UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM20-F
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
|
for the fiscal year ended December 31, 20162018
Commission File Number0-99
PETRÓLEOS MEXICANOS
(Exact name of registrant as specified in its charter)
Mexican Petroleum | United Mexican States | |
(Translation of registrant’s name into English) | (Jurisdiction of incorporation or organization) |
Avenida Marina Nacional No. 329
Colonia Verónica Anzures
11300 Ciudad de México, México
(Address of principal executive offices)
Jaime José del Río CastilloVanessa Julia Ramírez Inches
(5255) 1944 97009126-2940
ri@pemex.com
Avenida Marina Nacional No. 329
Torre Ejecutiva, Piso 38 Colonia Verónica Anzures
11300 Ciudad de México, México
(Name, telephone,e-mail and/or facsimile number
and address of company contact person)
Securities registered or to be registered pursuant to Section 12(b) of the Act.None
Securities registered or to be registered pursuant to Section 12(g) of the Act.None
Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act.
Title of Each Class
8.00% Guaranteed Notes due 2019 | ||
3.500% Notes due 2020 | ||
6.000% Notes due 2020 | 6.375% Notes due 2021 | |
5.50% Notes due 2021 | 4.875% Notes due 2022 | |
5.375% Notes due 2022 | Floating Rate Notes due 2022 | |
8.625% Bonds due 2022 | 3.500% Notes due 2023 | |
4.625% Notes due 2023 | ||
8.625% Guaranteed Bonds due 2023 | ||
4.875% Notes due 2024 | 4.250% Notes due 2025 | |
4.500% Notes due 2026 | 6.875% Notes due 2026 | |
9.50% Guaranteed Bonds due 2027 | 9.50% Global Guaranteed Bonds due 2027 | |
6.500% Notes due 2027 | 5.350% Notes due 2028 | |
6.500% Notes due 2029 | 6.625% Guaranteed Bonds due 2035 | |
6.625% Guaranteed Bonds due 2038 | 6.500% Bonds due 2041 | |
5.50% Bonds due 2044 | 6.375% Bonds due 2045 | |
5.625% Bonds due 2046 | 6.750% Bonds due 2047 | |
6.350% Bonds due 2048 |
Indicate by check mark if the registrant is awell-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes ☐ No ☒☐ No☒
If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.
Yes ☐ No ☒☐ No☒
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes ☒ No ☐☒ No☐
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of RegulationS-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
N/AYes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, anon-accelerated filer, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” and “emerging growth company” in Rule12b-2 of the Exchange Act. (Check one):
Large accelerated filer☐ Accelerated filer☐ Non-accelerated filer☒ Emerging growth company☐
If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards†standards provided pursuant to Section 13(a) of the Exchange Act.
☐
†The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.
Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:
U.S. GAAP☐ GAAP☐ IFRS as issued by the IASB☒ Other☐☐
If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow.
Item 17☐Item 18☐☐
If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule12b-2 of the Exchange Act).
Yes ☐ No ☒☐ No☒
i
Petróleos Mexicanos and its sevensix subsidiary entities, which we refer to as the subsidiary entities,Pemex ExploracióExploración y ProduccióProducción (Pemex Exploration and Production),Pemex TransformacióTransformación Industrial (Pemex Industrial Transformation),Pemex PerforacióPerforación y Servicios (Pemex Drilling and Services),Pemex LogíLogística (Pemex Logistics),Pemex Cogeneración y Servicios (Pemex Cogeneration and Services),Pemex Fertilizantes (Pemex Fertilizers) andPemex Etileno (Pemex Ethylene), comprise the state oil and gas company of the United Mexican States, which we refer to as Mexico. Petróleos Mexicanos is a productivestate-owned company of the Federal Government of Mexico, which we refer to as the Mexican Government, and each of the subsidiary entities is a productivestate-owned subsidiary of Mexico. Each of Petróleos Mexicanos and the subsidiary entities is a legal entity empowered to own property and carry on business in its own name. In addition, a number of subsidiary companies that are defined in Note 1 and listed in Note 45 to our consolidated financial statements incorporated in Item 18, which we refer to as our subsidiary companies, are incorporated into the consolidated financial statements; these subsidiary companies are also identified with their corresponding ownership percentages in “—Consolidated Structure of PEMEX” on page 4. As further described under “Item 4—Information on the Company—History and Development—Corporate Reorganization,” the seven new subsidiary entities assumed, on or prior to, November 1, 2015, all of the rights and obligations of the prior subsidiary entities of Petróleos Mexicanos—Pemex-Exploración y Producción(Pemex-Exploration and Production),Pemex-Refinación(Pemex-Refining),Pemex-Gas y Petroquímica Básica(Pemex-Gas and Basic Petrochemicals) andPemex-Petroquímica(Pemex-Petrochemicals). References to the subsidiary entities prior to this corporate reorganization refer toPemex-Exploration and Production,Pemex-Refining,Pemex-Gas and Basic Petrochemicals andPemex-Petrochemicals.Petróleos Mexicanos, the subsidiary entities and the subsidiary companies are collectively referred to as “PEMEX” or “we.” See “Item 4—Information on the Company—History and Development—Energy Reform”Corporate Structure” for more details.
References herein to “U.S. $,” “$,” “U.S. dollars” or “dollars” are to United States dollars. References herein to “pesos” or “Ps.” are to the legal currency of Mexico. References herein to “euros” or “€” are to the legal currency of the European Economic and Monetary Union. References herein to “pounds” or “£” are to the legal currency of the United Kingdom. References herein to “Swiss francs” or “CHF” are to the legal currency of the Swiss Confederation. References herein to “Japanese yen” or “¥” are to the legal currency of Japan. References herein to “Australian dollars” or “AUD” are to the legal currency of Australia. The term “billion” as used herein means one thousand million.
Our consolidated financial statements included in this annual report were prepared in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board. We refer in this report to “International Financial Reporting Standards as issued by the International Accounting Standards Board” as IFRS. In addition, these financial statements were audited in accordance with the International Standards on Auditing, as required by theLey del Mercado de Valores (Securities Market Law) and theDisposiciones de carácter general aplicables a las emisoras de valores y a otros participantes del mercado de valores(General Provisions applicable to issuers of securities and other participants in the securities market) in each case, of Mexico, for purposes of filing with theComisiónNacional Bancaria y de Valores (National Banking and Securities Commission, or the CNBV) and theBolsa Mexicana de Valores, S.A.B. de C.V.(Mexican Stock Exchange, or the BMV)Exchange), and in accordance with the standards of the Public Company Accounting Oversight Board (United States), or PCAOB, for purposes of filings with the U.S. Securities and Exchange Commission, or the SEC.
The regulations of the SEC do not require foreign private issuers that prepare their financial statements on the basis of IFRS to reconcile such financial statements to United States Generally Accepted Accounting Principles, which we refer to as U.S. GAAP. Accordingly, while we have in the past reconciled our consolidated financial statements prepared in accordance withNormas de Información Financiera Mexicanas(Mexican Financial Reporting Standards, or Mexican FRS)Standards) to U.S. GAAP, those reconciliations are no longer presented in our filings with the SEC. We do, however, continue to provide the disclosure required under the U.S. Financial Accounting Standards Board Accounting Standards Codification (ASC) Topic 932 “Extractive Activities—Oil and Gas” (which we refer to as ASC Topic 932), as this is required regardless of the basis of accounting on which we prepare our financial statements.
We maintain our consolidated financial statements and accounting records in pesos. Unless otherwise indicated, we have translated all peso amounts to U.S. dollars in this Form20-F, including all convenience translations of our consolidated financial statements included herein, at an exchange rate of Ps. 20.664019.6829 = U.S. $1.00, which is the exchange rate that the SecretaríSecretaría de Hacienda y CréCrédito PúPúblico (Ministry of Finance and Public Credit) instructed us to use on December 31, 2016.2018. You should not construe these translations from pesos into dollars as actually representing such U.S. dollar amounts or meaning that you could convert such amounts into U.S. dollars at the rates indicated. Mexico has a free market for foreign exchange, and the Mexican Government allows the peso to float freely against the U.S. dollar. There can be no assurance that the Mexican Government will maintain its current policies with regard to the peso or that the peso will not depreciate or appreciate significantly in the future. Due to the volatility of the peso/U.S. dollar exchange rate, the exchange rate on any date subsequent to the date hereof could be materially different from the rate indicated above. See “Item 3—Key Information—Exchange Rates” for information regarding the rates of exchange between pesos and U.S. dollars.
PRESENTATION OF INFORMATION CONCERNING RESERVES
The proved hydrocarbon reserves included in this report for the year ended December 31, 20162018 are those that we have the right to extract and sell based on assignments granted to us by the Mexican Government to us in August 2014 through the process commonly referred to as Round Zero. See “Item 4—Information on the Company—History and Development—Energy Reform” for a description of the Round Zero process.Government.
The estimates of our proved reserves of crude oil and natural gas for the five years ended December 31, 20162018 included in this report have been calculated according to the technical definitions required by the SEC. DeGolyer and MacNaughton, Netherland, Sewell International, S. de R.L. de C.V. (which we refer to as Netherland Sewell) and Ryder Scott Company, L.P.GLJ Petroleum Consultants LTD. (which we refer to as Ryder Scott)GLJ) conducted reserves audits of our estimates of our proved hydrocarbon reserves as of December 31, 20162018 or January 1, 2017,2019, as applicable. All reserves estimates involve some degree of uncertainty. For a description of the risks relating to reserves and reserves estimates, see “Item 3—Key Information—Risk Factors—Risk Factors Related to our Relationship with the Mexican Government—Information on Mexico’s hydrocarbon reserves is based on estimates, which are uncertain and subject to revisions,” “—We must make significant capital expenditures to maintain our current production levels, and to maintain, as well as increase, the proved hydrocarbon reserves assigned to us by the Mexican Government. Reductions in our income, adjustments to our capital expenditures budget and our inability to obtain financing may limit our ability to make capital investments” and “—The Mexican nation, not us, owns the hydrocarbon reserves located in the subsoil in Mexico and our right to continue to extract these reserves is subject to the approval of the Ministry of Energy.”
FORWARD-LOOKING STATEMENTS
This Form20-F contains words, such as “believe,” “expect,” “anticipate” and similar expressions that identifyforward-looking statements, which reflect our views about future events and financial performance. We have madeforward-looking statements that address, among other things, our:
exploration and production activities, including drilling;
activities relating to import, export, refining, petrochemicals and transportation, storage and distribution of petrochemicals, petroleum, natural gas and oil products;
activities relating to our lines of business, including the generation of electricity;business;
projected and targeted capital expenditures and other costs, commitments and revenues;costs;
trends in international and Mexican crude oil and natural gas prices;
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 suchforward-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;prices, refining margins and prevailing exchange rates;
credit ratings and retain skilled personnel;
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;
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;
significant economic or political developments in Mexico including fluctuations inand thepeso-U.S. dollar exchange rate or in the rate of inflation; United States;
developments affecting the energy sector; and
changes in, or failure to comply with, our legal regime or regulatory environment, including with respect to tax, environmental regulations, fraudulent activity, corruption and environmental regulations.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 theseforward-looking statements. In any event, these statements speak only as of their dates, and we undertake no obligation to update or revise any of them, whether as a result of new information, future events or otherwise.
For a discussion of important factors that could cause actual results to differ materially from those contained in anyforward-looking statement, see “Item 3—Key Information—Risk Factors.”
PART I
Item 1. Identity of Directors, Senior Management and Advisers
Not applicable.
Item 2. Offer Statistics and Expected Timetable
Not applicable.
SELECTED FINANCIAL DATA
The selected statement of comprehensive income (loss), statement of financial position and cash flows data set forth below as of and for the five years ended December 31, 20162018 have been derived from, and should be read in conjunction with, our consolidated financial statements as of December 31, 20152017 and 20162018 and for the years ended December 31, 2014, 20152016, 2017 and 2016,2018, which are included in Item 18 of this report. Our consolidated financial statements for the fiscal year ended December 31, 2012 were audited by KPMG Cárdenas Dosal, S.C., an independent registered public accounting firm. Our consolidated financial statements for each of the fiscal years ended December 31, 2013, 2014, 2015, 2016 and 20162017 were audited by Castillo Miranda y Compañía, S.C. (which we refer to as BDO Mexico), an independent registered public accounting firm. Our consolidated financial statements for the fiscal year ended December 31, 2018 were audited by KPMG Cárdenas Dosal, S.C. (which we refer to as KPMG Mexico), an independent registered public accounting firm. Certain amounts in the consolidated financial statements for the years ended December 31, 2012, 2013, 2014, 2015, 2016 and 20152017 have been reclassified to conform the presentation of the amounts in the consolidated financial statements for the year ended December 31, 2016.2018. These reclassifications are not significant to the consolidated financial statements and had no impact on our consolidated net income (loss).
As detailed below, for the years ended December 31, 2016, 2017 and 2015,2018, we recognized a net lossesloss of Ps. 191.1 billion, Ps. 280.9 billion and Ps. 712.6180.4 billion, respectively. In addition, we had negative equity as of December 31, 20162017 and 20152018 of Ps. 1,233.01,502.4 billion and Ps. 1,331.71,459.4 billion, respectively, which resulted in a negative working capital of Ps. 70.825.6 billion and Ps. 176.254.7 billion, respectively,respectively; and negative cash flows from operating activities of Ps. 41.5141.8 billion for the year ended December 31, 2016.2018. This has led our independent auditorsus to state in their most recent audit reportour consolidated financial statements that there is important uncertainty and significantexists substantial doubt about our ability to continue as a going concern. We have disclosed the circumstances that have caused these negative trends and the actionsHowever, we are taking to face them and have concluded that we continue to operate as a going concern. Accordingly, we have prepared our consolidated financial statements on a going concern basis, which assumes that we can meet our payment obligations. For more information on the actions that we are taking to face these negative trends, see “Item 5—Operating and Financial Review and Prospects—Overview” and “Item 5—5 — Operating and Financial Review and Prospects—LiquidityProspects —Liquidity and Capital Resources.”
Selected Financial Data of PEMEX
Year ended December 31, (1) | Year ended December 31,(1) | |||||||||||||||||||||||||||||||||||||||||||||||
2012 | 2013 | 2014 | 2015 | 2016 | 2016(2) | 2014 | 2015 | 2016 | 2017 | 2018 | 2018(2) | |||||||||||||||||||||||||||||||||||||
(in millions of pesos, except ratios) | (in millions of U.S. dollars) | (in millions of pesos, except ratios) | (in millions of U.S. dollars) | |||||||||||||||||||||||||||||||||||||||||||||
Statement of Comprehensive Income (Loss) Data | ||||||||||||||||||||||||||||||||||||||||||||||||
Net sales | Ps. 1,646,912 | Ps. 1,608,205 | Ps. 1,586,728 | Ps. 1,166,362 | Ps. 1,079,546 | U.S.$ | 52,243 | Ps.1,586,728 | Ps. 1,161,760 | Ps. 1,074,093 | Ps.1,397,030 | Ps. 1,681,119 | U.S.$ 85,410 | |||||||||||||||||||||||||||||||||||
Operating income | 905,339 | 727,622 | 615,480 | (154,387 | ) | 424,350 | 20,536 | 615,480 | (154,387 | ) | 424,350 | 104,725 | 367,400 | 18,666 | ||||||||||||||||||||||||||||||||||
Financing income | 2,532 | 8,736 | 3,014 | 14,991 | 13,749 | 665 | 3,014 | 14,991 | 13,749 | 16,166 | 31,557 | 1,603 | ||||||||||||||||||||||||||||||||||||
Financing cost | (46,011 | ) | (39,586 | ) | (51,559 | ) | (67,774 | ) | (98,844 | ) | (4,783 | ) | (51,559 | ) | (67,774 | ) | (98,844 | ) | (117,645 | ) | (120,727 | ) | (6,134 | ) | ||||||||||||||||||||||||
Derivative financial instruments (cost) income—Net | (6,258 | ) | 1,311 | (9,439 | ) | (21,450 | ) | (14,000 | ) | (678 | ) | (9,439 | ) | (21,450 | ) | (14,000 | ) | 25,338 | (22,259 | ) | (1,131 | ) | ||||||||||||||||||||||||||
Exchange (loss) gain—Net | 44,846 | (3,951 | ) | (76,999 | ) | (154,766 | ) | (254,012 | ) | (12,292 | ) | (76,999 | ) | (154,766 | ) | (254,012 | ) | 23,184 | 23,659 | 1,202 | ||||||||||||||||||||||||||||
Net (loss) income for the period | 2,600 | (170,058 | ) | (265,543 | ) | (712,567 | ) | (191,144 | ) | (9,250 | ) | (265,543 | ) | (712,567 | ) | (191,144 | ) | (280,851 | ) | (180,420 | ) | (9,166 | ) | |||||||||||||||||||||||||
Statement of Financial Position Data (end of period) | ||||||||||||||||||||||||||||||||||||||||||||||||
Cash and cash equivalents | 119,235 | 80,746 | 117,989 | 109,369 | 163,532 | 7,914 | 117,989 | 109,369 | 163,532 | 97,852 | 81,912 | 4,162 | ||||||||||||||||||||||||||||||||||||
Total assets | 2,024,183 | 2,047,390 | 2,128,368 | 1,775,654 | 2,329,886 | 112,751 | 2,128,368 | 1,775,654 | 2,329,886 | 2,132,002 | 2,075,197 | 105,431 | ||||||||||||||||||||||||||||||||||||
Long-term debt | 672,618 | 750,563 | 997,384 | 1,300,873 | 1,807,004 | 87,447 | 997,384 | 1,300,873 | 1,807,004 | 1,880,666 | 1,890,490 | 96,047 | ||||||||||||||||||||||||||||||||||||
Totallong-term liabilities | 2,059,445 | 1,973,446 | 2,561,930 | 2,663,922 | 3,136,704 | 151,793 | 2,561,930 | 2,663,922 | 3,136,704 | 3,245,227 | 3,086,826 | 156,828 | ||||||||||||||||||||||||||||||||||||
Total equity (deficit) | (271,066 | ) | (185,247 | ) | (767,721 | ) | (1,331,676 | ) | (1,233,008 | ) | (59,669 | ) | (767,721 | ) | (1,331,676 | ) | (1,233,008 | ) | (1,502,352 | ) | (1,459,405 | ) | (74,146 | ) | ||||||||||||||||||||||||
Statement of Cash Flows | ||||||||||||||||||||||||||||||||||||||||||||||||
Depreciation and amortization | 140,538 | 148,492 | 143,075 | 167,951 | 150,439 | 7,280 | 143,075 | 167,951 | 150,439 | 156,705 | 153,382 | 7,793 | ||||||||||||||||||||||||||||||||||||
Acquisition of wells, pipelines, properties, plant and equipment(3) | 197,509 | 245,628 | 230,679 | 253,514 | 188,389 | 9,117 | 230,679 | 253,514 | 151,408 | 91,859 | (94,004 | ) | (4,776 | ) | ||||||||||||||||||||||||||||||||||
Other Financial Data | ||||||||||||||||||||||||||||||||||||||||||||||||
Ratio of earnings to fixed charges(4)(5) | 1.01 | — | — | — | — | — |
(1) | Includes Petróleos Mexicanos, the subsidiary entities and the subsidiary companies listed in Note |
(2) | Translations into U.S. dollars of amounts in pesos have been made at the exchange rate established by the Ministry of Finance and Public Credit for accounting purposes of Ps. |
(3) | Includes capitalized financing cost. See Note |
PEMEX’s consolidated financial statements, prepared in accordance with IFRS, as it relates to the selected statements of |
Source: PEMEX’s consolidated financial statements, prepared in accordance with IFRS, as it relates to the selected statements of comprehensive income, statement of financial position and statement of cash flows data; and Petróleos Mexicanos, as it relates to other financial data.
EXCHANGE RATES
The following table sets forth, for the periods indicated, the high, low, average andperiod-end exchange rates for the purchase of U.S. dollars, expressed in pesos per U.S. dollar. These rates have not been restated in constant currency units.
Period | Exchange Rate | |||||||||||||||
High | Low | Average(1) | Period End | |||||||||||||
Year Ended December 31, | ||||||||||||||||
2011 | 14.254 | 11.505 | 12.464 | 13.951 | ||||||||||||
2012 | 14.365 | 12.625 | 13.140 | 12.964 | ||||||||||||
2013 | 13.433 | 11.976 | 12.857 | 13.098 | ||||||||||||
2014 | 14.794 | 12.846 | 13.370 | 14.750 | ||||||||||||
2015 | 17.358 | 14.564 | 15.873 | 17.195 | ||||||||||||
2016 | 20.842 | 17.190 | 18.667 | 20.617 | ||||||||||||
November 2016 | 20.842 | 18.435 | 20.009 | 20.457 | ||||||||||||
December 2016 | 20.738 | 20.223 | 20.499 | 20.617 | ||||||||||||
2017 | ||||||||||||||||
January 2017 | 21.891 | 20.753 | 21.391 | 20.836 | ||||||||||||
February 2017 | 20.816 | 19.735 | 20.301 | 19.998 | ||||||||||||
March 2017 | 19.927 | 18.665 | 19.280 | 18.829 | ||||||||||||
April 2017(2) | 18.868 | 18.478 | 18.701 | 18.843 |
Source: Noon buying rate for cable transfers in New York reported by the Federal Reserve.
The noon buying rate for cable transfers in New York reported by the Federal Reserve on April 21, 2017 was Ps. 18.8425 = U.S. $1.00.
RISK FACTORS
Risk Factors Related to Our Operations
We have a substantial amount of indebtedness and other liabilities and are exposed to liquidity constraints, which could make it difficult for us to obtain financing on favorable terms and could adversely affect our financial condition, results of operations and ability to repay our debt and, ultimately, our ability to operate as a going concern.
We have a substantial amount of debt. 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. Therefore, in order to develop our hydrocarbon reserves and amortize scheduled debt maturities, we will need to obtain funds from a broad range of sources, in addition to implementing the efficiency andcost-cutting initiatives described in this annual report.
As of December 31, 2018, our total indebtedness, including accrued interest, was Ps. 2,082.3 billion (U.S. $105.8 billion), which represented a 2.2% increase compared to our total indebtedness, including accrued interest, of Ps. 2,037.9 billion (U.S. $103.5 billion) as of December 31, 2017. 27.2% of our existing debt as of December 31, 2018, or Ps. 566.1 billion (U.S. $28.8 billion), is scheduled to mature in the next three years, including Ps. 191.8 billion (U.S. $9.7 billion) scheduled to mature in 2019. As of December 31, 2018, we had a negative working capital of Ps. 54.7 billion (U.S. $2.8 billion). Our level of debt may increase further in the short or medium term as a result of new financing activities or 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 flows provided by our operations, drawdowns under our available credit facilities and the incurrence of additional indebtedness. See “Item 5 — Operating and Financial Review and Prospects —Liquidity and Capital Resources — Overview—Changes to Our Business Plan.”
If we were unable to obtain financing on favorable terms, this could hamper our ability to obtain further financing, invest in projects financed through debt and meet our principal and interest payment obligations with our creditors. As a result, we may be exposed to liquidity constraints and may not be able to service our debt or make the capital expenditures required to maintain our current production levels and to maintain, and increase, the proved hydrocarbon reserves assigned to us by the Mexican Government, which may adversely affect our financial condition and results of operations. See “—Risk Factors Related to our Relationship with the Mexican Government—We must make significant capital expenditures to maintain our current production levels, and to maintain, as well as increase, the proved hydrocarbon reserves assigned to us by the Mexican Government. Reductions in our income, adjustments to our capital expenditures budget and our inability to obtain financing may limit our ability to make capital investments” below.
If such constraints occur at a time when our cash flow from operations is less than the resources necessary to meet our debt service obligations, in order to provide additional liquidity to our operations, we could be forced to further reduce our planned capital expenditures, implement further austerity measures and/or sell additionalnon-strategic assets in order to raise funds. A reduction in our capital expenditure program could adversely affect our financial condition and results of operations. Additionally, such measures may not be sufficient to permit us to meet our obligations.
Our consolidated financial statements have been prepared under the assumption that we will continue as a going concern. However, there exists substantial doubt about our ability to continue as a going concern. Our consolidated financial statements do not include any adjustments that might result from the outcome of that uncertainty. If the actions we are taking to improve our financial condition, which are described in detail under “Item 5 — Operating and Financial Review and Prospects —Liquidity and Capital Resources — Overview—Changes to Our Business Plan,” are not successful, we may not be able to continue operating as a going concern.
Downgrades in our credit ratings could negatively impact our access to the financial markets and cost of financing.
We rely on access to the financial markets to finance the capital expenditures needed to carry out our capital investment projects. Accordingly, maintaining investment grade credit ratings is important to our business and financial condition, as credit ratings affect the cost and other terms upon which we are able to obtain funding. 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. 1,080.5 billion (U.S. $54.9 billion) as of December 31, 2018; (7) the persistence of our operating expenses notwithstanding declines in oil prices; (8) the possibility that our budget for capital expenditures will be insufficient to maintain and exploit reserves; and (9) the involvement of the Mexican Government in our strategy, financing and management.
On April 12, 2018, Moody’s Investors Service announced the revision of its outlook for our credit ratings from negative to stable and affirmed our global foreign currency rating as Baa3 and our global local currency credit rating as Aa3. On January 29, 2019, Fitch Ratings lowered our credit rating from BBB+ toBBB- in both global local and global foreign currency and affirmed the outlook for our credit ratings as negative. On March 4, 2019, Standard and Poor’s announced the revision of the outlook for our credit ratings from stable to negative and affirmed our global foreign currency credit rating as BBB+ and our global local currency rating asA-.
Any further lowering of our credit ratings, particularly 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. Credit rating downgrades could also negatively impact the prices of our debt securities. There can be no assurance that we will be able to maintain our current credit ratings or outlooks.
Crude oil and natural gas prices are volatile and low crude oil and natural gas prices adversely affect our income and cash flows and the amount of hydrocarbon reserves that we have the right to extract and sell.
International crude oil and natural gas prices are subject to global supply and demand and fluctuate due to many factors beyond our control. These factors include competition within the oil and natural gas industry, the prices and availability of alternative sources of energy, international economic trends, exchange rate fluctuations, expectations of inflation, domestic and foreign laws and government regulations, political and other events in major oil and natural gas producing and consuming nations and actions taken by oil exporting countries, trading activity in oil and natural gas and transactions in derivative financial instruments (which we refer to as DFIs) related to oil and gas.
When international crude oil, petroleum product and/or natural gas prices are low, we generally earn less revenue and, therefore, generate lower cash flows and earn less income before taxes and duties because our costs remain roughly constant. Conversely, when crude oil, petroleum product and natural gas prices are high, we earn more revenue and our income before taxes and duties increases. Crude oil export prices, which had generally traded above U.S. $75.00 per barrel since October 2009 and traded above U.S. $100.00 per barrel as of July 30, 2014, began to fall in August 2014. After a gradual decline that resulted in per barrel prices falling to U.S. $91.16 at September 30, 2014, this decline sharply accelerated in October 2014 and prices fell to U.S. $53.27 per barrel at the end of 2014, with a weighted average price for the year of 2014 of U.S. $86.00 per barrel. During 2015, theThe weighted average Mexican crude oil export price was approximately U.S. $44.17 per barrel and fell to U.S. $26.54 per barrel by the end of December 2015. In 2016, the weighted average Mexican crude oil export price was approximately U.S. $35.63 per barrel, falling tofurther in subsequent years, reaching U.S. $18.90 per barrel on January 20, 2016, the lowest in twelve years, before rebounding to U.S. $46.53 per barrel on December 28, 2016. This decline in crude oil prices had a direct effect on our results of operations and financial condition for the year ended December 31, 2016. During the first three months of 2017, the weighted average Mexican crude oil price was U.S. $44.11 per barrel, an increase of U.S. $8.48 per barrel as compared to the 2016 weighted average Mexican crudeCrude oil export price. As of April 27, 2017,prices have since stabilized, with the weighted average Mexican crude oil export price wasaveraging of U.S. $42.25$62.29 per barrel a slight decrease from the first three months of 2017, but an increase of U.S. $6.62 per barrel as compared to the 2016 weighted average Mexican crude oil export price. Future declinesin 2018. However, prices remain significantly below 2014 levels and fluctuated greatly in 2018.
Any future decline in international crude oil and natural gas prices will likely have a similar negative impact on our results of operations and financial condition. TheseIn addition, significant fluctuations may also affect estimates of the amount of Mexico’s hydrocarbon reserves that we have the right to extract and sell.sell, which could affect our future production levels. See “—Risk Factors Related to our Relationship with the Mexican Government—Information on Mexico’s hydrocarbon reserves is based on estimates, which are uncertain and subject to revisions” below and “Item 11—Quantitative and Qualitative Disclosures About Market Risk—Changes in Exposure to Main Risks—Market Risk—Hydrocarbon Price Risk.”
We have a substantial amount of indebtedness and other liabilities and are exposed to liquidity constraints, which could make it difficult for us to obtain financing on favorable terms and could adversely affect our financial condition, results of operations and ability to repay our debt and, ultimately, our ability to operate as a going concern.
We have a substantial amount of debt, which we have incurred primarily to finance the capital expenditures needed to carry out our capital investment projects. Due to our heavy tax burden, our cash flow from operations in recent years has not been sufficient to fund our capital expenditures and other expenses and, accordingly, our debt has significantly increased and our working capital has decreased. The sharp decline in oil prices that began in late 2014 has had a negative impact on our ability to generate positive cash flows, which, together with our continued heavy tax burden and increased competition from the private sector, has further exacerbated our ability to fund our capital expenditures and other expenses from cash flow from operations. Therefore, in order to develop our hydrocarbon reserves and amortize scheduled debt maturities, we will need to raise significant amounts of financing from a broad range of funding sources.
As of December 31, 2016, our total indebtedness, including accrued interest, was approximately U.S. $96.0 billion (Ps. 1,983.1 billion), in nominal terms, which represents a 10.6% increase (a 32.8% increase in peso terms) compared to our total indebtedness, including accrued interest, of approximately U.S. $86.8 billion (Ps. 1,493.4 billion) as of December 31, 2015. 23.5% of our existing debt as of December 31, 2016, or U.S. $22.5 billion, is scheduled to mature in the next three years. As of December 31, 2016, we had negative working capital of U.S. $3.4 billion. Our level of debt may increase further in the short or medium term and may have an adverse effect on our financial condition, results of operations and liquidity position. To service our debt and to raise funds for our capital expenditures, we have relied and may continue to rely on a combination of cash flows provided by our operations, the divestment ofnon-strategic assets, drawdowns under our available credit facilities and the incurrence of additional indebtedness. See “Item 5—Operating and Financial Review and Prospects—Liquidity and Capital Resources—Overview—Changes to Our Business Plan.”
Certain rating agencies have expressed concerns regarding: (1) our heavy tax burden, (2) the total amount of our debt; (3) the significant increase in our indebtedness over the last several years; (4) our negative free cash flow during 2016, primarily resulting from our significant capital investment projects and the low price of oil; (5) the natural decline of certain of our oil fields and lower quality of crude oil; (6) our substantial unfunded reserve for retirement pensions and seniority premiums, which was equal to U.S. $59.1 billion as of December 31, 2016; and (7) the resilience of our operating expenses notwithstanding the sharp decline in oil prices that began in late 2014. On January 29, 2016, Standard & Poor’s (S&P) rating agency downgraded ourstand-alone credit profile from “BB+” to “BB,” and on August 23, 2016 downgraded our credit outlook from stable to negative. On December 23, 2016, S&P affirmed our global foreign currency rating of “BBB+.” On March 31, 2016, Moody’s Investors Service announced the revision of our global foreign currency and local currency credit ratings from “Baa1” to “Baa3” and changed the outlook for our credit ratings to negative. On December 9, 2016, Fitch Ratings affirmed our “BBB+” global credit rating, but revised the outlook for our credit ratings from stable to negative.
Any further lowering of our credit ratings may have adverse consequences on our ability to access the financial markets and/or our cost of financing. If we were unable to obtain financing on favorable terms, this could hamper our ability to obtain further financing, invest in projects financed through debt and meet our principal and interest payment obligations with our creditors. As a result, we may be exposed to liquidity constraints and may not be able to service our debt or make the capital expenditures required to maintain our current production levels and to maintain, and increase, the proved hydrocarbon reserves assigned to us by the Mexican Government, which may adversely affect our financial condition and results of operations. See “—Risk Factors Related to our Relationship with the Mexican Government—We must make significant capital expenditures to maintain our current production levels, and to maintain, as well as increase, the proved hydrocarbon reserves assigned to us by the Mexican Government. Reductions in our income, adjustments to our capital expenditures budget and our inability to obtain financing may limit our ability to make capital investments” below.
If such constraints occur at a time when our cash flow from operations is less than the resources necessary to fund our capital expenditures or to meet our debt service obligations, in order to provide additional liquidity to our operations, we could be forced to further reduce our planned capital expenditures, implement further austerity measures and/or sell additionalnon-strategic assets in order to raise funds. A reduction in our capital expenditure program could adversely affect our financial condition and results of operations. Additionally, such measures may not be sufficient to permit us to meet our obligations.
Our consolidated financial statements have been prepared under the assumption that we will continue as a going concern. However, our independent auditors have stated in their most recent report that there is important uncertainty and significant doubt concerning our ability to continue operating as a result of recurring net losses, negative working capital, negative equity and negative cash flows from operating activities for the year ended December 31, 2016. Our consolidated financial statements do not include any adjustments that might result from the outcome of that uncertainty. If the actions we are taking to improve our financial condition, which are described in detail under “Item 5—Operating and Financial Review and Prospects—Liquidity and Capital
Resources—Overview—Changes to Our Business Plan,” are not successful, we may not be able to continue operating as a going concern.
We are an integrated oil and gas company and are exposed to production, equipment and transportation risks, criminal acts, blockades to our facilities, and criminal actscyber-attacks, failure in our information technology system and deliberate acts of terror.terror that could adversely affect our business, results of operations and financial condition.
We are subject to several risks that are common among oil and gas companies. These risks include production risks (fluctuations in production due to operational hazards, natural disasters or weather, accidents, etc.), equipment risks (relating to the adequacy and condition of our facilities and equipment) and transportation risks (relating to the condition and vulnerability of pipelines and other modes of transportation). More specifically, our business is subject to the risks of explosions in pipelines, refineries, plants, drilling wells and other facilities, oil spills, hurricanes in the Gulf of Mexico and other natural or geological disasters and accidents, fires and mechanical failures. Criminal attempts
Our operations are also subject to the risk of criminal acts to divert our crude oil, natural gas or refined products from our pipeline network, including the theft, and facilities fortampering with the quality, of our products. We have experienced an increase in the illegal sale havetrade in the fuels that we produce and in the illegal “tapping” of our pipelines, which has resulted in explosions, property and environmental damage, injuries and loss of life.life, as well as loss of revenue from the stolen product.
Our
In 2018, we discovered 14,910 illegal pipeline taps. We are also subject to the risk that some of our employees may, or may be perceived to, be participating in the illicit market in fuels. In addition, our facilities are also subject to the risk of sabotage, terrorism blockades and cyber-attacks.blockades. For example, in early 2017 we experienced widespread demonstrations, including blockades, as a result of the Mexican Government’s recent increase in fuel prices haveduring 2017, which prevented us from accessing certain of our refined products supply terminals and caused critical gasoline shortages at several retail service stations in at least three Mexican states.Mexico. The occurrence of incidents such as these incidents related to the production, processing and transportation of oil and gas products could result in personal injuries, loss of life, environmental damage from the subsequent containment,clean-up and repair expenses, equipment damage and damage to our facilities.facilities, which in turn could adversely affect our business, results of operations and financial condition.
Our operations depend on our information technology systems and therefore cybersecurity plays a key role in protecting our operations.Cyber-threats andcyber-attacks are becoming increasingly sophisticated, coordinated and costly, and could be targeted at our operations. Although we have established an information security program which includes cybersecurity systemsthat helps us to prevent, detect and procedures to protect our information technology,correct vulnerabilities, and we have not yet suffered a significantcyber-attack, if the integrity of our information technology system were everto be compromised due to acyber-attack, or due to the negligence or misconduct of our employees, our business operations could be disrupted or even paralyzed and our proprietary information could be lost or stolen. As a result of these risks, we could face, among other things, regulatory action, legal liability, damage to our reputation, a significant reduction in revenues, an increase in costs, a shutdown of operations, or loss of our investments in areas affected areas.by suchcyber-attacks, which in turn could have a material adverse effect on our reputation, results of operations and financial condition.
