Mexico Pemex swings to Q4 net income on lower costs

HOUSTON (ICIS)–Mexican state energy producer Pemex reported on Monday a Q4 comprehensive income of pesos (Ps) 86.8bn ($4.36bn) compared with a loss of Ps281.5bn for the same time in 2015 because of lower costs and higher sales.

Pemex recently has a new head, Jose Antonio Gonzalez Anaya, who later adopted a cost-cutting programme to reverse the company’s string of losses.

It was the first quarter that Pemex had reported a quarterly comprehensive income since Q4 2013, when it reported a comprehensive net income of Ps173.6bn.

For Q4 2016, net sales were Ps323.8bn, up 23% from Ps264.2bn from the same time in 2015.

Sales rose because of higher prices and volumes for oil exports. Revenue increased also because of higher prices and domestic sales volumes for petroleum products.

Cost of sales were Ps103.1bn, down 84% from Ps636.2bn from the same last year. Pemex attributed the decline to its cost-cutting programme as well as to more efficient operations.

Because sales rose while costs fell, Q4 gross profit was Ps220.7bn, compared with a gross loss of Ps372.0bn in Q4 2015.

Although Pemex’s finances have improved, its operational performance has continued to deteriorate.

Crude production in the fourth quarter was 2.07m bbl/day, down from 2.28m bbl/day from the same time in 2015. For comparison, oil production was 2.61m bbl/day in Q1 2010, the earliest ICIS records.

Pemex attributed the drop to natural declines in its oil fields.

Oil production is crucial for Mexico’s petrochemical industry because it is the main source of ethane, the feedstock used by all of the country’s crackers.

Natural-gas production was 4.580bn cubic feet/day (4.580bcf/day), down from 5.37bcf/day in Q4 2015. In Q1 2010, gas production was 6.39bcf/day. Pemex attributed the drop to natural declines in its fields.

Natural-gas processing reached 3.47bcf/day, down from 3.97bcf/day in Q4 2015.

Production of natural gas liquids (NGLs) was 296,000 bbl/day, down from 308,000 bbl/day in Q4 2015. The Q4 2016 figure marks the first time that NGL production has fallen below 296,000 bbl/day since at least Q1 2010, the oldest entry for the ICIS data series.

NGL production fell because there was less wet gas available to process, Pemex said.

Pemex has struggled to meet ethane demand from its own crackers because of declines in production of the feedstock.

In addition, Pemex has been under contract to supply ethane to the new Ethylene XXI complex owned by the Braskem-Idesa joint venture.

Because Pemex has chosen to honour the terms of the supply contract, its own production of ethane derivatives has fallen while Ethylene XXI has continued to ramp up production at its new polyethylene (PE) plants.

The following shows Pemex’s petrochemical production for the past several quarters. The figures are listed in thousands of tonnes.

For comparison, the production of ethane derivatives was 357,000 tonnes in Q1 2010.

Pemex did not explain why production for ethane derivatives fell during the quarter.

Propylene derivatives fell because of unplanned shutdowns at the fluid catalytic crackers (FCCs) at the Madero and Cadereyta refineries.

For refining, production rates also fell.

The following shows quarterly output for various oil products. The figures are in thousands of bbl/day.

Overall, the Q4 crude processing rate was 784,000, down from 1.08m bbl/day in Q4 2015.

Pemex attributed the decline to lower rates at its Tula and Cadereyta refineries, the result of unplanned shutdowns, shortcoming of auxiliary services and scheduled maintenance.

In addition, Pemex had a lower yield of petroleum products from the Salina Cruz refinery.

Refineries are important to Pemex’s petrochemical industry because they are the main domestic source of aromatics and propylene.

($1 = Ps19.92)

Image above: Worker at the Pemex refinery in Tula. Source: KD/Keystone USA/REX/Shutterstock