (180,374,350 Ps. (1,752,732,435 Ps. (1,459,882,550 Ps. 477,118  Ps. (1,459,405,432
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Transfer to accumulated deficit

       180,374,350   (180,374,350   

Increase in Mexican Government contributions

  122,131,000   —     —     —     —     —     —     122,131,000   —     122,131,000 

Total comprehensive (loss) income

  —     —     —     2,101,233   (223,043,973  (175,764,518  —     (396,707,258  (602,041  (397,309,299
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Balances as of September 30, 2019

 Ps. 478,675,447  Ps. 43,730,591  Ps. 1,002,130  Ps. 48,021,460  Ps. (197,017,133 Ps. (175,764,518 Ps. (1,933,106,785 Ps. (1,734,458,808 Ps. (124,923 Ps. (1,734,583,731
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Balances as of December 31, 2019

 Ps. 478,675,447  Ps. 43,730,591  Ps. 1,002,130  Ps. 43,229,070  Ps. (283,307,660 Ps. (347,289,362 Ps. (1,933,106,785 Ps. (1,997,066,569 Ps. (141,793 Ps. (1,997,208,362
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Transfer to accumulated deficit

  —     —     —     —     —     347,289,362   (347,289,362  —     —     —   

Increase in Mexican Government contributions

  46,256,000   —     —     —     —     —     —     46,256,000   —     46,256,000 

Non-controlling divestment

  —     —     —     —     —     —     —     —     783,749   783,749 

Total comprehensive (loss) income

  —     —     —     22,444,930   (54,156  (605,044,201  —     (582,653,427  (222,310  (582,875,737
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Balances as of September 30, 2020

 Ps. 524,931,447  Ps. 43,730,591  Ps. 1,002,130  Ps. 65,674,000  Ps. (283,361,816 Ps. (605,044,201 Ps. (2,280,396,147 Ps. (2,533,463,996 Ps. 419,646  Ps. (2,533,044,350
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

The accompanying notes are an integral part of these unaudited condensed consolidated interim financial statements.

 

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PETRÓLEOS MEXICANOS, PRODUCTIVE STATE-OWNED SUBSIDIARIES AND SUBSIDIARY COMPANIES

UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS OF CASH FLOWS

FOR THE NINE-MONTH PERIODS ENDED SEPTEMBER 30, 2020 AND 2019

(Figures stated in thousands, except as noted)

 

   2020  2019 

Operating activities

   

Net (loss)

   Ps. (605,176,101  Ps. (176,367,306

Items related to investment activities

   

Income taxes and duties

   125,947,145   269,206,986 

Depreciation and amortization

   99,181,110   102,603,808 

Amortization of intangible assets

   234,190   363,671 

(Reversal) impairment of wells, pipelines, properties, plant and equipment

   (16,110,579  (7,649,092

Exploration costs

   4,455,298   26,188,435 

Unsuccessful wells

   1,651,090   —   

Loss from derecognition of disposal of wells, pipelines, properties, plant and equipment

   2,130,238   1,156,394 

Depreciation of rights of use

   5,573,600   5,552,237 

Unrealized foreign exchange loss (income) of reserve for plugging of wells

   2,646,107   3,165,784 

Gains on disposal of subsidiary

   (707,533  —   

Loss (profit) sharing in joint ventures and associates

   2,214,544   42,126 

Items related to financing activities

   

Unrealized foreign exchange (income) loss

   364,617,367   (17,922,192

Interest expense

   113,870,064   102,657,224 

Amortized cost from debt

   1,282,015   —   

Interest income

   (9,521,018  (20,972,064
  

 

 

  

 

 

 
   92,287,537   288,026,011 

Profit-sharing duty paid

   (125,144,792  (259,834,646

Derivative financial instruments

   (10,372,535  20,926,295 

Accounts receivable

   (6,381,477  (7,302,066

Inventories

   26,224,692   13,452,732 

Accounts payable and accrued expenses

   10,549,621   13,216,544 

Suppliers

   (39,627,093  (25,108,366

Provisions for sundry creditors

   17,044,475   (3,479,079

Employee benefits

   48,416,932   56,115,255 

Other taxes and duties

   (10,700,541  (33,784,043
  

 

 

  

 

 

 

Net cash flows from operating activities

   2,296,819   62,228,637 
  

 

 

  

 

 

 

Investing activities

   

Interests collected

   1,556,196   14,745,918 

Resources from the disposal of subsidiary

   134,716   —   

Other assets

   (7,737,469  (992,914

Acquisition of wells, pipelines, properties, plant and equipment

   (90,783,312  (49,405,879

Intangible assets

   (11,953,918  (24,694,119
  

 

 

  

 

 

 

Net cash flows (used in) investing activities

   (108,783,787)  (60,346,994
  

 

 

  

 

 

 

(Cash deficit before) excess cash to apply in financing activities

   (106,486,968  1,881,638 

Financing activities

   

Increase in equity due to Certificates of Contribution “A”

   46,256,000   122,131,000 

Long-term receivables from the Mexican Government

   4,080,544   32,311,967 

Interest received for long-term receivable from the Mexican Government

   903,126   6,392,385 

Lease payments of principal and interests

   (9,500,587  (10,188,100

Loans obtained from financial institutions

   940,509,304   893,221,059 

Debt payments, principal only

   (797,661,890  (953,669,062

Interest paid

   (115,990,121  (107,951,227
  

 

 

  

 

 

 

Net cash flows from (used in) financing activities

   68,596,376   (17,751,978
  

 

 

  

 

 

 

Net (decrease) in cash and cash equivalents

   (37,890,592  (15,870,335

Effects of foreign exchange on cash balances

   14,010,951   9,160,619 

Cash and cash equivalents at the beginning of the period

   60,621,631   81,912,409 
  

 

 

  

 

 

 

Cash and cash equivalents at the end of the period (Note 8)

   Ps. 36,741,990   Ps. 75,202,693 
  

 

 

  

 

 

 

The accompanying notes are an integral part of these unaudited condensed consolidated interim financial statements.

 

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PETRÓLEOS MEXICANOS, PRODUCTIVE STATE-OWNED SUBSIDIARIES AND SUBSIDIARY COMPANIES

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

AS OF SEPTEMBER 30, 2020 AND DECEMBER 31, 2019 AND

FOR THE THREE- AND NINE-MONTH PERIODS ENDED SEPTEMBER 30, 2020 AND 2019

(Figures stated in thousands, except as noted)

NOTE 1. STRUCTURE AND BUSINESS OPERATIONS OF PETRÓLEOS MEXICANOS, SUBSIDIARY ENTITIES AND SUBSIDIARY COMPANIES

Petróleos Mexicanos was created by a decree issued by the Mexican Congress on June 7, 1938. The decree was published in the Diario Oficial de la Federación (Official Gazette of the Federation) on July 20, 1938 and came into effect on that date. On December 20, 2013, the Decreto por el que se reforman y adicionan diversas disposiciones de la Constitución Política de los Estados Unidos Mexicanos, en Materia de Energía (Decree that amends and supplements various provisions of the Mexican Constitution relating to energy matters), was published in the Official Gazette of the Federation. This Decree came into effect on December 21, 2013 and includes transitional articles setting forth the general framework and timeline for implementing legislation relating to the energy sector.

On August 11, 2014, the Ley de Petróleos Mexicanos (Petróleos Mexicanos Law) was published in the Official Gazette of the Federation. The Petróleos Mexicanos Law became effective on October 7, 2014, except for certain provisions. On December 2, 2014, the Secretaría de Energía (“Ministry of Energy”) published in the Official Gazette of the Federation the declaration pursuant to which the special regime governing Petróleos Mexicanos’ activities relating to productive state-owned subsidiaries, affiliates, compensation, assets, administrative liabilities, state dividend, budget and debt came into effect. On June 10, 2015, the Disposiciones Generales de Contratación para Petróleos Mexicanos y sus Empresas Productivas Subsidiarias (General Contracting Provisions for Petróleos Mexicanos and its productive state-owned subsidiaries) was published in the Official Gazette of the Federation and the following day the special regime for acquisitions, leases, services and public works matters came into effect.

Once the Petróleos Mexicanos Law came into effect, Petróleos Mexicanos was transformed from a decentralized public entity to a productive state-owned company. Petróleos Mexicanos is a legal entity empowered to own property and carry on business in its own name with the purpose of carrying out exploration and extraction of crude oil and other hydrocarbons in the United Mexican States (“Mexico”), as well as refining, processing, storing, transporting, selling and trading in these products.

The Subsidiary Entities, Pemex Exploración y Producción (Pemex Exploration and Production), Pemex Transformación Industrial (Pemex Industrial Transformation), Pemex Logística (Pemex Logistics) and Pemex Fertilizantes (Pemex Fertilizers) are productive state-owned subsidiaries empowered to own property and carry on business in their own names, subject to the direction and coordination of Petróleos Mexicanos (the “Subsidiary Entities”).

The Subsidiary Entities, and their primary purposes, are as follows:

 

  

Pemex Exploration and Production: This entity is in charge of exploration and extraction of crude oil and solid, liquid or gaseous hydrocarbons in Mexico, in the exclusive economic zone of Mexico and abroad, as well as drilling services and repair and services of wells

 

  

Pemex Industrial Transformation: This entity performs activities related to refining, processing, importing, exporting, trading and the sale of hydrocarbons, as well as commercializes, distributes and trades methane, ethane and propylene, directly or through others.

 

  

Pemex Logistics: This entity provides transportation, storage and related services for crude oil, petroleum products and petrochemicals to PEMEX (as defined below) and other companies, through pipelines and maritime and terrestrial means, and provides guard and management services.

 

  

Pemex Fertilizers: This entity produces, distributes and commercializes ammonia, fertilizers and its derivatives, as well as provides related services.

The principal distinction between the Subsidiary Entities and the Subsidiary Companies (as defined below) is that the Subsidiary Entities are productive state-owned entities, whereas the Subsidiary Companies are affiliate companies that were formed in accordance with the applicable laws of each of the respective jurisdictions in which they were incorporated.

The “Subsidiary Companies” are defined as those companies which are controlled, directly or indirectly, by Petróleos Mexicanos.

“Associates,” as used herein, means those companies in which Petróleos Mexicanos has significant influence but not control or joint control over its financial and operating policies.

Petróleos Mexicanos, the Subsidiary Entities and the Subsidiary Companies are referred to collectively herein as “PEMEX.”

PEMEX’s address and its principal place of business is: Av. Marina Nacional No. 329, Col. Verónica Anzures, Alcaldía Miguel Hidalgo, 11300, Ciudad de México, México.

 

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NOTE 2. AUTHORIZATION AND BASIS OF PREPARATION

Authorization –

On December 23, 2020, these unaudited condensed consolidated interim financial statements under IFRS and the notes hereto were authorized for issuance by the following officers: Mr. Octavio Romero Oropeza, Chief Executive Officer, Mr. Alberto Velázquez García, Chief Financial Officer, Mr. Carlos Fernando Cortez González, Deputy Director of Budgeting and Accounting, and Mr. Oscar René Orozco Piliado, Associate Managing Director of Accounting.

Statement of compliance –

PEMEX prepared its unaudited condensed consolidated interim financial statements as of September 30, 2020 and December 31, 2019, and for the nine-month periods ended September 30, 2020 and 2019, in accordance with IAS 34, “Interim Financial Reporting” (“IAS 34”) of the International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”).

These unaudited condensed consolidated interim financial statements do not include all the information and disclosures required for full annual consolidated financial statements and should be read in conjunction with PEMEX’s audited consolidated financial statements as of and for the year ended December 31, 2019. PEMEX estimates that there is no significant impact on its unaudited condensed consolidated interim financial statements due to the seasonality of operations. These unaudited condensed consolidated interim financial statements follow the same accounting policies and methods of computation as PEMEX’s audited consolidated financial statements as of and for the year ended December 31, 2019.

 

A.

Basis of accounting

These unaudited condensed consolidated interim financial statements have been prepared using the historical cost basis method, except for the following items, which have been measured using an alternative basis.

 

Item

  

Basis of measurement

Derivative Financial Instruments (“DFIs”)  Fair Value
Employee Benefits  Fair Value of plan assets less present value of the obligation (defined benefit plan)

 

B.

Going concern

The unaudited condensed consolidated interim financial statements have been prepared on a going concern basis, which assumes that PEMEX will be able to continue its operations and can meet its payment obligations for a reasonable period. (See Note 18).

 

C.

Functional and reporting currency

These unaudited condensed consolidated interim financial statements are presented in Mexican pesos, which is both PEMEX’s functional currency and reporting currency, due to the following:

 

 i.

The economic environment in which PEMEX operates is Mexico, where the legal currency is the Mexican peso;

 

 ii.

The budget through which Petróleos Mexicanos and its Subsidiary Entities operate as entities of the Mexican Government, including the ceiling for personnel services, is elaborated, approved and exercised in Mexican pesos.

 

 ii.

Employee benefits provision was approximately 34% and 37% of PEMEX’s total liabilities as of each of September 30, 2020 and December 31, 2019, respectively. This provision is computed, denominated and payable in Mexican pesos; and

 

 iv.

Cash flows for payment of general expenses, taxes and duties are realized in Mexican pesos.

Although the sales prices of certain products are based on international U.S. dollar-indices, final domestic selling prices are governed by the economic and financial policies established by the Mexican Government. Accordingly, cash flows from domestic sales are generated and received in Mexican pesos.

Mexico’s monetary policy regulator, the Banco de México, requires that Mexican Government entities other than financial entities sell their foreign currency to the Banco de México in accordance with its terms, receiving Mexican pesos in exchange, which is the currency of legal tender in Mexico.

Terms definition –

References in these unaudited condensed consolidated interim financial statements and the related notes to “pesos” or “Ps.” refers to Mexican pesos, “U.S. dollars” or “U.S. $” refers to dollars of the United States of America, “yen” or “¥” refers to Japanese yen, “euro” or “€” refers to the legal currency of the European Economic and Monetary Union, “Pounds sterling” or “£” refers to the legal currency of the United Kingdom and “Swiss francs” or “CHF” refers to the legal currency of the Swiss Confederation. Figures in all currencies are presented in thousands of the relevant currency unit, except exchange rates and product and share prices.

 

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D. Use of judgments and estimates

The preparation of the unaudited condensed consolidated interim financial statements in accordance with IFRS requires the use of estimates and assumptions made by PEMEX’s management that affect the recorded amounts of assets and liabilities and the disclosures of contingent assets and liabilities as of the date of these unaudited condensed consolidated interim financial statements, as well as the recorded amounts of income, costs and expenses during the period. Actual results may differ from these estimates.

Significant estimates and underlying assumptions are reviewed, and the effects of such revisions are recognized in the periods in which any estimates are revised and in any future periods affected by such revision.

The significant judgements made by management in applying PEMEX’s accounting policies and the key sources of estimation uncertainty were the same as those described in PEMEX’s audited consolidated financial statements as of and for the year ended December 31, 2019.

i.    Measurement of fair values

Some of PEMEX’s accounting policies and disclosures require the measurement of the fair values of financial assets and liabilities, as well as non-financial assets and liabilities.

PEMEX has an established control framework with respect to the measurement of fair values. This includes a valuation team that has overall responsibility for overseeing all significant fair value measurements, including Level 3 fair values.

The valuation team regularly reviews significant unobservable inputs and valuation adjustments. If third party information, such as broker quotes or pricing services, is used to measure fair values, then the valuation team assesses the evidence obtained from the third parties to support the conclusion that these valuations meet the requirements of IFRS, including the level in the fair value hierarchy in which the valuations should be classified.

When measuring the fair value of an asset or a liability, PEMEX uses market observable data as far as possible. Fair values are categorized into different levels in a fair value hierarchy based on the inputs used in the valuation techniques as follows.

 

  

Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities.

 

  

Level 2: inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).

 

  

Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).

If the inputs used to measure the fair value of an asset or a liability might be categorized in different levels of the fair value hierarchy, then the fair value measurement is categorized in its entirety in the same level of the fair value hierarchy as the lowest level input that is significant to the entire measurement.

PEMEX recognizes transfers between levels of the fair value hierarchy at the end of the reporting period during which the change has occurred.

NOTE 3. SIGNIFICANT ACCOUNTING POLICIES

The accounting policies applied in the preparation of these unaudited condensed consolidated interim financial statements are consistent with those applied in the preparation of PEMEX’s annual consolidated financial statements as of and for the year ended December 31, 2019. A number of new standards are effective from January 1, 2020, but they do not have a material effect on these unaudited condensed consolidated interim financial statements.

NOTE 4. STANDARDS ISSUED BUT NOT YET EFFECTIVE

A number of new standards and amendments to standards are effective for annual periods beginning after January 1, 2021 and earlier application is permitted; however, PEMEX has not early adopted any of the forthcoming new or amended standards in preparing these unaudited condensed consolidated interim financial statements.

 

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NOTE 5. SUBSIDIARY ENTITIES AND SUBSIDIARY COMPANIES

As of September 30, 2020 and December 31, 2019, the Subsidiary Entities consolidated in these financial statements include Pemex Exploration and Production, Pemex Industrial Transformation, Pemex Logistics and Pemex Fertilizers. Former Subsidiary Entities Pemex Drilling and Services and Pemex Ethylene were also consolidated in these financial statements until June 30, 2019.