We purchase comprehensive insurance policies covering most of these risks; however, these policies may not cover all liabilities, and insurance may not be available for some of the consequential risks. There can be no assurance that accidents, sabotage or acts of terrorsignificant incidents will not occur in the future, that insurance will adequately cover the entire scope or extent of our losses or that we maywill not be found directly liable in connection with claims arising from accidentsheld responsible for such incidents. The occurrence of a significant incident or other similar events.unforeseen liability for which we are not fully insured or for which insurance recovery is significantly delayed could have a material adverse effect on our results of operations and financial condition. See “Item 4—Information on the Company—Business Overview—PEMEX Corporate Matters—Insurance.”
A continued decline in our proved hydrocarbon reserves and production could adversely affect our operating results and financial condition.
Some of our existing oil and gas producing fields are mature and, as a result, our reserves and production may decline as reserves are depleted. In recent years the replacement rate for our proved hydrocarbon reserves has been insufficient to prevent a decline in our proved reserves. During 2018, our total proved reserves decreased by 683.7 million barrels of crude oil equivalent, or 8.9%, after accounting for discoveries, extensions, revisions, and delimitations, from 7,694.7 million barrels of crude oil equivalent as of December 31, 2017 to 7,010.3 million barrels of crude oil equivalent as of December 31, 2018. See “Item 4—Information on the Company—Business Overview––Exploration and Production––Reserves” for more information about the factors leading to this decline. Ourreserve-replacement ratio, or RRR, in 2018 was 34.7%, as compared to our RRR of 17.5% in 2017. In addition, our crude oil production decreased by 5.0% in 2016, by 9.5% in 2017 and by 6.4% in 2018, primarily as a result of the decline of the Cantarell,Yaxché-Xanab, Crudo Ligero Marino, ElGolpe-Puerto Ceiba,Bellota-Chinchorro, Antonio J. Bermúdez,Cactus-Sitio Grande,Ixtal-Manik, Chuc, Costero Terreste andTsimín-Xux projects. There can be no assurance that we will be able to stop or reverse the decline in our proved reserves and production, which could have an adverse effect on our business, results of operations and financial condition.
Developments in the oil and gas industry and other factors may result in substantialwrite-downs of the carrying amount of certain of our assets, which could adversely affect our operating results and financial condition.
We evaluate on an annual basis, or more frequently where the circumstances require, the carrying amount of our assets for possible impairment. Our impairment tests are performed by a comparison of the carrying amount of an individual asset or acash-generating unit with its recoverable amount. Whenever the recoverable amount of an individual asset orcash-generating unit is less than its carrying amount, an impairment loss is recognized to reduce the carrying amount to the recoverable amount.
Changes in the economic, regulatory, business or political environment in Mexico or other markets where we operate, such as the gradual liberalization of fuel prices pursuant to energy reform and theor a significant decline in international crude oil and gas prices, among other factors, may result in the recognition of impairment charges in certain of our assets. Due to the decline in oil prices, we have performed impairment tests of ournon-financial assets (other than inventories and deferred taxes) at the end of each quarter. As of December 31, 2015,2016 and 2017, we recognized a net reversal of impairment of Ps. 331,314 million and an impairment charge of Ps. 477,945 million.151,444 million, respectively. As of December 31, 2016,2018, we recognized a net reversal of impairment in the amount of Ps. 331,31421,419 million. See Note 12(d)15 to our consolidated financial
statements for further information about the impairment of certain of our assets. Future developments in the economic environment, in the oil and gas industry and other factors could result in further substantial impairment charges, adversely affecting our operating results and financial condition.
Increased competition in the energy sector due to the current legal framework in Mexico could adversely affect our business and financial performance.
The Constitución Política de los Estados Unidos Mexicanos(Political Constitution of the United Mexican States (theor the “Mexican Constitution”) was amended in 2013 and theLey de Hidrocarburos (Hydrocarbons Law) allowswas enacted in 2014 in order to allow other oil and gas companies, in addition to us, to carry out certain activities related to the energy sector in Mexico, including exploration and extractionproduction activities, and the import and sale of gasoline. As a result, we face competition for the right to explore and develop new oil and gas reserves in Mexico. We will also likely face competition in connection with certain refining, transportation and processing activities. In addition, increasedIncreased competition could make it difficult for us to hire and retain skilled personnel. For more information, see “Item 4—Information onWhile we have not yet experienced significant adverse effects from increased competition, there can be no assurances that we will not experience such adverse effects in the Company—History and Development—Energy Reform.”future. If we are unable to compete successfully with other oil and gas companies in the energy sector in Mexico, our results of operations and financial condition may be adversely affected.
We participate in strategic alliances, joint ventures and other joint arrangements. These arrangements may not perform as expected, which could harm our reputation and have an adverse effect on our business, results of operations and financial condition.
We have entered into and may in the future enter into strategic alliances, joint ventures and other joint arrangements. These arrangements are intended to reduce risks in exploration and production, refining, transportation and processing activities. Our partners in such arrangements may, as a result of financial or other difficulties, be unable or unwilling to fulfill their financial or other obligations under our agreements, threatening the viability of the relevant project. In addition, our partners may have inconsistent or opposing economic or business interests and take action contrary to our policies or objectives, which could be to our overall detriment. If our strategic alliances, joint ventures and other joint arrangements do not perform as expected, our reputation may be harmed and our business, financial condition and results of operations could be adversely affected.
We are subject to Mexican and internationalanti-corruption,anti-bribery andanti-money laundering laws. Our failure to comply with these laws could result in penalties, which could harm our reputation prevent us from obtaining governmental authorizations needed to carry out our operations and have an adverse effect on our business, results of operations and financial condition.
We are subject to Mexican and internationalanti-corruption,anti-bribery andanti-money laundering laws. See “Item 4—Information on the Company—General Regulatory Framework.” Although we maintain policies and processes intended to comply with these laws, including the review of our internal control over financial reporting, we are subject to the risk that our employees, contractors or any person doing business with us may engage in fraudulent activity, corruption or bribery, circumvent or override our internal controls and procedures or misappropriate or manipulate our assets for their personal or business advantage to our detriment. We have in place a number of systems for identifying, monitoring and mitigating these risks, but our systems may not be effective and we cannot ensure that these compliance policies and processes will prevent intentional, reckless or negligent acts committed by our officers or employees. Any failure—real or perceived—by our officers or employees to comply with applicable governance or regulatory obligations could harm our reputation, limit our ability to obtain financing and otherwise have a material adverse effect on our business, financial condition and results of operations.
If we fail to comply with any applicableanti-corruption,anti-bribery oranti-money laundering laws, we and our officers and employees may be subject to criminal, administrative or civil penalties and other remedial measures, which could have material adverse effects on our reputation, business, financial condition and results of operations. Any investigation of potential violations ofanti-corruption,anti-bribery oranti-money laundering laws by governmental authorities in Mexico or other jurisdictions could result in an inability to prepare our consolidated financial statements in a timely manner. Thismanner and could adversely impact our reputation, ability to access the financial markets and ability to obtain contracts, assignments, permits and other government authorizations necessary to participate in our industry, which, in turn, could have adverse effects on our business, results of operations and financial condition.
Our management has identified material weaknesses in our internal control over financial reporting for each of the last four years and has concluded that our internal control over financial reporting was not effective at December 31, 2018, which may have a material adverse result on our results of operation and financial condition.
Our management identified two material weaknesses in our internal control over financial reporting in 2018. For further information on the material weaknesses identified by our management in 2018, see “Item 15—Controls and Procedures—Management’s Annual Report on Internal Control over Financial Reporting.” In light of the identified material weaknesses, our management concluded that our internal control over financial reporting was not effective at December 31, 2018. Although we have developed and implemented several measures to remedy these material weaknesses, we cannot be certain that there will be no other material weaknesses in our internal control over financial reporting in the future.
In addition, our management identified material weaknesses in our internal control over financial reporting in connection with the preparation of our consolidated financial statements as of and for each of the years ended December 31, 2015, 2016 and 2017. We disclosed the circumstances giving rise to these material weaknesses—which were generally different from one year to the next—in our annual reports on Form20-F for the years 2015, 2016 and 2017, respectively. As of the date of this annual report, we believe that each of these material weaknesses has been remediated.
If our efforts to remediate the material weaknesses identified in 2018 are not successful, we may be unable to report our results of operations for future periods accurately and in a timely manner and make our required filings with government authorities, including the SEC. There is also a risk that there could be accounting errors in our financial reporting, and we cannot be certain that in the future additional material weaknesses will not exist or otherwise be discovered. Any of these occurrences could adversely affect our results of operation and financial condition.
Our compliance with environmental regulations in Mexico, including in connection with efforts to address climate change, could result in material adverse effects on our results of operations.
A wide range of general andindustry-specific Mexican federal and state environmental laws and regulations apply to our operations; these laws and regulations are often difficult and costly to comply with and carry substantial penalties fornon-compliance. This regulatory burden increases our costs because it requires us to make significant capital expenditures and limits our ability to extract hydrocarbons, resulting in lower revenues. For an estimate of our accrued environmental liabilities, see “Item 4—Information on the Company—Environmental Regulation—Environmental Liabilities.” Growing international concern over greenhouse gas emissions and climate change could result in new laws and regulations that could adversely affect our results of
operations and financial condition. International agreements, including the Paris Agreement approved by the Mexican Government, contemplate coordinated efforts to combat climate change. We may become subject to market changes, including carbon taxes, efficiency standards,cap-and-trade and emission allowances and credits. These measures could increase our operating and maintenance costs, increase the price of our hydrocarbon products and possibly shift consumer demand tolower-carbon sources. See “Item 4—4 — Environmental Regulation—ClimateRegulation —Climate Change” for more information on the Mexican Government’s current legal and regulatory framework for combatting climate change.
Risk Factors Related to Mexico
Economic conditions and government policies in Mexico and elsewhere may have a material impact on our operations.
A deterioration in Mexico’s economic condition, social instability, political unrest or other adverse social developments in Mexico could adversely affect our business and financial condition. Those events could also lead to increased volatility in the foreign exchange and financial markets, thereby affecting our ability to obtain new financing and service our debt. Additionally, the Mexican Government in the past has announced budget cuts in November 2015, February 2016, and September 2016 in response to declines in international crude oil prices, and, while the Mexican Government did not reduce our budget in 2017 and announced a budget increase in December 2018, it may cut spendingreduce our budget in the future. See “—Risk Factors Related to our Relationship with the Mexican Government—The Mexican Government controls us and it could limit our ability to satisfy our external debt obligations or could reorganize or transfer us or our assets” below. TheseAny new budget cuts could adversely affect the Mexican economy and, consequently, our business, financial condition, operating results and prospects.
In the past, Mexico has experienced several periods of slow or negative economic growth, high inflation, high interest rates, currency devaluation and other economic problems. These problems may worsen or reemerge, as applicable, in the future and could adversely affect our business and ability to service our debt. A worsening ofdeterioration in international financial or economic conditions, such as a slowdown in growth or recessionary conditions in Mexico’s trading partners, including the United States, or the emergence of a new financial crisis, could have adverse effects on the Mexican economy, our financial condition and our ability to service our debt.
Changes in Mexico’s exchange control laws may hamper our ability to service our foreign currency debt.
The Mexican Government does not currently restrict the ability of Mexican companies or individuals to convert pesos into other currencies. However, we cannot provide assurances that the Mexican Government will maintain its current policies with regard to the peso. In the future, the Mexican Government could impose a restrictive exchange control policy, as it has done in the past. Mexican Government policies preventing us from exchanging pesos into U.S. dollars could hamper our ability to service our foreign currency obligations, including our debt, the majority of which is denominated in currencies other than pesos.
Political conditions in Mexico could materially and adversely affect Mexican economic policy and, in turn, our operations.
Political events in Mexico may significantly affect Mexican economic policy and, consequently, our operations. Enrique Peña Nieto, a member of thePartido Revolucionario Institucional(Institutional Revolutionary Party or PRI), was elected President of Mexico and took office on December 1, 2012. As of the date of this annual report, no political party holds a simple majority in either house of the Mexican Congress.
Presidential and federal congressional elections in Mexico will be held in July 2018. The Mexican presidential election will result in a change in administration, as presidential reelection is not permitted in Mexico. As a result, we cannot predict whether changes in Mexican governmental policy will result from the change in administration. Political events in Mexico could adversely affect economic conditions and/or the oil and gas industry and, by extension, our results of operations and financial position.
Mexico has experienced a period of increasing criminal activity, which could affect our operations.
In recent years, Mexico has experienced a period of increasing criminal activity, primarily due to the activities of drug cartels and related criminal organizations. In addition, the development of the illicit market in fuels in Mexico has led to increases in theft and illegal trade in the fuels that we produce. In response, the Mexican Government has implemented various security measures and has strengthened its military and police forces, and we have also established various strategic measures aimed at decreasing incidents of theft and other criminal activity directed at our facilities and products. See “Item 8—Financial Information—Legal Proceedings—Actions Against the Illicit Market in Fuels.” Despite these efforts, criminal activity continues to exist in Mexico, some of which may target our facilities and products. These activities, their possible escalation and the violence associated with them, in an extreme case, may have a negative impact on our financial condition and results of operations.
Economic and political developments in Mexico and the United States may adversely affect PEMEX.Mexican economic policy and, in turn, PEMEX’s operations.
ChangesPolitical events in Mexico may significantly affect Mexican economic politicalpolicy and, regulatory conditionsconsequently, our operations. Presidential and federal congressional elections in Mexico were held on July 1, 2018. Mr. Andrés Manuel López Obrador, a member of theMovimiento Regeneración Nacional (National Regeneration Movement, or Morena), was elected President of Mexico and took office on December 1, 2018, replacing Mr. Enrique Peña Nieto, a member of thePartido Revolucionario Institucional(Institutional Revolutionary Party, or PRI). The new President’s term will expire on September 30, 2024. Thenewly-elected members of the Mexican Congress took office on September 1, 2018. As of the date of this annual report, the National Regeneration Movement holds an absolute majority in the United StatesChamber of Deputies.
The new administration and the Mexican Congress are discussing a number of reforms that could affect economic conditions or the oil and gas industry in U.S. lawsMexico. Until any reform has been adopted and implemented, we cannot predict how these policies governing foreign tradecould impact our results of operation and foreign relations could create uncertaintyfinancial position. We cannot provide any assurances that political developments in the international markets and couldMexico will not have a negative impactan adverse effect on the Mexican economy. economy or oil and gas industry and, in turn, our business, results of operations and financial condition, including our ability to repay our debt.
Economic conditions in Mexico are highly correlated with economic conditions in the United States due to the physical proximity and the high degree of economic activity between the two countries generally, including the trade facilitated by the North American Free Trade Agreement, (“NAFTA”). In addition,or NAFTA. As a result, political developments in the United States, including changes in the administration and governmental policies, can also have an impact on the exchange rate between the U.S. dollar and the Mexican peso, economic conditions in Mexico and the global capital markets.
Following the U.S. elections in November 2016 and the change in the U.S. administration, there is uncertainty regarding future U.S. policies with respect to matters of importance to Mexico and its economy. In particular, the U.S. administration has raised the possibility ofre-negotiating, or withdrawing from, NAFTA and taking actions related to trade, tariffs, immigration and taxation that could affect Mexico.
Since 2003, exports of petrochemical products from Mexico to the United States have enjoyed azero-tariff rate under NAFTA and, subject to limited exceptions, exports of crude oil and petroleum products have also been free or exempt from tariffs. During 2016,2018, our export sales to the United States amounted to Ps. 138.2434.8 billion, representing 12.8%25.9% of total sales and 35.0%62.8% of export sales for the year. On November 30, 2018, the presidents of Mexico, the United States and Canada signed the UnitedStates-Mexico-Canada Agreement, or the USMCA, which, if ratified by the legislatures of the three countries, would replace NAFTA. As of the date of this annual report, there is uncertainty about whether the USMCA will be ratified, as well as the timing thereof, and the potential for furtherre-negotiation, or even termination, of NAFTA. Any increase of import tariffs resulting from the implementation of the USMCA or there-negotiation or termination of NAFTA could make it economically unsustainable for U.S. companies to import our petrochemical, crude oil and petroleum products if they are unable to transfer those additional costs onto consumers, which would increase our expenses and decrease our revenues, even if domestic and international prices for our products remain constant. Higher tariffs on products that we export to the United States could also require us to renegotiate our contracts or lose business, resulting in a material adverse impact on our business and results of operations.
BecauseIn addition, because the Mexican economy is heavily influenced by the U.S. economy, there-negotiation, or even termination, of NAFTA and/or other U.S. government policies that may be adopted by the U.S. administrationgovernment may adversely affect economic conditions in Mexico. These developments could in turn have an adverse effect on our financial condition, results of operations and ability to repay our debt.
Risk Factors Related to our Relationship with the Mexican Government
The Mexican Government controls us and it could limit our ability to satisfy our external debt obligations or could reorganize or transfer us or our assets.
We are controlled by the Mexican Government and our annual budget may be adjusted by the Mexican Government in certain respects. Pursuant to the Petróleos Mexicanos Law, Petróleos Mexicanos was transformed from a decentralized public entity to a productivestate-owned company on October 7, 2014. The Petróleos Mexicanos Law establishes a special regime governing, among other things, our budget, debt levels,
administrative liabilities, acquisitions, leases, services and public works. This special regime provides Petróleos Mexicanos with additional technical and managerial autonomy and, subject to certain restrictions, with additional autonomy with respect to our budget. Notwithstanding this increased autonomy, the Mexican Government still controls us and has the power to adjust our financial balance goal, which represents our targeted net cash flow for the fiscal year based on our projected revenues and expenses, and our annual wage and salary expenditures, subject to the approval of theCámara de Diputados (Chamber of Deputies).
The adjustments to our annual budget mentioned above may compromise our ability to develop the reserves assigned to us by the Mexican Government and to successfully compete with other oil and gas companies that may enter the Mexican energy sector. See “Item 4—Information on the Company—History and Development—Capital Expenditures” for more information about our February 2016 budget adjustment and “—General Regulatory Framework” for more information about the Mexican Government’s authority with respect to our budget. In addition, the Mexican Government’s control over us could adversely affect our ability to make payments under any securities issued by Petróleos Mexicanos. Although Petróleos Mexicanos is wholly owned by the Mexican Government, our financing obligations do not constitute obligations of and are not guaranteed by the Mexican Government.
The Mexican Government’s agreements with international creditors may affect our external debt obligations. In certain past debt restructurings of the Mexican Government, Petróleos Mexicanos’ external indebtedness was treated on the same terms as the debt of the Mexican Government and other public sectorpublic-sector entities, and it may be treated on similar terms in any future debt restructuring. In addition, Mexico has entered into agreements with official bilateral creditors to reschedule public sectorpublic-sector external debt. Mexico has not requested restructuring of bonds or debt owed to multilateral agencies.
The Mexican Government has the power, if the Mexican Constitution and federal law were further amended, to further reorganize our corporate structure, including a transfer of all or a portion of our assets to an entity not controlled, directly or indirectly, by the Mexican Government. See “—Risk Factors Related to Mexico” above.
Our financing obligations are not guaranteed by the Mexican Government.
Although Petróleos Mexicanos is wholly owned by the Mexican Government, our financing obligations do not constitute obligations of and are not guaranteed by the Mexican Government. As a result, the Mexican Government would have no legal obligation to make principal or interest payments on our debt if we were unable to satisfy our financial obligations.
We pay significant taxes and duties to the Mexican Government, and, if certain conditions are met, we may be required to pay a state dividend, which may limit our capacity to expand our investment program or negatively impact our financial condition generally.
We are required to make significant payments to the Mexican Government, including in the form of taxes and duties, which may limit our ability to make capital investments. In 2016, approximately 32.0% of our sales revenues was used for payments2018, we paid Ps. 570.3 billion to the Mexican Government in the form of taxes and duties, which constituted a substantial portion of the Mexican Government’s revenues.
The Secondary Legislation includes changes to the fiscal regime applicable to us, particularly with respect to the exploration and extraction activities thatIn addition, we carry out in Mexico. As of 2016, we have the obligation,are generally required, subject to the conditions set forth in the Petróleos Mexicanos Law, to pay a state dividend to the Mexican Government. We were not required to pay a state dividend in 2016, 2017 and are2018 and we will not be required to do sopay a state dividend in 2017.2019. See “Item 8—Financial Information—Dividends” for more information. Although the changes to the fiscal regime applicable to us are designed in partMexican Government has on occasion indicated a willing to reduce the Mexican Government’sits reliance on payments made by us, we cannot provide assurances that we will not be required to continue to pay a large proportion of our sales revenue to the Mexican Government. See “Item 4—Information on the Company—Taxes, Duties and Other Payments to the Mexican Government—Fiscal Regime.” In addition, the Mexican Government may change the applicable rules in the future.
The Mexican Government has historically imposed price controls in the domestic market on our products.
The Mexican Government has from time to time imposed price controls on the sales of natural gas, liquefied petroleum gas, gasoline, diesel, gas oil intended for domestic use, fuel oil and other products. As a result of these
price controls, we have not been able to pass on all of the increases in the prices of our product purchases to our customers in the domestic market when the peso depreciates in relation to the U.S. dollar. A depreciation of the peso increases our cost of imported oil and petroleum products, without a corresponding increase in our revenues unless we are able to increase the price at which we sell products in Mexico. In accordance with theLey de Ingresos de la Federación para el Ejerecicio Fiscal de 2017 (2017 Federal Revenue Law), the Mexican Government will gradually remove price controls on gasoline and diesel over the course of 2017 and 2018 as part of the liberalization of fuel prices in Mexico. On December 27, 2016, the Ministry of Finance and Public Credit announced maximum gasoline and diesel prices to be applied in each of the regions of Mexico where prices are not determined based on market conditions. For more information, see “Item 4—Information on the Company—Business Overview—Industrial Transformation.”
We do not control the Mexican Government’s domestic policies and the Mexican Government could impose additional price controls on the domestic market in the future. The imposition of such price controls would adversely affect our results of operations. For more information, see “Item 4—Information on the Company—Business Overview—Refining—Pricing” and “Item 4—Information on the Company—Business Overview—Gas and Basic Petrochemicals—Pricing.”
The Mexican nation, not us, owns the hydrocarbon reserves located in the subsoil in Mexico and our right to continue to extract these reserves is subject to the approval of the Ministry of Energy.
The Mexican Constitution provides that the Mexican nation, not us, owns all petroleum and other hydrocarbon reserves located in the subsoil in Mexico.
Article 27 of the Mexican Constitution provides that the Mexican Government will carry out exploration and production activities through agreements with third parties and through assignments to and agreements with us. The Secondary Legislation allows us and other oil and gas companies to explore and extract the petroleum and other hydrocarbon reserves located in Mexico, subject to assignment of rights by the Ministry of Energy and entry into agreements pursuant to a competitive bidding process.
Access to crude oil and natural gas reserves is essential to an oil and gas company’s sustained production and generation of income, and our ability to generate income would be materially and adversely affected if the Mexican Government were to restrict or prevent us from exploring or extracting any of the crude oil and natural gas reserves that it has assigned to us or if we are unable to compete effectively with other oil and gas companies in potential future bidding rounds for additional exploration and production rights in Mexico. For more information, see “—We must make significant capital expenditures to maintain our current production levels, and to maintain, as well as increase, the proved hydrocarbon reserves assigned to us by the Mexican Government. Reductions in our income, adjustments to our capital expenditures budget and our inability to obtain financing may limit our ability to make capital investments” below.
Information on Mexico’s hydrocarbon reserves is based on estimates, which are uncertain and subject to revisions.
The information on oil, gas and other reserves set forth in this annual report is based on estimates. Reserves valuation is a subjective process of estimating underground accumulations of crude oil and natural gas that cannot be measured in an exact manner; the accuracy of any reserves estimate depends on the quality and reliability of available data, engineering and geological interpretation and subjective judgment. Additionally, estimates may be revised based on subsequent results of drilling, testing and production. These estimates are also subject to certain adjustments based on changes in variables, including crude oil prices. Therefore, proved reserves estimates may differ materially from the ultimately recoverable quantities of crude oil and natural gas. Downward revisions in our reserve estimates could lead to lower future production, which could have an adverse effect on our results of operations and financial condition. See “—Risk Factors Related to Our Operations—Crude oil and natural gas prices are volatile and low crude oil and natural gas prices adversely affect our income
and cash flows and the amount of hydrocarbon reserves that we have the right to extract and sell” above. We revise annually our estimates of hydrocarbon reserves that we are entitled to extract and sell, which may result in material revisions to these estimates. Our ability to maintain ourlong-term growth objectives for oil production depends on our ability to successfully develop our reserves, and failure to do so could prevent us from achieving ourlong-term goals for growth in production.
TheComisión Nacional de Hidrocarburos (National Hydrocarbon Commission, or CNH) has the authority to review and approve our estimated hydrocarbon reserves estimates and may require us to make adjustments to these estimates. A request to adjust these reserves estimates could result in our inability to prepare our consolidated financial statements in a timely manner. This could adversely impact our ability to access financial markets, obtain contracts, assignments, permits and other government authorizations necessary to participate in the crude oil and natural gas industry, which, in turn, could have an adverse effect on our business, results of operations and financial condition.
We must make significant capital expenditures to maintain our current production levels, and to maintain, as well as increase, the proved hydrocarbon reserves assigned to us by the Mexican Government. Reductions in our income, adjustments to our capital expenditures budget and our inability to obtain financing may limit our ability to make capital investments.
Because our ability to maintain, as well as increase, our oil production levels is highly dependent upon our ability to successfully develop existing hydrocarbon reserves and, in the long term, upon our ability to obtain the right to develop additional reserves, we continually invest capital to enhance our hydrocarbon recovery ratio and improve the reliability and productivity of our infrastructure. During 2016, our total proved reserves had a net increase of 40 million barrels of oil equivalent after accounting for discoveries, extensions, revisions, and delimitations. This amount, however, was less than production in 2016. Accordingly, our total proved reserves decreased by 11.1%, from 9,632 million barrels of crude oil equivalent as of December 31, 2015 to 8,562.8 million barrels of crude oil as of December 31, 2016. See “Item 4—Information on the Company—Business Overview—Exploration and Production—Reserves” for more information about the factors leading to this decline, including the results of Round Zero. Our crude oil production decreased by 1.0% from 2012 to 2013, by 3.7% from 2013 to 2014 and by 6.7% from 2014 to 2015 and by 5.0% from 2015 to 2016 primarily as a result of the decline of the Cantarell,Tsimín-Xux, Antonio J. Bermúdez, Chuc and Crudo Ligero projects.
Pursuant to energy reform in Mexico, the Mexican Government outlined a process, commonly referred to as Round Zero, for the determination of our initial allocation of rights to continue to carry out exploration and production activities in Mexico. On August 13, 2014, the Ministry of Energy granted us the right to continue to explore and develop areas that together contain 95.9% of Mexico’s estimated proved reserves of crude oil and natural gas. The development of the reserves that were assigned to us pursuant to Round Zero, particularlyby the reserves in the deep waters of the Gulf of Mexico and in shale oil and gas fields in the Burgos basin,Mexican Government will demand significant capital investments and will pose significant operational challenges. Our right to develop the reserves assigned to us through Round Zero is conditioned on our ability to develop such reserves in accordance with our development plans, which were based on our technical, financial and operational capabilities at the time. We cannot provide assurances that we will have or will be able to obtain, in the time frame that we expect, sufficient resources or the technical capacity necessary to explore and extract the reserves that the Mexican Government assigned to us, as part of Round Zero, or that it may grant to us in the future. The declineIn the past, we have reduced our capital expenditures in response to declining oil prices, has forced us to make adjustments to our budget, including a significant reduction of our capital expenditures. Unlessand unless we are able to increase our capital expenditures, we may not be able to develop the reserves assigned to us in accordance with our development plans. We would lose the right to continue to extract these reserves if we fail to develop them in accordance with our development plans, which could adversely affect our operating results and financial condition. In addition, increased competition in the oil and gas sector in Mexico may increase the costs of obtaining additional acreage in potential future bidding rounds for the rights to new reserves.
Our ability to make capital expenditures is limited by the substantial taxes and duties that we pay to the Mexican Government, the ability of the Mexican Government to adjust certain aspects of our annual budget, cyclical decreases in our revenues primarily related to lower oil prices and any constraints on our liquidity. The availability of financing may limit our ability to make capital investments that are necessary to maintain current production levels and increasedecrease the proved hydrocarbon reserves that we are entitled to extract. The energy reform has provided us with opportunities to enter into strategic alliances and partnerships, which may reduce our capital commitments and allow us to participate in projects for which we are more competitive. However, no assurance can be provided that these strategic alliances and partnerships will be successful or reduce our capital commitments. For more information, see “Item 4—Information on the Company—History and Development—
Capital Expenditures” and “—Energy Reform.” For more information on the liquidity constraints we are exposed to, see “—We have a substantial amount of indebtedness and other liabilities and are exposed to liquidity constraints, which could make it difficult for us to obtain financing on favorable terms and could adversely affect our financial condition, results of operations and ability to repay our debt and, ultimately, our ability to operate as a going concern” above.
In addition, we have entered into strategic alliances, joint ventures and other joint arrangements with third parties in order to develop our reserves. If our partners were to significantly default on their obligations to us, we may be unable to maintain production levels or extract from our reserves. Moreover, we cannot assure you that these strategic alliances, joint ventures and other joint arrangements will be successful or reduce our capital commitments. For more information, see “—Risk Factors Related to Pemex’s Operations—We participate in strategic alliances, joint ventures and other joint arrangements. These types of arrangements may not perform as expected, which could harm our reputation and have an adverse effect on our business, results of operations and financial condition” above and “Item 4—Information on the Company—History and Development—Capital Expenditures.”
The Mexican Government has historically imposed price controls in the domestic market on our products.
The Mexican Government has from time to time imposed price controls on the sales of natural gas, liquefied petroleum gas, gasoline, diesel, gas oil intended for domestic use, fuel oil and other products. As a result of these price controls, we have not been able to pass on all of the increases in the prices of our product purchases to our customers in the domestic market when the peso depreciates in relation to the U.S. dollar. A depreciation of the peso increases our cost of imported oil and gas products, without a corresponding increase in our revenues unless we are able to increase the price at which we sell products in Mexico.
In accordance with theLey de Ingresos de la Federación para el Ejercicio Fiscal de 2017 (2017 Federal Revenue Law), during 2017 the Mexican Government gradually removed price controls on gasoline and diesel as part of the liberalization of fuel prices in Mexico. As of the date of this annual report, sales prices of gasoline and diesel have been fully liberalized and are determined by the free market. For more information, see “Item 4—Information on the Company—Business Overview—Industrial Transformation.” However, we do not control the Mexican Government’s domestic policies and the Mexican Government could impose additional price controls on the domestic market in the future. The imposition of such price controls would adversely affect our results of operations. For more information, see “Item 4—Information on the Company—Business Overview—Refining—Pricing Decrees” and “Item 4—Information on the Company—Business Overview—Gas and Aromatics—Pricing Decrees.”
We may claim some immunities under the Foreign Sovereign Immunities Act and Mexican law, and your ability to sue or recover may be limited.
We arepublic-sector entities of the Mexican Government. Accordingly, you may not be able to obtain a judgment in a U.S. court against us unless the U.S. court determines that we are not entitled to sovereign immunity with respect to that action. Under certain circumstances, Mexican law may limit your ability to enforce judgments against us in the courts of Mexico. We also do not know whether Mexican courts would enforce judgments of U.S. courts based on the civil liability provisions of the U.S. federal securities laws. Therefore, even if you were able to obtain a U.S. judgment against us, you might not be able to obtain a judgment in Mexico that is based on that U.S. judgment. Moreover, you may not be able to enforce a judgment against our property in the United States except under the limited circumstances specified in the Foreign Sovereign Immunities Act of 1976, as amended. Finally, if you were to bring an action in Mexico seeking to enforce our obligations under any securities issued by Petróleos Mexicanos, satisfaction of those obligations may be made in pesos, pursuant to the laws of Mexico.
Our directors and officers, as well as some of the experts named in this annual report, reside outside the United States. Substantially all of our assets and those of most of our directors, officers and experts are located outside the United States. As a result, investors may not be able to effect service of process on our directors or officers or those experts within the United States.
Item 4. Information on the Company
HISTORY AND DEVELOPMENT
We are the largest company in Mexico according to the June 2016 specialJuly 2018 edition ofExpansiónmagazine, and according to the November 21, 201619, 2018 issue ofPetroleum Intelligence Weekly,we were the eighthlargesttenthlargest crude oil producer and the eighteenthnineteenth largestoil and gas company in the world based on data from the year 2015.2017.
Our executive offices are located at Avenida Marina Nacional No. 329, Colonia Verónica Anzures, 11300, Alcandía Miguel Hildalgo, Ciudad de México, 11300, México. Our telephone number is(52-55) 1944-2500.9126-8700.
In March 1938, President Lázaro Cárdenas del Río nationalized theforeign-owned oil companies that were then operating in Mexico, and the Mexican Congress established Petróleos Mexicanos through theDecreto que crea la Institución Petróleos Mexicanos (Decree that creates the entity Petróleos Mexicanos), which was published in the Official Gazette of the Federation and took effect on July 20, 1938.
In July 1992, theLey Orgánica de Petróleos Mexicanos y Organismos Subsidiarios (Organic Law of Petróleos Mexicanos and Subsidiary Entities) took effect and, among other things, created Pemex-Exploration and Production, Pemex-Refining,Pemex-Gas and Basic Petrochemicals and Pemex-Petrochemicals as decentralized public entities of the Mexican Government with the legal authority to own property and conduct business in their own names. Each of the subsidiary entities had the characteristics of a subsidiary of Petróleos Mexicanos. The principal lines of business of those subsidiary entities were as follows:
Energy Reform
Energy Reform DecreeLegal Regime
On December 20,21, 2013, amendments to Articles 25, 27 and 28 of the Mexican Constitution were signed into law by President Enrique Peña Nieto and published in the Official Gazette of the Federation. We refer to this as the Energy Reform Decree. The Energy Reform Decree, which includestook effect, including transitional articles setting forth the general framework and timeline for implementing legislation relating to the related secondary legislation, took effect on December 21, 2013.
Secondary Legislationenergy sector.
On August 11, 2014, the secondarythis implementing legislation was published pursuant to the Energy Reform Decree in the Official Gazette of the Federation. We refer in this annual report to thisThe implementing legislation as the Secondary Legislation. The Secondary Legislation includes nine new laws, of which the following are most relevant to our operations:
The new Petróleos Mexicanos Law, which took effect, with the exception of certain provisions, on October 7, 2014 and repealed the previous Petróleos Mexicanos2014;
Hydrocarbons Law, which had been effective as of November 29, 2008;took effect on August 12, 2014; and
• | Ley de Ingresos sobre Hidrocarburos (Hydrocarbons Revenue Law). |
Together, the Hydrocarbons Law and the Hydrocarbons Revenue Law establish the legal framework for the exploration and production of oil and gas through assignments and contracts, as well as the new fiscal regime through which the Mexican Government will collectcollects revenues from participants in the Mexican oil and gas industry. The Hydrocarbons Law empowers the Ministry of Energy to determine the appropriate contract model for each area that is subject to a competitive bidding process, while the Ministry of Finance and Public Credit is responsible for determining the economic and fiscal terms of each contract. See “—Taxes, Duties and Other Payments to the Mexican Government—Fiscal Regime” below in this Item 4. The following arrangements comprise the new contractual regime established by the Secondary Legislationcurrent legal framework for upstream activities:
licenses, pursuant to which a license holder is entitled to the oil and gas that are extracted from the subsoil;
production-sharing contracts, pursuant to which a contractor is entitled to receive a percentage of production;
profit-sharing contracts, pursuant to which a contractor is entitled to receive a percentage of the profit from the sale of the extracted oil and gas; and
service contracts, pursuant to which a contractor would receive cash payments for services performed (serviceperformed; and
service contracts, together with licenses,production-sharing contracts andprofit-sharing contracts are known as the contracts for the exploration and extractionproduction of oil and gas, collectively referred to as contracts for exploration and production).production.
The fiscal terms of each contract for exploration and production are to be established in accordance with the Hydrocarbons Revenue Law. See “—Taxes, Duties and Other Payments to the Mexican Government—Fiscal Regime” below in this Item 4.
For midstream and downstream activities, including oil refining and natural gas processing, the Hydrocarbons Law establishes a permit regime that is granted by the Ministry of Energy and the EnergyComisión Reguladora de Energía (Energy Regulatory Commission, or CRE), as applicable. The Hydrocarbons Law also sets forth the process by which entities may apply for these permits. The Energy Regulatory Commission began issuingCRE has issued permits for the retail sale of gasoline and diesel fuel insince 2016. During 2017 and 2018,
Under the Energy Regulatory Commission, with the opinion of theComisión Federal de Competencia Económica (Federal Economic Antitrust Commission), will issue guidelines and schedules for different regions in Mexico relating to the processes to be used by the Ministry of Finance and Public Credit to determine prices of gasoline and diesel, which will take into account, among other things, transportation costs and volatility in international prices. Beginning in 2018, the prices of gasoline and diesel fuel will be freely determined by market conditions.
