Mexico’s state oil company Pemex is preparing to launch its 2021 oil hedge that will protect its revenues, Reuters reports, citing an unnamed company source, who also said the company had been waiting for oil prices to recover before it begins hedging future production.
According to the report, Pemex made $377.3 million from its 2020 hedge and $369 million from the 2019 hedge. The program for the 2021 hedge has already been approved by the company’s board of directors, the Reuters source said.
The Pemex oil hedge is much smaller than the oil hedge of the Mexican government—perhaps the most notorious hedge deal in the world, in which Mexico buys options on oil from banks and oil supermajors based on a projected average price. For this year, the projected price was $49 a barrel. To compare, the Mexican oil export basket this year has averaged just $34.22 a barrel.
Pemex has become the most indebted oil company in the world despite efforts from the Andres Manuel Lopez Obrador government to support it with tax relief and other means. The company has been struggling with falling production and few options for help as the government suspended all contracts with foreign oil companies as well as tenders for new exploration blocks.
The government recently had to revise down Pemex’s 2021 production target because of these factors and now expects it to produce 1.875 million bpd next year, down from an earlier projection of 2.027 million bpd.
This year Pemex is likely to fall short of its production target, too, for the same reasons in addition to natural field depletion that has been plaguing the company for years, ever since it reached a peak of 3.4 million bpd in 2004. Earlier this year, Pemex cut production by about 100,000 between May and July to support OPEC+ efforts to control oil supply. Since then, however, output has failed to recover. The latest monthly data shows a daily average of just 1.627 million bpd.
By Irina Slav for Oilprice.com