As of September 30, 2020 and December 31, 2019, the consolidated Subsidiary Companies are as follows:

 

  

PEP Marine, DAC. (“PEP DAC”)(v)

 

  

P.M.I. Services, B.V. (“PMI SHO”)(i)(iv)

 

  

P.M.I. Holdings, B.V. (“PMI HBV”)(i)

 

  

P.M.I. Trading DAC (“PMI Trading”)(i)

 

  

P.M.I. Holdings Petróleos España, S. L. (“HPE”)(i)

 

  

P.M.I. Services North America, Inc. (“PMI SUS”)(i)

 

  

P.M.I. Norteamérica, S. A. de C. V. (“PMI NASA”)(i)

 

  

P.M.I. Comercio Internacional, S. A. de C. V. (“PMI CIM”)(i)(ii)

 

  

P.M.I. Campos Maduros SANMA, S. de R. L. de C. V. (“SANMA”)

 

  

Pro-Agroindustria, S. A. de C. V. (“AGRO”)

 

  

P.T.I. Infraestructura de Desarrollo, S. A. de C. V. (“PTI ID”)(iii)

 

  

P.M.I. Cinturón Transoceánico Gas Natural, S. A. de C. V. (“PMI CT”)(i)(v)

 

  

P.M.I. Transoceánico Gas LP, S. A. de C. V. (“PMI TG”)(i)(v)

 

  

P.M.I. Servicios Portuarios Transoceánicos, S. A. de C. V. (“PMI SP”)(i)

 

  

P.M.I. Midstream del Centro, S. A. de C. V. (“PMI MC”)(i)

 

  

PEMEX Procurement International, Inc. (“PPI”)

 

  

Hijos de J. Barreras, S. A. (“HJ BARRERAS”)(ii)(vi)

 

  

PEMEX Finance, Ltd. (“FIN”)

 

  

Mex Gas Internacional, S. L. (“MGAS”)

 

  

Pemex Desarrollo e Inversión Inmobiliaria, S. A. de C. V. (“PDII”)

 

  

Kot Insurance Company, AG. (“KOT”)

 

  

PPQ Cadena Productiva, S.L. (“PPQCP”)

 

  

III Servicios, S. A. de C. V. (“III Servicios”)

 

  

PM.I. Ducto de Juárez, S. de R.L. de C.V. (“PMI DJ”)(i)

 

  

PMX Fertilizantes Holding, S.A de C.V. (“PMX FH”)

 

  

PMX Fertilizantes Pacífico, S.A. de C.V. (“PMX FP”)

 

  

Grupo Fertinal (“GP FER”)

 

  

Compañía Mexicana de Exploraciones, S.A. de C.V. (“COMESA”)(ii)

 

  

P.M.I. Trading Mexico, S.A. de C.V. (“TRDMX”)(i)

 

  

Holdings Holanda Services, B.V. (“HHS”)

 

 i.

Member Company of the “PMI Subsidiaries”.

 

 ii.

Non-controlling interest company.

 

 iii.

Formerly PMI Infraestructura de Desarrollo, S.A. de C.V. until March 2019. On May 30, 2019 these shares were transferred to Pemex Industrial Transformation.

 

 iv.

This company was liquidated in 2019.

 

 v.

These companies were merged into PMI NASA during the first quarter of 2020.

 

 vi.

As of May 2020, this company is not included in the consolidation (see Note 18-g).

 

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Table of Contents

NOTE 6. Segment financial information

PEMEX’s primary business is the exploration and production of crude oil and natural gas, as well as the production, processing, marketing and distribution of petroleum and petrochemical products. As of September 30, 2020, PEMEX’s operations were conducted through six business segments: Exploration and Production, Industrial Transformation, Logistics, Fertilizers, the Trading Companies and Corporate and Other Operating Subsidiary Companies. Until June 30, 2019, PEMEX’s operations were also conducted through the additional two business segments: Drilling and Services (merged into Pemex Exploration and Production as of July 1, 2019) and Ethylene (merged into Pemex Industrial Transformation as of July 1, 2019). Due to PEMEX’s structure, there are significant amounts of inter-segment sales among the reporting segments, which are made at internal transfer prices established by PEMEX that are intended to reflect international market prices.

The primary sources of revenue for PEMEX’s business segments are as described below:

 

  

The exploration and production segment earns revenues from domestic sales of crude oil and natural gas, and from exporting crude oil through certain of the Trading Companies. Crude oil export sales are made through the agent subsidiary company PMI CIM, to 18 major customers in various foreign markets. Approximately half of PEMEX’s crude oil is sold to Pemex Industrial Transformation.

 

  

The industrial transformation segment earns revenues from sales of refined petroleum products and derivatives, mainly to third parties within the domestic market. This segment also sells a significant portion of the fuel oil it produces to the Comisión Federal de Electricidad (Federal Eletricity Commission, or “CFE”) and a significant portion of jet fuel produced to the Aeropuertos y Servicios Auxiliares (Airports and Auxiliary Services Agency). The refining segment’s most important products are different types of gasoline and diesel.

 

  

The industrial transformation segment also earns revenues from domestic sources generated by sales of natural gas, liquefied petroleum gas, naphtha, butane and ethane and certain other petrochemicals such as methane derivatives, ethane derivatives, aromatics and derivatives.

 

  

The logistics segment earns income from transportation and storage of crude oil, petroleum products and petrochemicals, as well as related services, which it provides by employing pipelines and offshore and onshore resources, and from providing services related to the maintenance, handling, guarding and management of these products.

 

  

The fertilizers segment earns revenues from trading ammonia, fertilizers and its derivatives, mostly in the domestic market.

 

  

The trading companies segment, which consist of PMI CIM, PMI NASA, PMI Trading and MGAS (the “Trading Companies”), earns revenues from trading crude oil, natural gas and petroleum and petrochemical products in international markets.

 

  

The segment related to corporate and other operating Subsidiary Companies provides administrative, financing, consulting and logistical services, as well as economic, tax and legal advice and re-insurance services to PEMEX’s entities and companies.

 

  

The drilling segment receives income from drilling services, and servicing and repairing wells. This entity was merged into Pemex Exploration and Production on July 1, 2019.

 

  

The ethylene segment earns revenues from the distribution and trade of methane, ethane and propylene in the domestic market. This entity was merged into Pemex Industrial Transformation on July 1, 2019.

 

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Table of Contents

The following tables present the condensed financial information of these segments, after elimination of unrealized intersegment gain (loss), and include only select line items. As a result, the line items presented below may not total. The columns before intersegment eliminations include unconsolidated figures. These reporting segments are those which PEMEX’s management evaluates in its analysis of PEMEX and on which it bases its decision-making. These reporting segments are presented in PEMEX’s reporting currency.

 

As of/for the nine-month
period ended
September 30, 2020

 Exploration and
Production
  Industrial
Transformation
  Logistics  Fertilizers  Trading
Companies
  Corporate and
Other Operating
Subsidiary
Companies
  Intersegment
eliminations
  Total 

Sales:

        

Trade

  Ps.221,607,638   359,745,773   —     966,745   112,485,775   6,487,350   —     701,293,281 

Intersegment

  177,364,499   68,660,130   59,763,749   331,859   211,396,438   84,928,390   (602,445,065 

Services income

  94,162   82,524   3,230,746   533   74,857   58,233   —     3,541,055 

(Impairment) reversal of wells pipelines, properties, plant and equipment, net

  (32,741,187  16,537,964   —     92,644   —     —     —     (16,110,579

Cost of sales

  258,270,923   485,113,906   30,514,141   2,157,783   318,977,076   20,968,738   (530,758,339  585,244,228 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Gross income (loss)

  173,536,563   (73,163,443  32,480,354   (951,290  4,979,994   70,505,235   (71,686,726  135,700,687 

Other revenue

  901,504   2,549,808   211,502   12,485   355,166   3,792,358   —     7,822,823 

Other expenses

  (744,603  (49,016  72,820   6,536   (167,589  (96,016  210,745   (767,123

Distribution, transportation and sales expenses

  167,988   9,362,353   108,979   273,433   938,596   132,903   (3,067,997  7,916,255 

Administrative expenses

  61,832,426   41,188,079   13,683,850   932,444   1,554,103   58,927,425   (68,403,179  109,715,148 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Operating income (loss)

  111,693,050   (121,213,083  18,971,847   (2,138,146  2,674,872   15,141,249   (4,805  25,124,984 

Financing income

  54,183,827   183,536   1,956,929   191,717   228,155   127,757,132   (174,980,278  9,521,018 

Financing cost

  (115,601,069  (8,187,775  (340,506  (572,237  (598,400  (164,837,173  174,985,081   (115,152,079

Derivative financial instruments (cost) income, net

  (8,461,387  4,433   —     —     (1,061,471  (3,522,842  —     (13,041,267

Foreign exchange (loss) income, net

  (339,136,720  (24,505,754  (698,957  (293,630  (616,668  (18,215,339  —     (383,467,068

Profit (loss) sharing in joint ventures and associates

  7,585   750,132   (1,142  (3,524,621  (2,664,883  (570,404,325  573,622,710   (2,214,544

Taxes, duties and other

  112,585,930   —     3,720,438   —     4,696,278   4,944,499   —     125,947,145 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Net (loss) income

  Ps.(409,900,644  (152,968,511  16,167,733   (6,336,917  (6,734,673  (619,025,797  573,622,708   (605,176,101
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total current assets

  884,810,498   139,674,873   141,871,250   2,437,372   129,446,883   951,703,208   (1,942,927,128  307,016,956 

Total non-current assets

  788,553,823   381,627,771   168,847,661   3,582,734   45,392,108   807,311,727   (596,826,149  1,598,489,675 

Total current liabilities

  365,666,080   346,271,603   30,340,924   10,292,321   90,789,438   1,766,885,049   (1,940,127,786  670,117,629 

Total non-current liabilities

  2,567,307,169   705,900,626   84,095,252   6,635,064   1,969,847   2,420,831,647   (2,018,306,253  3,768,433,352 

Equity (deficit), net

  (1,259,608,928  (530,869,585  196,282,735   (10,907,279  82,079,706   (2,428,701,761  1,418,680,762   (2,533,044,350

Depreciation and amortization

  78,387,052   14,698,003   4,443,842   (253,071  235,442   1,669,842   —     99,181,110 

Depreciation of rights of use

  230,171   3,673,625   277,195   26,636   804,199   561,776   —     5,573,602 

Net periodic cost of employee benefits excluding items recognized in other comprehensive income

  26,843,419   38,423,937   6,326,761   497,468   —     24,565,958   —     96,657,543 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

 

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Table of Contents

As of/for the three-month period
ended September 30, 2020

 Exploration and
Production
  Industrial
Transformation
  Logistics  Fertilizers  Trading
Companies
  Corporate
and Other
Operating
Subsidiary
Companies
  Intersegment
eliminations
  Total 

Sales:

        

Trade

 Ps.81,007,347   113,603,295   —     64,336   40,819,055   2,416,299   —     237,910,332 

Intersegment

  67,624,904   31,701,395   16,008,458   (10,877  64,689,217   24,442,307   (204,455,404  —   

Services income

  28,530   22,507   1,011,470   62   27,135   31,125   —     1,120,829 

(Impairment) reversal of wells pipelines, properties, plant and equipment, net

  (22,107,486  13,828,839   —     92,644   —     —     —     (8,186,003

Cost of sales

  90,002,922   160,668,397   11,329,346   439,099   104,168,342   6,771,322   (184,334,458  189,044,970 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Gross income (loss)

  80,765,345   (29,170,039  5,690,582   (478,222  1,367,065   20,118,409   (20,120,946  58,172,194 

Other revenue

  292,478   606,762   67,930   3,703   93,581   523,483   —     1,587,937 

Other expenses

  813,414   2,860   83,159   210   (3,726  33,689   7,348   936,954 

Distribution, transportation and sales expenses

  86,801   (138,018  27,118   69,221   340,903   (9,716  (1,028,470  (652,161

Administrative expenses

  18,277,929   12,221,925   4,641,955   329,420   508,989   19,948,161   (19,088,477  36,839,902 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Operating income (loss)

  63,506,507   (40,644,324  1,172,598   (872,950  607,028   737,136   3,349   24,509,344 

Financing income

  17,160,389   53,852   720,855   61,709   68,189   37,999,291   (53,563,898  2,500,387 

Financing cost

  (34,768,980  (2,800,004  (141,915  (159,830  (167,803  (51,562,096  53,560,548   (36,040,080

Derivative financial instruments (cost) income, net

  20,915,997   17,238   —     —     (469,412  (2,986,515  —     17,477,308 

Foreign exchange (loss) income, net

  30,289,073   3,083,958   81,282   22,554   30,497   2,686,483   —     36,193,847 

Profit (loss) sharing in joint ventures and associates

  5,260   185,060   10   (252,865  (1,617,270  12,941,804   (12,665,919  (1,403,920

Taxes, duties and other

  40,275,201   —     (722,445  —     301,400   1,971,508   —     41,825,664 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Net (loss) income

 Ps.56,833,045   (40,104,220  2,555,275   (1,201,382  (1,850,171  (2,155,405  (12,665,920  1,411,222 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Depreciation and amortization

  27,895,972   4,865,162   1,548,850   (84,586  76,664   554,273   —     34,856,335 

Depreciation of rights of use

  66,393   1,217,141   167,187   8,878   227,895   194,562   —     1,882,056 

Net periodic cost of employee benefits excluding items recognized in other comprehensive income

  8,947,806   12,807,979   5,995,115   (3,720,372  —     8,188,652   —     32,219,180 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

 

As of/for the nine-month
period ended
September 30, 2019

 Exploration and
Production(1)
  Industrial
Transformation(2)
  Logistics  Fertilizers  Trading
companies
  Corporate
and Other
Operating
Subsidiary
Companies
  Intersegment
eliminations
  Total 

Sales:

        

Trade

  313,804,420   612,584,261   —     1,071,046   140,227,195   7,635,699   —     1,075,322,621 

Intersegment

  257,965,075   97,354,062   67,291,033   430,199   364,111,085   81,908,703   (869,060,157  —   

Services income

  441,079   2,023,922   3,476,916   751   50,982   2,071,165   —     8,064,815 

Impairment (reversal) of wells, pipelines, properties, plants and equipment

  61,204,466   (29,090,913  (39,762,645  —     —     —     —     (7,649,092

Cost of sales

  312,420,951   741,307,212   25,433,980   2,422,778   494,482,055   38,576,601   (812,099,147  802,544,430 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Gross income (loss)

  198,585,157   (254,054  85,096,614   (920,782  9,907,207   53,038,966   (56,961,010  288,492,098 

Other revenue

  4,517,847   2,990,401   172,208   21,535   1,678,270   3,461,687   (475,558  12,366,390 

Other expenses

  (5,046,961  (533,262  (1,681,347  (325  —     (54,758  3,744,773   (3,571,880

Distribution, transportation and sales expenses

  165,504   17,993,605   42,860   232,978   939,528   53,691   (3,248,895  16,179,271 

Administration expenses

  48,647,097   40,682,541   6,971,653   519,745   1,715,669   51,599,503   (51,077,072  99,059,136 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Operating income

  149,243,442   (56,473,061  76,572,962   (1,652,295  8,930,280   4,792,701   634,172   182,048,201 

Financing cost

  (98,660,614  (6,581,198  (394,272  (565,309  (737,197  (159,722,331  164,003,697   (102,657,224

Financing income

  66,092,037   1,834,116   307,938   12,420   652,965   116,710,525   (164,637,937  20,972,064 

Derivative financial instruments (cost) income, net

  (20,941,666  (9,838  —     —     (827,434  (3,009,090  72   (24,787,956

Foreign exchange (loss) income, net

  19,287,119   (1,421,102  23,842   27,781   (198,913  (412,006  —     17,306,721 

Profit (loss) sharing in joint ventures and associates

  66,994   —     (135  —     (186,051  (133,242,494  133,319,560   (42,126

Tax, duties and other

  272,036,079   (1,446,202  (4,328,055  —     3,960,675   (1,015,511  —     269,206,986 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Net (loss) income

  (156,948,767  (61,204,881  80,838,390   (2,177,403  3,672,975   (173,867,184  133,319,564   (176,367,306
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total current assets

  1,024,853,978   231,054,623   35,373,626   2,219,207   123,088,374   704,140,924   (1,791,801,563  328,929,169 

Total non-current assets

  918,964,729   373,340,486   151,973,544   5,295,903   28,963,483   1,245,347,139   (1,021,697,810  1,702,187,474 

Total current liabilities

  338,632,149   206,964,157   22,553,796   11,767,511   79,942,267   1,552,714,837   (1,789,896,426  422,678,291 

Total non-current liabilities

  2,273,426,936   716,282,788   9,671,450   791,838   4,145,469   2,099,631,252   (1,760,927,650  3,343,022,083 

Equity (deficit), net

  (668,240,378  (318,851,836  155,121,924   (5,044,239  67,964,121   (1,702,858,026  737,324,703   (1,734,583,731

Depreciation and amortization

  83,948,004   14,543,037   2,275,558   -237,017   72,674   2,001,552   —     102,603,808 

Depreciation of rights of use

  257,923   3,523,823   260,894   35,515   962,901   511,181   —     5,552,237 

Net periodic cost of employee benefits excluding items recognized in other comprehensive income

  26,566,094   41,459,272   213,342   14,339   —     20,533,820   —     88,786,867 

 

(1) 

On July 1, 2019 Pemex Drilling and Services was merged into Pemex Exploration and production. For comparison purposes all operations for periods prior to the merger are presented in the Pemex Exploration and Production segment.