Legal Regime for Petróleos Mexicanos
As part of energy reform, Petróleos Mexicanos was transformed from a decentralized public entity into a productive state-owned company on October 7, 2014—the day on which the new Petróleos Mexicanos Law, took effect, with the exception of certain provisions. As a productive state-owned company, Petróleos Mexicanos remainsis a productivestate-owned company, wholly owned by the Mexican Government, and has the corporate purpose of generating economic value and increasing the income of the Mexican nation while adhering to principles of equity, as well as social and environmental responsibility.
On December 2, 2014, upon its determination that the new Board of Directors of Petróleos Mexicanos was performing its duties and the mechanisms for our oversight, transparency and accountability had been implemented, the Ministry of Energy formally announced in the Official Gazette of the Federation that the
special regime provided for in the Petróleos Mexicanos Law, which governs Petróleos Mexicanos’ activities relating to productivestate-owned subsidiaries, affiliates, compensation, assets, administrative liabilities, budget, debt levels and the state dividend, had takentook effect. On June 10, 2015, theDisposiciones Generales de Contratación para Petróleos Mexicanos y Sus Empresas Productivas Subsidiarias (General Provisions for Contracting for Petróleos Mexicanos and its ProductiveState-Owned Subsidiaries) were published in the Official Gazette of the Federation, and on June 11, 2015, the special regime for acquisitions, leases, services and public works became effective.
Corporate Reorganization
In accordance with the transitional articles of the Petróleos Mexicanos Law, on November 18, 2014, the Board of Directors of Petróleos Mexicanos approved the Director General’s proposal for our corporate reorganization. In our corporate reorganization, the four existing subsidiary entities of Petróleos Mexicanos were transformed into two new productive state-owned subsidiaries—Pemex Exploration and Production and Pemex Industrial Transformation—and five new productive state-owned subsidiaries—Pemex Drilling and Services, Pemex Logistics, Pemex Cogeneration and Services, Pemex Fertilizers and Pemex Ethylene—were created. Each of these productive state-owned subsidiaries is a legal entity empowered to own property and carry on business in its own name and has technical and operational autonomy, subject to the central coordination and strategic direction of Petróleos Mexicanos.
On March 27, 2015, the Board of Directors of Petróleos Mexicanos adoptedacuerdos de creación (creation resolutions) for each of the new productive state-owned subsidiaries, all of which were subsequently published in the Official Gazette of the Federation on April 28, 2015.Structure
The principal lines of business of the new productivestate-owned subsidiaries are as follows:
• | Pemex Exploration and Production, formed on June 1, 2015 as a successor toPemex-Exploración y Producción(Pemex-Exploration and Production), explores for, extracts, transports, stores and markets crude oil and natural gas; |
Pemex Fertilizers, formed on August 1, 2015, integrates the ammonia production chain up to the point of sale of fertilizers;
Pemex Ethylene, formed on August 1, 2015, separates the ethylene business from our petrochemicals segment in order to take advantage of the integration of the ethylene production chain and distributes and trades other gases, including methane and propylene;
Pemex Logistics, formed on October 1, 2015, provides land, maritime and pipeline transportation, storage and distribution to us and third parties; and
• | Pemex Industrial Transformation, formed on November 1, 2015 as a successor ofPemex-Refinación(Pemex-Refining),Pemex-Gasy Petroquímica Básica(Pemex-Gas and Basic Petrochemicals) andPemex-Petroquímica(Pemex-Petrochemicals), refines petroleum products and derivatives; processes natural gas, natural gas liquids, artificial gas and derivatives; engages in industrial petrochemical processes and generates, supplies and trades electric and thermal energy. |
Each of these productivestate-owned subsidiaries is a legal entity empowered to own property and carry on business in its own name and has technical and operational autonomy, subject to the central coordination and strategic direction of Petróleos Mexicanos.
Prior to July 27, 2018,PemexCogeneración y Servicios(Pemex Cogeneration and Services) operated as an additional productivestate-owned subsidiary. On July 13, 2018, the Board of Directors of Petróleos Mexicanos issued theDeclaratoria de Liquidación y Extinción de Pemex Cogeneración y Servicios(Declaration of Liquidation and Extinction of Pemex Cogeneration and Services), which was published in the Official Gazette of the Federation and became effective on July 27, 2018. As of July 27, 2018, all of the assets, liabilities, rights and obligations of Pemex Cogeneration and Services were automatically assumed by, and transferred to, Pemex Industrial Transformation, formed on November 1, 2015and Pemex Industrial Transformation became, as a matter of Mexican law, the successor to Pemex Cogeneration and Services. Pemex Cogeneration and Services was in turn dissolved effective as of Pemex-Refining,Pemex-GasJuly 27, 2018.
On March 26, 2019, the Board of Directors of Petróleos Mexicanos requested that our management bring forth proposals for the merger of Pemex Ethlyene into Pemex Industrial Transformation and Basic Petrochemicalsof Pemex Drilling and Pemex-Petrochemicals, refines petroleum productsServices into Pemex Exploration and derivatives; processes natural gas, natural gas liquids, artificial gas and derivatives and engagesProduction. As of the date of this annual report, the Board of Directors has not yet approved resolutions in industrial petrochemical processes.respect of the proposed mergers.
Capital Expenditures
The following table shows our capital expenditures, excludingnon-capitalizable maintenance, for each of the three years ended December 31, 2016, and2018, as well as the budget for these expenditures for 2017.2019. Capital expenditure amounts are derived from our budgetary records, which are prepared on a cash basis. Accordingly, these capital expenditure amounts do not correspond to capital expenditure amounts included in our consolidated financial
statements prepared in accordance with IFRS. The following table presents our capital expenditures by subsidiary. For the year ended December 31, 2015, we have included capital expenditures made by the subsidiary entities prior to our recent corporate reorganization, and for the new productive state-owned subsidiaries, capital expenditures made after their creation. For the year ended December 31, 2016 and for the 2017 budget, we have included capital expenditures made by, or expected to be made by the new productivestate-owned subsidiaries. subsidiary.
Capital Expenditures and Budget by Subsidiary
Year ended December 31, | Budget 2017(1) | |||||||||||||||
2014 | 2015 | 2016 | ||||||||||||||
(in millions of pesos)(2) | ||||||||||||||||
Pemex-Exploration and Production(3) | Ps. | 222,069 | Ps. | 153,110 | Ps. | 137,242 | Ps. | 73,927 | ||||||||
Pemex Industrial Transformation(4) | — | 4,952 | 33,947 | 21,369 | ||||||||||||
Pemex Logistics(5) | — | 631 | 7,015 | 4,449 | ||||||||||||
Pemex Drilling and Services(6) | — | — | 2,688 | 1,580 | ||||||||||||
Pemex Ethylene(7) | — | 426 | 746 | 1,786 | ||||||||||||
Pemex Fertilizers(8) | — | 205 | 379 | 444 | ||||||||||||
Pemex-Refining | 39,767 | 34,152 | n.a. | — | ||||||||||||
Pemex-Gas and Basic Petrochemicals | 7,549 | 5,070 | n.a. | — | ||||||||||||
Pemex-Petrochemicals | 4,765 | 2,604 | n.a. | — | ||||||||||||
Pemex Cogeneration and Services | — | — | — | — | ||||||||||||
Petróleos Mexicanos | 3,006 | 2,157 | 1,004 | 5,422 | ||||||||||||
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Total capital expenditures | Ps. | 277,156 | Ps. | 203,307 | Ps. | 183,021 | Ps. | 108,977 | ||||||||
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Year ended December 31, | Budget | |||||||||||||||
2016 | 2017 | 2018 | 2019(1) | |||||||||||||
(in millions of pesos)(2) | ||||||||||||||||
Pemex Exploration and Production | Ps. 137,242 | Ps. 85,491 | Ps. 71,107 | Ps. 98,226 | ||||||||||||
Pemex Industrial Transformation | 33,947 | 18,576 | 17,026 | 57,500 | ||||||||||||
Pemex Logistics | 7,015 | 4,917 | 5,042 | 1,200 | ||||||||||||
Pemex Drilling and Services | 2,688 | 1,550 | 1,388 | 1,295 | ||||||||||||
Pemex Ethylene | 746 | 618 | 975 | 300 | ||||||||||||
Pemex Fertilizers | 379 | 264 | 331 | 500 | ||||||||||||
Petróleos Mexicanos | 1,004 | 1,609 | 893 | 107 | ||||||||||||
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Total capital expenditures | Ps. 183,021 | Ps. 113,025 | Ps. 96,762 | Ps. 159,128 | ||||||||||||
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Note: |
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n.a. | Not available. |
(1) | Original budget published in the Official Gazette of the Federation on |
(2) | Figures |
Petróleos Mexicanos. |
Source: Petróleos Mexicanos.
The following table shows our capital expenditures, excludingnon-capitalizable maintenance, by segment for the years ended December 31, 20152017 and 20162018 and the budget for these expenditures in 2017.2019.
Capital Expenditures by Segment
Year ended December 31, | Budget 2017(1) | |||||||||||
2015 | 2016 | |||||||||||
(millions of pesos) | ||||||||||||
Exploration and Production(2) | Ps. | 151,546 | Ps. | 137,242 | Ps. | 73,927 | ||||||
Industrial Transformation | ||||||||||||
Refining | 29,646 | 30,501 | 18,919 | |||||||||
Gas and Aromatics(3) | 5,654 | 3,446 | 2,450 | |||||||||
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Total | 35,300 | 33,947 | 21,369 | |||||||||
Logistics(4) | 9,827 | 7,015 | 4,449 | |||||||||
Drilling and Services(5) | 1,564 | 2,688 | 1,580 | |||||||||
Ethylene(6) | 1,869 | 746 | 1,786 | |||||||||
Fertilizers(7) | 1,044 | 379 | 444 | |||||||||
Cogeneration and Services | — | — | — | |||||||||
Corporate and other Subsidiaries | 2,157 | 1,004 | 5,422 | |||||||||
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Total Capital Expenditures | Ps. | 203,307 | Ps. | 183,021 | Ps. | 108,977 | ||||||
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Year ended December 31, | Budget | |||||||||||||
2017 | 2018 | 2019(1) | ||||||||||||
(millions of pesos) | ||||||||||||||
Exploration and Production | Ps. 85,491 | Ps. 71,107 | Ps. 98,226 | |||||||||||
Industrial Transformation | ||||||||||||||
Refining | 15,988 | 14,119 | 57,500 | |||||||||||
Gas and Aromatics | 2,587 | 2,907 | — | |||||||||||
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Total | 18,576 | 17,026 | 57,500 | |||||||||||
Logistics | 4,917 | 5,042 | 1,200 | |||||||||||
Drilling and Services | 1,550 | 1,388 | 1,295 | |||||||||||
Ethylene | 618 | 975 | 300 | |||||||||||
Fertilizers | 264 | 331 | 500 | |||||||||||
Corporate and other Subsidiaries | 1,609 | 893 | 107 | |||||||||||
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Total Capital Expenditures | Ps. 113,025 | Ps. 96,762 | Ps. 159,128 | |||||||||||
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Note: |
Capital expenditures and budget by project are described under each segment below in this Item 4. Sincemid-2014, the international reference prices of crude oil have fluctuated
the need to incur more indebtedness than the amount included in our approved financing program for Our budget for Our main objectives for upstream investment are to maximize ourlong-term economic value, and to increase and improve the quality of the oil and gas reserves assigned to us, enhance Pemex Exploration and Production’s reserves recovery ratio, improve the reliability of its production and transportation infrastructure for crude oil and natural gas operations and continue to emphasize industrial safety and compliance with environmental regulations. Our Our downstream investment program seeks to increase our refining capacity, to improve the quality of our product selection and the reliability of our logistics and distribution services, to achieve a level of efficiency similar to that of our international competitors and to continue to emphasize industrial safety and environmental compliance. BUSINESS OVERVIEW Overview by Business Segment Exploration and Production Our exploration and production segment operates through the productivestate-owned subsidiary Pemex Exploration and Production and explores for and produces crude oil and natural gas, primarily in the northeastern and southeastern regions of Mexico and offshore in the Gulf of Mexico. In nominal peso terms, our capital expenditures in exploration and production activities decreased by Our natural gas production (excluding natural gas liquids) decreased by Our primary objectives in Our production goals for Industrial Transformation Our industrial transformation segment is comprised of two principal activities: (i) refining and (ii) gas and aromatics: Refining
oil, asphalts and lubricants. We also distribute and market most of these products throughout Our primary goal for Gas and Aromatics Our gas and aromatics business processes wet natural gas to produce dry natural gas, ethane, liquefied petroleum gas (LPG) and other natural gas liquids, along with aromatic derivatives chain products such as In Fertilizers Our fertilizers segment operates through the productivestate-owned subsidiary Pemex Fertilizers and integrates the ammonia production chain up to the point of sale of
In 2019, we intend to focus our strategy on: (1) increasing the national production of fertilizers at competitive prices; (2) increasing the economic value of our segment by generating diverse investment opportunities in the agricultural sector in Ethylene Our ethylene segment operates through the productivestate-owned subsidiary Pemex Ethylene and takes advantage of the integration of the ethylene production chain. In
Drilling and Services Our drilling and services segment operates through the productivestate-owned subsidiary Pemex Drilling and Services and provides drilling, completion,work-over and other services for wells in offshore and onshore fields. In Our well drilling activities during Logistics Our logistics segment operates through the productivestate-owned subsidiary Pemex Logistics and provides land, maritime and pipeline transportation, storage and distribution services to During
During 2018, we injected 139.1 thousand barrels per day of LPG, As of 2016, natural gas transportation is carried out by CENAGAS, with the support of Pemex Logistics through an operation and
International Trading The international trading segment In 2017. In Infrastructure of PEMEX
Exploration and Production Following our 2015 corporate reorganization, certain business units and assets that were operated by our exploration and production segment were transferred to our drilling and services segment upon the formation of Pemex Drilling and Services on August 1, 2015. For the year ended December 31, 2015, we have not presented separately the operating results of our drilling and services segment in this Item 4 and, accordingly, the results of our exploration and production segment include the results of that segment for this period. Operating results for both the exploration and production and drilling and services segments are presented separately for periods beginning January 1, 2016. For a detailed description of the financial results of each segment, see our consolidated financial statements included herein. Exploration and Drilling We seek to identify new oil reservoirs through our exploration program in order to increase the future replacement rate of proved reserves. From 1990 to Our The following table summarizes our drilling activity for the five years ended December 31,
Extensions and Discoveries During Reserves Under the Mexican Constitution, all oil and other hydrocarbon reserves located in the subsoil of Mexico are owned by the Mexican nation and not by us. Proved oil and natural gas reserves are those estimated quantities of crude oil, natural gas and natural gas liquids which geological and engineering data demonstrate with reasonable certainty to be economically producible from a given date forward, from known reservoirs and under existing economic conditions, operating methods and government regulations. Proved reserves estimates as of December 31, We estimate reserves based on generally accepted petroleum engineering and evaluation methods and procedures, which are based primarily on applicable SEC regulations and, as necessary, the Society of Petroleum Engineers’ (which we refer to as the SPE) publication entitledStandards Pertaining to the Estimating and Auditingof Oil and Gas Reserves Information,
experience in the area;
stage of development;
quality and completeness of basic data; and
production and pressure histories. Reserves data set forth herein represent only estimates. Reserves valuation is a subjective process of estimating underground accumulations of crude oil and natural gas that cannot be measured in an exact manner. The accuracy of any reserves estimate depends on the quality of available data, engineering and geological interpretation and professional judgment. As a result, estimates of different engineers may vary. In addition, the results of drilling, testing and producing subsequent to the date of an estimate may lead to the revision of an estimate. During In order to ensure the reliability of our reserves estimation efforts, we have undertaken the internal certification of our estimates of reserves since 1996. We have established certain internal controls in connection with the preparation of our proved reserves estimates. Initially, teams of geoscientists from our exploration and production business units (with each of these units covering several projects) prepare the reserves estimates, using distinct estimation processes for valuations relating to new discoveries and developed fields, respectively. Subsequently, the regional reserves offices collect these reserves estimates from the units and request that theGerencia de Recursos y Certificación de Reservas (Office of Resources and Certification of Reserves), the central hydrocarbon reserves management body of Pemex Exploration and Production, review and certify such valuations and the booking of the related reserves. This internal certification process is undertaken in accordance with internal guidelines for estimating and classifying proved reserves, which are based on the SEC’s rules and definitions. The Office of Resources and Certification of Reserves, which additionally oversees and conducts an internal audit of the process described above, consists entirely of professionals with geological, geophysical, petrophysical and reservoir engineering backgrounds. In addition to this internal review process, our exploration and production segment’s final reserves estimates are audited by independent engineering firms. Three independent engineering firms audited our estimates of proved reserves as of December 31, Since reserves estimates are, by definition, only estimates, they cannot be reviewed for the purpose of verifying exactness. Instead, the Independent Engineering Firms conducted a detailed review of our reserves estimates so that they could express an opinion as to whether, in the aggregate, the reserves estimates we furnished were reasonable and had been estimated and presented in conformity with generally accepted petroleum engineering and evaluation methods and procedures. All questions, including any suggested modifications to proved reserves estimates, that arose during the Independent Engineering Firms’ review process were resolved by our exploration and production segment to the satisfaction of the Independent Engineering Firms. The Independent Engineering Firms have concluded that our estimated total proved oil and natural gas reserve volumes set forth in this report are, in the aggregate, reasonable and have been prepared in accordance with Rule4-10(a) of RegulationS-X of the SEC, as amended (which we refer to as Rule4-10(a)), are consistent with international reserves reporting practice and are in accordance with the revised oil and gas reserves disclosure provisions of ASC Topic 932. Our total proved developed and undeveloped reserves of crude oil, condensates and liquefiable hydrocarbons recoverable from field processing plants decreased by
Our total proved developed and undeveloped dry gas reserves decreased by During In 2018, our proved reserves increased by
The following three tables of crude oil and dry gas reserves set forth our estimates of our proved reserves determined in accordance withRule4-10(a). Summary of Oil and Gas(1) Proved Reserves as of December 31, Based on Average Fiscal Year Prices
Crude Oil and Condensate Reserves (including natural gas liquids)(1)
Dry Gas Reserves
The following table sets forth, as of December 31,
Field Rabasa Teotleco Bellota Sen Madrefil Lum Cárdenas Etkal Cuitláhuac Tetl Caparroso-Pijije-Escuintle Cinco Presidentes Tupilco Nejo Ixtoc Edén-Jolote Cauchy Los Soldados Jaatsul Magallanes-Tucán-Pajonal Paredón San Ramón Nohoch Ayocote Taratunich Guaricho Uech Jacinto Sinán Mora Bacab Tintal Takín Sunuapa Esah Bedel Sini Total Our proved reserves Percentage
Ourreserve-replacement ratio, or RRR, for a given period is calculated by dividing the sum of proved reserves additions due to discoveries, developments, delineations and revisions by that period’s total production. During Our reserves production ratio, which is presented in terms of years, is calculated by dividing the estimated remaining reserves at the end of the relevant year by the total production of hydrocarbons for that year. As of December 31, Sales Prices and Production Costs The following table sets forth our average sales price per unit of oil and gas produced and our average production cost per unit of production, in the aggregate and for each field containing 10% or more of our proved reserves. Unit Sales Prices and Production Costs(1)
In We calculate and disclose our production costs pursuant to international practices, which are based on U.S. GAAP under ASC Topic 932. In accordance with ASC Topic 932, the production cost per barrel of oil equivalent is calculated by dividing total production expenses (in U.S. dollars) by total production of oil and gas (in barrels of oil equivalent) for the relevant period. Our total production cost consists of all direct and indirect costs incurred to produce crude oil and gas, including costs associated with the operation and maintenance of wells and related equipment and facilities. In addition, it includes costs of labor to operate the wells and facilities, the costs of materials, supplies and fuel consumed, including gas used for gas lifting, nitrogen and other chemicals, repair andnon-capitalized maintenance costs, and other costs, such as fees for general services, a labor fund for active personnel, corporate services, indirect overhead and applicable taxes and duties. However, it excludesnon-cash expenses such as amortization of capitalized well expenses, the depreciation of fixed assets, expenses associated with the distribution and handling of oil and gas and other expenses that are related to exploration and drilling activities. Crude Oil and Natural Gas Production In Crude oil can be classified by its sulfur content. “Sour” or heavy crude oil contains 3.4% or greater sulfur content by weight and “sweet” or light crude oil contains less than 1.0% sulfur content by weight. Most of our production is classified as sour or heavy crude oil. Our exploration and production segment primarily produces four types of crude oil:
Altamira, a heavy crude oil;
Maya, a heavy crude oil;
Isthmus, a light crude oil; and
Olmeca, anextra-light crude oil. Most of our production consists of Isthmus and Maya crude oil. In The most productive crude oil and natural gas fields in the Gulf of Mexico are located in the
The following table sets forth our annual crude oil production rates by type of oil for the five years ended December 31, Crude Oil Production
The following table sets forth our annual crude oil production by region and business unit for the five years ended December 31, Crude Oil Production
The Marine regions, which are comprised of the Northeastern Marine region and the Southwestern Marine region, are located on the continental shelf and its slope in the Gulf of Mexico. They cover a surface area of approximately 550,000 square kilometers, located entirely within Mexican territorial waters, along the coast of the states of Tabasco, Campeche, Yucatán, Quintana Roo and the southern coast of the state of Veracruz. In The Southern region covers an area of approximately 392,000 square kilometers, including the states of Guerrero, Oaxaca, Chiapas, Tabasco, Yucatán, Quintana Roo, Campeche and Veracruz. In The Northern region, including its offshore area, is located on the continental shelf in the Gulf of Mexico along the coast of the state of Tamaulipas and the northern coast of the state of Veracruz. It covers an area of approximately 1.8 million square kilometers. Our production area in the onshore portion of this region is located in, among others, the states of Veracruz, Tamaulipas, Nuevo León, Coahuila, San Luis Potosí and Puebla; we also produce offshore on the continental shelf in the Gulf of Mexico. In The following table sets forth our annual natural gas production by region and business unit for the five years ended December 31, Natural Gas Production
In Our average natural gas production decreased by Investments in Exploration and Production In nominal peso terms, our capital expenditures for exploration and production were Ps. capital expenditures, Ps.
For The Exploration and Production Investment Trends In In Our projected exploration and development capital expenditures correspond to the areas assigned to us through ventures with other oil and gas companies. Through these joint ventures, we hope to gain access to new technology and international best practices, while sharing the costs associated with security, occupational health and environmental protection and The capital expenditures of our exploration and production segment have constituted The following Exploration and Development Capital Expenditures
Investments and Production by Project We conduct exploration, production and development activities in fields throughout Mexico. Our main projects areKu-Maloob-Zaap,Tsimin-Xux, ATG, Cantarell, Crudo Ligero Marino, Burgos, Chuc, Antonio J. Bermúdez,Ogarrio-Sánchez Magallanes and Delta del Grijalva. These projects are described below. Exploration and Production’s Capital Expenditures
Bacab, Lum, Ku Maloob, Tekel, Utsil and Zaap fields, and extends over an area of 305.7 square kilometers. As of December 31, In nominal peso terms, our exploration and production segment’s capital expenditures for this project were Ps. Tsimin As of December 31, In nominal peso terms, our exploration and production segment’s capital expenditures for theTsimin-Xux project were Ps. Chuc Project.The Chuc project is the second largest producer of light crude oil in the Southwestern Marine region, and includes the operation and maintenance of thePol-A facility and water injection complexes. In nominal peso terms, our exploration and production segment’s capital expenditures for the Chuc project were Ps. Cantarell Project.The Cantarell project is located on the continental shelf of the Gulf of Mexico. It consists of the Akal, Chac, Ixtoc, Kambesah, Kutz, Nohoch, Sihil and Takin fields, which extend over an area of 294.4 square kilometers. As of December 31, As of December 31, The Akal field, which is the most important field in the Cantarell project, averaged In nominal peso terms, our exploration and production segment’s capital expenditures for the Cantarell project totaled Ps. On October 10, 1997, we awarded abuild-own-operate contract for a nitrogen cryogenic plant at the Cantarell project to a consortium formed by BOC Holdings, Linde, Marubeni, West Coast Energy and ICA Fluor Daniel. Under this contract, the consortium is responsible for the financing, design, construction and operation of the plant. The plant began operations in 2000 and cost During Crudo Ligero Marino Project.In 2013, the Ministry of Finance and Public Credit approved the designation of the Crudo Ligero Marino project as astand-alone project, thereby separating it from the Strategic Gas Program of which it formed part from 2001 through 2012. In 2013, theOch-Uech-Kax project was integrated into this project. The main objectives for the Crudo Ligero Marino project during the years facilities, particularly in the Sinan, Kab and In nominal peso terms, our exploration and production segment’s capital expenditures for the Crudo Ligero Marino project totaled Ps. Ogarrio As of December 31, In nominal peso terms, our capital expenditures for theOgarrio-Sánchez Magallanes project were Ps. Delta del Grijalva Project.The Delta del Grijalva project is the most important project in the Southern region in terms of both oil and gas production. The project covers an area of 1,343 square
As of December 31, In nominal peso terms, our exploration and production segment’s capital expenditures for the Delta del Grijalva project were Ps. Antonio J. In nominal peso terms, our exploration and production segment’s capital expenditures for the Antonio J. Bermúdez project were Ps. Burgos Project.The Burgos project is the largest producer ofnon-associated gas in Mexico. During Main Fields of the Burgos Project (as of December 31,
During In nominal peso terms, our exploration and production segment’s capital expenditures (including capital expenditures made pursuant to FPWCs) for the Burgos project were Ps. Aceite Terciario del Golfo Project (formerly Paleocanal de Chicontepec). The ATG project is located in the Northern region and covers an area of 4,243 square kilometers. This project comprises 29 fields, which are divided among eight sectors. As of December 31, During 95.4% success rate. As of December 31, In nominal peso terms, our exploration and production segment’s capital expenditures for the ATG project were Ps. Crude Oil Sales During The following table sets forth crude oil distribution for the past five years. Crude Oil Distribution
Differences between the volume of crude oil measured at the wellhead and the volume distributed reflect customary adjustments due to, among other things, shifting inventories, evaporation, shrinkage and product segregation. In Gas Flaring The flaring of produced gas, which consists of the burning off of surplus combustible vapors from a well, usually occurs as a result of operational adjustments to carry out maintenance at production facilities, and in some cases is due to limitations in the ability to handle, process or transport natural gas. In addition, the flaring of produced gas is also used as a safety measure to relieve well pressure. Gas flaring is considered to be one of the most significant sources of air emissions from offshore oil and gas installations. In Pipelines The crude oil and natural gas pipeline network owned by our exploration and production segment connects crude oil and natural gas producing centers with refineries and petrochemical plants. At the end of Integrated Exploration and Production Contracts and Financed Public Works Contracts Our FPWC program, previously known as the Multiple Services Contracts program, was first announced in December 2001. The objective of the program was to provide a contractual framework that promotes efficient execution of public works in order to increase Mexico’s oil and gas production. The FPWC were public works contracts based on unit prices that aggregate a number of different services into a single contract. Under the FPWC framework, Our Integrated E&P Contracts program was established as part of reforms to the Mexican energy sector enacted in 2008. The objective of these Integrated E&P Contracts was to increase our execution and production capabilities. The oil and gas reserves located in and extracted from the areas to which we have a legal right, continue to be owned exclusively by the Mexican Government. Under this program, payments to the contractors were made on aper-barrel basis, plus recovery costs, provided that the payments did not exceed our cash flow from the particular block. We may amend our Integrated E&P Contracts and FPWCs in order to align these contracts
On December 18, 2017, the Integrated E&P Contract On August 3, 2018, the Integrated E&P Contract governing the Ebano block On November 21, 2018, the In addition, we migrated the FPWCs governing the Misión block and the Olmos block on March 2, 2018 and February 22, 2018, respectively, to different contractual frameworks permitted under the Petróleos Mexicanos Law. We have also requested migration of the Among the FPWC works during During
Over the last several years, we have pursuedfarm-outs and
The Mexican Government has announced its intention to suspend bidding rounds for newfarm-outs for a period of three years to provide an opportunity to evaluate the performance of existingfarm-outs. The existing farm-outs will continue to operate in accordance with the terms and conditions of their respective contracts. We understand the Mexican Government will use the results of such evaluation to determine whether to pursuefarm-outs in the future. TriónFarm-Out On July 28, 2016, the On December 5, 2016, the
Ogarrio,Cárdenas-Mora andAyin-BatsilFarm-Outs In addition to the Triónfarm-out, on October 4, 2017, the CNH held a bidding round forfarm-outsof multiple bids were received for the Ogarrio block, which currently produces approximately 4,900 barrels of crude oil per day and 16 million cubic feet of natural gas per day, and theCárdenas-Mora block, which currently produces approximately 5,500 barrels of crude oil per day and 15.9 million cubic feet of natural gas per day. The Ogarrio andCárdenas-Mora blocks, both onshore fields located in the Other Exploration and Production Contracts In addition to thefarm-outs described above, we have also
On December 5, 2016, On May 2, 2017, Pemex Exploration and Production entered into a contract for crude oil extraction with the CNH to upgrade the assignments under the shared shallow water production structure for the Ek and Balam project area located in Campeche Sound. Under the contract, which has a term of 22 years with two possiblefive-year extensions, the Mexican Government will retain 70.5% of the operating profits and will pay Pemex Exploration and Production the remaining 29.5%. Pemex Exploration and Production has provided a guarantee of U.S. $5.0 billion. During 2018, we produced an average of 34.1 thousand barrels per day of crude oil and 6.8 million cubic feet per day of gas pursuant to this contract. On June 19, 2017, we participated in another bidding round conducted by the CNH, referred to as Round 2.1. As a result of this bidding process, we won two blocks. We were awarded Block 2, which covers an area of 549 square kilometers and is located on the continental shelf of theTampico-Misantla basin, to the west of the Gulf of Mexico, in partnership with DEA. We are the operating partner in this block and own a 70% interest. Additionally, we were awarded Block 8, which is located in the Southeastern Basins and covers an area of 586 square kilometers, in partnership with Colombia’s Ecopetrol. In Block 8, we are also the operating partner and own a 50% interest. The corresponding contracts for the exploration and extraction of hydrocarbons with DEA and Ecopetrol were signed on September 25, 2017. Both blocks are in the exploration phase following approval of the exploration plans by the CNH in November and October of 2018, respectively. On December 18, 2017, we executed contracts for an association with Petrofac México, S.A. de C.V., or Petrofac, under which we assigned to Petrofac the rights to certain fields that were part of the ElGolpe-Puerto Ceiba project, including the onshore fields of Santuario, El Golpe and Caracolillo, located in the state of Tabasco. We have a 64% share in this project. During 2018, we had an average production of 7.2 thousand barrels per day of crude oil and 5.7 million cubic feet per day of gas. These fields are currently in the development stage following approval of the exploration plan by the CNH in December of 2018. On March 2, 2018, we completed the first migration of an FPWC. The FPWC governing the Misión block was migrated to a shared production contract with Servicios Múltiples de Burgos, S.A. de C.V. and the CNH. The Misión block is located in the states of Nuevo León and Tamaulipas. We have a 51% interest in the contractual area and the average production under this contract in 2018 amounted to 59.8 million cubic feet per day of gas. The Misión block is currently in the development stage following approval of the development plan by the CNH in January of 2019. On March 27, 2018, we successfully participated in the first call of bidding Round 3 of the CNH, and were awarded seven contractual areas in shallow waters, six of them as part of a consortium and one on an individual basis. Pemex Exploration and Production won four blocks in the Southeast Basins: two in consortium with Total S.A., one with Shell Oil Company and one individually, as well as three blocks corresponding to the province ofTampico-Misantla-Veracruz: two in partnership with Compañía Española de Petróleos and one in partnership with DEA. On May 7, 2018, we signed four hydrocarbon exploration and extraction contracts covering severaldeep-water blocks in the Gulf of Mexico, the rights to which were auctioned off pursuant to the bidding round referred to as Round 2.4: Exploration and production contract for block 2 with Shell Exploración y Extracción de México, S.A. de C.V., as operator. We have a 50% interest in the contractual area, which spans 2,146 square kilometers and is located in the Plegado Perdido Belt. Exploration and production contract for block 22 with Chevron Energía de Mexico, S. de R.L. de C.V., as operator, and Inpex E&P México, S.A. de C.V. We have a 27.5% interest in the contractual area, which spans 2,879 square kilometers and is located in the Cuenca Salina region. Exploration and production contract for block 5. We are the operator of and have a 100% interest in the contractual area, which spans 2,733 square kilometers and is located in the Plegado Perdido Belt. Exploration and production contract for block 18. We are the operator of and have a 100% interest in the contractual area, which spans 2,917 square kilometers and is located in Cordilleras Mexicanas basin. On August 3, 2018, we migrated the Integrated E&P Contract for the Ebano block to a shared production contract with DS Servicios Petroleros, S.A. de C.V. (DIAVAZ), as operator, and D&S Petroleum, S.A. de C.V. The Ebano block spans an area of 1,569.1 square kilometers and is located in the states of Veracruz, San Luis Potosí and Tamaulipas. As of December 31, 2018, average production under this contract was 7.2 thousand barrels per day of crude oil and 3.8 million cubic feet per day of gas. We and DIAVAZ contributed to a corporate guarantee delivered to the Mexican Government in accordance with our respective interests in the partnership. The corporate guarantee totaled U.S. $500 million, 55% of which was contributed by us and 45% of which was contributed by DIAVAZ. On September 20, 2018, we signed apre-utilization agreement related to certain tracts of the Yaxché fields and the shared production contract for Block 7 with a consortium of Talos Energy, as operator, Sierra Oil and Gas and Premier Oil. Both areas are located in the offshore regions of Mexico’s Southeast basin. This was the firstpre-utilization agreement signed in Mexico. Such agreements are permissible under recent changes to the legal and regulatory framework under which we operate. Thispre-utilization agreement is a two year contract that enables information sharing relating to the Zama discovery, which is located in Block 7, and potential expansion of the Zama discovery into a neighboring block assigned to us. Thepre-utilization agreement also contemplates the signing of a unit agreement and unit operating agreement in the event that a shared reservoir is confirmed. As a result of thepre-utilization agreement, we will form a working group with the consortium with the objectives of maximizing operational and informational efficiencies, optimizing the collection of data for the area and reducing potential hazards. The working group will be comprised of legal and technical representatives of the member companies. On November 21, 2018, we migrated the Integrated E&P Contract for the Miquetla block to a license contract with Operadora de Campos DWF, S.A. de C.V., as operator. The Miquetla block spans 139.7 square kilometers and is located in the states of Puebla and Veracruz. As of December 31, 2018, average production under this contract was 135.6 thousand barrels per day of crude oil and 255.6 million cubic feet per day of gas. We have a 49% interest in the contractual area and the contract has a term of 30 years. Collaboration and Other Agreements Pemex Exploration and Production, or its predecessorPemex-Exploration and Production, have entered intonon-commercial scientific and technology agreements with the following parties, which remain in effect as of the date of this annual report:
Pan American Oil, Plc (PAO), during
Hokchi Energy, S.A. de C.V., Kinder Morgan Texas LLC, during ENI México, S. de R.L. de C.V., during 2016;
Ministerio de Energía y Minas de Nicaragua, Pan American Oil, PLC and the Empresa Nicaragüense del Petróleo (Petronic), during
3M México, S.A. DE C.V., during 2017; and Sun God Energía de México, S.A. de C.V., during 2018. On March 6, 2019, we signed a memorandum of understanding with the Japan Bank for International Cooperation with a view to pursue strategic opportunities in the energy sector. We believe this collaboration Through these agreements, we Industrial Transformation Our industrial transformation segment is comprised of two principal activities: (i) refining and (ii) gas and aromatics. Refining Refining Processes and Capacity Our refining production processes include the following:
These production processes together constitute our production capacity as set forth in the table below. Refining Capacity by Production Process
As of December 31, During During 2018, we Since 1993, through our subsidiary company, process 340 thousand barrels per day of crude oil. Under the Deer Park Limited Partnership agreement, Production We produce a wide range of products derived from crude oil and natural gas, including LPG, gasoline, jet fuel, diesel, fuel oil, asphalts, lubricants and other refined products. In This decrease was partially offset by an increase in The following table sets forth, by category, our production of petroleum products Refining Production
Variable Refining Margin During The following table sets forth the variable refining margin for the five years ended December 31, Variable Refining Margin
Domestic Sales We market a full range of refined products, including gasoline, jet fuel, diesel, fuel oil and petrochemicals. We are one of a few major producers of crude oil worldwide that experiences significant domestic demand for our refined products. For the five years ended December 31, Value of Refining’s Domestic Sales(1)
In The volume of our domestic sales of refined products for thefive-year period ended December 31, Volume of Refining’s Domestic Sales
The volume of our domestic gasoline sales Sales of Pemex Premium gasoline We have also made concerted efforts to build and enhance our brands.
