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Pemex receives credit risk and debt rating

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World Pipelines,

The rating agency Standard & Poors confirmed the credit risk and debt rating of Petróleos Mexicanos (Pemex) as BBB+ in foreign currency and as A in local currency, and modified its prospect from negative to stable for the sovereign debt rating.

In the report published by the agency, it considers Pemex as maintaining a critical and strategic role for Mexico, due to its important contributions to public sector income, and that it would have the Federal Government’s backing in case of an adverse financial scenario. For Pemex, this is a positive rating, as it recognizes what the current management has been doing to strengthen the company’s financial position, in turn reducing the need for Government support.

Among the actions adopted by Pemex, established in its 2017 - 2021 business plan, are financial discipline, the implementation of a wide-reaching austerity programme, and the channeling of investments towards the most profitable projects. The above achieved positive results in the last two quarters, which had not occurred for six years.

Pemex is taking advantage of the tools provided by the Energy Reform to promote joint ventures and strategic alliances throughout the value chain. In this sense, the first farmout with the company BHP Billiton to develop the Trion field, as well as the consortium with Chevron and Inpex for the block 3 North, both located in deep waters. Likewise, in previous days, Pemex won the bidding process to develop two fields in shallow waters with the oil companies DEA and Ecopetrol respectively, and four new farmouts for exploration and production in various offshore and onshore fields are currently in process.

Pemex has also established joint ventures in industrial transformation, undersigning an agreement with Air Liquide for hydrogen supply in the refinery in Tula. In logistics, contracts have been undersigned with the company Tesoro to rent pipeline transport capacity and storage of oil products in the northwest of the country. Thus, the first phase of the open season was concluded and the schedule for the second stage will be announced shortly.

These measures have helped reduce the interest rate at which Pemex contracts risks, and have provided a greater certainty, transparency and competitiveness. The fundamental objective is to achieve a financial balance in the next three or four years.

Mexico’s stable perspective reflects an expectation of continuity in economic policy over the following two years, according to the ratings agency, along with the fiscal policy that has restricted the general debt of the Federal Government. Standard & Poors forecasts a wide-ranging continuity in the Mexican economic policy after the July 2018 elections, and no interruption of the instrumentation of the recent economic reforms.

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