(2)

On July 1, 2019 Pemex Ethylene was merged into Pemex Industrial Transformation. For comparison purposes all operations for periods prior to the merger are presented in the Pemex Industrial Transformation segment.

 

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Table of Contents

As of/ for the three-month
period ended
September 30, 2019

 Exploration
And
Production(1)
  Industrial
Transformation(2)
  Logistics  Fertilizers  Trading
companies
  Corporate and
Other Operating
Subsidiary
Companies
  Intersegment
eliminations
  Total 

Sales:

        

Trade

  Ps. 98,943,709   Ps.199,768,323   Ps. —     Ps. 17,775   Ps. 46,220,072   Ps. 2,372,201   Ps.—     Ps. 347,322,080 

Intersegment

  88,965,340   28,450,354   23,630,367   138,087   111,799,110   34,186,814   (287,170,072  —   

Services income

  44,652   1,511,814   1,106,283   61   22,876   479,849   —     3,165,535 

Impairment (reversal) of wells, pipelines, properties, plants and equipment

  10,337,033   (27,584,166  —     —     —     —     —     (17,247,133

Cost of sales

  104,429,859   241,017,229   11,157,695   484,908   156,241,919   12,709,073   (262,226,981  263,813,702 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Gross income (loss)

  73,186,809   16,297,428   13,578,955   (328,985  1,800,139   24,329,791   (24,943,091  103,921,046 

Other revenue

  309,295   1,131,564   61,789   15,628   896,291   1,081,689   (267,195  3,229,061 

Other expenses

  (1,544,841  (271,400  535,255   81      (10,451  1,003,100   (288,256

Distribution, transportation and sales expenses

  39,646   5,580,863   18,206   55,550   304,896   11,854   (875,084  5,135,931 

Administration expenses

  20,008,195   14,773,296   3,239,453   230,755   785,324   17,708,153   (23,580,110  33,165,066 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Operating income

  51,903,422   (3,196,567  10,918,340   (599,581  1,606,210   7,681,022   248,008   68,560,854 

Financing income

  29,253,608   633,060   170,150   10,765   219,349   49,386,365   (65,780,025  13,893,272 

Financing cost

  (36,441,928  (3,401,129  (116,755  (204,065  (250,737  (66,477,087  65,531,951   (41,359,750

Derivative financial instruments (cost) income, net

  (20,514,500  (2,777  —     —     629,114   80,540   72   (19,807,551

Foreign exchange (loss) income, net

  (28,778,237  (3,204,295  (111,480  (33,129  14,612   (3,407,698  —     (35,520,227

Profit (loss) sharing in joint ventures and associates

  25,663   —     (33  —     (77,837  (79,900,440  79,925,666   (26,981

Tax, duties and other

  76,256,242   —     1,166,756   —     1,061,372   (4,886,600  —     73,597,770 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Net (loss) income

  (80,808,214  (9,171,708  9,693,466   (826,010  1,079,339   (87,750,698  79,925,672   (87,858,153
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Depreciation and amortization

  26,198,646   5,910,302   673,171   (86,626  27,660   931,571   —     33,654,724 

Depreciation of rights of use

  71,217   1,186,420   86,327   15,784   575,831   171,541   —     2,107,120 

Net periodic cost of employee benefits excluding items recognized in other comprehensive income

  8,836,889   13,795,547   70,686   4,776   —     6,835,276   —     29,543,174 

 

(1)

On July 1, 2019 Pemex Drilling and Services was merged into Pemex Exploration and production. For comparison purposes all operations for periods prior to the merger are presented in the Pemex Exploration and Production segment.

(2)

On July 1, 2019 Pemex Ethylene was merged into Pemex Industrial Transformation. For comparison purposes all operations for periods prior to the merger are presented in the Pemex Industrial Transformation segment.

 

As of December 31, 2019

 Exploration
and Production
  Industrial
Transformation
  Logistics  Fertilizers  Trading
Companies
  Corporate and
Other Operating
Subsidiary
Companies
  Intersegment
eliminations
  Total 

Total current assets

  985,938,224   220,597,465   111,583,417   7,773,098   161,300,389   718,345,361   (1,864,985,583  340,552,371 

Total non-current assets

  769,244,352   385,462,326   160,374,484   1,720,770   43,127,474   1,001,402,395   (783,436,152  1,577,895,649 

Total current liabilities

  393,129,182   290,128,797   28,995,291   12,648,563   125,341,872   1,564,317,345   (1,862,357,422  552,203,628 

Total non-current liabilities

  2,210,050,053   682,521,743   78,111,581   6,121,684   3,382,236   2,080,349,970   (1,697,084,513  3,363,452,754 

Equity (deficit), net

  (847,996,659  (366,590,749  164,851,029   (9,276,379  75,703,755   (1,924,919,559  911,020,200   (1,997,208,362

 

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Table of Contents

NOTE 7. REVENUE

For the nine-month periods ended September 30, 2020 and 2019, revenues from sales to third parties were as follows:

A.     Revenue disaggregation

 

For the nine-month
periods ended
September 30,

 Exploration and
Production
  Industrial
Transformation
  Drilling
and
Services(1)
  Logistics  Fertilizers  Ethylene(2)  Trading
Companies
  Corporate
and Other
Operating
Subsidiary
Companies
  Total 

Geographical market

         

2020

         

United States

 Ps.129,993,896   —     —     —     —     —     93,364,619   211,184   223,569,699 

Other

  28,726,798   —     —     —     —     —     5,146,621   1,954,164   35,827,583 

Europe

  62,710,943   —     —     —     —     —     606,844   18,898   63,336,685 

Local

  270,163   359,828,297   —     3,230,746   967,278   —     13,442,548   4,361,337   382,100,369 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total

 Ps.221,701,800   359,828,297   —     3,230,746   967,278   —     112,560,632   6,545,583   704,834,336 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

2019

         

United States

 Ps.172,338,802   —     —     —     —     —     117,067,336   631,728   290,037,866 

Other

  41,744,035   —     —     —     —     —     18,239,543   2,213,445   62,197,023 

Europe

  99,518,894   —     —     —     —     —     3,446,135   1,706,355   104,671,384 

Local

  623,013   609,350,259   20,755   3,476,916   1,071,797   5,257,924   1,525,163   5,155,336   626,481,163 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total

 Ps.314,224,744   609,350,259   20,755   3,476,916   1,071,797   5,257,924   140,278,177   9,706,864   1,083,387,436 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Major products and services

         

2020

         

Crude oil

 Ps.221,431,637   —     —     —     —     —     —     —     221,431,637 

Gas

  176,001   40,644,697   —     —     —     —     23,937,451   —     64,758,149 

Refined petroleum products

  —     312,270,553   —     —     —     —     87,321,183   —     399,591,736 

Oher

  —     6,830,523   —     —     966,745   —     1,227,141   6,487,350   15,511,759 

Services

  94,162   82,524   —     3,230,746   533   —     74,857   58,233   3,541,055 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total

 Ps.221,701,800   359,828,297   —     3,230,746   967,278   —     112,560,632   6,545,583   704,834,336 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

2019

         

Crude oil

 Ps.313,601,731   —     —     —     —     —     60,101,434   —     373,703,165 

Gas

  202,690   49,936,879   —     —     —     —     42,072,008   —     92,211,577 

Refined petroleum products

  —     552,640,599   —     —     —     —     37,129,803   956,566   590,726,968 

Oher

  —     4,752,549   —     —     1,071,046   5,254,234   923,951   6,679,131   18,680,911 

Services

  420,323   2,020,232   20,755   3,476,916   751   3,690   50,981   2,071,167   8,064,815 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total

 Ps.314,224,744   609,350,259   20,755   3,476,916   1,071,797   5,257,924   140,278,177   9,706,864   1,083,387,436 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Timing of revenue recognition

         

2020

         

Products transferred at a point in time

 Ps.221,701,800   340,519,251   —     —     966,745   —     112,485,775   15,004   675,688,575 

Products and services transferred over the time

  —     19,309,046   —     3,230,746   533   —     74,857   6,530,579   29,145,761 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total

 Ps.221,701,800   359,828,297   —     3,230,746   967,278   —     112,560,632   6,545,583   704,834,336 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

2019

         

Products transferred at a point in time

 Ps.313,804,421   607,330,027   —     —     1,071,046   5,254,234   140,227,196   7,635,697   1,075,322,621 

Products and services transferred over the time

  420,323   2,020,232   20,755   3,476,916   751   3,690   50,981   2,071,167   8,064,815 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total

 Ps.314,224,744   609,350,259   20,755   3,476,916   1,071,797   5,257,924   140,278,177   9,706,864   1,083,387,436 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

 

For the three-month periods
ended September 30,

 Exploration and
Production
  Industrial
Transformation
  Drilling
and
Services(1)
  Logistics  Fertilizers  Ethylene(2)  Trading
Companies
  Corporate
and Other
Operating
Subsidiary
Companies
  Total 

Geographical market

         

2020

         

United States

 Ps.46,923,793   —     —     —     —     —     34,190,567   211,184   81,325,544 

Other

  13,074,867   —     —     —     —     —     1,109,253   1,028,960   15,213,080 

Europe

  20,954,287   —     —     —     —     —     314,688   —     21,268,975 

Local

  82,930   113,625,802   —     1,011,470   64,398   —     5,231,682   1,207,280   121,223,562 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total

 Ps.81,035,877   113,625,802   —     1,011,470   64,398   —     40,846,190   2,447,424   239,031,161 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

2019

         

United States

 Ps.54,277,692   —     —     —     —     —     39,607,469   335,049   94,220,210 

Other

  16,904,921   —     —     —     —     —     8,167,483   279,757   25,352,161 

Europe

  27,698,496   —     —     —     —     —     981,663   450,907   29,131,066 

Local

  107,252   201,280,137   —     1,106,283   17,836   —     (2,513,667  1,786,337   201,784,178 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total

 Ps.98,988,361   201,280,137   —     1,106,283   17,836   —     46,242,948   2,852,050   350,487,615 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Major products and services

         

2020

         

Crude oil

 Ps.80,952,947   —     —     —     —     —     —     —     80,952,947 

Gas

  54,400   14,082,711   —     —     —     —     7,710,869   —     21,847,980 

Refined petroleum products

  —     97,540,381   —     —     —     —     33,037,338   —     130,577,719 

Oher

  —     1,980,203   —     —     64,336   —     70,848   2,416,299   4,531,686 

Services

  28,530   22,507   —     1,011,470   62   —     27,135   31,125   1,120,829 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total

 Ps.81,035,877   113,625,802   —     1,011,470   64,398   —     40,846,190   2,447,424   239,031,161 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

2019

         

Crude oil

 Ps.98,881,108   —     —     —     —     —     20,878,545   —     119,759,653 

Gas

  62,601   16,367,129   —     —     —     —     13,404,180   —     29,833,910 

Refined petroleum products

  —     183,292,575   —     —     —     —     11,905,721   445,570   195,643,866 

Oher

  —     108,619   —     —     17,775   —     31,626   1,926,631   2,084,651 

Services

  44,652   1,511,814   —     1,106,283   61   —     22,876   479,849   3,165,535 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total

 Ps.98,988,361   201,280,137   —     1,106,283   17,836   —     46,242,948   2,852,050   350,487,615 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Timing of revenue recognition

         

2020

         

Products transferred at a point in time

 Ps.81,101,509   94,376,773   —     —     64,336   —     40,819,055   (4,056,047  212,305,626 

Products and services transferred over the time

  (65,632  19,249,029   —     1,011,470   62   —     27,135   6,503,471   26,725,535 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total

 Ps.81,035,877   113,625,802   —     1,011,470   64,398   —     40,846,190   2,447,424   239,031,161 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

2019

         

Products transferred at a point in time

 Ps.98,943,709   199,768,323   —     —     17,775   —     46,220,072   2,372,201   347,322,080 

Products and services transferred over the time

  44,652   1,511,814   —     1,106,283   61   —     22,876   479,849   3,165,535 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total

 Ps.98,988,361   201,280,137   —     1,106,283   17,836   —     46,242,948   2,852,050   350,487,615 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

 

(1)

This company was merged on July 1, 2019. All operations for periods subsequent to the merger were transferred to Pemex Exploration and Production. Therefore, these amounts are not comparable with 2020 figures.

(2)

This company was merged on July 1, 2019. All operations for periods subsequent to the merger were transferred to Pemex Industrial Transformation. Therefore, these amounts are not comparable with 2020 figures.

 

F-16


Table of Contents

B.     Accounts receivable in the statement of financial position

As of September 30, 2020 and December 31, 2019, PEMEX had accounts receivable derived from customer contracts in the amounts of Ps. 65,746,413 and Ps. 89,263,870, respectively (see Note 9).

C.     Practical expedients

 

 i.

Expiration of contracts

PEMEX has no outstanding performance obligations to disclose as of September 30, 2020 and December 31, 2019 due to the nature of its operations.

 

 ii.

Significant financial component, less than one year

PEMEX does not need to adjust the amount committed in consideration for goods and services to account for the effects of a significant financing component, since the transfer and the time of payment of a good or service committed to the customer is less than one year.

 

 iii.

Practical expedient

PEMEX applied the practical expedient, so disclosure about remaining performance obligations that conclude in less than one year is not needed.

When PEMEX is entitled to consideration for an amount that directly corresponds to the value of the performance that PEMEX has completed, it may recognize an income from ordinary activities for the amount to which it has the right to invoice.

NOTE 8. CASH AND CASH EQUIVALENTS

a. As of September 30, 2020 and December 31, 2019, cash and cash equivalents were as follows:

 

   September 30, 2020   December 31, 2019 

Cash on hand and in banks(i)

  Ps.22,507,584   Ps.27,502,675 

Highly liquid investments(ii)

   14,234,406    33,118,956 
  

 

 

   

 

 

 
  Ps.36,741,990   Ps.60,621,631 
  

 

 

   

 

 

 

 

(i)

Cash on hand and in banks is primarily composed of cash in banks.

(ii)

Mainly composed of short-term Mexican Government investments.

 

F-17


Table of Contents

NOTE 9. CUSTOMERS AND OTHER ACCOUNTS RECEIVABLE

As of September 30, 2020 and December 31, 2019, accounts receivable and other receivables were as follows:

 

   September 30, 2020   December 31, 2019 

a. Customers

    

Domestic customers, net

  Ps.37,962,470   Ps.46,792,824 

Export customers, net

   27,783,943    42,471,046 
  

 

 

   

 

 

 

Total customers

  Ps.65,746,413   Ps.89,263,870 
  

 

 

   

 

 

 

 

   September 30, 2020   December 31, 2019 

b. Other accounts receivable

    

Financial assets:

    

Sundry debtors

  Ps.32,316,999   Ps.27,748,849 

Employees and officers

   3,509,436    3,667,242 
  

 

 

   

 

 

 

Total financial assets

   35,826,435    31,416,091 

Non-financial assets:

    

Special Tax on Production and Services

   32,313,647    31,587,018 

Taxes to be recovered and prepaid taxes

   50,873,202    26,162,225 

Other accounts receivable

   2,127,461    2,076,477 
  

 

 

   

 

 

 

Total non-financial assets:

  Ps.85,314,310   Ps.59,825,720 
  

 

 

   

 

 

 

Total other account receivable

  Ps.121,140,745   Ps.91,241,811 
  

 

 

   

 

 

 

 

F-18


Table of Contents

NOTE 10. INVENTORIES

As of September 30, 2020 and December 31, 2019, inventories were as follows:

 

   September 30, 2020   December 31, 2019 

Refined and petrochemicals products

  Ps.35,441,455   Ps.41,211,837 

Products in transit

   6,350,683    22,719,635 

Crude oil

   10,810,662    14,087,218 

Materials and products in stock

   3,702,012    4,381,628 

Materials in transit

   228    127,594 

Gas and condensate products

   142,464    144,284 
  

 

 

   

 

 

 
  Ps.56,447,504   Ps.82,672,196 
  

 

 

   

 

 

 

NOTE 11. INVESTMENTS IN JOINT VENTURES AND ASSOCIATES

The investments in joint ventures and associates as of September 30, 2020 and December 31, 2019, were as follows:

 

   Percentage
of investment
  September 30, 2020   December 31, 2019 

Deer Park Refining Limited

   49.99  Ps.12,530,778    Ps.12,652,599 

Sierrita Gas Pipeline LLC

   35.00  1,399,532    1,171,593 

Frontera Brownsville, LLC.

   50.00  537,257    446,202 

Texas Frontera, LLC.

   50.00  228,298    199,923 

CH 4 Energía, S. A. de C.V.

   50.00  204,142    192,614 

Administración Portuaria Integral de Dos Bocas, S. A. de C.V.