On November 15, 2017, we relaunched the “Pemex Franchise” image program with a new business model that includes new products and a variety of association structures. The goal of this program, which consists of nearly 10,000 service stations throughout Mexico, is to provide better service to end users and to strengthen the PEMEX brand. On October 11, 2018, we launched the seventh generation of ourhigh-end performance additive that blends with our Pemex Magna and Pemex Premium gasolines. This additive will be promoted as Pemex Aditec. We believe Pemex Aditec could be a competitive advantage for our Pemex Franchise program. As part of the Pemex Franchise program, we
As of
Pricing Decrees
As of
Discount Since the early 1980s, the Mexican Government has also established a discount of 30% on the price at which we sell gas oil intended for domestic use to the state of Chihuahua during the months of January, February and December of each year. On January 1, 2014, pursuant to the IEPS Tax on Fossil Fuels, such gas oil became subject to aone-time price increase of 10.857 Mexican cents per liter. Gas oil became subject to aone-time price increase of 11.307 Mexican cents per liter in 2015, 11.558 Mexican cents per liter as of January 1, 2016, Fuel Oil Since December 2008, the price at which we sell fuel oil to CFE has been linked to international market prices in accordance with a pricing methodology established by the Mexican Government. This methodology is based on the price of fuel oil in the U.S. Gulf of Mexico coastal region, and is then adjusted for quality as well as expenses related to distribution.
As of November 3, 2017, the CRE authorized new formulas to determine the price for fuel oil. As of December 31, 2017, there arefirst-hand sale prices for sales at refineries and market prices for sales at storage and distribution terminals. These prices are calculated weekly and apply to all customers, including the CFE. The Mexican Government could modify these price controls or impose additional price controls in the future. See “Item 3—Key Information—Risk Factors—Risk Factors Related to our Relationship with the Mexican Government—The Mexican Government has historically imposed price controls in the domestic market on our products.” We withhold IEPS Tax. While it is included in the price to our customers, we pay this tax to the authorities upon collection of the sale of our products and it is not Investments Over the past several years, we have focused our investment program on enhancing the quality of the gasoline and diesel we produce to meet Mexico’s Our refining business invested Ps. This increase in our capital expenditures budget is principally related to the Ps. 50,000 million we intend to allocate to the construction of the new Dos Bocas refinery in The following table sets forth our refining business’ capital expenditures, excludingnon-capitalizable maintenance, for each of the three years ended December 31, amounts are derived from our budgetary records, which are prepared on a cash basis. Accordingly, these capital expenditure amounts do not correspond to capital expenditure amounts included in our consolidated financial statements prepared in accordance with IFRS. Refining’s Capital Expenditures
In
Additionally, we intend to seek private sector Our projects are described in further detail below. Fuel Quality Project, Gasolines Phase (ULSG)
This project consists of the construction of five ULSD facilities, five hydrogen plants, four sulfur recovery units, five sour water treatment plants and the reconfiguration of 17 existing units
Tula (formerly Reconfiguration of the Miguel Hidalgo Refinery in
Residual Conversion of the Salamanca Refinery The reconfiguration of the “Ingeniero Antonio M. Amor” refinery in Salamanca, Guanajuato
Tuxpan Maritime Terminal The Tuxpan Maritime Terminal project is intended to help meet the increasing demand for refined products in the metropolitan area of the Mexico Valley. The total cost of the project is which includes the construction of a pipeline measuring
Maintenance at the Francisco I. Madero Refinery On August 23, 2017, we commenced a scheduled gradual shutdown of our Francisco I. Madero refinery, located in Ciudad Madero, Tamaulipas, in order to implement a comprehensive general maintenance program for the plants at this refinery. Operations at the plants were restarted in February 2018, but we experiencedstart-up and stabilization difficulties which caused our Madero refinery to be out of operation during the second half of 2018. In January 2019, we were able to restart our Mayan plant andU-901 reformer after performing maintenance at these plants, and we expect to allocate additional resources to the maintenance of our other plants at this refinery in 2019 through the plan for rehabilitation of the National Refining System. We expect that this program will lead to improved safety and reliability of our operating processes and, in turn, improved performance of this refinery. Hydrogen Supply for Refineries
On September 1, 2017, we entered intolong-term agreements with Air Liquide for the supply of hydrogen to the Miguel Hidalgo refinery in Tula. Air Liquide will operate the existing hydrogen plant at the Miguel Hidalgo refinery. In February 2018, we executed the plant’s performance and stabilization tests, which was an important milestone under the contract with Air Liquide. In addition, in April 2018 we entered into a long-term agreement with Linde AG for the supply of hydrogen to our Madero refinery. In July 2018, we signed several agreements related to the supply of hydrogen to our Cadereyta refinery. However, some of the conditions precedent required by these agreements were not met, and these agreements were subsequently terminated. In 2018, we continued to experience shortages in the supply of hydrogen to our refineries, which has contributed to our operational difficulties. We intend to address the operational difficulties in our refineries through our plan for the rehabilitation of the National Refining System. Rehabilitation of National Refining System As part of our efforts to stabilize the operations of our refineries, we are adopting a plan for the rehabilitation of the National Refining System. Pursuant to this plan, we will allocate additional resources for the repair and maintenance of our six existing refineries. The goal of this plan is to repair and maintain our refinery infrastructure so as to improve efficiency and stabilize our crude oil processing. Our budget for this rehabilitation of the National Refining System for 2019 is Ps. 7,500 million. We are currently evaluating the optimal allocation of resources based on evaluations of our existing refineries, and, as of the date of this annual report, we have not allocated definitive amounts to specific projects. Dos Bocas Refinery In 2019, we announced our plans for the construction of a new refinery in Dos Bocas in the state of Tabasco. Our 2019 budget includes Ps. 50,000 million for the construction of the Dos Bocas refinery, of which Ps. 1,800 million has been allocated to conductpre-investment studies. The Dos Bocas refinery is intended to increase our production of gasoline and diesel by processing additional volumes of heavy crude oil. As of the date of this annual report, we are preparing the business case for construction of the Dos Bocas refinery, which will be presented to the Board of Directors of Petróleos Mexicanos once complete. Gas and Aromatics Natural Gas and Condensates
All wet natural gas production is directed to our gas processing facilities. At the end of The following facilities are located in the Southern region:
The Morelos, Cangrejera and Pajaritos facilities form the Coatzacoalcos area gas processing complex (which we refer to as a GPC):
The following facilities are located in the Northern region:
Petrochemical Complexes In addition to our gas processing facilities, we also own the following two petrochemical complexes:
The following tables set forth our processing capacity, as well as our total natural gas processing and production, for the five years ended December 31, Gas and Aromatics’ Processing and Production Capacity(1)
Natural Gas, Condensates and Aromatics’ Processing and Production(1)
We process sour and sweet condensates from our exploration and production segment in order to obtain stabilized natural gas liquids and also recover liquid hydrocarbons obtained from the processing of sweet natural gas. In addition, we obtain natural gas liquids from internal streams and liquid hydrocarbons condensed in sour wet gas pipelines. Our production of natural gas liquids, including stabilized condensates, reprocessing and other fractionating streams, decreased by We process sour condensates, which have a higher sulfur content, to produce stabilized sweet condensates. The volume of sour condensates we processed from our exploration and production segment and internal streams of our gas and aromatic compoundsub-segment totaled The production of aromatic compounds and derivatives decreased
Over the five years ended December 31, Value of Gas and Aromatics’ Domestic Sales(1)
The volume of our domestic sales of gas and aromatics for thefive-year period ended December 31, Volume of Gas and Aromatics’ Domestic Sales
In Domestic sales of natural gas decreased by 21.3%, as compared to Domestic sales of LPG decreased by Subsidiaries of Pemex Industrial Transformation Pemex Industrial Transformation conducts certain management, real estate and distribution activities through its subsidiaries and through certain joint ventures. The following table lists its subsidiaries, their principal operating activities and Pemex Industrial Transformation’s ownership interest as of December 31, Subsidiaries of Pemex Industrial Transformation(1)
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Divestitures
On July 31, 2015, we announcedOctober 5, 2017, the Board of Directors of Petróleos Méxicanos authorized the divestiture of our 50% ownership interest5% indirect participation in TAG Norte Holding, S. of R. L. de C. V. (TAG Norte Holding) for the Gasoductos de Chihuahua, S. de R.L. de C.V. (Gasoductos de Chihuahua) joint venture with Infraestructura Energética Nova, S.A.B. de C.V. (IEnova). IEnova shareholders approvedRamones II Norte project. The divestiture was subsequently carried out on August 31, 2018 for a total amount of U.S. $43.0 million.
Pricing Decrees
As of December 31, 2017, fuel prices in Mexico are fully liberalized. However, the transaction in September 2015. On September 15, 2016, Mexico’sCRE reserves the right to intervene. Therefore, until theComisión Federal de Competencia Económica (Federal Economic Competition Commission or COFECE) approved the proposed direct sale to IEnova as it was structured, which included a competitive bidding process with respect to Gasoducto San Fernando and LPG Ducto TDF. The initial divestiture did not include Gasoductos de Chihuahua’s subsidiary company, Ductos y Energéticos del Norte, S. de R.L. de C.V., so Pemex Industrial Transformation retained a 50% share participation. On September 28, 2016, we announced the divestiture of our interest in Gasoductos de Chihuahua. IEnova’s interest in the company increased from 50% to 100%. The transaction was valued at US$ 1,143.8 million.
Los Ramones
The Los Ramones pipeline project, which is being implemented in two phases, is part of a strategy to supply central Mexico with natural gas imported from the United States. When complete, the Los Ramones pipeline is projected to have a transportation capacity of 3,530 million cubic feet per day and an approximate length of 859.4 km. Phase one of the pipeline project is complete and currently serves to address the natural gas deficit in the country with a maximum capacity of 2,100 million cubic feet per day. Phase two of this project, with a total capacity of 1,430 million cubic feet per day and consisting of the construction of a pipeline running from Los Ramones, Nuevo León to Apaseo el Alto, Guanajuato, is further subdivided into two stages: Ramones Norte totaling 452 km in length and Ramones Sur totaling 291 km in length. TAG Pipelines, S. de R.L. de C.V. (an indirect subsidiary of Pemex Industrial Transformation, which we refer to as TAG Pipelines) developed the project through partnerships for each of these stages. In 2016, commercial operations for this pipeline project commenced. On January 1, 2016, the transport service contract was transferred to CENAGAS, which is now responsible for monitoring the operations of the Los Ramones system and for payment of transportation services.
Pricing Decrees
The energy reform provides for fuel price liberalization, which began in January 2017. Our sales will continue to be regulated by the Energy Regulatory Commission until COFECECommission) determines that there is effective competition in the wholesale market.
The Mexican Government currently determines natural gasmarket, our sales prices for domestic sales, which are calculated in accordance with directives issuedcontinue to be subject to potential future regulations by the Energy Regulatory Commission onCRE.
As of July 20, 20091, 2017, the CRE permitsthird-party participants to enter the gasoline and diesel market and has authorized the related Resolutionspermanent regime of December 20, 2010, March 3, 2011, December 20, 2012, January 17, 2013, March 21, 2013 and December 3, 2013, by which the Energy Regulatory Commission approved and issued a temporary methodology for determining the maximum prices of natural gas of first-hand sales. On February 15, 2016, the Energy Regulatory Commission issued a new methodology which, effective March 1, 2016, determines the maximum first-hand sales price of natural gas. These prices aimThis permanent regime allows us to reflectsell natural gas opportunityunder two separate pricing mechanisms: (1) the first hand sale price, wherein we may sell natural gas directly to customers without additional transportation or services and (2) the full marketing price, wherein we may charge a higher price that includes transportation and services costs and competitive conditions in international markets and atassociated with the pointcommercialization of sale.natural gas.
Since 2003, price control mechanisms for LPG have been implemented through governmental decrees. In January 2010, the Mexican Government issued a decree establishing the maximum weighted averageend-user price of LPG before taxes of Ps. 8.08 per kilogram. Subsequently, as of February 2010, the Mexican Government established monthly maximum price increases in cents per kilogram before taxes, as follows:
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Beginning in August 2014, the methodology for calculatingend-user price was modified from weighted average prices to simple average prices.
On January 1, 2016, the Mexican Government issued a decree establishing aone-time price increase of 34 Mexican cents per kilogram, which was effective until August 16, 2016. On August 17, 2016, the Mexican Government authorized an end user discount of 9.97%, which was effective until December 31, 2016. Since January 1, 2017, we have sold natural gas in accordance with the new methodology authorized by CRE for determining thefirst-hand sales price at the point of delivery, and all end user prices have beenare freely determined by the market.
We withhold IEPS tax. For more information, see “Item 4—Taxes, Duties and Other Payments to the Mexican Government—Fiscal Regime for PEMEX.”
The Mexican Government could modify these price controls or impose additional price controls in the future. See “Item 3—Key Information—Risk Factors—Risk Factors Related to our Relationship with the Mexican Government—The Mexican Government has historically imposed price controls in the domestic market on our products.”
Natural Gas Hedging Operations
We offer, as avalue-added service, various hedging contracts to our domestic customers to protect them against fluctuations in the prices of natural gas. For information on hedging contracts offered to natural gas domestic customers, see “Item 11—Quantitative and Qualitative Disclosures about Market Risk.”
Gas and Aromatics Capital Expenditures
Our gas and aromatics business invested Ps. 3,4462,907 million in capital expenditures in 2016 and has budgeted Ps. 2,450 million in2018. Our budget for 2019 does not contain any capital expenditures for 2017.this segment. However, we contemplate that we mayre-allocate certain resources during 2019 in order to meet potential capital expenditure requirements for this segment.
The following table sets forth our gas and aromatics business’ capital expenditures, excludingnon-capitalizable maintenance, for each of the three years ended December 31, 2016,2018, and the budget for 2017.2019. Capital expenditure amounts are derived from our budgetary records, which are prepared on a cash basis. Accordingly, these capital expenditure amounts do not correspond to capital expenditure amounts included in our consolidated financial statements prepared in accordance with IFRS.
Gas and Aromatics’ Capital Expenditures
Year ended December 31,(1) | Budget 2017(2) | |||||||||||||||
2014 | 2015 | 2016 | ||||||||||||||
(in millions of pesos)(3) | ||||||||||||||||
Gas and Aromatics | ||||||||||||||||
Modernization of Transportation Areas of GPCs | Ps. 252 | Ps. 534 | Ps. 482 | Ps. 296 | ||||||||||||
Modernization of Measuring, Control and Security Systems of GPCs | 187 | 463 | 481 | — | ||||||||||||
Refurbishment and Modernization of Natural Gas Turbocompressors of the Cryogenic Plants at Nuevo Pemex GPC | 27 | 143 | 257 | 47 | ||||||||||||
Modernization and Rehabilitation of Facilities of the Supply and Water Treatment System at Nuevo Pemex GPC | 117 | 344 | 255 | 62 | ||||||||||||
Integral Project of Electric Reliability at GPCs | 240 | 474 | 177 | 5 | ||||||||||||
Adaptation of Fractionation Plants and Conversion of the Liquids Sweetener at Nuevo Pemex GPC | 880 | 320 | 174 | 36 | ||||||||||||
Refurbishment of Refrigerating and Ethane Turbocompressors of Fractionating Plants at Nuevo Pemex GPC | — | 199 | 119 | — | ||||||||||||
Integral Maintenance of Gas Sweetening Plants 1, 2, 3 and 12 at Cactus GPC | 30 | 109 | 116 | 117 | ||||||||||||
Conservation and Modernization of the Storage Area at Coatzacoalcos Area GPC | 286 | 208 | 88 | 35 | ||||||||||||
Security Requirements for Improvement of Operational Reliability of the GPCs | 74 | 211 | 87 | 24 | ||||||||||||
Conditioning of the Venting Systems at Cactus GPC | — | 109 | 75 | 2 | ||||||||||||
Conservation of Processing Capacity at Nuevo Pemex GPC | 504 | 180 | 70 | — | ||||||||||||
Conservation of Operational Reliability at Ciudad Pemex GPC | 352 | 196 | 31 | 21 | ||||||||||||
Efficiency in Storage and Distribution I | 142 | 102 | 27 | — |
Year ended December 31,(1) | Budget 2017(2) | |||||||||||||||||||||||||||||||
2014 | 2015 | 2016 | Year ended December 31,(1) | |||||||||||||||||||||||||||||
(in millions of pesos)(3) | ||||||||||||||||||||||||||||||||
2016 | 2017 | 2018 | Budget 2019(2) | |||||||||||||||||||||||||||||
(in millions of pesos)(3) | ||||||||||||||||||||||||||||||||
Gas and Aromatics | ||||||||||||||||||||||||||||||||
Modernization of Transportation Areas of GPCs | Ps. 482 | Ps. 239 | Ps. 644 | Ps. — | ||||||||||||||||||||||||||||
Modernization and Rehabilitation of Facilities of the Supply and Water Treatment System at Nuevo Pemex GPC | 255 | 216 | 241 | — | ||||||||||||||||||||||||||||
Adaptation of Fractionation Plants and Conversion of the Liquids Sweetener at Nuevo Pemex GPC | 174 | 271 | 136 | — | ||||||||||||||||||||||||||||
Conditioning of the Venting Systems at Cactus GPC | 75 | 147 | 131 | — | ||||||||||||||||||||||||||||
Integral Maintenance of Gas Sweetening Plants 1, 2, 3 and 12 at Cactus GPC | 116 | 64 | 53 | — | ||||||||||||||||||||||||||||
Conservation and Modernization of the Storage Area at Coatzacoalcos Area GPC | 88 | 32 | 53 | — | ||||||||||||||||||||||||||||
Security Requirements for Improvement of Operational Reliability of the GPCs | 87 | 31 | 41 | — | ||||||||||||||||||||||||||||
Modernization of Measuring, Control and Security Systems of GPCs | 481 | — | — | — | ||||||||||||||||||||||||||||
Refurbishment and Modernization of Natural Gas Turbocompressors of the Cryogenic Plants at Nuevo Pemex GPC | 257 | 41 | — | — | ||||||||||||||||||||||||||||
Integral Project of Electric Reliability at GPCs | 177 | 22 | — | — | ||||||||||||||||||||||||||||
Refurbishment of Refrigerating and Ethane Turbocompressors of Fractionating Plants at Nuevo Pemex GPC | 119 | — | — | — | ||||||||||||||||||||||||||||
Conservation of Processing Capacity at Nuevo Pemex GPC | 70 | — | — | — | ||||||||||||||||||||||||||||
Conservation of Operational Reliability at Ciudad Pemex GPC | 31 | 6 | — | — | ||||||||||||||||||||||||||||
Conditioning of Facilities for Ethane Supply at Cactus GPC | 313 | 234 | 21 | 2 | 21 | 5 | — | — | ||||||||||||||||||||||||
Integral Facilities Maintenance at Cactus GPC | 113 | 137 | 21 | — | 21 | — | — | — | ||||||||||||||||||||||||
Others | 8,797 | 1,691 | 965 | 1,803 | 992 | 1,514 | 1,609 | — | ||||||||||||||||||||||||
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Total | Ps. 12,314 | Ps. 5,654 | Ps. 3,446 | Ps. 2,450 | Ps. 3,446 | Ps. 2,587 | Ps. 2,907 | Ps. — | ||||||||||||||||||||||||
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Notes: Numbers may not total due to rounding.
Notes: | Numbers may not total due to rounding. |
GPC | = Gas Processing Complex. |
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(1) | Amounts based on cash basis method of accounting. |
(2) | Original budget published in the Official Gazette of the Federation on |
(3) | Figures |
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Ethane Supply Contract
On February 19, 2010, we entered into a contract to supply 66,000 barrels per day of ethane to the Etileno XXI project, a petrochemical complex in Nanchital, Veracruz that will produceproduces ethylene and polyethylene. The Etileno XXI project commenced operations on March 18, 2016. The Etileno XXI project is being developed and will be owned and operated byBraskem-IDESA, aBrazilian-Mexican consortium. In order to meet the obligations of this contract, we made adjustments to the infrastructure of our gas processing plants in the Ciudad Pemex, Nuevo Pemex and Cactus. Additional ethane will beis transported from the GPCsgas processing plants located in Tabasco, in southeastern Mexico, to Coatzacoalcos, Veracruz. This contract provides for “take or pay—delivery or pay” obligations for the parties, and thus, in case of breach of our supply obligation, we are subject to the payment of liquidated damages. In the event of termination as a consequence of our material default under the ethane supply contract, we may be obligated to pay to the other parties involved in the project an amount equal to the termination value of this project (the value of which is determined pursuant to the contract and takes into consideration, among other factors, the outstanding debt of the project and the amount invested in the project at such time). The Etileno XXI project commenced operations on March 18, 2016. By December 31, 2016, we had supplied 562.8 million cubic meters of ethane for a total of Ps. 1,426 million. Also asAs of December 31, 2016, construction of the pipeline to transport ethane from the gas processing plants located in Tabasco in Southeastern Mexico, to Coatzacoalcos, Veracruz, was complete. During 2018, we supplied 804.5 million cubic meters of ethane for a total of Ps. 3,203.4 million under this contract.
Fertilizers
Our fertilizers segment operates through the productivestate-owned subsidiary Pemex Fertilizers produces ammonia and carbon dioxide and integrates the ammonia production chain up to the point of sale of fertilizers, including agricultural and industrial nitrates, phosphate fertilizers and acids (produced by Fertinal). We also expect that our subsidiaryPro-Agroindustria will be able to begin producing urea at our Pajaritos petrochemical complex in the second half of 2019.
Our strategy focuses on: (1) increasing the national fertilizers production at competitive prices; (2) increasing the economic value of our segment by generating diverse investment opportunities in the agricultural sector in Mexico; (3) ensuring a reliable supply of natural gas for the operation of our plants; and (4) continuing to make capital expenditure investments to strengthen the operational reliability of our four ammonia plants.
We expect to have two ammonia plants in operating condition during the second half of 2019. Taking into account the product mix of fertilizers we are currently producing, our Fertinal segment is operating near full capacity, but we intend to improve our profit margins by increasing our sales in the domestic market.
In addition, as part of our strategy we intend to integrate our Fertinal segment into the production chain of natural gas to ammonia to fertilizers. We expect that this integration will help us offer a wide range of fertilizers, nitrogen and phosphates at competitive prices. In addition, we expect that establishing new commercial channels will allow us to bring the supply of ammonia and fertilizers closer to industrial and agricultural producers throughout the country.
Capacity
At the endAs of 2016,December 31, 2018, we owned four petrochemical plants, threeone of which arewas in operation, for the production of petrochemical products mainly those classified as“non-basic.”ammonia. Two of our plants are scheduled to undergo a major rehabilitation in March and September of 2019, respectively, and another plant will also require rehabilitation, which will be scheduled based on the availability of resources. We had a total production capacity per unit of 480 thousand tons of petrochemicals per year in 2016. Three of these plants produce ammonia and have an installed capacity of 1,440 thousand tons of ammonia per year in 2015 and 2016.2018.
The total production capacity of our operating plants for the last twothree years was distributed among our facilities as set forth below:
Fertilizers’Fertilizers Segment’s Total Capacity
Year ended December 31, | Year ended December 31, | |||||||||||||||||||
Petrochemical Complexes | 2015 | 2016 | 2016 | 2017 | 2018 | |||||||||||||||
(thousands of tons) | (thousands of tons) | |||||||||||||||||||
Cosoleacaque (ammonia) | 1,440 | 1,440 | 1,440 | 1,440 | 1,440 |
Source: |
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Production
The following table summarizes the annual production of our fertilizers segment for the twothree years ended December 31, 2016.2018.
Fertilizers’Fertilizers Segment’s Production
Year ended December 31, | ||||||||||||||||||||||||||||
2018 | ||||||||||||||||||||||||||||
2016 | 2017 | 2018 | vs. 2017 | |||||||||||||||||||||||||
Year ended December 31, | ||||||||||||||||||||||||||||
2015 | 2016 | 2016 vs. 2015 | (thousands of tons) | (%) | ||||||||||||||||||||||||
(thousands of tons) | (%) | |||||||||||||||||||||||||||
Methane Derivatives | ||||||||||||||||||||||||||||
Ammonia | 575 | 533 | (7.3 | ) | 533 | 500 | 151 | (69.8 | ) | |||||||||||||||||||
Carbon dioxide | 830 | 786 | (5.3 | ) | 786 | 844 | 372 | (55.9 | ) | |||||||||||||||||||
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Total | 1,405 | 1,319 | (6.1 | ) | 1,319 | 1,343 | 523 | (61.1 | ) | |||||||||||||||||||
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Total annual production of methane derivatives in 20162018 decreased 6.1%61.1% from 1,4051,343 thousand tons in 20152017 to 1,319523 thousand tons in 2016,2018. This decrease was mainly due to low gasshortages in the supply of raw material that has kept our Cosoleacaque plant out of operation sincemid-August of 2018 and operations failures in our ammonia plants.unscheduled stoppages during the first half of 2018 due to equipment failure.
In 20162018 we produced 533151 thousand tons of ammonia, which represents a decrease of 7.3%69.8% as compared to 575500 thousand tons produced in 2015.2017. In 2016,2018, we produced 786372 thousand tons of carbon dioxide, aby-product of the production process, which represents a 5.3%55.9% decrease as compared to 2015.2017.
Sales of Fertilizers
The following table sets forth the value of our domestic sales for the twothree years ended December 31, 2016:2018.
Value of Fertilizers Segments’Segment’s Domestic Sales(1)
Year ended December 31, | ||||||||||||||||||||||||||||
2018 | ||||||||||||||||||||||||||||
2016 | 2017 | 2018 | vs. 2017 | |||||||||||||||||||||||||
Year ended December 31, | ||||||||||||||||||||||||||||
2015 | 2016 | 2016 vs. 2015 | (in millions of pesos)(2) | (%) | ||||||||||||||||||||||||
(in millions of pesos)(2) | (%) | |||||||||||||||||||||||||||
Methane Derivatives | ||||||||||||||||||||||||||||
Ammonia | Ps. 4,414.6 | Ps. 4,593.1 | 4.0 | Ps. 4,593.1 | Ps. 4,676.5 | Ps. 5,544.3 | 18.6 | |||||||||||||||||||||
Carbon dioxide | 69.9 | 90.2 | 29.0 | 90.2 | 109.1 | 56.8 | (47.9 | ) | ||||||||||||||||||||
Urea (resale) | 46.5 | 6.9 | (85.2 | ) | 6.9 | — | — | — | ||||||||||||||||||||
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Total | Ps. 4,531.0 | Ps. 4,690.2 | 3.5 | Ps. 4,690.1 | Ps. 4,785.7 | Ps. 5,601.1 | 17.0 | |||||||||||||||||||||
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(1) | Excludes value added tax. |
(2) | Figures are stated in nominal pesos. |
Source: | Pemex BDI. |
Source:Pemex BDI.
In 20162018 the value of domestic sales in our fertilizers segment increased by 3.5%17.0%, from Ps. 4,531.04,785.7 million in 20152017 to Ps. 4,690.25,601.1 million in 2016,2018, primarily due to an increase in the volumesales price of ammonia, and to a lesser extent due to the increase in sales volume of ammonia, as presented in more detail below.
Volume of sales
The following table sets forth the value of our domestic sales for the twothree years ended December 31, 2016:2018.
Volume of Fertilizers Segment’s Domestic Sales
Year ended December 31, | ||||||||||||||||||||||||||||
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2016 | 2017 | 2018 | vs. 2017 | |||||||||||||||||||||||||
Year ended December 31, | ||||||||||||||||||||||||||||
2015 | 2016 | 2016 vs. 2015 | (thousands of tons) | (%) | ||||||||||||||||||||||||
(thousands of tons) | (%) | |||||||||||||||||||||||||||
Methane Derivatives | ||||||||||||||||||||||||||||
Ammonia | 643.4 | 752.8 | 17.0 | 752.8 | 760.4 | 771.7 | 1.5 | |||||||||||||||||||||
Carbon dioxide | 166.0 | 179.7 | 8.3 | 179.7 | 207.6 | 151.3 | (27.1 | ) | ||||||||||||||||||||
Urea (resale) | 10.0 | 1.7 | (83.0 | ) | 1.7 | — | — | — | ||||||||||||||||||||
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Total | 819.4 | 934.2 | 14.0 | 934.3 | 968.0 | 923.0 | (4.6 | ) | ||||||||||||||||||||
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Source:
Pemex BDI.
Fertilizers Capital Expenditures
Our fertilizers segment invested Ps. 379331 million in capital expenditures in 20162018 and has budgeted Ps. 444500 million in capital expenditures for 2017.2019. The following table sets forth our fertilizers segment’s capital expenditures, excludingnon-capitalizable maintenance, for each of the twothree years ended December 1, 2016,31, 2018, and the budget for 2017.2019. Capital expenditure amounts are derived from our budgetary records, which are prepared on a cash basis. Accordingly, these capital expenditure amounts do not correspond to capital expenditure amounts included in our consolidated financial statements prepared in accordance with IFRS.
Fertilizers Segments’Fertilizers’ Capital Expenditures
Year ended December 31,(1) | Budget 2019(2) | |||||||||||||||||||||||||||
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Year ended December 31,(1) | Budget 2017(2) | |||||||||||||||||||||||||||
2015 | 2016 | (in millions of pesos)(3) | ||||||||||||||||||||||||||
(in millions of pesos)(3) | ||||||||||||||||||||||||||||
Fertilizers | ||||||||||||||||||||||||||||
Rehabilitation of Primary Reformers and Auxiliary Ammonia Plant VI and VII of Cosoleacaque PC | Ps. — | Ps. 75 | Ps. 138 | Ps. 170 | ||||||||||||||||||||||||
Efficiency in Storage and Distribution | 45 | 38 | 72 | — | ||||||||||||||||||||||||
Rehabilitation of the ammonia plant No. V, at Cosoleacaque PC | — | — | 38 | 11 | ||||||||||||||||||||||||
Maintenance of refrigeration and ammonia storage plant No. 2 of the Pajaritos Refrigerated Terminal | — | — | 30 | 50 | ||||||||||||||||||||||||
Maintaining the Production Capacity of Ammonia Plant VII and its Auxiliary Services at Cosoleacaque PC | 18 | 5 | 22 | — | ||||||||||||||||||||||||
Maintaining the Production Capacity of Ammonia Plant VI at Cosoleacaque PC | 16 | — | 18 | — | ||||||||||||||||||||||||
Rehabilitation of Ammonia Plant IV and Integration and Auxiliary Services for Cosoleacaque PC | Ps. 791 | Ps. 295 | Ps. 225 | 295 | 102 | 11 | — | |||||||||||||||||||||
Efficiency in Storage and Distribution of Pemex-Petrochemicals | — | 45 | 68 | |||||||||||||||||||||||||
Maintaining the Production Capacity of Ammonia Plant VII and its Auxiliary Services at Cosoleacaque PC | 101 | 18 | — | |||||||||||||||||||||||||
Maintaining the Production Capacity of Ammonia Plant VI at Cosoleacaque PC | 97 | 16 | — | |||||||||||||||||||||||||
Safety and Environmental Protection, Derived from Observations and Regulations II in Cosoleacaque PC | 43 | 5 | — | 5 | — | — | — | |||||||||||||||||||||
Rehabilitation of Primary Reformers and Auxiliary Ammonia Plant VI and VII of Cosoleacaque PC | — | — | 126 | |||||||||||||||||||||||||
Maintenance of the Ammonia Refrigeration and Storage Plant No. 1 of the Pajaritos Refrigerated Terminal | — | — | — | 157 | ||||||||||||||||||||||||
Maintenance for transportation, storage and handling of Ammonia | — | — | — | 112 | ||||||||||||||||||||||||
Others | 12 | — | 24 | — | 45 | 2 | — | |||||||||||||||||||||
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Total | Ps. 1,044 | Ps. 379 | Ps. 444 | Ps. 379 | Ps. 264 | Ps. 331 | Ps. 500 | |||||||||||||||||||||
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Notes: Numbers may not total due to rounding.
Notes: | Numbers may not total due to rounding. |
PC = Petrochemical Complex. |
(1) | Amounts based on cash basis method of accounting. |
(2) | Original budget published in the Official Gazette of the Federation on |
(3) | Figures |
Source: |
|
Pajaritos Petrochemical Complex
On January 16,In 2014, our subsidiary company P.M.I. Norteamérica, S.A. de C.V. signed an agreement through one of its subsidiaries to purchase the existing assets of Agro Nitrogenados, S.A. de C.V.,we acquired a subsidiary of Minera del Norte, S.A. de C.V., including a closednon-operating nitrogen fertilizer production facility located in Pajaritos, Veracruz, Mexico, for the purchase price of U.S. $275 million, which was subsequently lowered to U.S. $273 million.Veracruz. The renovationrehabilitation of the facility will involve restoring operationsinvolved the restoration of our rotating, static and mechanical equipment, buildingthe construction of a carbon dioxide compressorcompression station, as well as other auxiliary projects. The rehabilitation was completed in the second quarter of 2018. While tests were started at that time, production could not be stabilized due to the discontinuous operation of our Cosoleacaque petrochemical complex, which led to an insufficient supply of ammonia. We expect that we will be able to beginstart operations at this facility in the fourth quartersecond half of 20172019, and, once the production stabilizes, we expect to have an annuala production capacity of up to 990,00090 thousand tons of urea.urea per month.
Acquisition of Fertinal
On January 28, 2016, PMX Fertilizantes Pacífico, S.A. de C.V., one of our subsidiaries, acquired 99.99% of the outstanding shares of Fertinal for a total purchase price of Ps. 4,322.8 million. The net value of Fertinal’s assets is Ps. 315.8 million (consisting of total assets of Ps. 12,341.1 millionproduces fertilizers, primarily phosphates, as well as acids and total liabilities of Ps. 12,025.3 million)other agricultural and a goodwill of Ps. 4,007.0 million. As of December 31, 2016, a calculation of the impairment of goodwill resultedindustrial nitrates, and operates an industrial complex located in the complete cancellation of that amount. See Note 22 to our consolidated financial statements contained herein.
Lázaro Cárdenas, Michoacán. Fertinal’s total production capacity for the last yearthree years ended December 31, 2018 is as set forth below:below.
Fertinal’sFertinal Segment’s Total Capacity
|
Year ended December 31, | ||||||||||||
2016 | 2017 | 2018 | ||||||||||
(thousands of tons) | ||||||||||||
Nitrate and phosphates(1) | 1,299 | 1,420 | 1,225 |
Source: Fertinal Group.
(1) | During 2018, we produced Triple Superphosphate, which limits the production capacity for Diamonic Phosphate / Monoammonium phosphate, which, in turn, reduced our total production capacity. |
Source: | Fertinal Group |
Fertinal’s total production for the last yearthree years ended December 31, 2018 is set forth below:below.
Fertinal’sFertinal Segment’s Production
Year ended December 31, | ||||||||||||||||
2016 | 2017 | 2018 | 2018 vs. 2017 | |||||||||||||
(thousands of tons) | % | |||||||||||||||
Phosphates | 682.0 | 763.9 | 880.7 | 15.3 | ||||||||||||
Nitrate | 187.3 | 220.8 | 225.1 | 1.9 | ||||||||||||
Others | 5.7 | 3.5 | 23.3 | 565.7 | ||||||||||||
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| |||||||||
Total | 875.0 | 988.2 | 1,129.1 | 14.3 | ||||||||||||
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Source: | Fertinal Group | |||
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Source: Fertinal Group.
The following table sets forth the value of Fertinal’s domestic sales for the yearthree years ended December 31, 2016:2018.
Value of Fertinal’s Domestic Sales(1)
| ||||
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| ||||
Year ended December 31, | ||||||||||||||||
2016 | 2017 | 2018 | 2018 vs. 2017 | |||||||||||||
(in millions in pesos)(2) | % | |||||||||||||||
Phosphates | Ps. 1,430.9 | Ps. 1,717.5 | Ps. 1,576.1 | (8.2 | ) | |||||||||||
Nitrates | 1,154.3 | 1,099.1 | 1,316.9 | 19.8 | ||||||||||||
Ammonia | 33.5 | 108.6 | 1,168.2 | 975.7 | ||||||||||||
Sulfur | — | 11.1 | 158.7 | 1,329.7 | ||||||||||||
Sulfuric Acid | 7.5 | 4.5 | 2.5 | (44.4 | ) | |||||||||||
Others | 20.4 | 24.7 | 32.6 | 32.0 | ||||||||||||
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| |||||||||
Total | Ps. 2,646.6 | Ps. 2,965.5 | Ps. 4,255.0 | 43.5 | ||||||||||||
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Note:
Note: | Numbers may not total due to rounding. |
(1) | Excludes value added tax. |
(2) | Figures are stated in nominal pesos. |
Source: | Fertinal Group. |
Source: Fertinal Group.
We intendThe increase in our sales in 2018 was mainly due to incorporate Fertinal into the gas ammonia solid fertilizers value chain in order to offer a wide range of fertilizers and to cover approximately 50% of the domestic market. We are also assessing the possibility of selling this integrated businessan increase in the future.production available for sale, better prices obtained in the market as compared to 2017 prices (an average price increase of approximately U.S. $45.00 per ton), and an increase in sales of other products such as ammonia, sulfur and industrial use acids.
In 2018, we implemented a strategic plan to consolidate optimal production levels, continue to manageshort-term cash flows and strengthen our financial position. As a result, in 2018 we operated at 90.3% of our total production capacity and produced 1,106.0 thousand tons of final product, which represents an increase of 12.3% as compared to 2017.
Ethylene
Our ethylene segment operates through the productivestate-owned subsidiary Pemex Ethylene and takes advantage of the integration of the ethylene production chain by manufacturing various petrochemical products. Our ethylene segment manufactures various petrochemical products, including:
ethane derivatives, such as ethylene, polyethylene, low density polyethylene,polyethylenes, ethylene oxide and glycols;
propylene and derivatives; and
others such as oxygen, nitrogen, hydrogen butadiene and CPDI,butadiene, among other products.
Capacity
Total production capacity of our operating plants for the last twothree years ended December 31, 2018 was distributed among our facilities as set forth below:below.
Ethylene Segments’Segment’s Production Capacity
Year ended December 31, | ||||||||||||||||||||
2016 | 2017 | 2018 | ||||||||||||||||||
Year ended December 31, | ||||||||||||||||||||
2015 | 2016 | (in thousands of tons) | ||||||||||||||||||
(in thousands of tons) | ||||||||||||||||||||
Petrochemical Facility | ||||||||||||||||||||
Cangrejera(1) | 1,321 | 1,321 | 1,321.3 | 1,321.3 | 1,321.3 | |||||||||||||||
Morelos | 2,277 | 2,277 | 2,277.2 | 2,277.2 | 2,277.2 | |||||||||||||||
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Total | 3,598 | 3,598 | 3,598.5 | 3,598.5 | 3,598.5 | |||||||||||||||
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Notes:
Notes: | Numbers may not total due to rounding. |
(1) | Our ethylene segment’s capacity in Cangrejera does not include products from the aromatics and derivatives chain. These products belong to Pemex Industrial Transformation. |
Source: |
|
Production
The following table sets forth our ethylene segment’s production for the twothree years ended December 31, 2016:2018.
Ethylene Segment’s Production(1)
Year ended December 31, | ||||||||||||||||||||||||||||
Year ended December 31, | 2018 | |||||||||||||||||||||||||||
2015 | 2016 | 2016 vs. 2015 | 2016 | 2017 | 2018 | vs. 2017 | ||||||||||||||||||||||
(in thousands of tons) | (%) | (in thousands of tons) | (%) | |||||||||||||||||||||||||
Ethane derivatives | 1,992.8 | 1,690.7 | (15.2 | ) | 1,690.7 | 1,274.1 | 1,304.8 | 2.4 | ||||||||||||||||||||
Propylene and derivatives | 66.0 | 42.8 | (35.2 | ) | 42.8 | 12.9 | 16.5 | 27.9 | ||||||||||||||||||||
Others | 910.9 | 795.2 | (12.7 | ) | 795.2 | 597.0 | 509.0 | (14.7 | ) | |||||||||||||||||||
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| |||||||||||||||||||||||
Total(1) | 2,969.7 | 2,528.7 | (14.8 | ) | 2,528.7 | 1,884.0 | 1,830.3 | (2.9 | ) | |||||||||||||||||||
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Note:
Note: | Numbers may not total due to rounding. |
(1) | Figures include petrochemical products used as raw material to produce other petrochemicals. |
Source: | Pemex BDI. |
Source: Pemex BDI.
In 2016,2018, our total production in the ethylene segment decreased 14.8%2.9%, from 2,969.71,884.0 thousand tons in 20152017 to 2,528.71,830.3 thousand tons in 2016,2018, primarily due to a decrease in the national supply of ethane, which impacts the production of ethylene at theand its derivatives, in particular linearlow-density polyethylene.
During 2018, Pemex Ethylene reengineered its refrigerated terminal to provide ethane refrigeration rather than ethylene refrigeration, which allows us to import ethane, a raw material necessarily for our operations of which we have had a domestic shortage in recent years. We began to import ethane in January 2018. Our Cangrejera petrochemical complexLow Density Polyethylene Plant experienced growth in production, with 2018 production volume increasing 30.0% as compared to 2017, which was primarily due to increased operative reliability and a reducedan increased supply of ethane gas fromraw materials due to our third-party supplier.new capacity to import ethane.
Domestic Sales
The following table sets forth our ethylene segment’s domestic sales for the twothree years ended December 31, 2016.2018.
Value of Ethylene Segments’Segment’s Domestic Sales(1)
Year ended December 31, | ||||||||||||||||||||||||||||
Year ended December 31, | 2018 vs. | |||||||||||||||||||||||||||
2015 | 2016 | 2016 vs. 2015 | 2016 | 2017 | 2018 | 2017 | ||||||||||||||||||||||
(in millions of pesos)(2) | (%) | (in millions of pesos)(2) | (%) | |||||||||||||||||||||||||
Ethane derivatives | Ps.15,580.6 | Ps. 14,539.4 | (6.7 | ) | Ps. 14,539.4 | Ps. 12,252,7 | Ps. 12,472.8 | 1.8 | ||||||||||||||||||||
Propylene and derivatives | 1,156.5 | 788.3 | (31.8 | ) | 788.3 | 340.7 | 314.4 | (7.7 | ) | |||||||||||||||||||
Others | 104.0 | 64.8 | (37.7 | ) | 64.8 | 28.3 | 45.9 | 62.2 | ||||||||||||||||||||
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| |||||||||||||||||||||||
Total | Ps. 16,841.1 | Ps. 15,392.5 | (8.6 | ) | Ps. 15,392.5 | Ps. 12,621.7 | Ps. 12,833.2 | 1.7 | ||||||||||||||||||||
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|
Note:
Note: | Numbers may not total due to rounding. |
(1) | Excludes value added tax. |
(2) | Figures are stated in nominal pesos. |
Source: | Pemex BDI. |
Source: Pemex BDI.
In 2016,2018, the value of our domestic sales increased by 1.7% from Ps. 12,621.7 million in 2017 to Ps. 12,833.2 million in 2018. This increase was primarily due to an increase in income from sales of glycols andlow-density polyethylene. In 2018, the volume of our domestic sales decreased by 8.6% in 2016, from Ps. 16,841.1 million in 20151.5% as compared to Ps. 15,392.5 million in 2016. This decrease was primarily due2017 figures.
On June 27 2018, Pemex Ethylene successfully concluded its second auction to lower productionallocate the supply of high density polyethylene, low density polyethylene and ethylene oxide, which was partially offset by an increaseis a derivative of ethane. Eleven customers, including domestic ethoxylation companies and import brokers, participated in the salesauction, which resulted in 98.0 % of low linear density polyethylene in 2016 as compared to 2015.the available volume being placed at a fair market price.
Sales to other Subsidiary Entities
The following table sets forth the intercompany sales of petrochemical products for the twothree years ended December 31, 2016.2018.
Ethylene Segment’s Intercompany Sales(1)
Year ended December 31, | ||||||||||||||||||||||||||||
Year ended December 31, | 2018 vs. 2017 | |||||||||||||||||||||||||||
2015 | 2016 | 2016 vs. 2015 | 2016 | 2017 | 2018 | |||||||||||||||||||||||
(in millions of pesos)(2) | (%) | (in millions of pesos)(2) | (%) | |||||||||||||||||||||||||
Ethane and derivatives | Ps. 84.7 | Ps. 109.8 | 29.6 | Ps. 109.8 | Ps. 1.1 | Ps. 2.5 | 127.3 | |||||||||||||||||||||
Others | 91.9 | 373.7 | 306.6 | 457.8 | 284.2 | 62.5 | (78.2) | |||||||||||||||||||||
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Total | Ps. 176.6 | Ps. 483.5 | 173.8 | Ps. 567.6 | Ps. 285.3 | Ps. 64.5 | (77.4) | |||||||||||||||||||||
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Note: |
|
(1) | Excludes value added tax. |
(2) | Figures are stated in nominal pesos. |
Source:Pemex Ethylene.
In 2016,2018, our intercompany sales increaseddecreased by 173.8%77.4%, from Ps. 176.6285.3 million in 20152017 to Ps. 483.564.5 million in 2016.2018. This increasedecrease was primarily due to an increasea reduction in the volume of intercompany sales of nitrogen, hydrogen and pyrolysis liquids and nitrogen.gasoline in 2018, as compared to 2017, mainly because Pemex Industrial Transformation did not purchase any pyrolysis gasoline in 2018. We addressed this change in intercompany demand by exporting our products.
Ethylene Capital Expenditures
Our ethylene segment invested Ps. 746975 million in capital expenditures in 2016,2018, and has budgeted Ps. 1,786300 million for capital expenditures in 2017.2019.
The following table sets forth our ethylene segment’s capital expenditures, excludingnon-capitalizable maintenance, for each of the twothree years ended December 31, 2016,2018, and the budget for 2017.2019. Capital expenditure amounts are derived from our budgetary records, which are prepared on a cash basis. Accordingly, these capital expenditure amounts do not correspond to capital expenditure amounts included in our consolidated financial statements prepared in accordance with IFRS.
Ethylene’s Capital Expenditures
Year ended December 31,(1) | Budget 2017(2) | Year ended December 31,(1) | ||||||||||||||||||||||||||
2015 | 2016 | 2016 | 2017 | 2018 | Budget 2019(2) | |||||||||||||||||||||||
(in millions of pesos)(3) | (in millions of pesos)(3) | |||||||||||||||||||||||||||
Ethylene | ||||||||||||||||||||||||||||
Modernization of Fire Protection Network at Cangrejera PC | Ps. 71 | Ps. 68 | Ps. 171 | Ps. — | ||||||||||||||||||||||||
Modernization and Expansion of Production Capacity of Ethane Derivatives Chain I at Morelos PC | 3 | — | 168 | — | ||||||||||||||||||||||||
Maintaining the Production Capacity of the Swing Plant2015-2017 at Morelos PC | 6 | 16 | 78 | — | ||||||||||||||||||||||||
Sustainability of the Production Capacity of the Ethylene Plant at Morelos PC | 3 | 43 | 75 | 62 | ||||||||||||||||||||||||
Acquisition of Catalysts for Pemex Ethylene Plants | — | — | 72 | 56 | ||||||||||||||||||||||||
Maintaining the Production Capacity of Ethylene Oxide Plant2015-2017 at Morelos PC | 23 | 49 | 69 | 23 | ||||||||||||||||||||||||
Maintenance program of the Capacity of the Low Density Polyethylene plant at Cangrejera PC | — | 64 | 48 | — | ||||||||||||||||||||||||
Maintenance Program of the Ethylene Plant at Cangrejera PC | — | 39 | 48 | — | ||||||||||||||||||||||||
Rehabilitation of Maintenance Areas to Support Production at Cangrejera PC | 20 | 82 | 47 | — | ||||||||||||||||||||||||
Modernization and Optimization of Infrastructure and Auxiliary Services I at Cangrejera PC | 105 | 74 | 43 | — | ||||||||||||||||||||||||
Maintenance of the Production Capacity of the Asahi Plant2015-2017 at Morelos PC | 4 | 13 | 26 | 14 | ||||||||||||||||||||||||
Maintenance program for the production capacity of the Ethylene Oxide plant at Cangrejera PC | — | 2 | 20 | 49 | ||||||||||||||||||||||||
Maintaining the Production Capacity of Auxiliary Services at Morelos PC | 17 | 4 | 18 | — | ||||||||||||||||||||||||
Maintaining the Production Capacity of the Mitsui plant2015-2017 at Morelos PC | 8 | 14 | 8 | 23 | ||||||||||||||||||||||||
Maintenance of the Production Capacity of the Ethylene Oxide Plant at Cangrejera PC | 103 | 38 | 3 | — | ||||||||||||||||||||||||
Maintaining the Production Capacity of Ethylene Plant 2013-2015 at Morelos PC | Ps. 93 | Ps. 122 | Ps.— | 122 | — | — | — | |||||||||||||||||||||
Modernization and Optimization of Auxiliary Services Infrastructure I at Morelos PC | 5 | 105 | 213 | |||||||||||||||||||||||||
Modernization of Fire Protection Network at Cangrejera PC | 102 | 71 | 118 | |||||||||||||||||||||||||
Safety and Environmental Protection Based on Observations and Regulations IV at Morelos PC | 114 | 43 | 1 | 43 | 1 | — | — | |||||||||||||||||||||
Maintaining Production Capacity of the Low Density Polyethylene Plant | 112 | 40 | 156 | 40 | 67 | — | — | |||||||||||||||||||||
Maintaining the Production Capacity of Ethane Derivatives Chain II at Morelos PC | 87 | 38 | 0 | 38 | 1 | — | — | |||||||||||||||||||||
Maintaining the Production Capacity of Auxiliary Services II | 78 | 27 | 32 | 27 | 16 | — | — | |||||||||||||||||||||
Maintaining the production capacity of ethylene oxide plant 2015-2017 at Morelos PC | 1 | 23 | 97 | |||||||||||||||||||||||||
Maintaining the Production Capacity of Auxiliary Services III | 59 | 17 | 19 | 17 | 8 | — | — | |||||||||||||||||||||
Maintaining the Production Capacity of Auxiliary Services at Morelos PC | 48 | 17 | 42 | |||||||||||||||||||||||||
Maintaining the Production Capacity of the Ethane Derivatives Chain III at Morelos PC | 54 | 8 | 2 | 8 | 1 | — | — | |||||||||||||||||||||
Maintaining the Production Capacity of the Mitsui plant 2015-2017 at Morelos PC | 4 | 8 | 24 | |||||||||||||||||||||||||
Maintaining the Production Capacity of the Swing Plant 2015-2017 at Morelos PC | 7 | 6 | 150 | |||||||||||||||||||||||||
Modernization and Expansion of Production Capacity of Ethane Derivatives Chain I at Morelos PC | 402 | 3 | 6 | |||||||||||||||||||||||||
Modernization and Optimization of Infrastructure and Auxiliary Services I at Cangrejera PC | 277 | — | — | |||||||||||||||||||||||||
Others | 426 | 219 | 927 | 88 | 18 | 81 | 73 | |||||||||||||||||||||
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Total | Ps. 1,869 | Ps. 746 | Ps. 1,786 | Ps. 746 | Ps. 618 | Ps. 975 | Ps. 300 | |||||||||||||||||||||
| �� |
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Notes: | Numbers may not total due to rounding. |
PC = Petrochemical Complex. |
(1) | Amounts based on cash basis method of accounting. |
(2) | Original budget published in the Official Gazette of the Federation on |
(3) | Figures |
(4) | Capital expenditures were made for |
Source: Petróleos Mexicanos.
Source: | Petróleos Mexicanos. |
Joint Venture with Mexichem
We have a 44.1% interest in a joint venture with Mexichem S.A.B. de C.V., which we refer to as Mexichem, through an investment in Petroquímica Mexicana de Vinilo S.A. of C.V. (PMV) was a joint venture of the Vinyl Business Group of Mexichem, S.A.B. de C.V. (PMV)(Mexichem) and PPQ Cadena Productiva S.L. (PPQ), a Mexican entity incorporated by Mexichem in 2011. This joint venture allowed for the integration of the caustic soda-salt-chlorine-ethylene-vinyl chloride monomer production chain, which has streamlined operations and is expected to reduce manufacturing costs. Plants associated with this project began operating on September 12, 2013. The ethylene and vinyl chloride monomer plants are operated by employeessubsidiary of Pemex Ethylene. On December 20, 2017, Mexichem announced that the Board of Directors of PMV decided not to rebuild its Vinyl chloride monomer plantsMonochloride (VCM) production capacity, as the plant was damaged in a 2016 explosion. Therefore, the joint venture’s VCM production, and related infrastructure at the Pajaritos petrochemical complex were divested from Pemex-Petrochemicalsassets and contributed to PMV. During 2016, our petrochemicals segment supplied 2.6 thousand barrels per day of ethane to PMV, a decrease of 71.1 % as compared to 8.8 thousand barrels per day in 2015.
As a result of an accident at vinyl chloride plant III on April 20, 2016, the vinyl chloride IIIliabilities associated with ethylene production and auxiliary services associated with VCM and ethylene plants ceased operationswere classified as discontinued operations.
On November 30, 2018, we concluded the sale of our total 44.09% interest in PMV and total 44.09% interest in PMV Minera, S.A. de C.V. (PMV Minera) to Mexichem. These sales were recorded as investments in joint ventures and associates. The sale price for PMV was Ps. 3,198.6 million and the soda plant began operating at reduced capacity, which led tosale price for PMV Minera was Ps. 53.7 million. We recognized a decline in salesgain of all products in 2016. The vinyl chloride plant was the only plant affected by the accident,Ps. 689.3 million and we are currently evaluating plants to resume operations. To date, the cause of the accident is unknown.Ps. 1.6 million, respectively.
Drilling and Services
Our drilling and services segment operates through the productivestate-owned subsidiary Pemex Drilling and Services and provides drilling, completion,work-over and other services for wells in offshore and onshore fields. During 2016,2018, this segment mainly provided drilling services to Pemex Exploration and Production, but also began to provideprovided services tothird-party clients such as CONAGUA and the Armada Company.
As a result of our corporate reorganization, for the year ended December 31, 2015, we have presented operating results for our drilling and services segment together with results for our exploration and production segment. We have summarized some of these results below. For additional results for this segment, please see “—Exploration and Production—Exploration and Drilling” above in this Item 4. Operating results for these segments are presented separately for periods beginning January 1, 2016. When reviewing these results, please note that our exploration and production segment receives drilling services not only from our drilling and services segment but also from third parties. Accordingly, the amounts presented above under drilling activity do not relate only to services provided by our drilling and services segment. For a detailed description of the financial results of each segment, see our consolidated financial statements included herein. clients.
During 2016,2018, we drilled 93115 wells, 4175 onshore and 5240 offshore; completed 9291 wells, 4155 onshore and 5136 offshore; and made 617 workovers, 540542 work-overs, 446 onshore and 7796 offshore. Of the wells completed, two wereone was for CONAGUA. Those services were performed with an average of 5478 drilling and workoverwork-over rigs, 2446 terrestrial and 3032 marine, including both owned and leased equipment. Moreover, we conducted 24,85120,312 well services in 2016, 2018,
of which 52.7%50.2% were wireline operations, 28.2%29.0% were cementing jobs, 16.0%16.5% were logging operations and perforations and 3.1%4.4% were coiled tubing operations. In addition, we provided drilling and services to external customers such as CONAGUA, Marinsa, Latina, Fieldwood and Key Energy.
Given the current stateslight recovery of the oil and gas industry, and the decline in global oil prices, the demand for well drilling and services decreasedincreased in 20162018 by approximately 12%23.6% as compared to 2015.2017. In 2017,2019, we expect well interventions to decreaseincrease by approximately 37.9%61.8% compared to 2018, and we expect to operate an average of 35119 rigs—1673 land and 1946 marine—including both owned and leased equipment, which represents a 35.2% decrease52.6% increase as compared to 2016.2018. Of these, we expect that 1348 land and 39 marine will be rigs we own, which is a 42.9% decrease21.3% increase as compared to 2016. By the end of 2017, we expect to be operating a total of 14 rigs—11 land and 3 marine rigs.2018.
In 2016, we acquired two 3,000 hp land rigs for Ps. 1,442.3 million. Plans to acquire two marine rigs have been postponed due to delays in construction. In 2017,2018, in accordance with our “Programa de modernizacióModernización de la infraestructuraInfraestructura de perforacióPerforación” (Drilling Infrastructure Modernization Program), we expect to acquirecarried out the modernization of two 200 hpdrilling land rigs of 2,000 horsepower for well repairs.an amount of Ps. $803.6 million.
Drilling and Services Capital Expenditures
Our drilling and services segment invested Ps. 2,6881,388 million on capital expenditures in 20162018 and has budgeted Ps. 1,5801,295 million for capital expenditures in 2017.2019.
The following table sets forth our drilling and services segment’s capital expenditures, excludingnon-capitalizable maintenance, for each of the twothree years ended December 31, 2016,2018, and the budget for 2017.2019. Capital expenditure amounts are derived from our budgetary records, which are prepared on a cash basis. Accordingly, these capital expenditure amounts do not correspond to capital expenditure amounts included in our consolidated financial statements prepared in accordance with IFRS.
Drilling and Services’ Capital Expenditures
Year ended December 31, 2015(1) | Budget 2017(3) | Year ended December 31,(1) | Budget | |||||||||||||||||||||||||
2015(2) | 2016 | 2016 | 2017 | 2018 | 2019(2) | |||||||||||||||||||||||
(in millions of pesos)(4) | (in millions of pesos)(3) | |||||||||||||||||||||||||||
Drilling and Services | ||||||||||||||||||||||||||||
Acquisition of TwoJack-Up Platforms | Ps. 553 | Ps. 772 | Ps. 838 | Ps. 772 | Ps. 794 | Ps. 804 | Ps. 834 | |||||||||||||||||||||
Acquisition of Nine Land-Based Drilling Rigs | 288 | 340 | 386 | 340 | 352 | 353 | 386 | |||||||||||||||||||||
Drilling Rig Equipment and Well Service Equipment Maintenance Program | — | 74 | 287 | 74 | 96 | 83 | 49 | |||||||||||||||||||||
Acquisition of Two Modular Drilling Rigs | 723 | — | 65 | — | 3 | 2 | — | |||||||||||||||||||||
Acquisition of Modernization Equipment for Drilling and Repair of Wells | — | — | — | 25 | ||||||||||||||||||||||||
Others | — | 1,501 | 3 | 1,501 | 307 | 146 | — | |||||||||||||||||||||
|
|
|
|
|
|
| ||||||||||||||||||||||
Total | Ps. 1,564 | Ps. 2,688 | Ps. 1,580 | Ps. 2,688 | Ps. 1,550 | Ps. 1,388 | Ps. 1,295 | |||||||||||||||||||||
|
|
|
|
|
|
|
Notes: Numbers may not total due to rounding.
(1) Amounts based on cash basis method of accounting.
(2) Original budget published in the Official Gazette of the Federation on January 17, 2019.
(3) Figures are stated in nominal pesos.
Source: Petróleos Mexicanos.
Logistics
Our logistics segment operates through the productivestate-owned subsidiary Pemex Logistics and provides land, maritime and pipeline transportation, storage and distribution services to some of our other subsidiary entities and to other companies, including CFE,Aeropuertos y Servicios Auxiliares, CENAGAS, local gas stations and distributors.
Transportation of Crude Oil and Refined Products
During 2016,2018, we transported 58,016 millionton-kilometers of crude oil and petroleum products, an 11.3% decrease as compared to 2015 due to decreased production in our exploration and production segment, decreased processing of crude oil in our refineries and the illicit market in fuels which can lead to temporary pipeline closures. During 2016, we transportedinjected approximately 4,688 million cubic feet per day of natural gas, through an operation and maintenance service contract provided to CENAGAS. During 2016, we also transported 140 thousand barrels per day of LPG and 2,4751,581.5 thousand barrels per day of crude oil and petroleum products to be processed ininto our refining system and to satisfy domestic demand for petroleum products,pipelines, representing a 16.2% decrease as compared to 1742017 when we injected 1,887 thousand barrels per day, mainly due to a reduction in the volume of crude oil processed in the National Refining System and the illicit market in fuels that caused temporary closures of certain pipelines. Of the total amount of crude oil and petroleum products that we injected in 2018, 74.5% was transported by pipeline, 7.5% by tanker and the remaining 18.0% by land transport.
During 2018, we injected 139.1 thousand barrels per day of LPG, and 3,181representing a 0.7% increase as compared to the 138.1 thousand barrels per day we injected in 2018. In addition, we injected 2.4 thousand barrels per day of crude oilpetrochemicals, an increase of 4.3% as compared to the 2.3 thousand barrels per day we injected in 2017. These increases were mainly due to an increase in imports of isobutane by Pemex Industrial Transformation.
As of 2016, natural gas transportation is carried out by CENAGAS, with the support of Pemex Logistics through an operation and petroleum products transported in 2015. Of the total amount we transported in 2016, we carried 79.5% of the transported volumes in 2016 through pipelines, 7.8% by vessels and the remaining 12.7% by train tank cars and trucks.
maintenance contract. During 2016,2018, we transported approximately 5,4405,070.9 million cubic feet per day of natural gas, an increase asa 2.4% decrease compared to the 5,1425,195.1 million cubic feet per day we transported in 2015, partially2017, mainly due to a decrease in the transportationvolume of natural gas transported to the CFE and Pemex Industrial Transformation.
Treatment and Primary Logistic
We received an estimated 655average of 1,315.2 thousand barrels per day of crude oil for treatment, which consists of dehydration and desalination, in 2018, compared to 1,421.2 thousand barrels per day in 2017, which represents a decrease of 7.5%, mainly due to lower crude oil production by Pemex Exploration and Production. During 2018, an average of 804.5 thousand barrels of crude oil per day were delivered to the National Refining System and 554.7 thousand barrels of crude oil per day were delivered to the export terminals.
During 2018, we transported an average of 3,096.9 million cubic feet per day forof natural gas through the CFEAltamira, Misión, Santuario and Gas Marino Mesozoico transportation systems, as agreed amongcompared to the Ministry of Energy, the Energy Regulatory Commission3,415.8 million cubic feet per day in 2017, which represents a 9.3% decrease, partially due to a decrease in natural gas production by Pemex Exploration and Production and Pemex Industrial Transformation. On January 1, 2016,Transformation having to reject a certain volume of wet sour gas due to its nitrogen content. In addition, we began providing operation, maintenancetransported an average of 23.9 thousand barrels per day of condensate by the Misión and information technology services, among others,Condensado Terrestre Sur transportation systems compared to CENAGAS27.9 thousand barrels per day in connection with its2017, which represents a 14.3% decrease, partially due to a decrease in natural gas transportation infrastructure.production by Pemex Exploration and Production.
During 2018, we had six leak and spill events, none of which were significant.
Open Season
During 2017, under the guidelines issued by the CRE, Pemex Logistics began participating in “Open Season” auctions, which are intended to be transparent and competitive auctions for access to our pipelines and storage infrastructure, wherein any participant can compete to offer its services.
On May 2, 2017, following the first Open Season auction, Andeavor (formerly Tesoro Corporation), a U.S. company, was awarded athree-year contract at the assigned capacity at rates above the minimums set by us. On July 18, 2017, we signed the contracts with Andeavor, allowing it to use the pipeline transport and storage system owned by us in the states of Sonora and Baja California. These contracts include access to theRosarito-Mexicali,Rosarito-Ensenada,Guaymas-Hermosillo andGuaymas-Ciudad Obregón pipelines, as well as the Rosarito, Mexicali and Ensenada storage terminals in Baja California and the Guaymas, Ciudad Obregón, Hermosillo, Magdalena, Nogales and Navojoa in Sonora.
Also, in continuation of the Open Season auctions, on December 18, 2017, the CRE approved the auction procedures for the North Border Zone, Pacific Topolobampo Zone and North Zone Madero.
In March of 2018, we held an Open Season auction for the North Border Zone system, which consists of three terminals and two pipeline sections in the states of Coahuila and Tamaulipas. However, since no outside bids were received, the capacity for this sytem was assigned to Pemex Industrial Information.On July 24, 2018, following an Open Season auction for the Pacific Topolobampo Zone, Tesoro Mexico Supply & Marketing, S. de R.L. de C.V. (an affiliate of Andeavor) was awarded athree-year contract for the use of our storage terminals in Topolobampo, Culiacán, La Paz and Mazatlán.
In July 2018, we commenced an Open Season auction for the Pacific-Gulf zone, which consists of the Lázaro Cárdenas, Uruapan, Acapulco, Iguala, Oaxaca, Tapachula II, Tuxtla Gutiérrez and Villahermosa storage terminals. The period to submit bids for this Open Season auction ended on August 27, 2018. However, since no outside bids were received, the capacity for this system was assigned to Pemex Industrial Transformation.
Transport and distribution
Our pipelines connect crude oil and natural gas producingproduction centers with refineries and petrochemical plants, and our refineries and petrochemical plantsstorage terminals with Mexico’s major cities. At the end of 2016, our2018, the pipeline network measured approximately 17,69615,909.1 kilometers in length, of which 17,43314,458.0 kilometers
are operationalcurrently in operation and 2631,451.1 kilometers are temporarily out of operation. These pipelines may be temporarily out of operation because of a decline in the production inof a field where the pipeline is located or because the transportation service is irregular, makingwhich makes its operation of the pipeline unprofitable. Once production is restored in that field,such circumstances are more favorable, the pipelines may become operational again. WeAs of the date of this annual report, we are currently analyzing the 2631,451.1 kilometers of pipelines that are temporarily out of operation to determine if and how they may be used.used in the future.
Approximately 5,259 kilometersAs of December 31, 2018, the pipelines currently in operation transport crude oil, 8,582 kilometers transport petroleum products and petrochemicals, 1,583 kilometers transport LPG, 1,982 kilometers transport basic and secondary petrochemicals and 290 kilometers transport other products, including fuel oil, jet fuel and water.pipeline network of Pemex Logistics was distributed as follows:
On January 1, 2016, the 9,168 kilometers of pipelines used to transport natural gas were transferred to CENAGAS. For more information, see Note 9 to our consolidated financial statements included herein.
Transported Product | Length (km) | |||
Petroleum products | 8,427.9 | |||
Crude Oil | 5,216.5 | |||
LP Gas | 1,394.6 | |||
Chemicals | 392.2 | |||
Petrochemicals | 246.0 | |||
Fuel Oil | 142.6 | |||
Jet Fuel | 81.2 | |||
Water | 8.1 | |||
Total | 15,909.1 | |||
We have been working to implementimplemented a pipeline integrity management plan, which is basedrequires us to keep detailed documentation on the guidelinescondition of API Standard RP 1160, “Managing System Integrity for Hazardous Liquid Pipelines;” the American Society of Mechanical Engineers B31.8S, “Managing System Integrity of Gas Pipelines” andNOM-027.
our pipelines in order to optimize our maintenance investments. The pipeline integrity management plan consists ofis based onNOM-027, as well as API RP 1160 for liquid hydrocarbons and ASME B31.8S standards for gas, and includes the following stages:
collection of detailed records and the development of a pipeline database;
categorization and identification of threats that could affect pipeline integrity, safety and operation;
identification of critical points in the pipeline;
risk assessment and evaluation of pipeline reliability and integrity;
maintenance and risk-mitigation planning;risk mitigation planning and programming; and
ongoing monitoring duringthroughout all stages.
We have made considerable progress towards satisfying the requirements ofNOM-027.NOM-027 on risk assessment and pipeline integrity. Specifically, as of December 31, 2016,2018, we have analyzed 96%100% of our overall logistics pipeline network. In addition, we have implemented several measures required byrelated to our pipeline integrity management plan, including our data collection requirements.by collecting information in order to create pipeline databases.
Despite having implemented strategies to improve the integrity and operationThe results of our transportationrisk evaluation are as follows:
High Risk: 0 kilometers
Medium Risk: 4,230.3 kilometers
Low Risk: 12,895.0 kilometers
Notwithstanding the implementation of our pipeline network,integrity management plan, we experienced 3517 leaks and spills in 2016, which represents2018. The total number of incidents in 2018 represented a 45.3% decrease of 10.5%, as compared to 64 incidents in 2015. Of the 3519 incidents we experienced in 2017. Of the 17 incidents in our transportation pipelines, in 2016, 14seven were due to a failure in the mechanical integrity of the pipelines, twoseven were due tothird-party incidents and 19three were due to other factors.
The transportation of crude oil, natural gas and other products through athe pipeline network is subject to variousseveral risks, including risksrisk of leaksleakage and spills, explosions and theft.the illicit market in fuels. In 2016,2018, we incurredspent a total of Ps. 3,891.11,075.1 million in expenditures for the remediationrehabilitation and maintenance
of our pipeline network and we have budgeted an additional Ps. 2,987.3403.7 million for these expenditures in 2017. For more information on recent issues with our pipeline network, see2019. See “Item 3—Key Information—Risk Factors—Risk Factors Related to our
Operations—We are an integrated oil and gas company and are exposed to production, equipment and transportation risks, blockades to our facilities and criminal acts and deliberate acts of terror” and “—Environmental Regulation—Environmental Liabilities” below.above.
Other Transportation Equipment and Storage FacilitiesFleet Developments
AsIn July of December 31, 2016, we owned 16 refined product tankers and leased one. We also own 17 tugs, 1,485 tank trucks and 511 train tank cars, as well as 74 major wholesale storage and distribution centers, 10 liquefied gas terminals, five maritime terminals and 10 dock operation and maintenance facilities. These facilities, together with our pipeline network, constitute our oil and gas transportation and distribution infrastructure.
Our current fleet includes 17 vessels, of which we own 16 and lease one. Altogether, we have a transportation capacity of 4,618 thousand barrels. 67.5% of our vessels are located on the Pacific Coast and 32.4% are in the Gulf of Mexico. Of the vessels on the Pacific Coast, 83.7% are used to transport distillates, and 16.3% to transport fuel oil and heavy diesel. Of the vessels in the Gulf of Mexico, 82.5% are used for distillates and 17.5% for fuel oil and heavy diesel. Our vessel, BT Burgos, is currently out of operation due to an accident which occurred on September 24, 2016.
The plan for renewal and modernization of our fleet was concluded in 2014; however, we may resume renewal and modernization efforts pursuant to future demand for petroleum products or the retirement of a vessel in accordance with current international regulation.
On July 25, 2013, as part of a plan to modernize the fleet, we signed an agreement with the Secretaría de Marina—Marina - Armada de México (Mexican Navy), valued at approximately Ps. 3,212.1 million (U.S. $250.0$250.0 million), for the construction of 22 marine vessels for Pemex-Refining, now Pemex Industrial Transformation. Theour refining segment. This agreement initially included construction of 16 tugs,tugboats, three multipurpose vessels and three barges, but was modified in 2016 to remove the construction of the three barges and to extend the final delivery date to December 31, 2018. This transaction is now valued at approximately Ps. 4,346.44,705.0 million.
Treatment and Primary Logistics
Treatment and primary logistics systems As of December 31, 2018, the Mexican Navy has delivered eight tugboats. We are currently in the pipeline systems between our oil fields and our refineries andprocess of further extending the contract for delivery terminals. During 2016, Pemex Exploration and Production began to transfer its treatment and logistics systems to Pemex Logistics, including the transfer of the Misión, Altamiraremaining 11 vessels, subject to budget availability.
As of December 31, 2018, we owned 16 refined product tankers and Santuario systems on May 1, 2016, the Dos Bocas Maritime Terminal system on September 1, 2016,leased one. We also own 19 tugboats, 1,485 tank trucks and the oil and gas South Terrestrial system on November 1, 2016. Altogether these systems include 1,357 kilometers of natural gas pipelines, 1,124 kilometers of crude oil pipelines and 401 kilometers of gasoline pipelines,511 train tank cars, as well as one76 storage and distribution terminals, ten liquefied gas terminals, five maritime export terminal for crude oil.terminals and ten dock operation and maintenance facilities. These facilities, together with our pipeline network, constitute the hydrocarbons transportation and distribution infrastructure.
During 2016, these treatment and primary logistics systems transported an average of 2,133 thousand barrels per day of crude oil,Our current fleet includes 17 vessels, of which 935we own 16 and lease one, and altogether we have a transportation capacity of 5,071.3 thousand barrels per day were delivered tobarrels. 68% of our vessels are located on the National Refining SystemPacific coast and 1,198 thousand barrels per day were delivered to export terminals. For our gas distribution, an average32% are in the Gulf of 4,195 million cubic feet per day was transported in 2016, of which 3,699 million cubic feet per day were delivered to process plants, 496 million cubic feet per day were delivered directly to pipelines, and 36 million cubic feet per day of condensate were delivered to process plants.
During 2016, we experienced six leaks and spills.
Open Season
As a result of energy reform, we may offer pipeline transportation and storage services for refined products to the wider energy market. During 2017, under the guidelines issued by the Energy Regulatory Commission, Pemex Logistics will participate in an “open season,” a transparent and competitive auction procedure where any participant can compete to offer its services.