   40.00  199,441    165,370 

Other-net

   Various   12,172    46,278 
   

 

 

   

 

 

 
    Ps.15,111,620    Ps.14,874,579 
   

 

 

   

 

 

 

Profit (loss) sharing in joint ventures and associates:

 

   For the nine-month period ended
September 30,
 
   2020  2019 

Deer Park Refining Limited

  Ps.(2,476,491)  Ps.(305,863) 

Sierrita Gas Pipeline LLC

   147,668   30,764 

Frontera Brownsville, LLC.

   40,768   66,994 

Texas Frontera, LLC.

   29,053   38,541 

Administración Portuaria Integral de Dos Bocas, S.A. de C.V.

   34,071   89,047 

CH4 Energía S.A. de C.V.

   11,528   38,524 

Ductos el Peninsular, S. A. P. I. de C. V.

   (1,141  (133
  

 

 

  

 

 

 

(Loss) profit sharing in joint ventures and associates, net

  Ps.(2,214,544 Ps.(42,126
  

 

 

  

 

 

 

 

F-19


Table of Contents
   For the three-month period ended
September 30,
 
   2020  2019 

Deer Park Refining Limited

  Ps.(1,529,231 Ps.(118,512

Sierrita Gas Pipeline LLC

   71,136   8,701 

Frontera Brownsville, LLC.

   18,431   12,219 

Texas Frontera, LLC.

   7,685   13,007 

Administración Portuaria Integral de Dos Bocas, S.A. de C.V.

   20,265   25,663 

CH4 Energía S.A. de C.V.

   7,783   31,974 

Ductos el Peninsular, S. A. P. I. de C. V.

   11   (33
  

 

 

  

 

 

 

Profit sharing in joint ventures and associates, net

  Ps.(1,403,920 Ps.(26,981
  

 

 

  

 

 

 

Additional information about the significant investments in joint ventures and associates is presented below:

 

  

Deer Park Refining Limited. On March 31, 1993, PMI NASA acquired 49.99% of the Deer Park Refinery. In its capacity as general partner of Deer Park Refining Limited Partnership, Shell is responsible for the operation and management of the refinery (installed capacity of approximately 340,000 barrels per day of crude oil). Management decisions are made jointly with respect to investment in or disposal of assets, distribution of dividends, indebtedness and equity operations. In accordance with the investment contract and the operation of the agreement, the participants have the rights to the net assets in the proportion of their participation. This joint venture is recorded under the equity method.

 

  

Sierrita Gas Pipeline LLC. This company was created on June 24, 2013. Its main activity is the developing of projects related to the transportation infrastructure of gas in the United States. This investment is recorded under the equity method.

 

  

Frontera Brownsville, LLC. Effective April 1, 2011, PMI SUS entered into a joint venture with TransMontaigne Operating Company L.P. to create Frontera Brownsville, LLC. Frontera Brownsville, LLC was incorporated in Delaware, United States, and has the corporate power to own and operate certain facilities for the storage and treatment of clean petroleum products. This investment is recorded under the equity method.

 

  

Texas Frontera, LLC. This company was constituted on July 27, 2010, and its principal activity is the lease of tanks for the storage of refined product. PMI SUS, which owns 50% interest in Texas Frontera, entered into a joint venture with Magellan OLP, L.P., and together they are entitled to the results in proportion of their respective investment. The company has seven tanks with a capacity of 120,000 barrels per tank. This joint venture is recorded under the equity method.

 

  

CH4 Energía, S.A. de C.V. This company was constituted on December 21, 2000. CH4 Energía engages in the purchase and sale of natural gas and in activities related to the trading of natural gas, such as transport and distribution in Valle de Toluca, Mexico. This joint venture is recorded under the equity method.

 

  

Administración Portuaria Integral de Dos Bocas, S.A. de C.V. This company was constituted on August 12, 1999. Its primary activity is administrating the Dos Bocas port, which is in Mexico’s public domain, promoting the port’s infrastructure and providing related port services. This investment is recorded under the equity method.

 

  

Ductos el Peninsular S.A.P.I. de C.V. This company was created on September 22, 2014. Its primary activity is the construction and operation of an integral transportation system and storage of petroleum products in the Peninsula of Yucatán.

 

F-20


Table of Contents

NOTE 12. WELLS, PIPELINES, PROPERTIES, PLANT AND EQUIPMENT, NET

 

  Plants  Drilling
equipment
  Pipelines  Wells  Buildings  Offshore
platforms
  Furniture
and
equipment
  Transportation
equipment
  Construction
in progress
(1)
  Land  Unproductive
fixed assets
  Other
fixed
assets
  Total fixed
assets
 

Investment

             

Balances as of December 31, 2018

 Ps.811,270,391   20,080,965   421,235,950   1,379,323,723   64,845,163   326,482,265   52,020,042   15,159,952   129,352,513   44,351,625   —     32,659   3,264,155,248 

Transfers to rights of use

   (7,005,141  —     —     —      —     —     —     —     —     —     (7,005,141

Acquisitions

  6,716,930   210,844   611,482   (2,889,157  132,075   3,346,336   105,695   1,677,914   39,043,601   159,541   —     —     49,115,261 

Reclassifications

  (1,331,901  —     389,377   —     (173,655  (561,635  (129,237  (19,317  67,666   (3,619  35,377   —     (1,726,944

Capitalization

  (179,674  —     5,882,888   31,658,720   136,988   2,717,555   —     277,634   (40,482,000  (12,111  —     —     —   

Reversal of impairment (Impairment)

  12,905,516   —     40,806,059   (36,756,921  (112,921  (10,688,696  —     (1,098,105  2,594,160   —     —     —     7,649,092 

Disposals

  (5,012,032  (235,382  (254,948  (151,405  (115,936  —     (1,359,087  (86,059  (785,603  (71,255  (35,377  (32,659  (8,139,743
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Balances as of September 30, 2019

 Ps.824,369,230   13,051,286   468,670,808   1,371,184,960   64,711,714   321,295,825   50,637,413   15,912,019   129,790,337   44,424,181   —     —     3,304,047,773 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Balances as of January 1, 2019

 Ps.811,270,391   20,080,965   421,235,950   1,379,323,723   64,845,163   326,482,265   52,020,042   15,159,952   129,352,513   44,351,625   —     32,659   3,264,155,248 

Transfers to rights of use

  —     (7,005,141  —     —     —     —     —     —     —     —     —     —     (7,005,141

Acquisitions

  8,337,019   252,382   1,251,488   29,072,723   316,499   5,436,425   184,863   1,735,581   82,520,111   182,563   —     —     129,289,654 

Reclassifications

  (1,381,310  —     428,738   —     (51,885  (614,430  (234,643  47,110   (106,429  (16,161  35,403   —     (1,893,607

Unsuccessful wells

  —     —     —     (69,231,587  —     —     —     —     (7,922,365  —     —     —     (77,153,952

Capitalization

  6,830,064   —     6,538,540   35,251,706   143,312   13,013,199   2,566   955,134   (62,722,409  (12,112  —     —     —   

(Impairment) reversal of impairment

  24,464,081   —     (4,008,680  (83,730,351  (499,722  (31,991,592  —     (1,430,077  114,127   —     —     —     (97,082,214

Disposals

  (3,396,366  (235,382  (301,359  (151,405  (1,435,140  —     (1,565,266  (112,482  (1,310,108  (356,379  (35,403  (32,659  (8,931,949
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Balances as of December 31, 2019

 Ps.846,123,879   13,092,824   425,144,677   1,290,534,809   63,318,227   312,325,867   50,407,562   16,355,218   139,925,440   44,149,536   —     —     3,201,378,039 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Acquisitions

  8,596,129   17,992   1,141,350   20,527,095   1,192,275   1,842,005   187,129   867,498   71,679,103   746,526   —     —     106,797,102 

Reclassifications

  (1,983,871  —     140,460   —     (7,373  —     296,647   (236,331  44,364   41,165   16   —     (1,704,923

Capitalization

  918,736   —     8,681,048   32,142,329   19,870   2,797,069   5,198   —     (44,650,944  86,694   —     —     —   

Reversal of impairment (impairment)

  (17,992,773  153,456   284,133   28,740,051   1,497,335   4,191,754   8,159   —     (771,536  —     —     —     16,110,579 

Disposals

  (1,371,888  —     (1,585,018  (151,405  (5,630,559  —     (2,220,453  (461,591  (1,134,183  (248,065  (16  —     (12,803,178
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Balances as of September 30, 2020

 Ps.834,290,212   13,264,272   433,806,650   1,371,792,879   60,389,775   321,156,695   48,684,242   16,524,794   165,092,244   44,775,856   —     —     3,309,777,619 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Accumulated depreciation and amortization

             

Balances as of December 31, 2018

  (436,603,123  (5,998,481  (173,264,040  (973,467,746  (42,924,256  (179,831,090  (42,161,378  (7,419,050  —     —     —     —     (1,861,669,164

Transfers to rights of use

   693,738   —     —     —      —     —     —     —     —     —     693,738 

Depreciation and amortization

  (32,641,848  (1,248,696  (10,237,980  (44,602,724  (1,439,234  (10,045,253  (1,940,409  (447,664  —     —     —     —     (102,603,808

Reclassifications

  1,269,646   —     9,442   —     196,803   100,931   144,286   5,836   —     —     —     —     1,726,944 

Disposals

  3,268,583   167,811   2,341,772   —     161,972   (268,724  1,238,996   72,939   —     —     —     —     6,983,349 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Balances as of September 30, 2019

 Ps.(464,706,742  (6,385,628  (181,150,806  (1,018,070,470  (44,004,715  (190,044,136  (42,718,505  (7,787,939  —     —     —     —     (1,954,868,941
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Balances as of January 1, 2019

 Ps.(436,603,123  (5,998,481  (173,264,040  (973,467,746  (42,924,256  (179,831,090  (42,161,378  (7,419,050  —     —     —     —     (1,861,669,164

Transfers to rights of use

  —     943,639   —     —     —     —     —     —     —     —     —     —     943,639 

Depreciation and amortization

  (49,473,592  (591,168  (16,380,653  (51,574,532  (2,131,913  (13,820,275  (2,556,539  (658,338  —     —     —     —     (137,187,010

Reclassifications

  1,303,186   —     41,225   —     205,661   116,278   220,301   6,956   —     —     —     —     1,893,607 

Disposals

  3,308,366   128,561   184,172   817   1,226,345   —     1,449,659   92,471   —     —     —     —     6,390,391 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Balances as of December 31, 2019

 Ps.(481,465,163  (5,517,449  (189,419,296  (1,025,041,461  (43,624,163  (193,535,087  (43,047,957  (7,977,961  —     —     —     —     (1,989,628,537
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Depreciation and amortization

  (32,245,718  (317,678 ��(9,980,978  (44,243,938  (1,470,291  (8,531,806  (1,701,812  (688,889  —     —     —     —     (99,181,110

Reclassifications

  2,009,065   —     (225,047  —     7,496   —     (222,366  135,775   —     —     —     —     1,704,923 

Disposals

  924,538   —     1,547,492   —     5,461,455   —     2,152,775   586,680   —     —     —     —     10,672,940 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Balances as of September 30, 2020

 Ps.(510,777,278  (5,835,127  (198,077,829  (1,069,285,399  (39,625,503  (202,066,893  (42,819,360  (7,944,395  —     —     —     —     (2,076,431,784
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Wells, pipelines, properties, plant and
equipment—net as of September 30, 2019

 Ps.359,662,488   6,665,658   287,520,002   353,114,490   20,706,999   131,251,689   7,918,908   8,124,080   129,790,337   44,424,181   —     —     1,349,178,832 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Wells, pipelines, properties, plant and
equipment—net as of December 31, 2019

 Ps.364,658,716   7,575,375   235,725,381   265,493,348   19,694,064   118,790,780   7,359,605   8,377,257   139,925,440   44,149,536   —     —     1,211,749,502 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Wells, pipelines, properties, plant and
equipment—net as of September 30, 2020

 Ps.323,512,934   7,429,145   235,728,821   302,507,480   20,764,272   119,089,802   5,864,882   8,580,399   165,092,244   44,775,856   —     —     1,233,345,835 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Depreciation rates

  3 to 5  5  2 to 7  —     3 to 7  4  3 to 10  4 to 20  —     —     —     —     —   

Estimated useful lives

  20 to 35   20   15 to 45   —     33 to 35   25   3 to 10   5 to 25   —     —     —     —     —   

 

(1)

Mainly wells, pipelines and plants.

 

F-21


Table of Contents
A.

As of September 30, 2020 and December 31, 2019, the financing cost identified with fixed assets in the construction or installation stage, capitalized as part of the value of such fixed assets, was Ps. 3,068,530 and Ps. 2,959,025, respectively.

 

B.

The combined depreciation of fixed assets and amortization of wells for the nine-month periods ended September 30, 2020 and 2019, recognized in operating costs and expenses, was Ps. 99,181,110, and Ps. 101,967,362, respectively, which includes costs related to plugging and abandonment of wells for the nine-month periods ended September 30, 2020 and 2019, of Ps. 2,243,267 and Ps. 4,461,573, respectively.

 

C.

As of September 30, 2020 and December 31, 2019, provisions relating to future plugging of wells costs amounted to Ps. 103,772,600 and Ps. 80,849,900, respectively, and are presented in the “Provisions for plugging of wells” (see Note 17).

 

D.

As of September 30, 2020 and 2019, the translation effect of property, plant and equipment items from a different currency than the presentation currency was Ps. (6,562,460) and Ps. (217,161), respectively.

 

E.

During the nine-month periods ended September 30, 2020 and 2019, PEMEX recognized a reversal of impairment of Ps. 16,110,579 and Ps. 7,649,092, respectively, which is presented as a separate line item in the consolidated statement of comprehensive income as follows:

 

   2020  2019 
   Reversal of
impairment
   (Impairment)  Reversal of
impairment /
(Impairment), net
  Reversal of
impairment
   (Impairment)  Reversal of
impairment /
(Impairment), net
 

Pemex Exploration and Production

  Ps. 72,476,187    (39,735,000  32,741,187  Ps. 61,371,534    (122,576,000  (61,204,466

Pemex Industrial Transformation

   5,496,925    (22,034,889  (16,537,964  31,312,841    (2,221,928  29,090,913 

Pemex Fertilizers

   —      (92,644  (92,644  —      —     —   

Pemex Logistics

   —      —     —     39,762,645    —     39,762,645 
  

 

 

   

 

 

  

 

 

  

 

 

   

 

 

  

 

 

 

Total

  Ps. 77,973,112    (61,862,533  16,110,579  Ps. 132,447,020    (124,797,928  7,649,092 
  

 

 

   

 

 

  

 

 

  

 

 

   

 

 

  

 

 

 

Cash Generating Unit of Pemex Exploration and Production

As of September 30, 2020, Pemex Exploration and Production recognized a net reversal of impairment of Ps. 32,741,187, mainly due to: (i) a positive foreign currency exchange rate effect of Ps. 43,544,187 mainly in Cantarell, Aceite Terciario del Golfo (“ATG”), Chuc, Tsimin, Xux, Ixtal Manik and Burgos cash generating units (“CGUs”) and (ii) an increase in crude oil prices, generating a positive effect of Ps. 28,932,000, mainly in the Cantarell, Burgos and ATG CGUs. These increases were partially offset by (i) an impact from discounting future cash flows of Ps. (35,193,000), mainly in the Cantarell, ATG and Burgos CGUs due to higher income from volume, price and exchange rate effect; (ii) a decrease in the volume production profiles, generating a negative effect of Ps. (3,673,000), mainly in the Tsimin Xux, Chuc, Crudo Ligero Marino, Ixtal Manik and Costero CGUs, due to natural declining production, partially offset by increases in the volume production profiles of new fields Ixachi, Xikin, Uchbal, Tetl, Teekit, Suuk, Pokche and Mulach; and (iii) higher taxes of Ps. (905,000) due to higher income from production profiles and prices compared to December 31, 2019, mainly in the Cantarell, ATG and Burgos CGUs.

As of September 30, 2019, Pemex Exploration and Production recognized a net impairment of Ps. 61,204,466 mainly due to: (i) a decrease in oil and gas prices generating a negative effect of Ps. 82,999,000, mainly in Cantarell, ATG, Chuc, Tsimin Xux and Burgos projects; (ii) an increase in discount rate of Ps. 35,869,000, focused mainly on the Yaxché CGU due to the incorporation of new proved reserves of the Xikin, Uchbal, Tetl, Teekit, Suuk, Pokche and Mulach fields; (iii) a decrease in exchange rate from Ps. 19.6829 = U.S. $1.00 as of December 31, 2018 to Ps. 19.6363 = U.S. $1.00 of September 30, 2019; and (iv) tax payment resulting in a negative effect of Ps. 3,708,000. These effects were offset by a net benefit from a greater volume of hydrocarbons in proved reserves of Ps. 61,371,534, mainly in the Yaxché CGU.

 

F-22


Table of Contents

The cash generating units of Pemex Exploration and Production are investment projects in productive fields with hydrocarbon reserves associated with proved reserves. These productive hydrocarbon fields contain varying degrees of heating power consisting of a set of wells and are supported by fixed assets associated directly with production, such as pipelines, production facilities, offshore platforms, specialized equipment and machinery.

Each project represents the smallest unit which can concentrate the core revenues, with clear costs and expenses that enable future cash flows (value in use) to be determined.

Pemex Exploration and Production determines the recoverable amount of fixed assets based on the long-term estimated prices for Pemex Exploration and Production’s proved reserves. The recoverable amount on each asset is the value in use.

To determine the value in use of long-lived assets associated to hydrocarbon extraction, the net present value of reserves is determined based on the following assumptions:

 

   September 30, 
   2020   2019 

Average crude oil price

   50.94 USD/bl    51.85 USD/bl 

Average gas price

   5.42 USD/mpc    4.37 USD/mpc 

Average condensates price

   57.60 USD/bl    38.61 USD/bl 

Discount rate

   6.39% annual    7.31% annual 

For 2020 and 2019 the total forecast production, calculated with a horizon of 25 years was 6,511 and 5,999 million barrels of crude oil equivalent, respectively.

Pemex Exploration and Production, in compliance with practices observed in the industry, estimates the recovery value of asset by determining its value in use, based on cash flows associated with proved reserves after taxes and using a discount rate, also after taxes.

Cash Generating Units of Pemex Industrial Transformation

During the nine-month periods ended September 30, 2020 and 2019, Pemex Industrial Transformation recognized a net impairment and a net reversal of impairment of Ps. (16,537,964) and Ps. 29,090,913, respectively.

The net reversal of impairment was in the following cash generating units:

 

   2020   2019 

Tula Refinery

  Ps. 2,919,561   Ps. —   

Minatitlán Refinery

   2,577,364    11,968,797 

Madero Refinery

   —      5,808,517 

Salina Cruz Refinery

   —      13,535,527 
  

 

 

   

 

 

 

Reversal of impairment

   5,496,925    31,312,841 

Madero Refinery

   (15,070,542   —   

CEP Cangrejera

   (5,844,455   —   

CEP Morelos

   (1,119,892   (626,081

Tula Refinery

   —      (1,595,847
  

 

 

   

 

 

 

Impairment

   (22,034,889   (2,221,928
  

 

 

   

 

 

 

(Impairment) reversal of impairment

  Ps. (16,537,964  Ps. 29,090,913 
  

 

 

   

 

 

 

As of September 30, 2020, the net impairment of Ps. (16,537,964) was mainly due to (i) lower production levels, mainly at the Madero Refinery; (ii) decrease in prices of products; (iii) a decrease in the discount rate of CGUs of refined products, refined products and gas by 0.41%, 0.12% and 0.02%, respectively, and an increase in ethylene by 0.10%; and (iv) the depreciation of the peso against the U.S. dollar, from a peso/U.S. dollar exchange rate of Ps. 18.8452 = U.S. $1.00 as of December 31, 2019 to Ps. 22.4573 = U.S. $1.00 as of September 30, 2020, which are used as cash flows when U.S. dollars are taken as reference.

 

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The net reversal of impairment was mainly due to (i) an increase in the projected refinery processing due to a greater supply of light crude oil by Pemex Exploration and Production, generating a greater supply of refined products such as gasoline, turbines and diesel and a decrease in residual products such as fuel oil; (ii) a favorable effect in the reference prices for the 2022 and 2023 projections; (iii) a decrease in the discount rate of cash generating units of refined products, petrochemicals and gas by 0.08%, 0.37% and 0.09%, respectively; and (iv) the appreciation of the peso against the U.S. dollar, from a peso/U.S. dollar exchange rate of Ps. 19.6829 = U.S. $1.00 as of December 31, 2018 to Ps. 19.6363 = U.S. $1.00 as of September 30, 2019.

To determine the value in use of long-lived assets associated with the cash-generating units of Pemex Industrial Transformation, the net present value of cash flows was determined based on the following assumptions:

 

   As of September 30,
   2020 2019 2020 2019 2020 2019 2020 2019
   Refining Gas Petrochemicals Ethylene  

Average crude oil Price per barrel

  U.S. $35.50 U.S. $59.79 N.A. N.A.  N.A.

Processed volume

  726 mbd 643 mbd 2,134
mmpcd of

humid gas

 2,130 mmpcd
of

humid gas

 Variable because

the load

inputs are diverse

Rate of Ps./U.S. dollar

  22.45730 19.6363 22.45730 19.6363 22.45730 19.6363 22.45730 19.6363

Useful lives of the cash generating units (year average)

  12 13 7 8 7 7 6 7

Discount rate (% annual)

  11.22% 11.44% 9.70% 10.13% 8.69% 8.55% 8.27% 8.55%

Period*

  2020-2032 2019-2034 2020-2027 2019-2027 2020-2027 2019-2026 2020-2026 2019-2025

 

*

The first 5 years are projected and stabilize at year 6.

Cash generating units in Pemex Industrial Transformation are processing centers grouped according to their types of processes as refineries, gas complex processors, and petrochemical centers. These centers produce various finished products for direct sale to customers or intermediate products that can be processed in another of its cash generating units or by a third party. Each processing center of Pemex Industrial Transformation represents the smallest unit that has distinguishable revenues, with clear costs and expenses that enable future cash flows (value in use) to be determined.

Cash flow determinations are made based on PEMEX’s business plans, operating financial programs, forecasts of future prices of products related to the processes of the cash generating units, budget programs and various statistical models that consider historical information of processes and the capacity of various processing centers.

The recoverable amount of assets is based on each asset’s value in use. The value in use for each asset is calculated based on cash flows, taking into consideration the volumes to be produced and sales to be carried out. As of September 30, 2020 and 2019, the value in use for the impairment of fixed assets was as follows:

 

   September 30, 
   2020   2019 

Tula Refinery

   78,070,937    34,218,717 

Minatitlán Refinery

   63,556,867    —   

Salina Cruz Refinery

   53,509,636    —   

Madero Refinery

   10,210,029    —   

CEP Morelos

   7,094,966    —   

CEP Cangrejera

   6,366,959    —   

Morelos Refinery

   —      6,357,105 
  

 

 

   

 

 

 

Total

  Ps. 218,809,394   Ps. 40,575,822 
  

 

 

   

 

 

 

 

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Cash Generating Units of Pemex Logistics

As of September 30, 2020, the CGUs of Pemex Logistics recognized no impairment for the nine-month period ended September 30, 2020.

As of September 30, 2019, Pemex Logistics recognized a reversal of impairment in the CGU of pipelines for Ps. 39,762,645, mainly due to a decrease in non-operating losses, from Ps. 27,554,195 in the first nine months of 2018 to Ps. 3,746,050 in the first nine months of 2019. In addition, the discount rate decreased from 13.55% at the end of 2018 to 12.23% at the end of September 2019.

The recoverable amounts of the assets as of September 30, 2019, corresponding to the discounted cash flows at the rate of 12.23%, are as follows:

 

   September 30, 2019 

TAD, TDGL, TOMS (Storage terminals)

  Ps. 59,752,789 

Pipeline

   63,654,137 

Primary Logistics

   107,621,491 
  

 

 

 

Total

  Ps. 231,028,417 
  

 

 

 

NOTE 13. INTANGIBLE ASSETS, NET

At September 30, 2020 and December 31, 2019, intangible assets, net are mainly wells unassigned to a reserve and other components of intangible assets, which amounted to Ps. 18,691,580 and Ps. 14,584,524, respectively, as follows:

 

 a.

Wells unassigned to a reserve

 

   September 30, 2020   December 31, 2019   September 30, 2019 

Wells unassigned to a reserve:

      

Balance at the beginning of period

   Ps. 12,831,281    Ps.   9,779,239    Ps.   9,779,238 

Additions to construction in progress

   11,880,905    17,028,974    10,488,178 

Transfers against expenses

   (4,455,298   (7,990,877   (7,280,287

Transfers against fixed assets

   (3,157,374   (5,986,055   (4,894,915
  

 

 

   

 

 

   

 

 

 

Balance at the end of period

   Ps. 17,099,514    Ps. 12,831,281    Ps.   8,092,214 
  

 

 

   

 

 

   

 

 

 

 

 b.

Other intangible assets

 

   September 30, 2020   December 31, 2019 

Licenses

  Ps. 4,775,225   Ps. 4,579,486 

Exploration expenses, evaluation of assets and concessions

   2,000,680    2,187,677 

Accumulated amortization

   (5,183,838   (5,013,920
  

 

 

   

 

 

 

Balance at the end of the period

  Ps. 1,592,067   Ps. 1,753,243 
  

 

 

   

 

 

 

 

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NOTE 14. MEXICAN GOVERNMENT LONG-TERM NOTES RECEIVABLE AND OTHER ASSETS

 

A.

Long-term notes receivable

As of September 30, 2020 and December 31, 2019, the balance of long-term notes receivable was as follows:

 

   September 30, 2020   December 31, 2019 

Promissory notes issued by the Mexican Government

   Ps. 121,451,669    Ps. 121,624,852 

Other long-term notes receivable (1)

   900,000    940,454 
  

 

 

   

 

 

 

Total long-term notes receivable

   Ps. 122,351,669    Ps. 122,565,306 
  

 

 

   

 

 

 

 

(1)

Mainly collection rights related to Value Added Tax from the non-recourse factoring contract between Pemex Logistics and Banco Mercantil del Norte, S.A.

Promissory notes issued by the Mexican Government

 

   September 30, 2020   December 31, 2019 

Long-term promissory notes issued by the Mexican Government

   Ps. 127,527,734    Ps. 126,534,822 

Less: current portion of notes receivable issued by the Mexican Government(2)

   6,076,065    4,909,970 
  

 

 

   

 

 

 

Long-term promissory notes

   Ps. 121,451,669    Ps. 121,624,852 
  

 

 

   

 

 

 

 

(2) 

The amount reflects the principal and interest from promissory note 5 in 2020 and promissory note 4 in 2019, as well as promissory notes maturing on March 31, 2021 and matured in 2020, respectively.

On December 24, 2015, the Secretaría de Hacienda y Crédito Público (Ministry of Finance and Public Credit, or “SHCP”) published in the Official Gazette of the Federation the Disposiciones de carácter general relativas a la asunción por parte del Gobierno Federal de obligaciones de pago de pensiones y jubilaciones a cargo de Petróleos Mexicanos y sus empresas productivas subsidiarias (General provisions regarding the assumption by the Mexican Government of the payment obligations related to pensions and retirement plans of Petróleos Mexicanos and its productive state-owned subsidiaries). These regulations stated the terms, conditions, financing mechanisms and payment arrangements pursuant to which the SHCP would assume a portion of the payment obligations related to PEMEX’s pensions and retirement plans. An independent expert reviewed the calculation, the methodology used, the maturity profile and all of the information provided by PEMEX.

In accordance with these provisions and prior to the completion of the independent expert’s review described above, on December 24, 2015, the Mexican Government issued in advance payment, through the SHCP, a Ps. 50,000,000 non-negotiable promissory note due December 31, 2050 payable to Petróleos Mexicanos. The promissory note, which accrued interest at a rate of 6.93% per year, was recognized as a long-term note receivable in non-current assets once the independent expert named by SHCP concluded its review.

On August 5, 2016, Petróleos Mexicanos received promissory notes issued by the Mexican Government at a discount value of Ps. 184,230,586 as of June 29, 2016, as part of the Mexican Government’s assumption of a portion of the payment liabilities related to Petróleos Mexicanos and Subsidiary Entities’ pensions and retirement plans, which notes were delivered in exchange for the Ps. 50,000,000 promissory notes issued to Petróleos Mexicanos on December 24, 2015. On August 15, 2016, Petróleos Mexicanos exchanged Ps. 47,000,000 of these promissory notes for short-term floating rate Mexican Government debt securities, known as Bonos de Desarrollo del Gobierno Federal (Development Bonds of the Mexican Government, or “BONDES D”). Petróleos Mexicanos then sold the BONDES D to Mexican development banks at market prices.

Petróleos Mexicanos recognized a Ps. 135,439,612 increase in equity as a result of the Ps. 184,230,586 of the promissory notes as of June 29, 2016, minus the Ps. 50,000,000 promissory note received by Petróleos Mexicanos on December 24, 2015, plus a Ps. 1,209,026 increase in the value of the promissory notes from June 29, 2016 to August 15, 2016, the date on which PEMEX received the promissory notes.

 

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As of September 30, 2020 and December 31, 2019, these promissory notes amounted to Ps. 127,527,734 and Ps. 126,534,822, respectively. PEMEX intends to hold them to maturity. These promissory notes will be converted into cash with annual maturity dates ranging from 2020 to 2036 and yielding rates ranging from 5.57% to 7.00%, as follows:

 

As of September 30, 2020

Number of

Promissory

Notes

 

Maturity

 

Yield Rate Range

 

Principal Amount

1

 2021 5.57% Ps.6,076,065 (1)

1

 2022 5.74% 6,782,528

1

 2023 5.88% 7,428,706

1

 2024 5.99% 7,875,792

1

 2025 6.06% 8,179,960

1

 2026 6.10% 8,354,532

5

 2027 to 2031 6.32% to 6.77% 42,398,431

5

 2032 to 2036 6.81% to 7.00% 40,431,720
 

 

 

 

 

 

Total promissory notes

 127,527,734

Less: current portion

 6,076,065
 

 

Long-term notes receivable

 Ps.                                   121,451,669
 

 

 

(1)

The amount of the promissory note is Ps. 6,093,372, less an impairment of Ps. 17,307.

During the nine-month period ended September 30, 2020 PEMEX recorded Ps. 5,985,889 in accrued interests from these receivable promissory notes. This amount was recognized as financing income in the consolidated statement of comprehensive income.

Yield rates for these promissory notes are fixed all throughout their lifespans and up to their maturities. In addition, PEMEX believes the promissory notes do not have a credit risk because they are issued by the Mexican Government in Mexican pesos. The expected credit losses as of September 30, 2020 and December 31, 2019 were Ps. 17,307 and Ps. 8,000, respectively, which are presented net from the current portion of notes receivable.

During the year ended December 31, 2019, as part of the Mexican Government’s strategy to finance PEMEX, Petróleos Mexicanos received the prepayment of seven promissory notes (one maturing in 2019 and six prior to maturity) in the amount of Ps. 38,704,883 (Ps. 32,493,666 of principal and Ps. 6,211,217 of interest), which was transferred to the Fideicomiso Fondo Laboral Pemex (“Pemex Labor Fund” or “FOLAPE”) for the obligation payment related to its pension and retirement plan obligation. The monetization of two promissory notes took place after the expiration date of such notes, resulting in additional interest of Ps. 614.

As of March 31, 2020, Petróleos Mexicanos received the payment of promissory note No. 4 in the amount of Ps. 4,983,670 (Ps. 4,080,544 of principal and Ps. 903,126 of interest), which was transferred to the FOLAPE.

 

B.

Other assets

As of September 30, 2020 and December 31, 2019, the balance of other assets was as follows:

 

   September 30, 2020   December 31, 2019 

Insurance

  Ps.5,514,909   Ps.2,967,625 

Payments in advance

   7,668,374    2,650,251 

Other1

   1,690,863    1,518,801 
  

 

 

   

 

 

 

Total other assets

  Ps.14,874,146   Ps.7,136,677 
  

 

 

   

 

 

 

 

1

Includes restricted cash for Ps. 50,766 as of September 30, 2020, as a result of a cash retention ordered by the court in a commercial judgement promoted by OPCO Soluciones, S.A. de C.V. against PEMEX’s subsidiary company AGRO, due to lack of payment by this subsidiary company.

 

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NOTE 15. DEBT

The Federal Income Law applicable to PEMEX as of January 1, 2020, published in the Official Gazette of the Federation on November 25, 2019, authorized Petróleos Mexicanos and its Subsidiary Entities to incur an internal net debt up to Ps. 10,000,000 and an external net debt up to U.S. $1,250,000. PEMEX can incur additional internal or external debt, as long as the total amount of net debt (Ps. 34,875,000, equivalent to U.S. $1,851,000) does not exceed the ceiling established by the Federal Income Law.

The Board of Directors approves the terms and conditions for the incurrence of obligations that constitute public debt of Petróleos Mexicanos for each fiscal year, in accordance with the Petróleos Mexicanos Law and the Reglamento de la Ley de Petróleos Mexicanos (Regulations to the Petróleos Mexicanos Law). These terms and conditions are promulgated in accordance with the guidelines approved by the SHCP for Petróleos Mexicanos for the respective fiscal year.

During the period from January 1 to September 30, 2020, PEMEX participated in the following financing activities:

 

  

On January 21, 2020 Petróleos Mexicanos increased its Medium-Term Notes Program from U.S. $102,000,000 to U.S. $112,000,000.

 

  

On January 30, 2020, Petróleos Mexicanos issued U.S. $5,000,000 of debt securities under its U.S. $112,000,000 Medium-Term Notes Program, Series C, in two tranches:

 

 -

(1) U.S. $2,500,000 5.950% Notes due 2031

 

 -

(2) U.S. $2,500,000 6.950% Notes due 2060

All debt securities under this program are jointly and severally guaranteed by Pemex Exploration and Production, Pemex Industrial Transformation and Pemex Logistics and their respective successors and assignees.

 

  

On January 30, 2020, Petróleos Mexicanos repurchased a total of U.S. $61,992 notes due 2020.