OnceMexico. Of the capacity reserve authorized byof the CRE has been allocatedvessels located on the Pacific coast, 75% is used to Pemex Industrial Transformation in a volume sufficienttransport distillates and 25% is used to ensure that national supply is not affected,transport fuel oil and heavy diesel. Of the remaining services will be offered through an auction.
Pemex Logistics will offer its servicescapacity of the vessels located in the northGulf of Mexico, which includes the Rosarito area,88% is used for distillates and the Guaymas area. Once the auction process12% is complete, we anticipate that our logistics segment will gradually extend its transportationused for fuel oil and storage services to the rest of Mexico, until reaching full coverage before the end of 2017.heavy diesel.
During 2016, our logistics segment earned Ps. 71,130.8 million, primarily for services rendered to our other subsidiary entities.
Logistics Capital Expenditures
Our logistics segment invested Ps. 7,0155,042 million in capital expenditures in 20162018 and has budgeted Ps. 4,4491,200 million in capital expenditures for 2017.2019.
The following table sets forth our logistics segment’s capital expenditures, excludingnon-capitalizable maintenance, for each of the twothree years ended December 31, 2016,2018, and the budget for 2017.2019. Capital expenditure amounts are derived from our budgetary records, which are prepared on a cash basis. Accordingly, these capital expenditure amounts do not correspond to capital expenditure amounts included in our consolidated financial statements prepared in accordance with IFRS.
Logistics’ Capital Expenditures
Year ended December 31,(1) | Budget 2017(2) | |||||||||||
2015 | 2016 | |||||||||||
(in millions of pesos)(3) | ||||||||||||
Logistics | ||||||||||||
Larger Fleet Modernization | 458 | 583 | 487 | |||||||||
Renewal of Tugs, Chalanes and Multipurpose Vessels of the Smaller Fleet | 401 | 495 | 36 | |||||||||
Refurbishment, Modification and Modernization of Pumping and Compression Stations Nationwide | 221 | 476 | 97 | |||||||||
Maintenance of Safety, Measurement, Control and Automation Systems in Storage and Distribution Terminals | 460 | 452 | 332 | |||||||||
Acquisition of 5 Tankers Vessel by Cash and/or by Leasing | 363 | 427 | 309 | |||||||||
Evaluation and Rehabilitation of the Mechanical Integrity of the Pipeline’s Poza Rica-Salamanca and Nuevo Teapa- Tula-Salamanca | 461 | 347 | 388 | |||||||||
Replacement of Vessel Tanks Nuevo Pemex I, II, III and IV by Acquisition and/or Leasing | 278 | 326 | 240 | |||||||||
Implementation of the SCADA System in 47 Pipeline Transportation Systems | 520 | 270 | 106 | |||||||||
Evaluation and Rehabilitation of the Mechanical Integrity of the Pipelines in Northern and Pacific Zones | 271 | 251 | 450 | |||||||||
Evaluation and Rehabilitation of the Mechanical Integrity of the Pipelines Nuevo Teapa-Madero-Cadereyta | 574 | 193 | 41 | |||||||||
Integral Maintenance of Pipeline Systems for Natural Gas and LPG, Stage II | 293 | 172 | 176 |
Year ended December 31,(1) | Budget 2017(2) | |||||||||||||||||||||||||||
2015 | 2016 | Year ended December 31,(1) | Budget | |||||||||||||||||||||||||
(in millions of pesos)(3) | ||||||||||||||||||||||||||||
2016 | 2017 | 2018 | 2019(2) | |||||||||||||||||||||||||
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| |||||||||||||||||||||||||
(in millions of pesos)(3) | ||||||||||||||||||||||||||||
Logistics | ||||||||||||||||||||||||||||
Larger Fleet Modernization | Ps. 583 | Ps. 645 | Ps. 604 | Ps. — | ||||||||||||||||||||||||
Acquisition of 5 Tankers Vessel by Cash and/or by leasing | 427 | 431 | 435 | — | ||||||||||||||||||||||||
Replacement of Vessel Tanks Nuevo Pemex I, II, III and IV by Acquisition and/or Leasing | 326 | 332 | 334 | — | ||||||||||||||||||||||||
Evaluation and Rehabilitation of the Mechanical Integrity of the Turbosine, Diesel, Gasoline and Fuel Oil Pipelines and Gas Pipelines in the Central Zone | 109 | 80 | 204 | — | ||||||||||||||||||||||||
Evaluation and Rehabilitation of the Mechanical Integrity of the Pipelines in Northern and Pacific Zones | 251 | 316 | 105 | 20 | ||||||||||||||||||||||||
Maintenance of Safety, Measurement, Control andAuto-mation Systems in Storage and Distribution Terminals | 452 | 235 | 91 | 87 | ||||||||||||||||||||||||
Renewal of Tugs, Chalanes and Multipurpose Vessels of the Smaller Fleet | 495 | 258 | 68 | — | ||||||||||||||||||||||||
Evaluation and Rehabilitation of the Mechanical Integrity of the Pipelines NuevoTeapa-Madero-Cadereyta | 193 | 88 | 65 | — | ||||||||||||||||||||||||
Implementation of the SCADA System in 47 Pipeline Transportation Systems | 270 | 78 | 45 | 72 | ||||||||||||||||||||||||
Refurbishment, Modification and Modernization of Pumping and Compression Stations Nationwide | 476 | 95 | 7 | — | ||||||||||||||||||||||||
Modernization of the Instrumented Security and Basic Control Systems of the Pumping Stations and Product Receipt Northern Zone | 278 | 110 | 2 | 110 | 6 | 7 | — | |||||||||||||||||||||
Evaluation and Rehabilitation of the Mechanical Integrity of the Turbosine, Diesel, Gasoline and Fuel Oil Pipelines and Gas Pipelines in the Central Zone | 464 | 109 | 62 | |||||||||||||||||||||||||
Evaluation and Rehabilitation of the Mechanical Integrity of the Pipeline’s PozaRica-Salamanca and NuevoTeapa-Tula-Salamanca | 347 | 6 | 6 | — | ||||||||||||||||||||||||
Integral Maintenance of Pipeline Systems for Natural Gas and LPG, Stage II | 172 | 205 | — | — | ||||||||||||||||||||||||
Natural Gas Transportation from Jáltipan to Salina Cruz Refinery | 403 | 31 | 7 | 31 | 12 | — | — | |||||||||||||||||||||
Maintenance of Marine Facilities | 316 | 28 | 65 | 28 | 11 | — | — | |||||||||||||||||||||
Others | 4,066 | 2,745 | 1,654 | 2,745 | 2,120 | 3,072 | 1,021 | |||||||||||||||||||||
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| |||||||||||||||||||||||||
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| ||||||||||||||||||||||||||
Total | Ps. 9,827 | Ps. 7,015 | Ps. 4,449 | Ps. 7,015 | Ps. 4,917 | Ps. 5,042 | Ps. 1,200 | |||||||||||||||||||||
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|
|
|
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Notes:
Notes: | Numbers may not total due to rounding. |
(1) | Amounts based on cash basis method of accounting. |
(2) | Original budget published in the Official Gazette of the Federation on |
(3) | Figures |
Source: | Petróleos Mexicanos. |
Source: Petróleos Mexicanos.CENAGAS
Private Sector Participation in Natural Gas Distribution
Prior to the enactment of the Hydrocarbons Law, the Regulatory Law provided that private and “social sector” companies could, with governmental authorization, store, distribute and transport natural gas and construct, own and operate natural gas pipelines, facilities and equipment.
Since 1997, the Regulatory Law has required us to provide the private sector with open access to our transportation system for distribution, ending our prior exclusive rights over the distribution lines. We continue to market natural gas and may develop natural gas storage systems.
In 1996, the Energy Regulatory Commission approved the Gradual Access Program for 1996 to 1997, which required that we open access to our natural gas distribution system to the private sector and prohibited vertical integration between transportation and distribution. As a result,Pemex-Gas and Basic Petrochemicals’ distribution assets located within the following official distribution zones were privatized: Chihuahua, Toluca, Saltillo, Nuevo Laredo, Río Pánuco, Northern Tamaulipas, Distrito Federal, Valle deCuautitlán-Texcoco-Hidalgo, Hermosillo, Monterrey, Mexicali, El Bajío, Cananea, Querétaro, La Laguna, Bajío Norte, Puebla, Tlaxcala, Guadalajara, Piedras Negras and Ciudad Juárez. Most recently,Pemex-Gas and Basic Petrochemicals’ distribution assets located within Altamira and Morelos were privatized in 2012 and the distribution assets located within Veracruz were privatized in 2013.
In addition, with respect to first-hand sales of natural gas,Pemex-Gas and Basic Petrochemicals, now Pemex Industrial Transformation, submitted to the Energy Regulatory Commission its proposal for a new payment system in 2013, which would provide customers with the option to reserve transportation capacity of natural gas and make payments based on the volume consumed. This new payment system is designed to allow customers to better estimate their consumption of natural gas, as well as enhance our ability to manage costs and capacity related to the transportation of natural gas. We continue to employ a temporary methodology for determining maximum prices of first-hand sales of natural gas. However, we are prepared to begin operating under the new system once the Energy Regulatory Commission approves it and issues final regulations to govern natural gas sales under the system. The Energy Regulatory Commission has stated that it plans to issue new regulations by July 1, 2017.
The Hydrocarbons Law, which repealed the Regulatory Law, provides for the participation of other companies in the entire natural gas value chain. The law additionally establishes a permit regime that governs all midstream and downstream activities in Mexico. In January 2015, the Energy Regulatory Commission granted Gasoducto de Aguaprieta S. de R.L. de C.V. a transportation permit corresponding to the northwestern region of Mexico, including Cajeme and Navojoa in the state of Sonora and another for Ahome, Choix, El Fuerte, Guasave and Salvador Alvarado in the state of Sinaloa.
Pursuant to the Hydrocarbons Law, on August 11, 2014, CENAGAS was created as a decentralized public entity of the Mexican Government to act as the independent administrator of the Integrated Natural Gas System. This system interconnects the infrastructure for the storage and transportation of natural gas across the nation, with the aim of expanding coverage, strengthening security measures and improving the continuity, quality and efficiency in transportation service. As an integrated system of transportation systems owned by CENAGAS or other participating companies, the Integrated Natural Gas System functions as a primary transportation service supplier in Mexico with standardized fares. Within this system, theSistema Nacional de Gasoductos (National Gas Pipelines System) acts as the commercial administrator for the total available capacity of the Integrated Natural Gas System. In order for a transportation system to become part of the Integrated Natural Gas System, its transport capacity must enhance the Integrated Natural Gas System’s flow capacity and improve the overall transportation service provided to users.
In accordance with the Energy Reform Decree,On October 29, 2015, we signed a transfer agreement with CENAGAS on October 29, 2015 for the transfer to CENAGAS of assets associated with the Integrated Natural Gas System and the distribution contract for theNaco-Hermosillo pipeline system. The National Gas Pipeline System has 87 pipelines with a total length of almost 9,000 kilometers and a transport capacity over 5,000 million cubic feet per day, while theNaco-Hermosillo system is a 300 kilometers long pipeline with a transport capacity of 90 million cubic feet per day. The approximate aggregate book value of these assets, which were transferred to CENAGAS on January 1, 2016, was Ps. 35.3 billion7,450 million as of December 31, 2018.
On December 29, 2016, as described in Note 9 to our consolidated financial statements included herein.
Cogeneration and Services
Our cogeneration and services segment operates through the productive state-owned subsidiary Pemex Cogeneration and Services and uses the thermal heat and steam from our industrial processes to produce the electricity required by us, as well as surplus electricity to sell to third parties in Mexico. Our cogeneration and services segment also provides technical and management services associated with supplying electricity.
Our cogeneration and services segment designs construction, financing and development structures for cogeneration through alliances with third parties in close geographic proximity to our productive work centers.
In 2013, we throughPemex-Gas and Basic Petrochemicals, now Pemex Industrial Transformation, entered into a services agreementtwo agreements with the Cogeneration Plant of Nuevo Pemex, which we refer to as the Cogeneration Plant, owned by ACT Energy México, S. de R. L. de C. V., to convert demineralized/condensed water from liquid to steam and natural gas into electricity to supply the Nuevo Pemex gas processing complex and to transport natural gas to our other centers and productive state-owned subsidiaries. Through this services agreement, the Cogeneration Plant agrees to provide a minimum of between 550 and 800 tons per hour of steam and 277.2 megawatts of electricity to the Nuevo Pemex gas processing complex and our 191 other workplaces and productive state-owned subsidiaries throughout the country. On December 6, 2016, the services agreement with the Cogeneration Plant was amended to increase the supply of steam by 140 tons per hour beginning on December 1, 2017.
During 2016, the Cogeneration Plant generated an average of 561.3 tons per hour of steam for the Nuevo Pemex gas processing complex, a 4.5% decrease as compared to 2015, and 298 megawatts of electricity, a 2.6% decrease as compared to 2015. These decreases are primarily due to significant maintenance performed at the plant during February and March.
In November 2016, Pemex Industrial Transformation and CFE entered into a services agreement for the conversion of demineralized/condensed water from liquid to steam,CENAGAS pursuant to which CFE will supply 662 tonswe continued to provide operation and maintenance services and commercial operation services to CENAGAS during 2018. Both agreements, which, as of steam per hourDecember 31, 2018, have a total value of Ps. 3,045.0 million and Ps. 116.3 million, respectively, initially had a term of one year and are automatically renewed for one year unless either party gives advance notice to the Salamanca refinery throughcontrary. The agreements for nine of the external cogeneration project developed21 pipeline subsystems have been terminated as a result of a new services bidding strategy implemented by CFE. Operational and performance tests began in November 216 and will conclude in the second half of 2017. Our cogeneration and services segment will monitor and manage the services agreement between the parties.
Our cogeneration and services segment has two cogeneration projects to supply steam and electricity to Tula and Cadereyta refineries. During 2016, we carried out activities to define the scopeCENAGAS. However, Pemex Logistics subsequently won bids for three of these projects and to develop the relevant user requirements, which we are working to formalize with the aim of commencing operations by the end of 2022. These projects will be developed through alliances with, and investment capital from, third parties. The projected total investment is U.S. $ 1,127 million,nine pipeline subsystems with an estimated capacitycontract value of 969 megawatts of electricityPs. 78.8 million and, 2,000 tons per hour of steam.
The following table sets forthas a brief summaryresult, continues to provide services to CENAGAS for 15 of the three projects discussed above.21 pipeline subsystems.
Projects under Development
Electricity (Megawatts) | Steam (tons/hour) | |||||||||||
Capacity | Our Demand | |||||||||||
Tula | 444 | 267 | 1,150 | |||||||||
Cadereyta | 525 | 135 | 850 |
Source: Pemex Cogeneration and Services.
We did not have capital expenditures forDuring 2018 we obtained Ps. 3,577.6 million from our cogeneration and services segment for the year ended December 31, 2016, and do not have any capital expenditures budgeted for 2017.provided to CENAGAS.
International Trading
PMI and itsthe PMI subsidiaries conduct international commercial activities for our crude oil, refined and petrochemical products, with the exception of natural gas, which is marketed directly by our industrial transformation segment. The PMI subsidiaries’ main objectives are to assist in maximizing our profitability and optimizing our operations through the use of international trade, facilitating our link with the international markets and pursuing new business opportunities in marketing our products.products internationally. PMI and itsthe PMI subsidiaries manage the international sales of our crude oil and petroleum products and acquire in the international markets crude oil and those petroleum products that we import to satisfy domestic demand. Sales of our crude oil are carried out through PMI. Sales and purchases of crude oil and petroleum products in the international markets are carried out through P.M.I. Trading, Ltd., which also performsthird-party trading, transportation and risk management activities.
Exports and Imports
PMI purchases crude oil from our exploration and production segment and then sells it to PMI’s customers. PMI sold an average of 1.2 million1,184.1 thousand barrels of crude oil per day in 2016,2018, which represented 55.5%64.9% of our total crude oil production.
The following tables set forth the composition and average prices of our crude oil exports for the periods indicated.
Year ended December 31, | Year ended December 31, | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2012 | 2013 | 2014 | 2015 | 2016 | 2014 | 2015 | 2016 | 2017 | 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
(tbpd) | (%) | (tbpd) | (%) | (tbpd) | (%) | (tbpd) | (%) | (tbpd) | (%) | (tbpd) | (%) | (tbpd) | (%) | (tbpd) | (%) | (tbpd) | (%) | (tbpd) | (%) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Crude Oil Exports (by Volume) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Olmeca (API gravity of38°-39°) | 194 | 15 | 99 | 8 | 91 | 8 | 124 | 11 | 108 | 9 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Olmeca(1) (API gravity of38°-39°) | 91.2 | 8.0 | 124.2 | 10.6 | 108.0 | 9.0 | 18.9 | 1.6 | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Isthmus (API gravity of32°-33°) | 99 | 8 | 103 | 9 | 134 | 12 | 194 | 17 | 153 | 13 | 133.7 | 11.7 | 194.0 | 16.5 | 152.7 | 12.8 | 85.8 | 7.3 | 30.7 | 2.6 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Maya (API gravity of21°-22°) | 944 | 75 | 968 | 81 | 887 | 78 | 743 | 63 | 865 | 72 | 887.1 | 77.7 | 743.4 | 63.4 | 864.9 | 72.4 | 1,053.9 | 89.8 | 1,090.1 | 92.1 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Altamira (API gravity of15.0°-16.5°) | 19 | 2 | 20 | 2 | 27 | 2 | 28 | 2 | 23 | 2 | 27.2 | 2.4 | 27.7 | 2.4 | 23.6 | 2.0 | 15.3 | 1.3 | 19.9 | 1.7 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Talam (API gravity of-15.8º) | 3 | 0.3 | 83 | 7 | 45 | 4 | 3.0 | 0.3 | 83.1 | 7.1 | 45.2 | 3.8 | — | — | 43.5 | 3.7 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Total | 1,256 | 100 | % | 1,189 | 100 | % | 1,142 | 100 | % | 1,172 | 100 | % | 1,194 | 100 | 1,142.2 | 100.0 | 1,172.4 | 100.0 | 1,194.3 | 100.0 | 1,173.9 | 100.0 | 1,184.1 | 100.0 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Notes: | Numbers may not total due to rounding. |
tbpd = thousand barrels per day. |
API gravity refers to the specific gravity or density of liquid petroleum products, measured in degrees on the American Petroleum Institute (API) scale. On the API scale, oil with the lowest specific gravity has the highest API gravity. In addition, holding all other factors constant, the higher the API gravity, the greater the value of the crude oil. |
(1) | During 2018 we used Olmeca crude oil for processing in our refineries and did not export Olmeca crude oil. |
Source: | PMI operating statistics as of January 16, 2019. |
Year ended December 31, | ||||||||||||||||||||
2014 | 2015 | 2016 | 2017 | 2018 | ||||||||||||||||
(U.S. dollars per barrel) | ||||||||||||||||||||
Crude Oil Prices | ||||||||||||||||||||
Olmeca | U.S. $93.54 | U.S. $51.46 | U.S. $39.71 | U.S. $51.79 | U.S $— | |||||||||||||||
Isthmus | 93.39 | 49.28 | 37.72 | 50.75 | 64.54 | |||||||||||||||
Maya | 83.75 | 41.12 | 35.30 | 46.48 | 61.41 | |||||||||||||||
Altamira | 81.31 | 36.19 | 30.35 | 39.45 | 57.81 | |||||||||||||||
Talam | 36.74 | 36.40 | 28.44 | — | 58.91 | |||||||||||||||
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Weighted average realized price | U.S. $85.48 | U.S. $43.12 | U.S. $35.65 | U.S. $46.79 | U.S. $61.34 | |||||||||||||||
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Source: PMI operating statistics as of January 27, 2017.
Year ended December 31, | ||||||||||||||||||||
2012 | 2013 | 2014 | 2015 | 2016 | ||||||||||||||||
(U.S. dollars per barrel) | ||||||||||||||||||||
Crude Oil Prices | ||||||||||||||||||||
Olmeca | U.S.$ | 109.39 | U.S.$ | 107.92 | U.S.$ | 93.54 | U.S.$ | 51.46 | U.S.$ | 39.71 | ||||||||||
Isthmus | 107.28 | 104.69 | 93.39 | 49.28 | 37.72 | |||||||||||||||
Maya | 99.99 | 96.89 | 83.75 | 41.12 | 35.28 | |||||||||||||||
Altamira | 96.40 | 94.35 | 81.30 | 36.19 | 30.35 | |||||||||||||||
Talam | 36.74 | 36.40 | 28.26 | |||||||||||||||||
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Weighted average realized price | U.S. $ | 101.96 | U.S. $ | 98.44 | U.S. $ | 85.48 | U.S. $ | 43.12 | U.S. $ | 35.63 | ||||||||||
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Source: PMI operating statistics as of January 27, 2017.16, 2019.
Geographic Distribution of Export Sales
As of December 31, 2016,2018, PMI had 3430 customers in 1811 countries. Among these countries, the largest proportionIn 2018, 56.6% of our exports has consistently beencrude oil export sales were to customers in the United States Spain, India,and Canada, South Korea and Japan. Since 2009, the percentage of our crude oil export sales to the United States compared to our total crude oil export sales has declined, while the proportion of crude oil export sales to countries in Europe and Asia, particularly Spain and India, has increased. In 2016, 47.8% of our crude oil exports were to customers located in the United States, which represents an 11%a 17.6% decrease as compared to 2015. The decrease in our crude oil exports to the United States can be attributed mainly to the steady increase of domestic production of light and extra-light crude oil in the United States,2014. Since 2014, primarily as a result of shale discoveries and advances in technology that have made extraction of oil from shale rock commercially viable. In response to the increased availability of light crude oil in the U.S. Gulf of MexicoUnited States and other developing trends in international demand for imported crude oil, we have expanded the scope of itsour geographic distribution and renewedadapted our strategy to diversify and strengthen the presenceposition of Mexican crude oil in the international market. In January 2014, PMI began exporting Olmeca crude oil to European countries other than Spain. As part of our initiative to increase export sales of crude oil to East Asia, PMI also began exporting Isthmus and Maya crude oil to South Korea in January 2015 and continued to do so in 2016.
The following table sets forth our crude oil export sales by country for the five years ended December 31, 2016.
Crude Oil Exports byCountry
Percentage of Exports | ||||||||||||||||||||
2012 | 2013 | 2014 | 2015 | 2016 | ||||||||||||||||
United States | 76.2 | % | 72.1 | % | 69.4 | % | 58.8 | % | 47.8 | % | ||||||||||
Spain | 13.2 | 14.4 | 14.2 | 13.8 | 14.9 | |||||||||||||||
India | 6.0 | 8.2 | 7.0 | 9.1 | 10.4 | |||||||||||||||
Canada | 1.8 | 1.9 | 1.8 | 0.0 | 0.0 | |||||||||||||||
China | 0.8 | 1.6 | 1.2 | 1.3 | 1.7 | |||||||||||||||
Others | 2.0 | 1.8 | 6.3 | 16.9 | 25.3 | |||||||||||||||
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Total | 100.0 | % | 100.0 | % | 100.0 | % | 100 | % | 100 | % | ||||||||||
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Note: Numbers may not total due to rounding.
Source: PMI operating statistics as of January 27, 2017.
The following table sets forth the geographic distribution of PMI’s sales of crude oil exports for the five years ended December 31, 2016.2018. The table also presents the distribution of exports among PMI’s crude oil types for those years.
Composition and Geographic Distribution of Crude Oil Export Sales
Year ended December 31, | ||||||||||||||||||||||||||||||||||||||||
2012 | 2013 | 2014 | 2015 | 2016 | ||||||||||||||||||||||||||||||||||||
(tbpd) | (%) | (tbpd) | (%) | (tbpd) | (%) | (tbpd) | (%) | (tbpd) | (%) | |||||||||||||||||||||||||||||||
PMI Crude Oil Export Sales to: | ||||||||||||||||||||||||||||||||||||||||
United States and Canada | 980 | 78 | 879 | 74 | 813 | 71 | 690 | 59 | 570 | 48 | ||||||||||||||||||||||||||||||
Europe | 176 | 14 | 179 | 15 | 215 | 18 | 248 | 21 | 272 | 23 | ||||||||||||||||||||||||||||||
Far East | 85 | 7 | 116 | 10 | 100 | 9 | 219 | 19 | 318 | 26 | ||||||||||||||||||||||||||||||
Central and South America | 14 | 1 | 15 | 1 | 15 | 1 | 15 | 1 | 34 | 3 | ||||||||||||||||||||||||||||||
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Total | 1,256 | 100 | 1,189 | 100 | 1,142 | 100 | 1,172 | 100 | 1,194 | 100 | ||||||||||||||||||||||||||||||
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Olmeca (API gravity of 38°-39°) | ||||||||||||||||||||||||||||||||||||||||
United States and Canada | 184 | 15 | 90 | 8 | 35 | 3 | 40 | 4 | 4 | 0.3 | ||||||||||||||||||||||||||||||
Others | 9 | 1 | 8 | 1 | 56 | 5 | 84 | 7 | 104 | 9 | ||||||||||||||||||||||||||||||
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Total | 194 | 15 | 99 | 8 | 91 | 8 | 124 | 11 | 108 | 9 | ||||||||||||||||||||||||||||||
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Isthmus (API gravity of 32°-33°) | ||||||||||||||||||||||||||||||||||||||||
United States and Canada | 58 | 5 | 62 | 5 | 89 | 8 | 78 | 7 | 3 | 0.3 | ||||||||||||||||||||||||||||||
Others | 41 | 3 | 41 | 3 | 45 | 4 | 116 | 10 | 150 | 13 | ||||||||||||||||||||||||||||||
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Total | 99 | 8 | 103 | 9 | 134 | 12 | 194 | 17 | 153 | 13 | ||||||||||||||||||||||||||||||
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Maya (API gravity of 21°-22°) | ||||||||||||||||||||||||||||||||||||||||
United States and Canada | 719 | 57 | 707 | 59 | 662 | 58 | 513 | 44 | 540 | 45 | ||||||||||||||||||||||||||||||
Others | 224 | 18 | 260 | 22 | 225 | 20 | 230 | 20 | 325 | 27 | ||||||||||||||||||||||||||||||
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Total | 944 | 75 | 968 | 81 | 887 | 78 | 743 | 63 | 865 | 72 | ||||||||||||||||||||||||||||||
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Year ended December 31, | Year ended December 31, | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2012 | 2013 | 2014 | 2015 | 2016 | 2014 | 2015 | 2016 | 2017 | 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
(tbpd) | (%) | (tbpd) | (%) | (tbpd) | (%) | (tbpd) | (%) | (tbpd) | (%) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
PMI Crude Oil Export Sales to: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
United States and Canada | 812.8 | 71.2 | 689.6 | 58.8 | 570.3 | 47.7 | 617.2 | 52.6 | 669.8 | 56.6 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Europe | 214.6 | 18.8 | 248.3 | 21.2 | 272.2 | 22.8 | 219.1 | 18.7 | 199.1 | 16.8 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Asia | 100.1 | 8.8 | 219.2 | 18.7 | 318.3 | 26.6 | 317.2 | 27.0 | 311.4 | 26.3 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Central and South America | 14.7 | 1.3 | 15.4 | 1.3 | 33.6 | 2.8 | 20.4 | 1.7 | 3.8 | 0.3 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Total | 1,142.2 | 100 | 1,172.4 | 100 | 1,194.3 | 100 | 1,173.9 | 100 | 1,184 | 100 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Olmeca (API gravity of38°-39°) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
United States and Canada | 35.0 | 3.1 | 39.8 | 3.4 | 4.1 | 0.3 | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Others | 56.2 | 4.9 | 84.4 | 7.2 | 103.9 | 8.7 | 18.9 | 1.6 | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Total | 91.2 | 8.0 | 124.2 | 10.6 | 108.0 | 9.0 | 18.9 | 1.6 | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Isthmus (API gravity of32°-33°) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
United States and Canada | 88.8 | 7.8 | 78.1 | 6.7 | 3.2 | 0.3 | 4.7 | 0.4 | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Others | 44.9 | 3.9 | 115.9 | 9.9 | 149.5 | 12.5 | 81.1 | 6.9 | 30.7 | 2.6 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Total | 133.7 | 11.7 | 194.0 | 16.5 | 152. 7 | 12.8 | 85.8 | 7.3 | 30.7 | 2.6 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Maya (API gravity of21°-22°) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
United States and Canada | 662.3 | 58.0 | 513.2 | 43.8 | 539.9 | 45.2 | 597.2 | 50.9 | 624.1 | 52.7 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Others | 224.8 | 19.7 | 230.2 | 19.6 | 325.0 | 27.2 | 456.7 | 38.9 | 466.1 | 39.4 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Total | 887.1 | 77.7 | 743.4 | 63.4 | 864.9 | 72.4 | 1,053.9 | 89.8 | 1,090.1 | 92.1 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
(tbpd) | (%) | (tbpd) | (%) | (tbpd) | (%) | (tbpd) | (%) | (tbpd) | (%) |
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Altamira (API gravity of15.0°-16.5°) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
United States and Canada | 18 | 1 | 20 | 2 | 27 | 2 | 28 | 2 | 22 | 2 | 26.8 | 2.3 | 27.7 | 2.4 | 21.9 | 1.8 | 15.3 | 1.3 | 19.9 | 1.7 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Others | 1 | 1 | — | — | 0.4 | 0.4 | — | — | 2 | 0.2 | 0.4 | 0.04 | — | — | 1.8 | 0.1 | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Total | 19 | 2 | 20 | 2 | 27 | 2 | 28 | 2 | 24 | 2 | 27.2 | 2.4 | 27.7 | 2.4 | 23.62 | 1.8 | 15.3 | 1.3 | 19.9 | 1.7 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Talam (API gravity of 15.8°) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
United States and Canada | — | — | — | — | — | — | 31 | 3 | 1 | 0.1 | — | — | 30.7 | 2.6 | 1.3 | 0.1 | — | — | 25.8 | 2.2 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Others | — | — | — | — | 3 | 0.3 | 52 | 4 | 44 | 4 | 3.0 | 0.3 | 52.4 | 4.5 | 43.9 | 3.7 | — | — | 17.6 | 1.5 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Total | — | — | — | — | 3 | 0.3 | 83 | 7 | 45 | 4 | 3.0 | 0.3 | 83.1 | 7.1 | 45.17 | 3.8 | — | — | 43.5 | 3.7 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Notes: Numbers may not total due to rounding.
tbpd = thousand barrels per day.
API gravity refers to the specific gravity or density of liquid petroleum products, measured in degrees on the API scale. On the API scale, oil with the lowest specific gravity has the highest API gravity. In addition, holding all other factors constant, the higher the API gravity, the greater the value of the crude oil.
Source: PMI operating statistics as of January 27, 2017.16, 2019.
PMI sells a significant percentage of its crude oil under evergreen contracts, which can be terminated by either party pursuant to a three-monthphase-out clause. In addition, PMI enters into agreements with various international customers, including those located in the United States, Europe, India, China and Japan. PMI’s crude oil exports are sold on aFree On Board (FOB) basis.
In total, we exported 1.2 million1,184.1 thousand barrels of crude oil per day in 2016. In 2017,2018, and in 2019 we expect to export approximately 869993.0 thousand barrels of crude oil per day. We sell the crude oil produced by Pemex Exploration and Production under a variety of contractual arrangements. Of the 993.0 thousand barrels of crude oil per day we expect to export in 2019, we are contractually committed to deliver approximately 900.0 thousand barrels per day pursuant to existing supply commitments. We believe that our proved developed and proved undeveloped reserves will be sufficient to allow us to fulfill our supply commitments.
The following table sets forth the average volume of our exports and imports of crude oil, natural gas and petroleum products for the five years ended December 31, 2016.2018.
Volume of Exports and Imports
Year ended December 31, | 2016 vs. 2015 | |||||||||||||||||||||||
2012 | 2013 | 2014 | 2015 | 2016 | ||||||||||||||||||||
(in thousands of barrels per day, except as noted) | (%) | |||||||||||||||||||||||
Exports | ||||||||||||||||||||||||
Crude Oil: | ||||||||||||||||||||||||
Olmeca | 193.7 | 98.6 | 91.2 | 124.2 | 108.0 | (13.0 | ) | |||||||||||||||||
Isthmus | 99.4 | 102.7 | 133.7 | 194.0 | 152.7 | (21.3 | ) | |||||||||||||||||
Maya | 943.7 | 967.6 | 887.1 | 743.4 | 864.9 | 16.3 | ||||||||||||||||||
Altamira | 18.8 | 19.9 | 27.2 | 27.8 | 23.6 | (15.1 | ) | |||||||||||||||||
Talam | — | — | 3.0 | 83.1 | 45.2 | (45.6 | ) | |||||||||||||||||
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Total crude oil | 1,255.5 | 1,188.8 | 1,142.2 | 1,172.4 | 1,194.4 | 1.9 | ||||||||||||||||||
Natural gas(1) | 0.9 | 3.1 | 4.1 | 2.8 | 2.2 | (21.4 | ) | |||||||||||||||||
Gasoline | 69.4 | 66.8 | 66.0 | 62.9 | 52.7 | (16.2 | ) | |||||||||||||||||
Other petroleum products | 83.5 | 97.7 | 135.3 | 130.8 | 132.8 | 1.5 | ||||||||||||||||||
Petrochemical products(2)(3) | 1,344.7 | 1,336.9 | 488.0 | 333.8 | 124.7 | (62.6 | ) | |||||||||||||||||
Imports | ||||||||||||||||||||||||
Natural gas(1) | 1,089.3 | 1,175.4 | 1,250.4 | 1,415.8 | 1,933.9 | 36.6 | ||||||||||||||||||
Gasoline | 396.3 | 375.2 | 389.7 | 440.1 | 510.8 | 16.1 | ||||||||||||||||||
Other petroleum products and LPG(1)(4) | 260.2 | 220.5 | 243.4 | 299.8 | 288.7 | (3.7 | ) | |||||||||||||||||
Petrochemical products(2)(5) | 445.1 | 287.8 | 332.7 | 107.3 | 278.2 | 159.3 |
Exports Crude Oil: Olmeca Isthmus Maya Altamira Talam Total crude oil Natural gas(1) Gasoline Other petroleum products Petrochemical products(2)(3) Imports Natural gas(1) Gasoline Other petroleum products and LPG(1)(5) Petrochemical products(2)(4) Year ended December 31, 2018 2014 2015 2016 2017 2018 vs. 2017 (in thousands of barrels per day, except as noted) (%) 91.2 124.2 108.0 18.9 — (100.0) 133.7 194.0 152.7 85.8 30.7 (64.2) 887.1 743.4 864.9 1,053.9 1,090.1 (3.4) 27.2 27.7 23.6 15.3 19.9 30.1 3.0 83.1 45.2 — 43.5 100.0 1,142.2 1,172.4 1,194.3 1,173.9 1,184.1 0.9 4.1 2.7 2.2 1.7 1.4 (17.6) 66.0 62.9 52.7 45.0 37.7 (16.2) 133.3 130.8 132.9 113.1 95.1 (15.9) 406.1 333.8 124.7 60.5 57.8 (4.5) 1,357.8 1,415.8 1,933.9 1,766.0 1,316.5 (25.5) 389.7 440.1 510.8 582.5 599.9 3.0 248.7 299.7 289.6 353.6 376.7 6.5 85.3 107.3 278.2 332.8 831.8 149.9
Note:
Note: | Numbers subject to adjustment because crude oil exports may be adjusted to reflect the percentage of water in each shipment. |
(1) | Numbers expressed in millions of cubic feet per day. |
(2) | Thousands of metric tons. |
(3) | Includes propylene. |
(4) |
Includes isobutane, butane andN-butane. |
Includes liquefied natural gas imported through the Manzanillo terminal. PMI operating statistics as of January 16, 2019, and Pemex Industrial Transformation.Source: PMI operating statistics as of January 27, 2017,(5) Source:
Crude oil exports increased by 1.9%0.9% in 2016,2018, from 1,172.41,173.9 thousand barrels per day in 20152017 to 1,194.41,184.1 thousand barrels per day in 2016,2018, mainly due to a 16.3%an increase of exports of Maya7.9% of heavy crude oil (Maya, Talam and Altamira crudes), which was partially offset by a 21.3%64.2% decrease in exports of Isthmus crude oil and a 13.0% decrease of 100% in Olmeca crude oil export during 2016.2018. We exported no Olmeca crude oil in 2018 due to a lack of availability of Olmeca crude oil for export.
NaturalIn 2018, we imported 3.8 thousand barrels per day of light crude oil equivalent to U.S. $93.8 million, for processing in the National Refining System, which represented the first time we imported crude oil.