 

  

On February 6, 2020, Petróleos Mexicanos consummated the early settlement of its waterfall exchange offer pursuant to which it exchanged:

A) a total of U.S. $1,252,303 of notes and bonds with maturity dates between 2021 and 2026 as follows:

 

 -

(1) U.S. $264,752 aggregate principal amount of its outstanding 5.500% Notes due 2021,

 

 -

(2) U.S. $171,662 aggregate principal amount of its outstanding 6.375% Bonds due 2021,

 

 -

(3) U.S. $148,535 aggregate principal amount of its outstanding 4.875% Notes due 2022,

 

 -

(4) U.S. $63,854 aggregate principal amount of its outstanding Floating Rate Notes due 2022,

 

 -

(5) U.S. $157,487 aggregate principal amount of its outstanding 5.375% Notes due 2022,

 

 -

(6) U.S. $216,727 aggregate principal amount of its outstanding 3.500% Notes due 2023,

 

 -

(7) U.S. $117,333 aggregate principal amount of its outstanding 4.625% Notes due 2023 and

 

 -

(8) U.S. $111,953 aggregate principal amount of its outstanding 4.500 % Notes due 2026,

for U.S. $1,300,000 aggregate principal amount of its new 5.950% Notes due 2031.

B) a total of U.S. $1,374,426 of notes and bonds with maturity dates between 2044 and 2048 as follows:

 

 -

(1) U.S. $179,332 aggregate principal amount of its outstanding 5.500% Notes due 2044,

 

 -

(2) U.S. $750,969 aggregate principal amount of its outstanding 5.625% Bonds due 2046 and

 

 -

(3) U.S. $444,125 aggregate principal amount of its outstanding 6.350% Notes due 2048,

for U.S. $1,300,000 aggregate principal amount of its new 6.950% Bonds due 2060.

The 5.950% Notes due 2031 and 6.950% Bonds due 2060 are jointly and severally guaranteed by Pemex Exploration and Production, Pemex Industrial Transformation and Pemex Logistics and their respective successors and assignees and represent reopenings of the 5.950% Notes due 2031 and 6.950% Bonds due 2060, respectively, originally issued on January 29, 2020.

 

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On May 26, 2020, Petróleos Mexicanos partially renewed a credit line of U.S. $400,000 maturing on May 2020 for U.S. $200,000 maturing in 2021 linked to LIBOR plus 350 basis points.

 

  

On June 22, 2020, Petróleos Mexicanos entered into a Ps. 2,000,000 term loan due September 2020, which bears interest at a floating rate linked to TIIE plus 230 basis points.

 

  

On August 24, 2020, Petróleos Mexicanos entered into a U.S. $150,000 term loan due August 2022, which bears interest at a floating rate linked to LIBOR plus 425 basis points.

As of September 30, 2020, Petróleos Mexicanos had U.S. $7,450,000 and Ps. 37,000,000 in available credit lines in order to ensure liquidity, of which U.S. $650,000 and Ps. 2,000,000 are available.

All the financing activities were guaranteed by Pemex Exploration and Production, Pemex Industrial Transformation and Pemex Logistics.

From January 1 to September 30, 2020, HHS obtained U.S. $21,698,000 from its revolving credit line and repaid U.S. $22,885,000. As of December 31, 2019, the outstanding amount under this revolving credit line was U.S. $1,556,000. As of September 30, 2020, the outstanding amount under this revolving credit line was U.S. $639,000.

The following table presents the roll-forward of total debt of PEMEX for the nine-month periods ended September 30, 2020 and 2019, which includes short and long-term debt:

 

   September 30, 
   2020(i)  2019(i) 

Changes in total debt:

   

At the beginning of the period

  Ps.1,983,174,088   Ps.2,082,286,116 

Transfers to lease liabilities

   —     (6,053,280

Loans obtained - financing institutions

   940,509,304   893,221,059 

Debt payments

   (797,661,890  (954,775,636

Amortized cost

   1,282,015   —   

Accrued interest

   110,870,024   98,775,246 

Interest paid

   (115,990,121  (107,951,227

Foreign exchange

   353,932,098   (17,745,105
  

 

 

  

 

 

 

At the end of the period

  Ps.2,476,115,518   Ps.1,987,757,173 
  

 

 

  

 

 

 

 

(i)

These amounts include accounts payable by Financed Public Works Contracts (“FPWC”) (formerly known as Multiple Services Contracts), which do not generate cash flows.

As of September 30, 2020 and December 31, 2019, PEMEX used the following exchange rates to translate the outstanding balances in foreign currencies to pesos in the statement of financial position:

 

   September 30, 2020   December 31, 2019 
   (in pesos) 

U.S. dollar

   22.4573    18.8452 

Japanese yen

   0.2127    0.1734 

Pounds sterling

   28.8576    24.9586 

Euro

   26.1739    21.1537 

Swiss francs

   24.2834    19.4596 

 

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NOTE 16. FINANCIAL INSTRUMENTS AND DERIVATIVE FINANCIAL INSTRUMENTS

 

A.

Accounting classifications and fair values of financial instruments

The following tables present information about PEMEX’s carrying amounts and fair values of financial assets and financial liabilities, including their levels in the fair value hierarchy, as of September 30, 2020 and December 31, 2019. It does not include fair value information for financial assets and financial liabilities not measured at fair value if the carrying amount is a reasonable approximation of fair value.

 

  Carrying amount  Fair value hierarchy 

As of September 30,
2020

In thousands of pesos

 FVTPL  FVOCI –
debt
instruments
  FVOCI –
equity
instruments
  Financial
assets at
amortized
cost
  Other financial
liabilities
  Total carrying
amount
  Level 1  Level 2  Level 3  Total 

Financial assets measured at fair value

          

Derivative financial instruments

 Ps.20,517,676   —     —     —     —    Ps.20,517,676   —     20,517,676   —     20,517,676 

Equity instruments(i)

  —     —     346,563   —     —     346,563   —     346,563   —     346,563 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

     

Total

 Ps.20,517,676   —     346,563   —     —    Ps.20,864,239     

Financial assets not measured at fair value

          

Cash and cash equivalents

 Ps.—     —     —     36,741,990   —     36,741,990   —     —     —     —   

Customers, net

  —     —     —     65,746,413   —     65,746,413   —     —     —     —   

Employees and officers

  —     —     —     3,509,436   —     3,509,436   —        —     —   

Sundry debtors

  —     —     —     32,316,999   —     32,316,999   —     —     —     —   

Investments in joint ventures, associates and other

  —     —     —     15,111,620   —     15,111,620   —        —     —   

Long-term notes receivable

  —     —     —     128,427,734   —     128,427,734   —        —     —   

Other assets

  —     —     —     6,126,781   —     6,126,781   —     —     —     —   
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

     

Total

 Ps.—     —     —     287,980,973   —    Ps.287,980,973     

Financial liabilities measured at fair value

          

Derivative financial instruments

 Ps.(15,298,982  —     —     —     —    Ps.(15,298,982  —     (15,298,982  —     (15,298,982
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

     

Total

 Ps.(15,298,982  —     —     —     —    Ps.(15,298,982    

Financial liabilities not measured at fair value

          

Suppliers

 Ps.—     —     —     —     (168,407,314 Ps.(168,407,314  —     —     —     —   

Accounts and accrued expenses payable

  —     —     —     —     (36,604,772  (36,604,772  —     —     —     —   

Leases

  —     —     —     —     (73,507,125  (73,507,125  —     —     —     —   

Debt

  —     —     —     —     (2,476,115,518  (2,476,115,518  —     (2,194,419,215  —     (2,194,419,215
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

     

Total

 Ps.—     —     —     —     (2,754,634,729 Ps.(2,754,634,729   

 

(i)

Related to our participation in TAG Pipeline Sur, S. de R.L. de C.V.

 

  Carrying amount  Fair value hierarchy 

As of December 31,
2019

In thousands of pesos

 FVTPL  FVOCI –
debt
instruments
  FVOCI –
equity
instruments
  Financial
assets at
amortized
cost
  Other financial
liabilities
  Total carrying
amount
  Level 1  Level 2  Level 3  Total 

Financial assets measured at fair value

          

Derivative financial instruments

 Ps.11,496,330   —     —     —     —    Ps.11,496,330   —     11,496,330   —     11,496,330 

Equity instruments(i)

  —     —     346,563   —     —     346,563   —     346,563   —     346,563 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

     

Total

 Ps.11,496,330   —     346,563   —     —    Ps.11,842,893     

Financial assets not measured at fair value

          

Cash and cash equivalents

 Ps.—     —     —     60,621,631   —     60,621,631   —     —     —     —   

Customers, net

  —     —     —     89,263,870   —     89,263,870   —     —     —     —   

Employees and officers

  —     —     —     3,667,242   —     3,667,242   —        —     —   

Sundry debtors

  —     —     —     27,748,849   —     27,748,849   —     —     —     —   

Investments in joint ventures, associates and other

  —     —     —     14,874,579   —     14,874,579   —        —     —   

Long-term notes receivable

  —     —     —     127,475,276   —     127,475,276   —        —     —   

Other assets

  —     —     —     3,451,096   —     3,451,096   —     —     —     —   
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

     

Total

 Ps.—     —     —     327,102,543   —    Ps.327,102,543     

Financial liabilities measured at fair value

          

Derivative financial instruments

 Ps.
 

(16,650,171
 
  —     —     —     —    Ps.(16,650,171  —     (16,650,171     (16,650,171
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

     

Total

 Ps.(16,650,171  —     —     —     —    Ps.(16,650,171    

Financial liabilities not measured at fair value

          

Suppliers

 Ps.—     —     —     —     (208,034,407 Ps.(208,034,407  —     —     —     —   

Accounts and accrued expenses payable

  —     —     —     —     (26,055,151  (26,055,151  —     —     —     —   

Leases

  —     —     —     —     (68,148,627  (68,148,627  —     —     —     —   

Debt

  —     —     —     —     (1,983,174,088  (1,983,174,088  —     (2,036,457,122  —     (2,036,457,122
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

     

Total

 Ps.—     —     —     —     (2,285,412,273 Ps.(2,285,412,273   

 

(i)

Related to our participation in TAG Pipeline Sur, S. de R.L. de C.V.

 

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Debt is valued and registered at amortized cost and the fair value of debt is estimated using quotes from major market sources which are then adjusted internally using standard market pricing models. As a result of relevant assumptions, the estimated fair value does not necessarily represent the actual terms at which existing transactions could be liquidated or unwound.

 

B.

Fair value hierarchy

PEMEX values the fair value of its financial instruments under standard methodologies commonly applied in the financial markets. PEMEX’s related assumptions and inputs therefore fall under the three Levels of the fair value hierarchy for market participant assumptions, as described below.

The fair values determined by Level 1 inputs utilize quoted prices in active markets for identical assets or liabilities. Fair values determined by Level 2 inputs are based on quoted prices for similar assets or liabilities in active markets, and inputs other than quoted prices that are observed for assets or liabilities. Level 3 inputs are unobservable inputs for the assets or liabilities, and include situations where there is little, if any, market activity for the assets or liabilities.

Management uses appropriate valuation techniques based on the available inputs to measure the fair values of PEMEX’s applicable financial assets and liabilities.

When available, PEMEX measures fair value using Level 1 inputs, because they generally provide the most reliable evidence of fair value.

 

C.

Fair value of DFIs

PEMEX periodically evaluates its exposure to international hydrocarbon prices, interest rates and foreign currencies and uses DFIs as a mitigation mechanism when potential sources of market risk are identified.

PEMEX monitors the fair value of its DFI portfolio on a periodic basis. The fair value represents the price at which one party would assume the rights and obligations of the other, and is calculated for DFIs through models commonly used in the international financial markets, based on inputs obtained from major market information systems and price providers. Therefore, PEMEX does not have an independent third party to value its DFIs.

PEMEX calculates the fair value of its DFIs through the tools developed by its market information providers such as Bloomberg, and through valuation models implemented in software packages used to integrate all of PEMEX´s business areas and accounting, such as SAP (System Applications Products). PEMEX does not have policies to designate a calculation or valuation agent.

PEMEX’s DFI portfolio is composed primarily of swaps, for which fair value is estimated by projecting future cash flows and discounting them with the corresponding discount factor; for currency and interest rate options, this is done through the Black and Scholes Model, and for crude oil options, through the Levy model for Asian options.

According to IFRS 13 “Fair Value Measurement”, the mark to market (“MtM”) value of DFIs must reflect the creditworthiness of the parties. Consequently, the fair value of a DFI takes into account the risk that either party may default on its obligation. Due to the above, PEMEX applies the credit value adjustment (“CVA”) method to calculate the fair value of its DFIs.

Because PEMEX’s hedges are cash flow hedges, their effectiveness is preserved regardless of the variations in the underlying assets or reference variables, thus asset flows are fully offset by liabilities flows. Therefore, it is not necessary to measure or monitor the hedges’ effectiveness.

PEMEX’s DFIs’ fair-value assumptions and inputs fall under Level 2 of the fair value hierarchy for market participant assumptions.

 

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D.

Accounting treatment applied and impact in the financial statements

PEMEX enters into derivatives transactions with the sole purpose of hedging financial risks related to its operations, firm commitments, planned transactions and assets and liabilities recorded on its statement of financial position. Nonetheless, some of these transactions do not qualify for hedge accounting treatment because they do not meet the requirements of the accounting standards for designation as hedges. They are therefore recorded in the financial statements as instruments entered into for trading purposes, despite the fact that their cash flows are offset by the cash flows of the positions (assets or liabilities) to which they relate. As a result, the changes in their fair value are recognized in the “Derivative financial instruments (cost) income, net” line item in the consolidated statement of comprehensive income.

As of September 30, 2020 and December 31, 2019, the net fair value of PEMEX’s DFIs (including both DFIs that have not reached maturity and those that have reached maturity but have not been settled), recognized in the consolidated statement of financial position, was Ps. 5,218,694 and Ps. (5,153,841), respectively. As of September 30, 2020, and December 31, 2019, PEMEX did not have any DFIs designated as hedges for accounting purposes.

All of PEMEX’s DFIs are treated, for accounting purposes, as instruments entered into for trading purposes, therefore any change in their fair value, caused by any act or event, impacts directly in the “Derivative financial instruments (cost) income, net” line item in the consolidated statement of comprehensive income.

For the nine-month periods ended September 30, 2020 and 2019, PEMEX recognized a net gain (loss) of Ps. 2,003,364 and Ps. (27,788,930), respectively, in the “Derivative financial instruments (cost) income, net” line item with respect to DFIs treated as instruments entered into for trading purposes.

In accordance with established accounting policies, PEMEX has analyzed the different contracts that PEMEX has entered into and has determined that according to the terms thereof none of these agreements meet the criteria to be classified as embedded derivatives. Accordingly, as of September 30, 2020 and December 31, 2019, PEMEX did not recognize any embedded derivatives (foreign currency or index).

For the nine-month periods ended September 30, 2020 and 2019, PEMEX recognized a net (loss) gain of Ps. (15,044,632) and Ps. 3,000,973, respectively, in the “Derivative financial instruments (cost) income, net” line item which resulted from changes in the fair value of the accounts receivable from the sale of hydrocarbons whose performance obligations have been met and whose determination of the final price is indexed to future prices of the hydrocarbons.

 

NOTE

17. PROVISIONS FOR SUNDRY CREDITORS

As of September 30, 2020 and December 31, 2019, the provisions for sundry creditors and others is as follows:

 

   September 30, 2020   December 31, 2019 

Provision for plugging of wells (Note 12)

  Ps. 103,772,600   Ps. 80,849,900 

Provision for trials in process (Note 19)

   8,140,704    8,075,031 

Provision for environmental costs

   9,122,294    9,086,977 
  

 

 

   

 

 

 
  Ps. 121,035,598   Ps. 98,011,908 
  

 

 

   

 

 

 

 

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NOTE

18. EQUITY (DEFICIT)

a. Certificates of Contribution “A”

The capitalization agreement between Petróleos Mexicanos and the Mexican Government states that the Certificates of Contribution “A” constitute permanent capital.

During the nine-months ended September 30, 2019, PEMEX received Ps. 122,131,000 in Certificates of Contribution “A” from the Mexican Government to help improve PEMEX’s financial position.

During the nine-months ended September 30, 2020, PEMEX received a payment of Ps. 46,256,000, as part of the contributions to PEMEX established in the Federal Budget for 2020.

PEMEX’s Certificates of Contribution “A” are as follows:

 

   Amount 

Certificates of Contribution “A” as of December 31, 2018

  Ps. 356,544,447 

Increase in Certificates of Contribution “A” during the nine-months ended September 30, 2019

   122,131,000 
  

 

 

 

Certificates of Contribution “A” as of September 30, 2019

  Ps. 478,675,447 
  

 

 

 

Certificates of Contribution “A” as of December 31, 2019

   478,675,447 

Increase in Certificates of Contribution “A” during the nine-months ended September 30, 2020

   46,256,000 
  

 

 

 

Certificates of Contribution “A” as of September 30, 2020

  Ps. 524,931,447 
  

 

 

 

b. Mexican Government contributions

During the nine-months ended September 30, 2020 and during 2019, there were no Mexican Government contributions other than those in the form of Certificates of Contribution “A”.

c. Legal reserve

Under Mexican law, each of the Subsidiary Companies is required to allocate a certain percentage of its net income to a legal reserve fund until the fund reaches an amount equal to a certain percentage of each Subsidiary Company’s capital stock.

As of September 30, 2020 and December 31, 2019, there were no changes to the legal reserve.

d. Accumulated other comprehensive income (loss)

As a result of the discount rate analysis related to employee benefits liability, for the nine-month period ended September 30, 2020, PEMEX recognized net actuarial gains in other comprehensive income, net of deferred income tax for Ps. 54,156, related to retirement and post-employment benefits. The variation related to retirement and post-employment benefits was the result of a decrease in the discount and return on plan assets rates from 7.53% as of December 31, 2019 to 7.52% as of September 30, 2020.

e. Accumulated deficit from prior years

PEMEX has recorded negative earnings in the past several years. However, the Ley de Concursos Mercantiles (Commercial Bankruptcy Law of Mexico) is not applicable to Petróleos Mexicanos and the Subsidiary Entities. Furthermore, the financing agreements to which PEMEX is a party do not provide for financial covenants that would be breached or events of default that would be triggered as a consequence of negative equity.

f. Uncertainty related to Going concern

The unaudited condensed consolidated interim financial statements have been prepared on a going concern basis.

 

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Facts and conditions

During the nine-months ended September 30, 2020 and 2019, and for the year ended of December 31, 2019, PEMEX recognized a net loss of Ps. 605,176,101, Ps. 176,367,306, and Ps. 347,911,083, respectively. In addition, as of September 30, 2020 and December 31, 2019, PEMEX had a negative equity of Ps. 2,533,044,350 and Ps. 1,997,208,362, mainly due to continuous net losses, a negative working capital of Ps. 363,100,673 and Ps. 211,651,257 as of September 30, 2020 and December 31, 2019, respectively and cash flows used in operating activities of Ps. 10,269,356 during the nine-months ended September 30, 2020.

PEMEX also has substantial debt, including a substantial amount of short-term debt, incurred mainly to finance investments needed to carry out its operations. Due to its heavy fiscal burden resulting from the payment of hydrocarbon extraction duties and other taxes, the cash flows derived from PEMEX’s operations in recent years have not been sufficient to fund its operations and investment programs. As a result, PEMEX’s indebtedness has increased significantly, and its working capital has decreased. Additionally, the recent significant crude oil price drop, which started in March 2020 and the negative economic impact as a result of the current global health crisis caused by the Covid-19 pandemic have negatively impacted PEMEX´s financial performance (see Note 20).

PEMEX’s revenues have decreased both from the decline in crude oil prices and from a decrease in the demand of petroleum products.

In March and April 2020, certain ratings agencies downgraded PEMEX’s credit rating. Most recent credit downgrades have been mainly driven by the effects of Covid-19 and the associated reduced economic activity, as well as the low crude oil prices and the downgrade of the Mexican Government’s sovereign debt rating. These downgrades could have an impact on PEMEX´s access to the financial markets, the cost and terms of PEMEX’s new debt and contract renegotiations that PEMEX may carry out during 2020 and 2021 (see Note 20).

PEMEX has budget autonomy, and, in public finance terms, is subject to the cash flows financial balance goals approved in the Decreto de Presupuesto de Egresos de la Federación (Federal Expenditure Budget Decree). This represents the difference between its gross revenues (inflows) and its total budgeted expenditures (outflows) including the financial cost of its debt, which is proposed by the SHCP and approved by the Cámara de Diputados (Chamber of Deputies). The Federal Budget for 2020 authorized PEMEX to have a negative financial balance budget of Ps. 62,623,500. This shortfall does not consider payments of principal of PEMEX’s debt due in 2020.

In addition, PEMEX estimates that the drop in crude oil prices, the lower economic activity caused by the Covid-19 pandemic and the volatility of the foreign exchange rates, may have an impact on its negative financial balance for 2020.

PEMEX has short-term debt maturities of Ps. 412,064,410 (principal and interest), as of September 30, 2020.

The combined effect of the above-mentioned events indicates the existence of significant doubt about PEMEX’s ability to continue as a going concern.

To offset the lower gross income in the financial schedule for the remainder of the year, the following premises are being considered:

 

 1.

An average annual Mexican crude oil price of 34.0 U.S. dollars per barrel, which is aligned with market expectations and analysts.

 

 2.

An average annual exchange rate of Ps. 22.82 per U.S. dollar, which is higher than the exchange rate of Ps. 19.90 per U.S. dollar set in the approved budget for PEMEX, with the consequent net benefit on PEMEX’s additional revenue associated with export sales.

 

 3.

PEMEX´s contracted crude oil hedges will generate an expected maximum profit of U.S. $377,000, equivalent to Ps. 8,596,000.

 

 4.

Revenue from financing schemes that do not constitute public debt.

 

 5.

The tax credit of Ps. 65,000,000 pursuant to the presidential decree of the Mexican Government of April 21, 2020.

 

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On the other hand, according to prevailing market conditions, refinancing operations could eventually be considered in capital markets. Additionally, PEMEX has the capacity to refinance its short-term debt maturities through direct and revolving bank credit facilities and loans guaranteed by export credit agencies. PEMEX is working together with development banking and commercial banking institutions so that during the remainder of the year and the next twelve months, the production chain program can be boosted, in support of its suppliers and contractors.

The Ley de Ingresos de la Federación para el Ejercicio Fiscal de 2020 (Revenue Law for 2020) also authorized PEMEX a net additional indebtedness up to Ps. 34,875,000, which is considered as public debt by the Mexican Government and may be used to partially cover its negative financial balance. This indebtedness may arise from available credit lines and other financing sources. If necessary, PEMEX has a total amount of Ps. 204,306,885 (U.S. $7,450,000 and Ps. 37,000,000) in credit lines in order to provide liquidity, subject to the authorized net indebtedness. As of September 30, 2020, PEMEX has withdrawn U.S. $6,800,000 (Ps. 152,709,640) and Ps. 35,000,000 from these credit lines and has available U.S. $650,000 (Ps. 14,597,245) and Ps. 2,000,000.

PEMEX is currently working on a strategy for savings in capital expenditures for exploration and productions activities as well as savings from better negotiation of current and future contracts.

PEMEX is aligning its investment portfolio with actual economic assumptions by decreasing non-strategic projects and focusing instead on more profitable ones. For this purpose, the Board of Directors of Petróleos Mexicanos approved a reduction in its capital expenditures by Ps. 27,625,000, resulting primarily from the reduction of Ps. 40,500,000 in exploration and production activities and an increase of Ps. 11,340,000 in industrial transformation budget for the Refinery Rehabilitation Program.

On July 15, 2019, the Board of Directors of Petróleos Mexicanos approved PEMEX’s business plan for 2019 through 2023 (the “2019-2023 Business Plan”). The 2019-2023 Business Plan describes goals such as modernizing the company, improving its competitiveness and guaranteeing its financial viability in the short, medium and long-term.

The 2019-2023 Business Plan describes measures intended to address the main structural problems of the company: its high tax burden, its debt and low investment.

PEMEX continuously monitors and updates its 2019-2023 Business Plan. Due to changes in the energy sector environment caused by the global economic, health and market situation, which have affected PEMEX’s core business activities as well as its financial results, PEMEX seeks to redefine some strategies and translate them into a new Business Plan, which will be submitted for approval by the Board of Directors at a later date. Crude oil prices have now been recovering, economic activity has been accelerating and oil and gas sales have begun to recover.

Petróleos Mexicanos and its Subsidiary Entities are not subject to the Commercial Bankruptcy Law of Mexico and none of PEMEX���s existing financing agreements include any financial covenants that could lead to the demand for immediate payment of its debt due to having negative equity or non-compliance with financial ratios.

PEMEX prepared its unaudited condensed consolidated interim financial statements as of September 30, 2020 and December 31, 2019 on a going concern basis. There are certain conditions that have generated important uncertainty and significant doubts concerning the entity’s ability to continue operating, including recurring net losses, negative working capital and negative equity. These financial statements do not contain any adjustments that would be required if they were not prepared on a going concern basis.

g. Non-controlling interest

PEMEX does not currently own all of the shares of PMI CIM and COMESA, variations in income and equity from these entities are also presented in the consolidated statements of changes in equity (deficit) as “non-controlling interest.”

Until April 2020, the non-controlling interest in HJ Barreras was also presented. In May 2020, P.M.I. Holdings, B.V. (a subsidiary of Petróleos Mexicanos), a majority shareholder of HJ BARRERAS, transferred to Cruise Yacht Yard Co, Ltd, a company belonging to the acquirer of the vessel under construction by HJ BARRERAS, the corporate and economic rights derived from its 51.0 % of shareholding in HJ BARRERAS, through the conclusion of various contracts (i) of usufruct of shares, and (ii) shares purchase and share sale options, in exchange for a net amount of € 5,100 (Ps. 134,716). To ensure that P.M.I. Holdings, B.V. did not pay the penalty arising from a guarantee granted by HJ BARRERAS shareholders, Cruise Yacht Yard Co, Ltd, assumed payment of the latter and was part of the price of the assets (advance amounts) amounting to € 8,400.

 

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PMI HBV’s payment of the guarantee gave a right of recovery that becomes a participatory loan for HJ BARRERAS. As of the payment, the expiration period of the options for the purchase and sale of the shares between the two parties may take place on January 1, 2022, or earlier when the construction of that vessel is completed.

Therefore, as of May 2020, P.M.I. Holdings, B.V. does not maintain control over HJ BARRERAS and Petróleos Mexicanos does not consolidate HJ BARRERAS’ financial information in its financial statements.

As of April 30, 2020, HJ BARRERAS’ total assets amounted to Ps.1,558,000; total liabilities amounted to Ps. 2,945,300, respectively; and negative capital (of which 49.0% corresponds to non-controlling interest) amounted to Ps. 1,387,300. The negative capital amount as of April 30, 2020 includes Ps. 224,500 of losses generated by HJ BARRERAS during the period from January 1 to April 30, 2020 (of which 49.0% corresponds to the non-controlling interest). This operation resulted in a profit in the consolidated income statement of Petróleos Mexicanos, Empresas Productivas Subsidiaries and Subsidiary Companies of Ps. 833,038.

On July 31, 2020, Cruise Yacht Yard Co, Ltd exercised its purchase and sale option.

As of September 30, 2020, and December 31, 2019, non-controlling interest represented losses of Ps. 419,646 and Ps. 141,793, respectively, in PEMEX’s equity (deficit).

 

NOTE

19. CONTINGENCIES

In the ordinary course of business, PEMEX is named in a number of lawsuits of various types. PEMEX evaluates the merit of each claim and assesses the likely outcome. PEMEX has not recorded provisions related to ongoing legal proceedings due to the fact that an unfavorable resolution is not expected in such proceedings, with the exception of the proceeding described in further detail in this Note.

PEMEX is involved in various civil, tax, criminal, administrative, labor and commercial lawsuits and arbitration proceedings. The results of these proceedings are uncertain as of the date of these unaudited condensed consolidated interim financial statements. As of September 30, 2020, and December 31, 2019, PEMEX had accrued a reserve of Ps. 8,140,704 and Ps. 8,075,031, and, respectively, for these contingent liabilities.

As of September 30, 2020, the current status of the principal lawsuits in which PEMEX is involved is as follows:

 

  

On April 4, 2011, Pemex Exploration and Production was summoned before the Séptima Sala Regional Metropolitana (Seventh Regional Metropolitan Court) of the Tribunal Federal de Justicia Fiscal y Administrativa (Tax and Administrative Federal Court) in connection with an administrative claim (No. 4957/11-17-07-1) filed by EMS Energy Services de México, S. de R.L. de C.V. and Energy Maintenance Services Group I. LLC, requesting that Pemex Exploration and Production’s termination of the public works contract be declared null and void. In a concurrent proceeding, the plaintiffs also filed an administrative claim (No. 13620/15-17-06) against Pemex Exploration and Production before the Sexta Sala Regional Metropolitana (Sixth Regional Metropolitan Court) of the Tax and Administrative Federal Court in Mexico City seeking damages totaling U.S. $193,713 related to the above-mentioned contract. Pemex Exploration and Production filed a response requesting the two administrative claims be joined in a single proceeding, which was granted. On April 30, 2019, a judgment was issued by the Segunda Sección de la Sala Superior (Second Section of the Superior Court) in favor of Pemex Exploration and Production. On June 25, 2019, the plaintiffs filed an amparo (D.A. 397/2019) before the Tercer Tribunal Colegiado en Materia Administrativa del Primer Circuito (Third Administrative Joint Court of the First Circuit), which was granted. On March 12, 2020, Pemex Exploration and Production filed a motion to review before the Suprema Corte de Justicia de la Nación (Supreme Court of Justice), through the Third Administrative Joint Court of the First Circuit against the resolution granting this amparo. As of the date of these financial statements, a final resolution is still pending.

 

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On July 8, 2011, Pemex Exploration and Production was summoned in connection with an administrative claim (no. 4334/11-11-02-6) filed by Compañía Petrolera La Norma, S.A., against the Chief Executive Officer of Petróleos Mexicanos and the Chief Executive Officer of Pemex- Exploration and Production before the Segunda Sala Regional Hidalgo-México (Hidalgo-Mexico Second Regional Court) of the Tax Administrative Federal Court in Tlalnepantla, Estado de México. The plaintiff is seeking compensation for the cancellation of its alleged petroleum rights concessions and damages for up to Ps.1,552,730. On September 20, 2018, the Superior Court ruled that the plaintiff did not provide evidence to support its claim. The plaintiff filed an amparo (D.A. 731/2018) against this resolution and Pemex Exploration and Production filed its response. On May 17, 2019, the Décimo Noveno Tribunal Colegiado en Materia Administrativa del Primer Circuito (Nineteenth Administrative Joint Court of the First Circuit) issued a judgment requesting the Supreme Court to attract this claim, which was denied on September 4, 2019 and the claim was sent back to the Joint Court. On December 12, 2019, the amparo was denied. The plaintiff filed a request to review this resolution, which was denied. August 6, 2020, Pemex Exploration and Production was notified by the Nineteenth Administrative Joint Court of the First Circuit of a resolution issued by the Supreme Court of Justice of the Nation, which effectively dismissed the amparo under review. Therefore, the present claim has concluded, without any economic loss against or gain in favor of Pemex Exploration and Production.

 

  

On December 12, 2017, Pemex Exploration and Production was summoned in connection with an arbitration claim (no. 23217/JPA) filed by SUBSEA 7 de México, S. de R. L. de C.V. (“SUBSEA 7”) seeking U.S. $153,000 related to additional expenses in connection with pipelines construction contracts (No. 420832856 and 420833820). On January 5, 2018, Pemex Exploration and Production filed a response to the arbitration request and its counterclaim. On September 14, 2018, the defendant received the claim briefs including documentation and related evidence and the amount sought under this claim was increased to U.S. $310,484. On January 4, 2019, Pemex Exploration and Production filed a response to the claim. On February 14, 2019, SUBSEA 7 filed its reply. In June 2019, a hearing was held and on October 4, 2019 the parties filed their pleadings. The final award was issued on July 28, 2020, which was notified on July 30, 2020. Pemex Exploration and Production was ordered to pay U.S. $34,576 and U.S. $70,668.

 

  

On August 1, 2017, Pemex Exploration and Production was summoned in connection with an administrative claim (no. 11590/17-17-06-2) filed by Proyectos y Cimentaciones Industriales, S.A. de C.V. before the Sixth Regional Metropolitan Court seeking Ps. 800,000 and U.S. $12.82 and to have the settlement certificate dated March 22, 2017 related to services agreement declared null and void. On May 16, 2019, the Second Section of the Superior Court issued a judgment in favor of Pemex Exploration and Production. On July 1, 2019, the Décimo Primer Tribunal Colegiado en Materia Administrativa (Eleventh Administrative Joint Court) admitted an amparo (no. 399/2019) filed by the plaintiffs. On August 8, 2019, the defendant filed its pleadings. As of the date of these financial statements, a final resolution is still pending.

 

  

In March 2018, Pemex Drilling and Services (now Pemex Exploration and Production) was summoned before the International Centre for Dispute Resolution of the American Arbitration Association in connection with an arbitration claim (No. 01-18-0001-1499) filed by Loadmaster Universal Rigs, Inc., Loadmaster Drilling Technologies, LLC, Ulterra Drilling Technologies Mexico, S.A. de C.V. and Kennedy Fabricating, LLC seeking U.S. $139,870 in connection with the construction and acquisition of two units of modular drilling equipment for approximately U.S. $139,870. On June 6, 2018, the plaintiffs responded to the counterclaim filed by Pemex Drilling and Services. On September 28, 2018, Pemex Drilling and Services filed a motion rejecting the arbitration jurisdiction. On December 19, 2018, the parties exchanged documentation. On February 11, 2019, the plaintiffs filed their first brief. On March 29, 2019, the defendants filed its response. On April 29, 2019, the plaintiffs filed their second brief. On June 17, 2019, the defendants filed their rejoinders. A hearing was held in September in Mexico City. On October 23, 2019, the parties filed their final pleadings. On February 20, 2020, the final award was notified denying the claims filed by Loadmaster and requesting Loadmaster to pay approximately U.S. $80,000 to Pemex Exploration and Production.