We import dry gas, imports increaseda variety of natural gas, to satisfy shortfalls in our production and to meet demand in areas of northern Mexico that, due to their distance from the fields, can be supplied more efficiently by 36.6% in 2016,importing natural gas from 1,415.8the United States. Domestic sales of dry gas decreased by 21.3%, as compared to 2017, from 2,623.0 million cubic feet per day in 20152017 to 1,933.92,064.3 million cubic feet per day in 2016, which includes2018, mainly due to competition from third-party supply in the national market. Natural gas imports of liquefied natural gas through Manzanillo. The decreased availability of wet gas and natural gasby 25.5% in 2018, from our exploration and production segment’s fields made it necessary to increase natural gas imports. We exported 2.2 million cubic feet of natural gas per day in 2016, a decrease of 21.4% as compared to natural gas exports in 2015 of 2.81,766.0 million cubic feet per day primarily as a result of a decrease in the temporary surplus2017 to 1,316.5 million cubic feet per day in 2018. The total amount of natural gas that was originally designated for domestic consumption and subsequently used for export.
In 2016, exports of petroleum products decreased by 8.1%, from 193.8 thousand barrelsimported per day in 2015 to 185.5 thousand barrels2018 includes 17.4 million cubic feet per day in 2016, mainly due to a 16.2%of liquefied natural gas imported through the Manzanillo terminal. This decrease in the volume of exports of gasoline and an 8.6% decrease in the volume of sales of fuel oil. Imports of petroleum products increased by 8.1% in 2016, from 739.8 thousand barrels per day in 2015 to 799.5 thousand barrels per day in 2016,natural gas imports was primarily due to an 18.6% increasedecreased demand in the domestic demand for gasoline and a 29.3% increase in domestic demand for diesel.market due to competition from third party suppliers.
P.M.I. Trading Ltd. sells refined and petrochemical products on anFOB,Delivered ExEx-ship-ship andCost and Freight basis and buys refined and petrochemical products and crude oil on anFOB,Cost and Freight andDelivered Ex-ship, orDelivery at FrontierandDelivered at Place basis.
The following table sets forth the value of exports and imports of crude oil, natural gas and petroleum products for the five years ended December 31, 2016.2018.
Value of Exports and Imports(1)
Year ended December 31, | 2016 vs. 2015 | |||||||||||||||||||||||
2012 | 2013 | 2014 | 2015 | 2016 | ||||||||||||||||||||
(in millions of U.S. dollars) | (%) | |||||||||||||||||||||||
Exports | ||||||||||||||||||||||||
Olmeca | U.S.$ | 7,753.7 | U.S.$ | 3,883.9 | U.S.$ | 3,114.7 | U.S.$ | 2,333.1 | U.S.$ | 1,569.4 | (32.7 | ) | ||||||||||||
Isthmus | 3,904.4 | 3,925.7 | 4,557.1 | 3,489.0 | 2,107.6 | (39.6 | ) | |||||||||||||||||
Altamira | 661.6 | 683.7 | 806.8 | 366.8 | 262.7 | (28.4 | ) | |||||||||||||||||
Maya | 34,532.7 | 34,217.9 | 27,119.4 | 11,158.8 | 11,168.3 | 0.1 | ||||||||||||||||||
Talam | — | — | 40.4 | 1,103.6 | 467.2 | (57.7 | ) | |||||||||||||||||
Total crude oil(2) | U.S.$ | 46,852.3 | U.S.$ | 42,711.3 | U.S.$ | 35,638.4 | U.S.$ | 18,451.2 | U.S.$ | 15,575.2 | (15.6 | ) | ||||||||||||
Natural gas | 0.6 | 2.8 | 4.8 | 1.6 | 1.1 | (31.3 | ) | |||||||||||||||||
Gasoline | 2,257.4 | 2,162.5 | 1,985.9 | 1,007.4 | 733.2 | (27.2 | ) | |||||||||||||||||
Other petroleum products | 3,280.6 | 3,654.7 | 3,885.8 | 1,984.8 | 1,161.9 | (41.4 | ) | |||||||||||||||||
Petrochemical products | 362.9 | 234.0 | 166.9 | 63.5 | 20.5 | (67.7 | ) | |||||||||||||||||
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Total natural gas, petroleum and petrochemical products | U.S.$ | 5,901.5 | U.S.$ | 6,054.0 | U.S.$ | 6,040.3 | U.S.$ | 3,057.3 | U.S.$ | 1,916.7 | (37.3 | ) | ||||||||||||
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Total exports | U.S.$ | 52,753.8 | U.S.$ | 48,765.3 | U.S.$ | 41,681.8 | U.S.$ | 21,508.5 | U.S.$ | 17,491.9 | (18.7 | ) | ||||||||||||
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Year ended December 31, | 2016 vs. 2015 | Year ended December 31, | ||||||||||||||||||||||||||||||||||||||||||||||
2012 | 2013 | 2014 | 2015 | 2016 | 2014 | 2015 | 2016 | 2017 | 2018 | 2018 vs. 2017 | ||||||||||||||||||||||||||||||||||||||
(in millions of U.S. dollars) | (%) | |||||||||||||||||||||||||||||||||||||||||||||||
Exports | ||||||||||||||||||||||||||||||||||||||||||||||||
Olmeca | U.S. $3,114.7 | U.S. $2,333.1 | U.S. $1,569.3 | U.S. $358.1 | U.S.$ — | (100.0) | ||||||||||||||||||||||||||||||||||||||||||
Isthmus | 4,557.1 | 3,489.0 | 2,107.6 | 1,588.7 | 722.2 | (54.5) | ||||||||||||||||||||||||||||||||||||||||||
Altamira | 806.7 | 366.6 | 262.4 | 219.8 | 419.6 | 90.9 | ||||||||||||||||||||||||||||||||||||||||||
Maya | 27,119.4 | 11,158.9 | 11,172.6 | 17,880.6 | 24,435.7 | 36.7 | ||||||||||||||||||||||||||||||||||||||||||
Talam | 40.4 | 1,103.6 | 470.1 | — | 934.6 | 100.0 | ||||||||||||||||||||||||||||||||||||||||||
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Total crude oil(2) | U.S. $35,638.3 | U.S. $18,451.2 | U.S. $15,582.0 | U.S$20,047.2 | U.S. $26,512.1 | 32.2 | ||||||||||||||||||||||||||||||||||||||||||
Natural gas | 4.8 | 1.6 | 1.1 | 1.3 | 1.0 | (23.1) | ||||||||||||||||||||||||||||||||||||||||||
Gasoline | 1,985.9 | 1,007.4 | 733.2 | 746.9 | 813.9 | 9.0 | ||||||||||||||||||||||||||||||||||||||||||
Other petroleum products | 3,425.7 | 1,580.2 | 1,161.9 | 1,655.6 | 1,938.1 | 17.1 | ||||||||||||||||||||||||||||||||||||||||||
Petrochemical products | 132.4 | 63.5 | 20.5 | 37.8 | 39.7 | 5.0 | ||||||||||||||||||||||||||||||||||||||||||
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Total natural gas, petroleum and petrochemical products | U.S. $5,548.8 | U.S. $2,652.7 | U.S. $ 1,916.7 | U.S. $2,441.5 | U.S. $ 2,792.8 | 14.4 | ||||||||||||||||||||||||||||||||||||||||||
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Total exports | U.S. $41,187.1 | U.S. $21,103.9 | U.S. $17,498.7 | U.S. $22,488.8 | U.S. $ 29,304.8 | 30.3 | ||||||||||||||||||||||||||||||||||||||||||
(in millions of U.S. dollars) | (%) |
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Imports | ||||||||||||||||||||||||||||||||||||||||||||||||
Natural gas | U.S.$ | 1,216.2 | U.S.$ | 2,495.3 | U.S.$ | 2,819.3 | U.S.$ | 1,673.6 | U.S.$ | 2,097.9 | 25.4 | U.S. $2,819.3 | U.S. $1,673.7 | U.S. $2,097.9 | U.S. $2,484.1 | U.S. $ 2,043.2 | (17.7) | |||||||||||||||||||||||||||||||
Gasoline | 19,144.0 | 17,485.9 | 16,691.2 | 12,805.2 | 11,994.8 | (6.3 | ) | 16,691.2 | 12,805.2 | 11,994.8 | 15,380.1 | 18,867.5 | 22.7 | |||||||||||||||||||||||||||||||||||
Other petroleum products and LPG | 10,486.9 | 8,220.3 | 8,775.8 | 6,178.6 | 5,689.5 | (7.9 | ) | 8,738.7 | 6,178.6 | 5,699.9 | 8,446.3 | 11,103.3 | 31.5 | |||||||||||||||||||||||||||||||||||
Petrochemical products | 526.9 | 322.3 | 373.3 | 196.3 | 85.5 | (56.4 | ) | 168.1 | 196.3 | 85.5 | 122.5 | 588.8 | 380.7 | |||||||||||||||||||||||||||||||||||
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Total imports | U.S.$ | 31,374.0 | U.S.$ | 28,523.8 | U.S.$ | 28,659.6 | U.S.$ | 20,853.7 | U.S.$ | 19,867.7 | (4.7 | ) | U.S. $28,417.3 | U.S. $20,853.8 | U.S. $19,878.1 | U.S. $26,433.0 | U.S. $ 32,602.8 | 23.3 | ||||||||||||||||||||||||||||||
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Net exports (imports) | U.S.$ | 21,379.8 | U.S.$ | 20,241.5 | U.S.$ | 13,022.2 | U.S.$ | 654.8 | U.S.$ | (2,375.8 | ) | (2.6 | ) | U.S. $12,769.8 | U.S. $250.1 | U.S. $(2,379.4) | U.S. $(3,944.2) | U.S. $(3,297.9) | (16.4) | |||||||||||||||||||||||||||||
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Note: |
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(1) | Does not include crude oil, refined products and petrochemicals purchased by P.M.I. Trading, |
(2) | Crude oil exports are subject to adjustment to reflect the percentage of water in each shipment. |
Source: | PMI operating statistics as of January 16, 2019, which are based on information in bills of lading, and Pemex Industrial Transformation. |
Source: PMI operating statistics as of January 27, 2017, which are based on information in bills of lading, and Pemex Industrial Transformation.
ImportsIn 2018, imports of natural gas increaseddecreased in value by 25.4% during 2016,17.7% as compared to 2017, primarily as a result of an increase in domestic demand for natural gas and an increase in natural gas prices. Imports of gasoline decreased in value by 6.3%, despite a 16.1% increase in volume of domestic gasoline sales, due to a decrease in the volume of natural gas imports. Imports of gasoline increased in value by 22.7% over the same period due to an increase in the volume of gasoline imports resulting from lower domestic production of gasoline and a higher average sales price of gasoline.gasoline as compared to 2017.
The following table describes the composition of our exports and imports of selected refined products in 2014, 2015 and 2016.for the three years ended December 31, 2018.
Exports and Imports of Selected Petroleum Products
Year ended December 31, | Year ended December 31, | |||||||||||||||||||||||||||||||||||||||||||||||
2014 | 2015 | 2016 | 2016 | 2017 | 2018 | |||||||||||||||||||||||||||||||||||||||||||
(tbpd) | (%) | (tbpd) | (%) | (tbpd) | (%) | (tbpd) | (%) | (tbpd) | (%) | (tbpd) | (%) | |||||||||||||||||||||||||||||||||||||
Exports | ||||||||||||||||||||||||||||||||||||||||||||||||
Liquefied petroleum gas(2) | 1.3 | 0.7 | — | — | 4.5 | 2.4 | ||||||||||||||||||||||||||||||||||||||||||
Liquefied petroleum gas(1) | 4.5 | 2.4 | 5.7 | 3.6 | 1.2 | 0.9 | ||||||||||||||||||||||||||||||||||||||||||
Fuel oil | 123.6 | 63.9 | 123.9 | 64.0 | 113.3 | 61.1 | 113.3 | 61.0 | 103.5 | 65.5 | 89.8 | 67.6 | ||||||||||||||||||||||||||||||||||||
Gasoline | 66.0 | 34.1 | 62.9 | 32.5 | 52.7 | 28.4 | 52.7 | 28.4 | 45.0 | 28.4 | 37.7 | 28.4 | ||||||||||||||||||||||||||||||||||||
Others | 3.2 | 1.3 | 6.9 | 3.6 | 15.0 | 8.1 | 15.1 | 8.2 | 3.9 | 2.5 | 4.0 | 3.0 | ||||||||||||||||||||||||||||||||||||
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Total | 193.5 | 100.0 | % | 193.7 | 100.0 | % | 185.5 | 100.0 | % | 185.5 | 100.0 | 158.0 | 100.0 | 132.8 | 100 | |||||||||||||||||||||||||||||||||
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Imports | ||||||||||||||||||||||||||||||||||||||||||||||||
Gasoline(3) | 389.7 | 57.8 | 440.1 | 59.5 | 510.8 | 63.9 | 510.8 | 63.8 | 582.5 | 62.2 | 599.9 | 61.4 | ||||||||||||||||||||||||||||||||||||
Fuel oil | 13.0 | 2.0 | 17.0 | 2.3 | 10.7 | 1.3 | 10.7 | 1.3 | 24.4 | 2.6 | 16.5 | 1.7 | ||||||||||||||||||||||||||||||||||||
Liquefied petroleum gas(2) | 84.6 | 13.2 | 105.2 | 14.2 | 50.6 | 6.3 | 50.6 | 6.3 | 42.6 | 4.5 | 61.8 | 6.3 | ||||||||||||||||||||||||||||||||||||
Diesel | 132.9 | 20.8 | 145.3 | 19.6 | 187.8 | 23.5 | 187.8 | 23.5 | 237.5 | 25.4 | 238.8 | 24.5 | ||||||||||||||||||||||||||||||||||||
Others | 39.7 | 6.2 | 32.4 | 4.4 | 39.6 | 5.0 | 40.4 | 5.1 | 49.1 | 5.2 | 59.6 | 6.1 | ||||||||||||||||||||||||||||||||||||
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Total | 633.1 | 100.0 | % | 739.8 | 100.0 | % | 799.5 | 100.0 | % | 800.4 | 100.0 | 936.2 | 100.0 | 976.7 | 100 | |||||||||||||||||||||||||||||||||
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Notes: | Numbers may not total due to rounding. |
| tbpd = thousand barrels per day. |
(1) | Includes |
(2) | Includes |
(3) | Includes |
Source: Pemex BDI.
In 2018, exports of petroleum products decreased by 15.9%, from 158.0 thousand barrels per day in 2017 to 132.8 thousand barrels per day in 2018, mainly due to decreases in the export volumes of fuel oil and natural gas of 13.2% and 16.2%, respectively. Imports of petroleum products increased by 4.3% in 2018, from 936.2 thousand barrels per day in 2017 to 976.7 thousand barrels per day in 2018, primarily due to a decrease in domestic production of petroleum products.
Exports of petroleum products decreasedincreased in value by 36.7%14.6% in 2016,2018, primarily due to a 33.4% decrease34.3% increase in salesthe average price of fuel oil and decreasesincreases in the average prices of other petroleum products. In 2016,2018, imports of petroleum products decreasedincreased in value, by 7.9%25.8%, despite an 8.1%primarily due to a 4.4% increase in volume primarily due to increasedof imports caused by lower domestic demand for regular gasoline which decreasedproduction and an increase in the average price of gasoline as compared to prior years.the previous year. Our net imports of petroleum products for 20162018 totaled U.S. $3,794.4$3,297.9 million, which represents a 19.1% increase16.4% decrease from our net imports of petroleum products of U.S. $3,186.4$3,944.2 million in 2015.
For the three years ended December 31, 2016, our exports and imports of selected petrochemicals were as follows:
Exports and Imports of Selected Petrochemicals
Year ended December 31, | ||||||||||||||||||||||||
2014 | 2015 | 2016 | ||||||||||||||||||||||
(tmt) | (%) | (tmt) | (%) | (tmt) | (%) | |||||||||||||||||||
Exports(1) | ||||||||||||||||||||||||
Sulfur | 335.6 | 68.8 | 270.6 | 81.1 | 86.5 | 69.4 | ||||||||||||||||||
Butadien | 41.8 | 8.6 | 41.1 | 12.3 | 35.9 | 28.8 | ||||||||||||||||||
Ethylene | 15.6 | 3.2 | 1.5 | 0.4 | — | — | ||||||||||||||||||
Polyethylenes | 23.9 | 4.9 | 11.0 | 3.3 | 1.7 | 1.3 | ||||||||||||||||||
Others | 71.1 | 14.6 | 9.6 | 2.9 | 0.6 | 1.3 | ||||||||||||||||||
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Total | 488.0 | 100.0 | % | 333.8 | 100.0 | % | 124.7 | 100.0 | % | |||||||||||||||
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Imports(2) | ||||||||||||||||||||||||
Ammonia | — | — | 33.0 | 30.7 | 234.9 | 84.4 | ||||||||||||||||||
Methanol | 50.1 | 15.1 | 30.0 | 23.3 | 43.3 | 15.6 | ||||||||||||||||||
Isobutane-butane-hexane-1 | 228.7 | 68.7 | — | — | — | — | ||||||||||||||||||
Xylenes | 3.0 | 0.9 | 3.0 | 2.8 | — | — | ||||||||||||||||||
Toluene | 10.5 | 3.2 | 25.0 | 23.3 | — | — | ||||||||||||||||||
Others | 40.4 | 12.1 | 21.3 | 19.8 | — | — | ||||||||||||||||||
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Total | 332.7 | 100.0 | % | 107.3 | 100. | % | 278.2 | 100.0 | % | |||||||||||||||
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Source: Pemex BDl.
In 2016, our exports of petrochemical products decreased by 209.9 thousand metric tons, from 333.8 thousand metric tons in 2015 to 124.7 thousand metric tons in 2016. Our imports of petrochemical products increased by 170.9 thousand metric tons, from 107.3 thousand metric tons in 2015 to 278.2 thousand metric tons in 2016. Petrochemical exports decreased in 2016, mainly due a 68.0% decrease in sales of sulfur and 9.4% decrease in sales of polyethylenes. Imports of petrochemical products increased in 2016, primarily due to higher demand for methanol.
Supply Commitments
We sell crude oil through a variety of contracts, some of which specify the delivery of a fixed and determinable quantity of crude oil. As of the date of this report, we are party to the following long-term crude oil supply agreements:
An agreement executed on May 1, 1999, among Pecten Trading Company, which is a trading subsidiary of Shell Oil Company, and P.M.I. Norteamérica, S.A. de C.V., to supply the Deer Park refinery joint venture with a total of approximately 200 thousand barrels per day of Maya crude oil.
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We expect to fulfill the majority of these supply commitments with both proved developed and proved undeveloped reserves.
In addition to these agreements, PMI has automatic renewal contracts and occasional contracts with many other customers around the world, including the United States, Europe, India, China, South Korea and Japan. In total, we exported 1,194 thousand barrels per day of crude oil in 2016. During 2017, we expect to export approximately 869 thousand barrels per day of crude oil.
The Secretary of Energy has entered into certain agreements to reduce or increase crude oil exports. See “Item 4—Information on the Company—Trade Regulation and Export Agreements” below in this Item 4.
Hedging Operations
P.M.I. Trading Ltd. engages in hedging operations to cover its price exposure in the trading of petroleum products. The internal policies and procedures of P.M.I. Trading Ltd. establish: (1) that DFIs are used exclusively to mitigate the volatility of oil and gas prices; (2) limits on the maximum amount of capital at risk and on the daily and accumulated annual losses for each business unit; and (3) the segregation ofrisk-taking and
risk measurement. Capital at risk is calculated on a daily basis in order to compare the actual figures with the aforementioned limit. P.M.I. Trading Ltd. has a risk management subcommittee that reviewssupervises risk and hedging operations and meets on a quarterly basis.operations. See “Item 11—Quantitative and Qualitative Disclosures about Market Risk—Changes in Exposure to Main Risks—Hydrocarbon Price Risk.”
Gas Stations in the United States
On December 3,Between late 2015 and early 2016, we announced our initiative to openopened five gas stations in the United States by opening five gas stationsHouston, Texas that will beare owned and operated by franchiseesfranchisees. In 2018, we opened four additional gas stations, three of which are located in Houston,California and one of which is located in Texas. This is part of our strategy to expand our operations to the United States in order to fulfill the energy reform mandate to generate economic value in international markets.States. Further, it will allowhas allowed us to measure the impact of our brand against others and identify business opportunities abroad.abroad and to generate institutional knowledge about operating in a competitive environment in the retail business. The gas stations’ fuel supply is derived from the United States wholesale market and selling prices are subject to local market conditions. As of December 31, 2018, we have a presence in the dateTexas and California markets with a combined number of this report, all fivenine locations. In 2018, we saw an increase in fuel consumption of these gas stations have commenced operations.42% in our United States locations as compared to 2017.
PEMEX Corporate Matters
In addition to the operating activities that we undertake through the activities of our subsidiary entities and subsidiary companies, we have certain centralized corporate operations that coordinate general labor, safety, insurance and legal matters.
Industrial Safety and Environmental Protection
Our Corporate Office of Planning, Coordination and Performance is responsible for planning, conducting and coordinating programs to:
foster a company culture of safety and environmental protection;
improve the safety of our workers and facilities;
reduce risks to residents of the areas surrounding our facilities; and
reduce greenhouse gas emissions and identify the risks associated with climate change in Mexico in order to develop strategies to minimize the impact of climate change on our operations.operations; and
strengthen efforts in our operations with partners, contractors, subcontractors, suppliers and service providers.
We intend to further develop industrial safety and environmental programs for each subsidiary entity. The environmental and safety division of each subsidiary entity coordinates closely with the Corporate Office of Planning, Coordination and Performance.Performance, in order to strenghten our sustained and continuous improvement.
Insurance
We maintain a comprehensive property and general liability insurance program for onshore and offshore properties and liabilities. All onshore properties, such as refineries, processing plants, pipelines and storage facilities are covered, as are all of our offshore assets, such as drilling platforms, rigs, gas gathering systems, maritime terminals and production facilities.
Our insurance covers risks of sudden and accidental physical damage to or destruction of our properties, as well as risk of sudden and accidental physical loss, including as a consequence of purposeful terrorist acts. This insurance also provides coverage for the contents of pipelines and storage facilities, and any of our liabilities arising from such acts. Our insurance also covers extraordinary costs related to the operation of offshore wells, such as control andre-drilling costs, evacuation expenses and liability costs associated with spills. We also maintain protection and indemnity insurance for our full marine fleet, in addition to life insurance, automobile and heavy equipment insurance, cargo and marine hull insurance, as well as insurance for deep water drilling activities and onshore and offshore construction risks.on operating facilities.
In accordance with Mexican law, we have entered into all of our insurance contracts with Mexican insurance carriers. These policies have limits of U.S. $1.8 billion for onshore property, U.S. $1.3$1.9 billion for offshore property, U.S. $0.3 billion for extraordinary costs related to the operation of offshore wells, U.S.
$1.0 $1.0 billion formarine-related liabilities, U.S. $1.1 billion for onshore and offshore liabilities, U.S. $0.5 billion for offshore terrorist acts and U.S. $0.5 billion for onshore terrorist acts. Limitsacts.Limits of insurance policies purchased for each category of risk are determined using professional risk management assessment surveys conducted by international companies on an annual basis and the market capacity available per risk, and must be in compliance with local regulations enacted following the energy reform. In addition, in compliance with the regulations enacted in June of 2016 by the National Agency for Industrial Safety and Environmental Protection of the Hydrocarbons Sector (ASEA), we maintain insurance coverage with respect to third party liability, liability for environmental damage and control of well, works or drilling activities and extraction of hydrocarbons, the treatment and refining of crude oil and the processing of natural gas. We have also ensured that we maintain insurance coverage in connection with our strategic alliances and other joint arrangements.
Since June 2003, we have not maintained business interruption insurance, which in the past compensated us for loss of revenues resulting from damages to our facilities. We have discontinued such insurance based on the following factors: (1) the existence of mitigating factors across all of our facilities, (2) the nature and operation of our facilities, such as the ability of any of our six refineries to compensate for the loss of one refinery and the physical separation of plants within the refineries, and (3) the excess processing capacity available across our different lines of business,vis-à-vis the restricted coverage available in the international reinsurance markets. These factors led us to conclude that the benefits of this type of coverage were outweighed by the costs. Instead, we purchaseadad-hoc-hoc business interruption mitigation insurance coverage, which compensates us for the additional expenses necessary to recover our production capabilities in the shortest time possible.
During 20162018 we continued to engage in deep water exploratory and drilling activities that were covered by our existing insurance program. Inprogram.In August 2012, we purchased a policy to increase the coverage available for potential property damage,third-party liability and control of well risks related to these activities. Under this policy, we maintain coverage for each deep water well drilled, and the limits are determined based on the risk profile of the corresponding well. This policy has a limit of U.S. $3.3 billion, including U.S. $1.3 billion for control of well risks, U.S. $1.1 billion for casualty and U.S. $0.9 billion for property damage. This policy also contemplates additional coverage for environmental liabilities and remediation activities relating to deep water exploration and drilling.
All of our insurance policies are in turn reinsured through Kot Insurance Company, AG (which we refer to as Kot AG). Kot AG is a wholly owned subsidiary company that was originally formed in 1993 under the laws of Bermuda as Kot Insurance Company, Ltd. and was subsequently organized under the laws of Switzerland in 2004. Kot AG is used as a risk management tool to structure and distribute risks across the international reinsurance markets. The purpose of Kot AG is to reinsure policies held through our local insurance carriers and to maintain control over the cost and quality of the insurance covering our risks. Kot AG reinsures over 95%80% of its reinsurance policies with unaffiliatedthird-party reinsurers. Kot AG carefully monitors the financial performance of its reinsurers and actively manages counterparty credit risk across its reinsurance portfolio to ensure its own financial stability and maintain its creditworthiness. Kot AG maintains solid capitalization and solvency margins consistent with guidelines provided by Swiss insurance authorities and regulations. As of December 31, 2016,2018, Kot AG’s net risk retention is capped at U.S. $180$257 million of which U.S. $150 million corresponds to property and liabilities, and is spread across different reinsurance coveragecoverages to mitigate potential aggregation factors.
Investment in Repsol
As of December 31, 2016, we owned a total of 22,221,893 shares of Repsol, S.A. (formerly known as Repsol YPF, S.A., and which we refer to as Repsol), which represents approximately 1.5% of Repsol’s total shares. We recorded the 22,221,893 Repsol shares that we hold as“available-for-sale-non-current asset” investments and valued them, as of December 31, 2016, at Ps. 6,463.1 million. As of December 31, 2015, our investment in 20,724,331 shares of Repsol, approximately 1.5% of Repsol’s total shares, was valued at Ps. 3,944.7 million. As described in Note 10 to our consolidated financial statements, we recorded the effect of the valuation of the investment at fair value as a loss of Ps. 3,206.3 million and a profit of Ps. 207,816 in the consolidated statements of changes in equity (deficit) for the years ended December 31, 2015 and 2016, respectively. See Note 10 to our consolidated financial statements included herein.
On August 4, 2015, P.M.I. Holdings, B.V. obtained a loan for U.S. $250.0 million, which bears interest at a rate of 1.79% and is collateralized by all of our Repsol shares. This loan is due to mature in 2018.
Ethics Committee
Our Ethics Committee consists of members from our management team, with the head of ourthe Institutional Internal Control Unit at Petróleos Mexicanos serving as its chairman. Among other duties, the Ethics Committee is responsible for regulating and promoting the enforcement of our code of ethics and our code of conduct, as well as promoting corporate strategies that are designed to foster a culture of ethics and integrity. See “Item 16B—Code of Ethics” for more information regarding our code of ethics.
Our Ethics Committee is primarily responsible for:
promoting awareness and use of our code of ethics and code of conduct, including through online training available for our employees, in order to improve our culture of ethics;
establishing procedures that implement the principles found in our code of ethics in order to increase compliance and to detect behavior that adversely affects our activities;
analyzing and giving instructions to the appropriate areas on possible violations to our code of ethics and code of conduct that are reported through the Ethics Line; and
working with the Liabilities Unit ofat Petróleos Mexicanos and our Internal Auditing Area to exchange information regarding violations of our code of ethics and our code of conduct.
See “Item 16B—Code of Ethics” for more information regarding our code of ethics.
Collaboration and Other Agreements
On April 10, 2014, Petróleos Mexicanos signed a memorandum of understanding with TOTAL, a French company, to establish a framework for cooperation in the exchange of experience, knowledge and best practices related to upstream activities and scientific, administrative and technical matters, as well as the development of a sustainable energy sector.
On April 10, 2014, Petróleos Mexicanos signed a memorandum of understanding with GDF Suez, a French company, to establish terms for technical cooperation and the exchange of knowledge and experience related to energy efficiency, water treatment and natural gas projects, among others.
On September 25 and 26, 2014 at the World National Oil Companies Congress, Petróleos Mexicanos signed a memorandum of understanding with each of: (1) Petronas and YPF SA, (2) BHP Billiton and (3) Oil and Natural Gas Corporation Limited, through which the parties indicated their intent to analyze business opportunities in deep water, mature fields and heavy and extra-heavy crude oil, assess natural gas infrastructure and exchange best practices for sustainable development, environmental protection and exploration and production activities.
On October 2,27, 2014, Petróleos Mexicanos and Exxon MobiltheSecretaria de Agricultura, Ganadería, Desarrollo Rural, Pesca y Alimentación (SAGARPA) signed a memorandum of understanding with the aim of identifying business opportunities in exploration, production and industrial transformation processes with a focus on sustainable developmentcollaboration agreement to provide community and environmental stewardship, as well as exchanging best practices forsupport to communities within the developmentzones of human resources and industrial safety.
On October 17, 2014, Petróleos Mexicanos and Pacific Rubiales signed a memoranduminfluence of understanding to identify opportunities forthe oil industries. This collaboration agreement expired in exploration and production activities, hydrocarbons transportation, electricity generation and the exchange of best practices for industrial safety training andhealth-at-work initiatives.
On October 26, 2014, Petróleos Mexicanos and Chevron signed a memorandum of understanding with the aim of establishing opportunities for cooperation in mutually beneficial projects related to deep water, heavy crude oil and the revitalization of mature fields, among other things. This memorandum of understanding also lays the foundation for collaboration in connection with natural gas production, refining and fuel distribution and carbon-dioxide emissions reduction.
On October 29, 2014, Petróleos Mexicanos, through PMI, and Kuwait Foreign Petroleum Exploration Company signed a memorandum of understanding to share technical and commercial information for the evaluation and development of joint business opportunities in oil and gas exploration and production, both in Mexico and abroad.
On October 30, 2014, Petróleos Mexicanos and Eni S.p.A., an Italian oil and gas company, signed a memorandum of understanding to identify opportunities for collaboration in exploration and refining activities, natural gas and petrochemical production, technological development, emissions reduction, as well as the exchange of best practices for the development of human capital.
On November 13, 2014, Petróleos Mexicanos and CNOOC, a Chinese state-owned oil and gas company, the China Development Bank and the Industrial and Commercial Bank of China signed memoranda of understanding which intend to, among other things, encourage cooperation among the parties with respect to technical, human resources and financial matters.
On December 4, 2014, Petróleos Mexicanos and Reliance Industries Limited, an Indian oil and gas company, signed a memorandum of understanding to collaborate in the development of new technologies and human resources. This memorandum of understanding also lays the foundation for collaboration and the possibility of joint business opportunities in exploration, production, refining and downstream activities.2018.
On February 5, 2015, Petróleos Mexicanos and theInstituto Politécnico Nacional (National Polytechnic Institute) of Mexico entered into a collaboration agreement for the development of human resources, technology and research, with the aim of promoting and supporting joint research programs and the development of knowledge related to the hydrocarbons industry.
On February 18, 2015, Petróleos Mexicanos and the Organisation for EconomicCo-operation and Development (OECD) signed a memorandum of understanding with the aim of benefiting from the OECD’s knowledge of and experiences with international best practices relating to the procurement of goods and services.
On February 19, 2015, Petróleos Mexicanos signed a memorandum of understanding with the Infraestructura Energética Nova, S.A.B. de C.V. and Sempra LNG units of the U.S. energy company Sempra Energy for the potential joint development of a natural gas liquefaction project at the site of the Energía Costa Azul facility located in Ensenada, Mexico.
On April 7, 2015, Petróleos Mexicanos and First Reserve signed a memorandum of understanding and cooperation to explore new opportunities for joint energy projects, which would provide access to financing, as well as the exchange of technical and operational experience. This agreement contemplates up to U.S. $1.0 billion of investments in potential projects relating to infrastructure, maritime transport and power cogeneration, among others.
On May 12, 2015, Petróleos Mexicanos and Global Water Development Partners, a company founded by private equity funds operated by Blackstone, signed a memorandum of understanding with the aim of creating a partnership to invest in water and wastewater infrastructure for Petróleos Mexicanos’ upstream and downstream facilities. This partnership is intended to finance and carry out environmentally sustainable projects for water treatment in Petróleos Mexicanos’ operations.
On May 12, 2015, PMX Cogeneración, S.A.P.I. de C.V., an affiliate of Petróleos Mexicanos, signed a memorandum of understanding with the consortium formed by Enel S.p.A., an Italian renewable energy company, and Abengoa, S.A., a Spanish renewable energy company, to develop a cogeneration power plant to generate and supply clean energy to the Antonio Dovali Jaime refinery in Salina Cruz, as well as the Mexican national grid.
On June 1, 2015, Petróleos Mexicanos and the U.S. based global asset manager BlackRock Inc. signed a memorandum of understanding with the aim of accelerating the development and financing ofenergy-related infrastructure projects that are of strategic importance to Petróleos Mexicanos.
On July 20, 2015, Petróleos Mexicanos, through its Corporate Office of Procurement and Supply, signed an agreement with the OECD with the aim of adopting and promoting best practices in procurement and fostering
efficient management strategies and transparency in Petróleos Mexicanos’ processes. The agreement also contemplates the training of our personnel by the OECD on issues of transparency and ethics, the design of procurement procedures and mitigating risks of collusion.
On July 22, 2015, Petróleos Mexicanos and theSecretaría de Desarrollo Agrario, Territorial y Urbano (Ministry of Agriculture, Land and Urban Development) signed a collaboration agreement with the aim of establishing consulting and training mechanisms for the development of hydrocarbon exploration, extraction and distribution projects in strict observance of the applicable legal framework and with full respect for agricultural landowners.
On July 23, 2015, Petróleos Mexicanos and the Instituto Tecnológico y de Estudios Superiores de Monterrey, A.C. signed a collaboration agreement with the purpose of (1) fostering competitive development within the Mexican oil and gas industry; (2) carrying out specialized research and consulting services, including lectures, seminars, conferences and other events of common interest to the institutions; and (3) providing postgraduate studies for our employees and internships for college students at Petróleos Mexicanos.
On July 28, 2015, Petróleos Mexicanos and Banco Santander, S.A. (Santander) signed a collaboration agreement with the purpose of providing our franchisees with access to Santander banking services such as bank card sales, deposits ande-banking services, payroll management and the transportation of money.
On September 9, 2015, Petróleos Mexicanos and General Electric signed a memorandum of understanding with the aim of creating a partnership to invest in new technology and financing initiatives for gas compression, power generation and the production of hydrocarbons, both onshore and offshore, including in deepwater fields.
On October 7, 2015, Petróleos Mexicanos, through its subsidiary Pemex Cogeneration and Services, and Dominion Technologies signed a memorandum of understanding to form a company aimed at the joint implementation of cogeneration projects.
On October 10, 2015, Petróleos Mexicanos and the United Nations Development Programme in Mexico reaffirmed their commitment to use best practices in terms of inclusion, equality andnon-discrimination in the workplace.
On November 30, 2015, Petróleos Mexicanos and Global Water Development Partners agreed to create a joint venture intended to invest approximately U.S. $800 million in water and wastewater treatment infrastructure for upstream and downstream facilities in Mexico. This partnership aims to (1) provide access to advanced technology to meet the supply and treatment requirements of wastewater at our facilities, in both onshore and offshore production areas, as well as in refineries and petrochemical plants; and (2) in the future, to potentially implement and finance environmentally sustainable solutions for water management.
On January 19, 2016, Petróleos Mexicanos and Mubadala Petroleum signed a memorandum of understating agreeing to joint projects to explore the Mexican energy sector, including its upstream activities, primary midstream activities and infrastructure projects for a total investment of approximately U.S. $4.0 billion. Among these projects is a commercial logistic infrastructure system in the Salina Cruz, Oaxaca area, for an approximate investment in excess of U.S. $3.0 billion.