 

  

On February 6, 2019, the Sala Regional del Golfo Norte (North Gulf Regional Court) of Federal Court of Justice for Tax and Administrative Matters summoned Pemex Drilling and Services (now Pemex Exploration and Production) in connection with a claim (752/17-18-01-7) filed by Micro Smart System of Mexico, S. de R.L. de C.V., challenging a settlement statement dated March 14, 2017, related to a works contract number 424049831 dated December 9, 2009, seeking the payment of: U.S. $240,448 for work performed and U.S. $284 for work estimates. On May 8, 2019, a response to this claim was admitted and evidence was filed by the defendant (Pemex Exploration and Production), which were rejected by the plaintiff on May 24, 2019. On July 1, 2019, the Superior Court was instructed to review the claim. On September 24, 2019, the plaintiff filed its pleadings. On October 22, 2019, the complete file of this claim was sent to the Superior Court for its review. On February 13, 2020, a meeting was held in which it was informed that the plaintiff partially proved its claim and no payments shall be made by the defendant. On September 8, 2020, the judgment was published in the Gaceta Judicial (Jurisdictional Gazette). On September 29, 202, Pemex Exploration and Production filed a motion to clarify this judgment. As of the date of these financial statements, a resolution accepting this clarification is still pending.

 

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On October 18, 2019, the Sala Regional Peninsular (Regional Peninsular Court) of the Tribunal Federal de Justicia Administrativa (Federal Justice Administrative Court) in Mérida, Yucatán summoned Pemex Exploration and Production in connection with a claim (91/19-16-01-9) filed by PICO México Servicios Petroleros, S. de R.L. de C.V. requesting that Pemex Exploration and Production’s termination of the public works contract be declared null and void and seeking U.S. $137.3 for among others, expenses and related damages. On December 12, 2019, Pemex Exploration and Production filed a response to this claim. On January 7, 2020, evidence filed by the parties was admitted. On January 23, 2020, the accounting expert filed its report. On March 28, 2020, a notification dated February 10, 2020 was received in which the extended claim was admitted. On February 10, 2020, the expert appointed by the plaintiff was accepted. On February 18, 2020, an extension requested by the accounting expert appointed by Pemex Exploration and Production was accepted and his opinion was filed on August 11, 2020. As of the date of these financial statements, a resolution from the court admitting the response to the claim and the opinion filed is still pending.

 

  

Tech Man Group, S.A. de C.V. filed an administrative claim (7804/18-17-09-8) against Pemex Industrial Transformation seeking Ps. 2,009,598 for, among other things, payment of expenses and penalties in connection with a public works contract (CO-OF-019-4008699-11) before the Federal Justice Administrative Court. On June 25, 2019, a response was filed by the defendant (Pemex Industrial Transformation) as well as a motion against the admission of the claim, which was accepted. On October 2, 2019, the opinion of the accounting and construction experts submitted by the defendant was filed. On February 17, 2020, Pemex Industrial Transformation requested the Federal Justice Administrative Court to appoint a new accounting expert since the previous appointed expert rejected his designation. On March 2, 2020, the independent construction expert filed his opinion. As of the date of these financial statements, a final resolution is still pending.

The results of these proceedings are uncertain until their final resolutions are issued by the appropriate authorities. PEMEX has recorded liabilities for loss contingencies when it is probable that a liability has been incurred and the amount thereof can be reasonably estimated. When a reasonable estimation could not be made, qualitative disclosure was provided in the notes to these unaudited condensed consolidated interim financial statements. PEMEX does not disclose amounts accrued for each individual claim because such disclosure could adversely affect PEMEX’s legal strategy, as well as the outcome of the related litigation.

 

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NOTE 20. RELEVANT DEVELOPMENTS

 

A.

Decline in international crude oil prices

On March 6, 2020, the Organization of the Petroleum Exporting Countries (“OPEC”), led by Saudi Arabia, Russia and other group of petroleum producers, did not come to an agreement to reduce crude oil production in order to support crude oil prices, which resulted in a significant drop in global crude oil prices.    

On March 11, 2020, the World Health Organization declared the Covid-19 outbreak a pandemic. Governments across the world have instituted measures to address the pandemic, including mandatory quarantines, social distancing guidelines, travel restrictions and declaration of health emergencies. The effects of the Covid-19 virus have led to a worldwide economic slowdown, and as a result there has been a decrease in global demand for crude oil and derivatives.

In order to address the drop in crude oil prices that began in March 2020, on April 12, 2020, OPEC and other non-OPEC oil exporting countries, including, among others, Mexico and Russia, reached an agreement to reduce world crude oil supply. Pursuant to this agreement, these countries, which are known as OPEC+, agreed to reduce their overall crude oil production by 9.7 million barrels per day from May 1, 2020 through June 30, 2020, by 7.7 million barrels per day from July 1, 2020 through December 31, 2020 and by 5.8 million barrels per day from January 1, 2021 through April 30, 2022. In particular, Mexico agreed, and reduced its crude oil production by 100,000 barrels per day for a period of two months beginning on May 1, 2020. From April to October 2020, we decreased our crude oil production from an average of 1,746.7 barrels per day during the month of April 2020, to an average of 1,680.2 barrels per day during the month of October 2020, respectively.

PEMEX prepared its budget for 2020 based on a Mexican crude oil basket price of U.S. $49.00 per barrel and contracted financial derivative instruments to hedge PEMEX’s risk exposure to declines in the price of Mexican crude oil price, when it falls below the average price of U.S. $49.00, up to a floor of U.S. $44.00 per barrel.

PEMEX has been affected by these developments and in order to address these adverse effects on its budget results to comply with its budget financial goal established in the approved budget, PEMEX is taking actions to offset the expected decrease in revenue for the year (see Notes 18 and 21).

As of September 30, 2020, the weighted average Mexican crude oil price was U.S. $37.12 per barrel, a decrease of U.S. $18.51 per barrel as compared to the 2019 weighted average Mexican crude oil export price. As of December 18, 2020, the weighted average Mexican crude oil export price was U.S. $47.50 per barrel. While prices have begun to stabilize, they remain significantly lower than 2014 levels. Any future decline in international crude oil and natural gas prices will have a similar negative impact on our results of operations and financial condition.

 

B.

Tax Benefit Decree for PEMEX

On April 21, 2020, the Mexican Government granted through a President’s decree a tax benefit for PEMEX equal to Ps. 65,000,000 for 2020, consistent on a fiscal credit applicable to the DUC up to such amount. As of September 30, 2020, PEMEX recognized a DUC reduction of Ps. 48,752,000 as a result of the application of the tax benefit, which is in addition to the DUC rate reduction benefit from 65.0% in 2019 to 58.0% in 2020.

 

C.

Decrease in the demand of refined products

As a result of the Covid-19 pandemic, on March 24, 2020 the Mexican Government, through the Secretaría de Salud (Ministry of Health), implemented actions to protect against Covid-19. Some of these actions consist of, among others, issuing directives to avoid places of work, crowded areas, public places or unnecessary social activities during this time. These preventative measures have caused a decrease in demand of certain goods and services, including petroleum products. As of the date of issuance of these financial statements, PEMEX cannot predict what effect these measures will have on PEMEX’s operations or financial position.

As a result of the worldwide economic slowdown and, in particular, the decrease in fuel demand, PEMEX had a 43.8% decrease in its domestic sales of petroleum products in the nine-months period ended September 30, 2020 as compared to the same period of 2019.

 

D.

Decrease in inventory

Reduction in hydrocarbon prices has had a 31.7 % decrease in the value of PEMEX’s inventories as of September 30, 2020, as compared to book value as of December 31, 2019.

 

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E.

Reduction of 2020 Budget

On July 14, 2020, the Board of Directors of Petróleos Mexicanos authorized the amendment to the 2020 budget for Petróleos Mexicanos and its Subsidiary Productive Entities, which considers a decrease in income of Ps. 4,471,000 that is offset by a net decrease in expenses by Ps. 20,980,000, consisting of (i) a decrease in investment expenditure by Ps. 27,979,000 and (ii) an increase in operating expense of Ps. 6,999,000 and an increase in the financial cost of Ps. 16,510,000, so that PEMEX’s budget balance sheet target for the 2020 financial year has not changed.

 

F.

Indebtedness for 2021

The Ley de Ingresos de la Federación para el Ejercicio Fiscal de 2021 (the Federal Revenue Law for the Fiscal Year 2021), which will be applicable to PEMEX as of January 1, 2021, permits the incurrence of up to Ps. 42,100,000 of net indebtedness through a combination of domestic and international capital markets offerings and borrowings from domestic and international financial institutions.

 

G.

Impairment of assets

PEMEX did not have a negative impact in long-lived assets as of September 30, 2020 due to decreases in prices, since the increase in exchange rates resulted in higher revenues. However, PEMEX estimates that factors described above may impact impairment and/or reversal of long-lived assets during and at year end 2020, upon the behavior of the markets and the several economic and financial variables. A long period of low crude oil prices may greatly impact PEMEX’s impairment of long-lived assets, depending on changes in the remaining assumptions and economic and financial conditions.

 

H.

Ratings agencies’ downgrade of PEMEX’s credit rating

On April 1, 2020, HR Ratings affirmed PEMEX’s local credit rating at HR AAA with a stable outlook and downgraded PEMEX’s global credit ratings to HR BBB+(G) with a negative outlook. This ratings action followed a similar ratings action taken by S&P in relation to the United Mexican States.

On April 3, 2020, Fitch Ratings downgraded PEMEX’s ratings of its bonds from BB+ to BB with a negative outlook amid fears that PEMEX’s stand-alone credit profile may deteriorate further due to low oil prices. The downgrade reflects PEMEX’s limited flexibility to navigate the downturn in the oil and gas industry, given PEMEX’s elevated tax burden, high leverage, rising per barrel lifting costs and high investment needs to maintain production and replenish reserves.

On April 17, 2020, Fitch Ratings further downgraded PEMEX’s international foreign and local currency long-term ratings from BB to BB- as a consequence of the downgrades of the Mexican Government ratings. Fitch Ratings also revised the outlook from negative to stable. The downgrade of PEMEX’s credit rating reflects the direct link to the credit rating of the sovereign United Mexican States, in accordance with Fitch Ratings’ methodology.

On April 17, 2020, Moody’s downgraded PEMEX’s credit ratings from Baa3 to Ba2, maintaining a negative credit outlook, citing PEMEX’s higher liquidity and business risk. This ratings action followed a similar ratings action taken by Moody’s in relation to the United Mexican States.

According to Fitch and Moody’s credit rating scales, the BB- and Ba2 ratings, respectively, are considered non-investment grade. Therefore, PEMEX’s debt instruments are considered speculative, pursuant to these credit rating scales.

On April 21, 2020, Moody’s downgraded PEMEX’s senior unsecured credit ratings of its outstanding notes, as well as credit ratings based on Petróleos Mexicanos’ guarantee to A2.mx/Ba2 from Aa3.mx/Baa3. Moody’s also downgraded Petróleos Mexicanos’ short-term local scale rating to MX-2 from MX-1. This rating action followed a similar ratings action taken by Moody’s Investors Services of withdrawing Petróleos Mexicanos investor rating from Baa3 and assigning it a corporate family rating of Ba2 and maintaining negative credit outlook.

On December 4, 2020, Standard & Poor’s Global Ratings affirmed PEMEX’s credit rating for foreign currency long term issues and for local currency long term issues of BBB and BBB+, respectively, maintaining a negative credit outlook.

The rapid and growing spread of the Covid-19 virus, combined with the impairment of world economic outlook, the drop in crude oil prices and the decrease in asset prices is creating a severe and extensive credit crisis in several sectors, regions and markets. The effect on credit is without any precedent. The oil and gas sector has been one of the most affected sectors, due to its sensitivity to demand and consumers’ confidence.

These downgrades in PEMEX’s ratings could hinder or make PEMEX’s access to financial markets more difficult.

 

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NOTE 21. SUBSEQUENT EVENTS

During the period from October 1 to December 18, 2020, the following subsequent events have occurred.

 

A.

Recent financing activities

On October 16, 2020, Petróleos Mexicanos issued U.S. $1,500,000 of its 6.875% Notes due October 2025 under its U.S. $112,000,000 Medium Term Notes Program, Series C. All debt securities issued under this program are guaranteed by Pemex Exploration and Production, Pemex Industrial Transformation and Pemex Logistics and their respective successors and assignees.

On November 19, 2020, Petróleos Mexicanos and the SHCP agreed to exchange 16 promissory notes in favor of Petróleos Mexicanos (notes 5 to 20) in a total amount of Ps. 128,656,192 for 18 series of Mexican Government local bonds (the “New Government Bonds”). All of the New Government Bonds were issued by the Mexican Government. Petróleos Mexicanos recognized the New Government Bonds as long-term financial assets, and the short-term and long-term promissory notes receivable from the Mexican Government were written-off the accounting records.

On November 20, 2020, Petróleos Mexicanos monetized the New Government Bonds by entering into a three-year financial arrangement to raise Ps. 95,597.6 million at a rate of 8.56275% per annum, with a maturity of November 24, 2023, using the New Government Bonds as the underlying assets. Petróleos Mexicanos retains the economic rights of the New Government Bonds, accordingly Petróleos Mexicanos accounts for them as restricted assets and recognizes debt for this transaction.

On December 7, 2020, P.M.I. Trading, as borrower, and Petróleos Mexicanos, as guarantor, entered into a U.S. $1,500,000 revolving credit facility maturing in 2023, which bears interest at a floating rate linked to LIBOR plus 300 to 475 basis points.

As of September 30, 2020, the outstanding amount in PMI HHS’ revolving credit lines was U.S. $639,000. Between October 1, 2020 to December 18, 2020, PMI HHS obtained U.S. $5,090,000 and repaid U.S. $4,029,000 in financing from its revolving credit lines. As of December 18, 2020, the outstanding amount under these revolving credit lines was U.S. $1,700,000.

As of December 18, 2020, Petróleos Mexicanos had U.S. $5,500,000 and Ps. 37,000,000 in available revolving credit lines in order to ensure liquidity, with U.S. $1,170,000 and Ps. 9,500,000 remaining available.

 

B.

Decrease in the price of refined products

As a result of the economic slowdown and the consumption of refiners (gasolines, turbosins, diesel and others), a 47.0 % decrease in sales is estimated during the period from October 1 to November 30, 2020 compared to the same period of 2019.

 

C.

Exchange rates and crude oil prices

As of December 18, 2020, the Mexican peso-U.S. dollar exchange rate was Ps. 19.9513 per U.S. dollar, which represents a 11.2% appreciation of the value of the peso in U.S. dollar terms as compared to the exchange rate as of September 30, 2020, which was Ps. 22.4573 per U.S. dollar. This decrease in U.S. dollar exchange rate from September 30, 2020 to December 18, 2020, has led to a decrease of Ps. 249,506,680 in PEMEX’s foreign exchange loss as of December 18, 2020.

As of December 18, 2020, the weighted average price of the crude oil exported by PEMEX was U.S. $47.50 per barrel. This represents a price increase of approximately 28.0 % as compared to the average price as of September 30, 2020, which was U.S. $37.12 per barrel.

 

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

Petróleos Mexicanos
By: 

/s/ Emmanuel Quevedo Hernández

 Emmanuel Quevedo Hernández
 Associate Managing Director of Finance

Date: December 29, 2020

FORWARD-LOOKING STATEMENTS

This report contains words, such as “believe,” “expect,” “anticipate” and similar expressions that identify forward looking statements, which reflect our views about future events and financial performance. We have made forward looking statements that address, among other things, our:

 

  

exploration and production activities, including drilling;

 

  

activities relating to import, export, refining, transportation, storage and distribution of petrochemicals, petroleum, natural gas and oil products;

 

  

activities relating to our lines of business;

 

  

projected and targeted capital expenditures and other costs;

 

  

trends in international and Mexican crude oil and natural gas prices;

 

  

liquidity and sources of funding, including our ability to continue operating as a going concern;

 

  

farm outs, joint ventures and strategic alliances with other companies; and

 

  

the monetization of certain of our assets.

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

 

  

general economic and business conditions, including changes in international and Mexican crude oil and natural gas prices, refining margins and prevailing exchange rates;

 

  

credit ratings and limitations on our access to sources of financing on competitive terms;

 

  

our ability to find, acquire or gain access to additional reserves and to develop, either on our own or with our strategic partners, the reserves that we obtain successfully;

 

  

the level of financial and other support we receive from the Mexican Government;

 

  

global or national health concerns, including the outbreak of pandemic or contagious disease, such as the ongoing COVID-19, commonly known as coronavirus, pandemic;

 

  

effects on us from competition, including on our ability to hire and retain skilled personnel;

 

  

uncertainties inherent in making estimates of oil and gas reserves, including recently discovered oil and gas reserves;

 

  

technical difficulties;

 

  

significant developments in the global economy;


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significant economic or political developments in Mexico and the United States;

 

  

developments affecting the energy sector;

 

  

changes in, or failure to comply with, our legal regime or regulatory environment, including with respect to tax, environmental regulations, fraudulent activity, corruption and bribery;

 

  

receipt of governmental approvals, permits and licenses;

 

  

natural disasters, accidents, blockades and acts of sabotage or terrorism;

 

  

the cost and availability of adequate insurance coverage; and

 

  

the effectiveness of our risk management policies and procedures.

Accordingly, you should not place undue reliance on these forward 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.