On January 19, 2016, Petróleos Mexicanos and the Abu Dhabi National Oil Company signed a memorandum of understanding with the aim to share each company’s best practices with respect to different upstream activities, including exploration, development and production in oil fields; improved recovery, handling and processing of liquefied natural gas; as well as human resources training, sustainability, internal controls, transparency, process development andcyber-security.
On January 19, 2016, Petróleos Mexicanos and Saudi Aramco signed a memorandum of understanding renewing and strengthening the relationship between both companies and establishing an exchange of ideas
surrounding operational excellence, sustainability and energy efficiency, and innovation and technological development.
These broad agreements of technological and scientific collaboration are strictlynon-commercial,i.e., there is no transfer of resources among the parties.
Property, Plants and Equipment
General
Substantially all of our property, consisting of refineries, storage, production, manufacturing and transportation facilities and certain retail outlets, is located in Mexico, including Mexican waters in the Gulf of Mexico. The location, character, utilization and productive capacity of our exploration, drilling, refining, petrochemical production, transportation and storage facilities are described above. See “—Exploration and Production,” “—Drilling and Services,” “Industrial Transformation,” “—Ethylene,” “—Fertilizers,” “—Logistics”Fertilizers” and “—Cogeneration and Services.Logistics.” The insurance program covering all of our properties is also described above. See “—Insurance.”
Reserves
Under Mexican law, all crude oil and other oil and gas reserves located in the subsoil of Mexico are owned by the Mexican nation and not by us. The Mexican Government has granted us the right to exploit the petroleum and other oil and gas reserves assigned to us in connection with the process that occurred in August 2014 and is commonly referred to as Round Zero, as well as the right to explore for and exploit petroleum and other oil and gas reserves in areas that have been granted to us in Round 1.4. Productivestate-owned companies and other companies participating in the Mexican oil and gas industry may report assignments or contracts and the corresponding expected benefits for accounting and financial purposes. See “Information on the Company—History and Development—Energy Reform”Legal Regime” above in this Item 4. Our estimates of hydrocarbons reserves are described under “—Exploration and Production—Reserves” above.
GENERAL REGULATORY FRAMEWORK
Petróleos Mexicanos is regulated by the Mexican Constitution, the Petróleos Mexicanos Law and the Hydrocarbons Law, among other regulations. The purpose of the Petróleos Mexicanos Law is to regulate the organization, management, operation, monitoring, evaluation and accountability of Petróleos Mexicanos as aproductive-state owned company of the Mexican Government. On October 31, 2014, the Regulations to the Petróleos Mexicanos Law were published in the Official Gazette of the Federation. These regulations were modified on February 9, 2015. The purpose of these regulations is to regulate, among other things, the appointment and removal of the members of the Board of Directors of Petróleos Mexicanos, potential conflicts of interest for Board members, and the evaluation of Petróleos Mexicanos.
The Mexican Government and its ministries regulate our operations in the oil and gas sector. The Ministry of Energy monitors our operations, and the Secretary of Energy acts as the chairperson of the Board of Directors of Petróleos Mexicanos. In addition, theLey de los ÓrganosÓrganos Reguladores Coordinados en Materia EnergéEnergética (Coordinated Energy Regulatory Bodies Law related to the Energy Matters Law,Law), which was enacted as part of the Secondary Legislation and took effect on August 12, 2014)2014, establishes mechanisms for the coordination of these entities with the Ministry of Energy and other ministries of the Mexican Government. The NHCCNH has the authority to award and execute contracts for exploration and production in connection with competitive bidding rounds. The Energy Regulatory CommissionCRE has the authority to grant permits for the storage, transportation and distribution of oil, gas, petroleum products and petrochemicals in Mexico, and to regulate thefirst-hand sale of these products. The regulatory powers of the NHCCNH and the Energy Regulatory CommissionCRE extend to all oil and gas companies operating in Mexico, including Petróleos Mexicanos and our subsidiary entities.
On December 2, 2014, the Ministry of Energy published in the Official Gazette of the Federation a statement declaring that the new Board of Directors of Petróleos Mexicanos was performing its duties and the mechanisms for our oversight, transparency and accountability had been implemented in accordance with the Petróleos Mexicanos Law. As a result, the special regime that governs Petróleos Mexicanos’ activities relating to productivestate-owned subsidiaries, affiliates, compensation, assets, administrative liabilities, budget, debt levels and the state dividend took effect. On June 10, 2015 the General Provisions for Contracting with Petróleos Mexicanos and its ProductiveState-Owned Subsidiaries were published in the Official Gazette of the Federation, and on June 11, 2015, the special regime for acquisitions, leases, services and public became effective. On May 18, 2018, new General Provisions for Contracting with Petróleos Mexicanos and its Productive State-Owned Subsidiaries were published in the Official Gazette of the Federation, repealing the previous general provisions published in June 2015 and their subsequent amendments. These General Provisions regulate the legal process for acquisitions, leases, works and services needed for our projects and require that our suppliers, contractors and other participants with whom we have or intend to have a commercial relationship recognize and adopt our Compliance Program (as defined below) and establish prevention and compliance systems in accordance with applicable law. New amendments to these General Provisions were published in the Official Gazette of the Federation on August 1, 2018.
In accordance with the Petróleos Mexicanos Law, each year the Ministry of Finance and Public Credit provides us with estimated macroeconomic indicators for the following fiscal year, which we are to use to prepare the consolidated annual budget for Petróleos Mexicanos and the subsidiary entities, including our financing program. Upon approval by the Board of Directors of Petróleos Mexicanos, our consolidated budget and financing program is then submitted to the Ministry of Finance and Public Credit, which has the authority to adjust our financial balance goal and the ceiling on our wage and salary expenditures for the fiscal year. The consolidated annual budget and financing program of Petróleos Mexicanos and the subsidiary entities, including any adjustments made by the Ministry of Finance and Public Credit, is then incorporated into the federal budget for approval by the Chamber of Deputies. The Mexican Government is not, however, liable for the financial obligations that we incur. In approving the federal budget, the Chamber of Deputies authorizes our financial balance goal and the ceiling on our wage and salary expenditures for the fiscal year, which it may subsequently adjust at any time by modifying the applicable law.
The SuperiorWe are also subject to various domestic and international laws and regulations related toanti-corruption,anti-bribery andanti-money laundering, such as theCódigo Penal Federal (Federal Criminal Code), which criminalizes certain corrupt practices, including bribery, embezzlement and abuse of authority; theLey General del Sistema Nacional Anticorrupción (General Law of the National Anti-Corruption System); theLey de Fiscalización y Rendición de Cuentas de la Federación (Federal Audit Officeand Accountability Law) and theLey General de Responsabilidades Administrativas (General Law of Administrative Liabilities), among others. These laws establish a national anti-corruption system designed to coordinate efforts among the Mexican Government, federal entities, states and municipalities to prevent, investigate and punish corrupt activities and oversee public resources, as well as determine administrative liabilities of public officials and the applicable penalties.
We also employ internal control procedures and guidelines designed to monitor the activities of our employees, including senior management, and to ensure compliance with applicableanti-corruption,anti-bribery andanti-money laundering laws and regulations. TheLineamientos que regulan el sistema de control interno en Petróleos Mexicanos, sus empresas productivas subsidiarias y empresas filiales (Guidelines governing the internal control system of Petróleos Mexicanos, its productive subsidiary entities and affiliates) set forth the principles underlying our internal controls system and the procedures necessary for its implementation and monitoring. In addition, theLineamientos para regular a los Testigos Sociales en Petróleos Mexicanos y sus empresas productivas subsidiarias (Guidelines to regulate public witnesses in Petróleos Mexicanos and its productive subsidiary entities), delineates the ways in which public witnesses may act asthird-party observers in connection with our procurement procedures. These internal controls and guidelines are applicable to Petróleos Mexicanos and the subsidiary entities. For a description of the risks relating toanti-corruption,anti-bribery andanti-money laundering laws and regulations, see “Item 3—Key Information—Risk Factors—Risk Factors Related to our Operations—We are subject to Mexican and internationalanti-corruption,anti-bribery andanti-money laundering laws. Our failure to comply with these laws could result in penalties, which could harm our reputation, prevent us from obtaining governmental authorizations needed to carry out our operations and have an adverse effect on our business, results of operations and financial condition.”
On July 14, 2017, the Board of Directors of Petróleos Mexicanos approved our “Compliance Program”, a series of procedures aimed to comply with legal, accounting, and financial provisions to prevent corruption and to promote ethical values. These procedures include a focus on internal controls, risk management, ethical principles and corporate integrity, policies promoting transparency and accountability.
On August 28, 2017, a newCódigo de Conducta de Petróleos Mexicanos, sus empresas productivas subsidiarias y, en su caso, empresas filiales (Code of Conduct of Petróleos Mexicanos, its productive subsidiary entities and, where applicable, affiliated companies, or the Code of Conduct) was published in the Official Gazette of the Federation, orreplacing the ASF, reviews annuallycode of conduct issued in February 2015. This Code of Conduct delineates behaviors expected of and banned for our employees, in accordance with theCuenta Pública(Public Account) values established in the Code of Mexican Government entities, includingEthics, which was also published on that same day in the Official Gazette of the Federation, approved by the Board of the Directors of Petróleos Mexicanos in November 2016, such as: respect,non-discrimination, honesty, loyalty, responsibility, legality, impartiality and integrity, among others.
On September 11, 2017, the Políticas y Lineamientos Anticorrupción para Petróleos Mexicanos, sus empresas productivas subsidiarias y, en su caso, Empresas Filiales (Anti-corruption Policies and Guidelines for Petróleos Mexicanos, its productive subsidiary entities and, where applicable, affiliated companies) and the Políticas y Lineamientos para el desarrollo de la Debida Diligencia en Petróleos Mexicanos, sus empresas productivas subsidiarias y, en su caso, Empresas Filiales, en Materia de Ética e Integridad Corporativa (Policies and Guidelines to carry out Due Diligence in Petróleos Mexicanos, its productive subsidiary entities and, where applicable, affiliated companies, in Ethics and Corporate Integrity matters) became effective. The purpose of these regulations is to set up actions against acts of corruption as well as provide means to confront and fight them and mitigate our subsidiary entities. This review focuses mainly onown risks as well asthird-party risks that may affect the entities’ compliance with budgetary benchmarks and budget and accounting laws. The ASF prepares reportsactivities of its observations based on this review. The reports are subject toPEMEX for acts of corruption, lack of ethics or corporate integrity or our analysis and, if necessary, our clarification and explanationinvolvement in illicit acts of any issues raised during the audit. Discrepancies in amounts spent may subject our officials to legal sanctions. However, in most instances, the observed issues are explained and clarified.kind.
As an issuer of debt securities that are registered under the Securities Act and in connection with certain representations and covenants included in our financing agreements, we must comply with the U.S. Foreign Corrupt Practices Act, or the FCPA. The FCPA generally prohibits companies and anyone acting on their behalf from offering or making improper payments or providing benefits to government officials for the purpose of obtaining or keeping business. In addition, we are subject to other international laws and regulations related toanti-corruption,anti-bribery andanti-money laundering, including the U.K. Bribery Act 2010, which prohibits the solicitation of, the agreement to receive and the acceptance of bribes.
We are also subject to various domestic and international laws and regulations related to anti-corruption, anti-bribery and anti-money laundering. TheCódigo Penal Federal (Federal Criminal Code) criminalizes certain corrupt practices, including bribery, embezzlement and abuse of authority. TheLey Federal Anticorrupción en Contrataciones Públicas (Federal Law of Anti-Corruption in Public Contracting) sanctions companies and individuals that violate this law while participating in federal government contracting in Mexico, as well as Mexican companies and individuals engaged in international commercial transactions. This law is analogous in many respects to the FCPA. In addition, the Federal Law of Administrative Responsibilities of Public Officials prohibits the bribery of federal public officials in Mexico, including members of the Mexican Congress and the federal judiciary.
We also employ internal control procedures and guidelines designed to monitor the activities of our employees, including senior management, and to ensure compliance with applicable anti-corruption, anti-bribery and anti-money laundering laws and regulations. TheLineamientos que regulan el sistema de control interno en Petróleos Mexicanos, sus empresas productivas subsidiarias y empresas filiales (Guidelines governing the internal control system of Petróleos Mexicanos, its productive subsidiary entities and affiliates) set forth the principles underlying our internal controls system and the procedures necessary for its implementation and monitoring. In addition, theLineamientos para la participación de testigos sociales durante actividades de procura y abastecimiento y procedimiento de contratación de Petróleos Mexicanos y sus empresas productivas subsidiarias (Guidelines for the participation of public witnesses in the procurement and supply activities and contracting procedures of Petróleos Mexicanos, its productive subsidiary entities and affiliates), delineates the ways in which public witnesses may act as third-party observers in connection with our procurement procedures. These internal controls and guidelines are applicable to Petróleos Mexicanos and the subsidiary entities. For a description of the risks relating to anti-corruption, anti-bribery and anti-money laundering laws and regulations, see “Item 3—Key Information—Risk Factors—Risk Factors Related to our Operations—We are subject to Mexican and international anti-corruption, anti-bribery and anti-money laundering laws. Our failure to comply with these laws could result in penalties, which could harm our reputation, prevent us from obtaining governmental authorizations needed to carry out our operations and have an adverse effect on our business, results of operations and financial condition.”
On May 27, 2015 theDecreto mediante el cual se reformaron, adicionaron y derogaron diversas disposiciones de la Constitución Política de los Estados Unidos Mexicanos, en materia de combate a la corrupción (Decree that reformed, added to and repealed various provisions of the Mexican Constitution, related to combating corruption matters) was published in the Official Gazette of the Federation. Pursuant to this decree, theLey General del Sistema Nacional Anticorrupción (General Law of the National Anti-corruption System); theLey de Fiscalización y Rendición de Cuentas de la Federación (Federal Audit and Accountability Law); and theLey General de Responsabilidades Administrativas (General Law of Administrative Liabilities), among others, which were published in the Official Gazette of the Federation on July 18, 2016. Among other things, these laws establish a national anti-corruption system to coordinate efforts among the Mexican Government, federal entities, states and municipalities to prevent, investigate and punish corrupt activities and oversee public resources, as well as determine administrative liabilities of public officials and the applicable penalties. The Mexican Senate is to appoint the head of the Special Anti-Corruption Prosecutor’s Office, which was created to investigate and prosecute actions considered crimes of corruption.
ENVIRONMENTAL REGULATION
Legal Framework
We are subject to the environmental laws and regulations issued by the local and state governments where our facilities are located, including those associated with atmospheric emissions, water usage and wastewater discharge, as well as the management of hazardous andnon-hazardous waste. In particular, we are subject to the provisions of theLey General del Equilibrio EcolóEcológico y la ProteccióProtección al Ambiente (General Law on Ecological Equilibrium and Environmental Protection, which we refer to as the Environmental Law) and related regulations, theLey General para la Prevención y Gestión Integral de los Residuos (General Law on Waste Prevention and Integral Management), theLey General de Cambio ClimáClimático (General Law on Climate Change) and other technical environmental standards issued by the SecretaríSecretaría del Medio Ambiente y Recursos Naturales (Secretariat(Ministry of the Environment and Natural Resources, or SEMARNAT). We are also subject to and theLey General para la PrevenciónAgencia de Seguridad, Energía y Gestión Integral de los ResiduosAmbiente (General Law on Waste Prevention and Integral Management),Ley para el Aprovechamiento de Energías Renovables y el Financiamiento de la Transición Energética (Law of Use of Renewable Energy and Financing of the Energy Transition), as well as theLey para el Aprovechamiento Sustentable de la Energía (Sustainable Use of Energy Law).
Before we carry out any activity that may have an adverse impact on the environment, we are required to obtain certain authorizations from the Hydrocarbons(National Agency for Industrial Safety and Environmental Protection Agency, the SEMARNAT, the Ministry of Energy, the National Water Commission and the Mexican Navy, as applicable. In particular, specific environmental regulations apply to petrochemical, crude oil refining and extraction activities, as well as to the construction of crude oil and natural gas pipelines. Before authorizing a new project, the Hydrocarbons Industrial Safety and Environmental Protection Agency requires the submission of an environmental impact analysis and any other information that it may request.
The Hydrocarbons Industrial Safety and Environmental Protection Agency is an administrative body of the SEMARNAT that operates with technical and administrative autonomy and has the authority to regulate and supervise companies participating in the oil and gas sector through its issuance of rules establishing safety standards, limits on greenhouse gas emissions and guidelines for the dismantling and abandonment of facilities, among other things. The Hydrocarbons Industrial Safety and Environmental Protection Agency provides that until the general administrative provisions and Official Mexican Standards proposed by the Hydrocarbons Industrial Safety and Environmental Protection Agency are in effect, obligations will continue under the guidelines, technical and administrative arrangements, agreements and Official Mexican Standards promulgated by the SEMARNAT, CNH and CRE.
The environmental regulations specify, among other matters, the maximum permissible levels of emissions and water discharge. These regulations also establish procedures for measuring pollution levels.Sector, or ASEA).
In April 1997, the SEMARNAT issued regulations governing the procedures for obtaining an environmental license, under which new industrial facilities can comply with all applicable environmental requirements through a single administrative procedure. Each environmental license integrates all of the different permits, licenses and authorizations related to environmental matters for a particular facility. Since these regulations went into effect, we have been required to obtain an environmental license for any new facility. Our facilities
Before we carry out any activity that existed priormay have an adverse impact on the environment, we are required to obtain certain authorizations from ASEA, the SEMARNAT, the Ministry of Energy, the National Water Commission and the Mexican Navy, as applicable. In particular, specific environmental regulations apply to petrochemical, crude oil refining and extraction activities, as well as to the effectivenessconstruction of these regulationscrude oil and natural gas pipelines. Before authorizing a new project, ASEA requires the submission of an environmental impact and risk analysis.
ASEA is an administrative body of the SEMARNAT that operates with technical and administrative autonomy and has the authority to regulate and supervise companies participating in the hydrocarbon sector through its issuance of rules establishing safety standards, limits on greenhouse gas emissions and guidelines for the dismantling and abandonment of facilities, among other things. TheLey de la Agencia Nacional de Seguridad Industrial y de Protección al Medio Ambiente del Sector Hidrocarburos(Law of the Hydrocarbons Industrial Safety and Environmental Protection Agency of the Hydrocarbon Sector) provides that until the general administrative provisions and Official Mexican Standards proposed by the Hydrocarbons Industrial Safety and Environmental Protection Agency are not subject to this requirement.in effect, obligations will continue under the guidelines, technical and administrative arrangements, agreements and Official Mexican Standards promulgated by the SEMARNAT, CNH and CRE.
We are also subject to theNOM-001-SEMARNAT-1996 issued by CONAGUA in conjunction with theProcuraduría Federal de Protección al Ambiente(PROFEPA), which sets forth the maximum permissible levels of pollutants in wastewater that can be discharged into national bodies of water. In addition, we are subject to theNOM-052-SEMARNAT-2006, which regulates hazardous waste, theNOM-161-SEMARNAT-2011, which regulates special waste management procedures, as well as theNOM-138-SEMARNAT/SSA1-2012, which establishes the maximum permissible levels of hydrocarbons in the soil and sets forth guidelines with respect to soil testing and the treatment of sites affected by hydrocarbon production.
Federal and state authorities are authorized to inspect any facility to determine its compliance with the Environmental Law, localstate environmental laws, regulations and technical environmental regulations. Violations ornon-compliance with environmental standards and regulations may result in substantial fines, temporary or
permanent shutdown of a facility, required capital expenditures to minimize the effect of our operations on the environment, cleanup of contaminated soil and water, cancellation of a concession or revocation of an authorization to carry out certain activities and, in certain cases, criminal proceedings. See “Item 3—Key Information—Risk Factors—Risk Factors Related to Our Operations—Our compliance with environmental regulations in Mexico could result in material adverse effects on our results of operations.”
Mexico generally reviews and updates its environmental regulatory framework every five years, and we work with the Mexican Government to develop new environmental regulations of activities related to the oil and gas industry.
In August 2016,During 2018, ASEA issued regulations that establish comprehensive guidelines for theNOM-016-CRE-2016 was published in the Official Gazette prevention and control of the Federation, which establishes the petroleum products quality requirements, including a maximum sulfur content for diesel fuel of 15 Mg/kg, to be applicable throughout Mexico by December 31, 2018.
In November 2016, theNOM-014-CRE-2016 was published in the Official Gazette of the Federation, which establishes the ethane and propane quality requirements for ethylene production,methane emissions, as well as for special waste management.
In addition, ASEA published environmental standardNOM-006-ASEA-2017, which provides technical guidelines and criteria for industrial safety, operational safety and environmental protection for each of the grade mixture for propellant butanes, whether domestically produced or imported.
During 2016,phases of the CNH updateddesign, construction,pre-start, operation, maintenance, closing and, finally, the technical provisionsdismantling of land installations for the usestorage of natural gas in explorationpetroleum and extraction activities and issued regulations for drilling, exploration and development. Also in 2016, theAgencia de Seguridad Energía y Ambiente (National Agency for Industrial Safety and Environmental Protection of the Hydrocarbons Sector, better known as the Agency for Safety, Energy and Environment, or ASEA) required that CONAGUA monitor water tables before we began drilling shale gas exploratory wells in the northern part of Veracruz and the southern part of Tamaulipas.petroleum products, except liquefied petroleum gas.
Climate Change
On June 6, 2012, theThe General Law on Climate Change was published in the Official Gazette of the Federation withon June 6, 2012, and was subsequently amended on July 13, 2018. The purpose of the objectives of regulating greenhouse gas emissions and reducing the vulnerability of Mexico’s infrastructure, population and ecosystems to the adverse effects of climate change. The General Law on Climate Change establishes a seriesis to (i) regulate emissions of financial, regulatorygreenhouse gases and technical rulescompounds, (ii) reduce vulnerability to the effects of climate change, (iii) regulate the mitigation and regulations, as well as tools for strategy formation, evaluationadaptation efforts with respect to climate change and monitoring that form(iv) establish the framework for a comprehensive public policy on climate change.Mexico’s compliance with the Paris Agreement.
Our Special Climate Change Program 2014-2018 aims to reduce greenhouse gas emissions, improve energyThe Mexican Government participates in international discussions and operational efficiency, reduce gas flaring and promote the efficient use of gas, among other things. Pursuant to this program, in 2016, we began upgrading the Ing. Antonio Dovalí Jaime Refinery in Salina Cruz, Oaxaca to operate on cleaner natural gas. We also began the test period for a cogeneration project to increase energy efficiency at the Antonio M. Amor Refinery in Salamanca, Guanajuato. In addition, we launched our PEMEX Environmental Strategy 2016-2020, which incorporates our formerPlan de Acción Climática(Climate Action Plan), to identify action items, projects and best practices to mitigate the impact of our operations on climate change. These actions include the construction of infrastructure for transportation and gas management.
We also work with several national and international entitiesnegotiations to develop and promote agreements and initiatives that mitigate the effects of climate change. For instance,In September 2016, the Mexican Government ratified the international agreement on climate change referred to as the Paris Agreement. Pursuant to the Paris Agreement, the Mexican Government agreed to reduce greenhouse gas emissions by 22% and black carbon emissions by 51% by the year 2030, using 2013 emission levels as a baseline. In July 2018, the General Law on Climate Change was amended to include emission targets for specific industries in Mexico in order to achieve these targets. Pursuant to these amendments, the oil and gas industry in which we participate in the Climate and Clean Air Coalition (CCAC), which aimsoperate is required to substantially reduce emissions by 14% by the year 2030. In addition, ASEA issued a new regulation to prevent and control methane emissions, which is applicable to us. See “—Legal Framework” above.
The Mexican Government has indicated its commitment to adhere to its “nationally determined contribution” targets, including the targets that 35% of climate pollutants. In complianceall energy generated by 2024 must be generated from renewable sources and 43% by 2030. The Mexican Government has also indicated a commitment to replace heavy fuels with CCAC criteria, we carried out inspections in our Dos Bocas, Cactusnatural gas, biomass and Atasta facilities,other forms of clean energy, and are working to mitigatereduce the emissions identified in those inspections.leakage, venting and controlled burning of methane.
In accordance with the actions carried out by the Mexican Government to mitigate global climate change, we are implementinghave established a goal of reducing our greenhouse gas emissions by 25% by the year 2021, as compared to 2016 levels. During 2018, we recorded greenhouse gas emissions of 36.5 million tons of carbon dioxide equivalent, which represents a 5.5% decrease compared to 2017. This decrease was mainly due to an increase in the use of associated gas in our shallow water projects, as well as a decrease in the amount of methane sent to burners in our refineries as a result of reduced crude oil processing. Emissions were estimated considering a global warming potential (the amount of energy the emission of one ton of a gas will absorb over a given period of time, relative to the emissions of one ton of carbon dioxide) for methane of 28 and flare efficiency of 84%, consistent with the national emissions inventory.
We also work with national and international entities to develop, promote and implement initiatives that mitigate our impact on climate change. For instance, we participate in the United Nations Environmental Programme’s Climate and Clean Air Coalition (CCAC). Through participation in the CCAC, we aim to identify emission sources in our key facilities and substantially reduce emissions of short-lived climate pollutants. In 2018, with the support of the Global Methane Initiative, we developed a workshop on the key sources of methan emissions and the inspection of our facilities. In addition, as a member of the Oil and Gas Climate Initiative (OGCI), we joined the collective commitment to reduce the methane intensity of aggregate upstream oil and gas operations by 0.25% by the year 2025, using 2017 as a basline.
Furthermore, we continue to analyze the implementation of carbon capture, use and storage (CCUS) techniques. In 2014, the “Technology Route Map of CCUS in“CCUS Technology Roadmap for Mexico” was developed in conjunction with SENER,theSecretaría de Energía(the Ministry of Energy or SENER), SEMARNAT and CFE. This led to the
execution of integrated carbon dioxide capture projects at PEMEXPetróleos Mexicanos and CFE facilities and enhanced oil recovery (EOR) initiatives. InBetween 2016 and 2018, several studies and tools were developed to evaluate the firstCCUS-EOR project in Mexico. This project includedMexico, as well as the necessary environmental and social safeguards for the pilot projects. In 2018, the CCUS Technology Roadmap for Mexico was updated by the relevant stakeholders, and we signed a collaboration framework agreement with SENER, SEMARNAT and CFE, pursuant to which the Mexican CCUS Center was created. The Mexican CCUS Center seeks to channel all of our CCUS pilot projects going forward.
Additionally, we continue the implementation of the 2016-2019 strategic gas exploitation plan of Pemex Exploration and Production, in order to inject carbon dioxide produced at our Cosoleacaque Petrochemical Complex intoincrease the Brillante producing field atuse of associated gas and reduce gas flaring and greenhouse gas emissions. In 2018, we began the Cinco Presidentes business unit.
During 2016, wesecond phase of the verification of greenhouse gas emission levels for all sites that recorded emissions between 100,000 and 1,000,000 tCO2eq (the volume of greenhouse gas emissions of approximately 57.9 million tonsequivalent to one ton of carbon dioxide equivalent, which represented an 11.1% increase compared to 2015, mainly due to an increase in the dispatch of bitter gas into our burners in Kumaza, AbkatúnPol-Chuc and Litoral Tabasco, increase in dispatch of acid gas into our burners for maintenance activities in the sulfur plants at the Poza Rica, Ciudad Pemex and Nuevo Pemex Complexes and an increase in the volume of gas into our burners for maintenance issues in the sulfur plants in the Minatitlán and Salina Cruz refineries. Our gas usage level was 91.2% during 2016, as compared to 93.2% in 2015, due to field performance, volume of waste gas used in artificial pumping systems and variations and adjustments to the allocated budget.dioxide) per year.
Biodiversity
In 2016,2018, we continued to developsupport several biodiversity conservation and reforestationindirect climate change mitigation projects. These projects are designed to increase carbon dioxide and water capture and to preserve the ecosystems in which we operate. Our biodiversity conservation efforts and indirect mitigation measures have been carried out through the following projects:These projects include:
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• | Operación y manejo del corredor |
In 2018, we provided financial support for these projects, which we consider to be important initiatives to support biodiversity. The “House of Water” center, for example, is, at this time, the only wetland education center of its class in Mexico and is dedicated to environmental education and training for the conservation and restoration of wetlands. The center is located in the Pantanos de Centla Biosphere Reserve in the state of Tabasco, which is one of the most important locations for birds and aquatic plant diversity in Mesoamerica. Similarly, our Jaguaroundi Ecological Park, which saw improvements to its museum and the conditions for captive organisms exhibited therein, continued providing environmental education services to the surrounding communities and industry. We also begancontinued to developmanage the JATUSA Ecological Corridor. The JATUSA Ecological Corridor project. This project is one of our mostan important conservation initiatives and its purpose isinitiative designed to mergeunite natural or modified spaces, ecosystems and habitats to facilitate the conservation of biodiversity. It includes the implementation of a new scheme that allows third party participation to maximize profits and facilitate the preservation of the ecosystem.
Clean Development Mechanism Projects
In 2000, Mexico ratified the Kyoto Protocol to the United Nations Framework Convention on Climate Change as anon-Annex B country. Accordingly, Mexico is not subject to emission caps under the Kyoto
Protocol, but Mexican companies, such as PEMEX, are allowed to develop Clean Development Mechanism (CDM) projects. These CDM projects generate carbon dioxide emission reduction certificates or credits that can be traded in international markets. We have registered two CDM projects with the United Nations Framework Convention on Climate Change: Waste Energy Recovery at the Dos Bocas Marine Terminal and Tres Hermanos Oil Field Gas Recovery and Utilization Project. The execution of these projects is subject to market conditions, including an increase in the price of certified emission reductions. In addition, we began working on the Elimination of Nitrous Oxide in Lazaro Cardenas CDM project following our acquisition of Fertinal. As of the date of this annual report, that CDM project is in its final stages of development and will be registered with the United Nations once finalized.
HEALTH, SAFTEYSAFETY AND ENVIRONMENTAL PERFORMANCE
We believe that we are in substantial compliance with all current federal and state environmental laws as those laws have been historically interpreted and enforced and that we maintain an organizational structure designed to identify and solve environmental risks. We engage external consultants to perform operational audits at our processing plants. In addition, our subsidiary entities have specialized departments that implement their own internal environmental programs, audits and facilities inspections. When these internal audits reveal problems or deficiencies, the subsidiary entities take the necessary measures to eliminate them.
In addition to our internal monitoring structure, Petróleos Mexicanos and its subsidiary entities’ environmental audit program is subject to review by ASEA, which is in charge of reviewing compliance with environmental regulations for the oil and gas sector and establishes environmental remediation standards.
Since 1993, we have participated in the National Environmental Audit Program (NEAP), a voluntary alternative to the traditional system of inspections and penalties, with PROFEPA and now with ASEA. This program was created by PROFEPA in 1992 as a regulatory incentive for companies to voluntarily correct any environmental irregularities in their operations.
In general terms, voluntary environmental auditing consists of three stages: (i) an audit and compliance diagnosis; (ii) development of an action plan to correct irregularities; and (iii) the implementation of the action plan. If a company satisfactorily completes these three stages, ASEA grants the audited company a clean industry certificate, which means that it complies with the applicable environmental legislation of their industry.
As of December 31, 2016,2018, we were in the processhave registered 221 of auditing 660our facilities with NEAP with the objective of obtaining a “clean industry” certificate for each facility. In 2015, we certified 73During 2018, 69 of our facilities while the 2016 audits resulted in the certification of 445 facilities, of which 270 werere-certificationsre-certified and 175an additional 32 facilites were certified for the first time. The audits of the remaining 215120 facilities have begun, but are still under review. We will continue including new facilities under this program, as we expand our activities in the areas of exploration, exploitation, refining and distribution of hydrocarbons.
During 2016,2018, we did not experience any major incident that had significant environmental consequences. We did, however, experience the following five material blasts or hazardous events at our facilities, during 2016, none of which had significant environmental consequences:
On January 23, 2016, a fire occurred during rig installation of theZaap-E platform, located in the Gulf of Mexico. The fire was causedFebruary 6, 2018, an employee lost his life when struck by a lack of supervision and poor risk assessment. No personnel were injured.heavy truck on a lubrication ramp at a Poza Rica garage.
On February 7, 2016,March 5, 2018, a fire and explosion occurredsubcontractor lost his life due to a fall while working on repairs at the Nejo 2D oil well.
On March 14, 2018, a contractor lost his life due to an accident at our Madero refinery, as he was applyingAbkatun-A-Compressioncorrosion-resistant processing platform incoating at a lifting platform.
On June 26, 2018, a contractor lost his life due to an accident while inspecting a production pipe at the Gulf of Mexico, which activatedArenque C platform.
On July 5, 2018, a tank truck from the safety systems, proceduresSaltillo storage terminal overturned and protocols and the platform was evacuated.caught fire. As a result of this accident, three offshore workers (two PEMEX employees and one contractor) lost their lives. The explosion was caused when the weldingdriver of anFA-4210 cap failed.
As part of our accident prevention strategy, we conduct root cause investigations of all incidents that occur during our operations. These investigations allow us to identify the tramp oil remover was opened without having previously been drained, duecauses and establish corrective measures to by poor planning, failure to update operating procedures and a lackavoid the recurrence of personal safety equipment.
incident.
In 2016,2018, our lost time injury rate decreased 23.4%26.5% from 0.470.34 in 20152017 to 0.360.25 in 2016.2018. The segment that contributed most to this decrease was the industrial transformationour logistics segment. Our lost days indicator due to injuries decreased 25.8%28.6% from 3121 to 2315 lost days per million man hoursman-hours worked with risk exposure from 20152017 to 2016.2018. Lost days are those missed as a result of incapacitating injuries suffered at work or those on which compensation is paid for partial, total or permanent incapacity or death. From 20152017 to 2016,2018, our contractors’ lost time injury rate decreased 40.9%increased 55.6% from 0.440.09 to 0.260.14 injuries per million man hoursman-hours worked with risk exposure.
In order to decrease our number of accidents, we have established the “Binomio” (Audit-Advisory Plan) project. This new program seeks to align our strategies, increases accountability and includes 12zero-tolerance EH&S guidelines. We have also run EH&S campaigns to decrease moderate and minor accidents. These campaigns focus on promoting a culture of safety and reducing accidents by better identifying risks, preventing slips and falls, providing additional lessons on how to handle objects and instructing on better planning and job scheduling. We have also used theBinomio program with our contractors to identify companies that have had fatal and/or serious accidents in the previous year to avoid entering into contracts with companies that perform poorly on the EH&S guidelines.
In 2016,2018, our primary initiatives in industrial safety, health and environmental protection (or, EH&S) included the following:
Weekly visits to and technical support for our productive subsidiary entities’ facilities to supervise the implementationalignment of EH&S functions and execution of thePEMEX-SSPA system. The PEMEX-SSPA system is the system we developed, based on international best practices, to ensure compliance with our EH&S policies, principles and objectives, and which we continue to evolve and improve;
Execution of the PEMEX-SSPA System;campaigns “Layers of Protection,” “Order and Cleaning” and “Planning and Safe Work Execution;”
Improved acccountability for EH&S leadership teams in our productive subsidiary entities;
• | Application of the PEMEX-SSPA effective execution program with theSindicato de Trabajadores Petroleros de la República Mexicana(the Petroleum Workers’ Union of the Mexican Republic, or the Petroleum Workers’ Union); |
Implementation of workplace riskswork cycles for critical procedures, such as the opening of pipelines, electrical safety and decrease accidents related to improper use of personal safety equipment;special protection equipment for personnel;
Establishment of several task forces in optimal health;critical facilities of the productive subsidiary entities to reverse causes of serious accidents;
Application of culture and leadership evaluations to command line personnel under our newPEMEX-SSPA system in a joint effortorder to establish actions required to address critical elements;
Technical support to implement EH&S standards in the new operating scenarios permitted under the Energy Reform;
Training of the EH&S professionals in four roles: auditing, establishing norms, training and technical support;
• | Supervision on compliance with theSistema de Seguridad Industrial, Seguridad Operativa y Protección Ambiental (The Industrial Safety, Operational Safety and Environmental Protection System, or SASISOPA) resolutions issued by ASEA, which establish certain requirements relating to industrial safety, operational safety and environmental protection, and which apply to Pemex Exploration and Production and Pemex Industrial Transformation; |
Evolve the PEMEX-SSPA system to ensure disciplined execution and prioritization of leadership, risk management and the human factor;
Review of compliance with ASEA, executing a strategy to comply with new requirements from ASEA applicablethe twelve “zero tolerance” guidelines in thePEMEX-SSPA system;
Verification and advice in the application of nine critical safety procedures; and
• | Supervision of the execution of theBinomio project by EH&S professionals of the productive subsidiary entities. TheBinomioproject is an audit program with corresponding technical support for the effective execution of thePEMEX-SSPA system and the immediate verification and mitigation of risks. |
Additionally, in 2018, as part of our continuous improvement of thePEMEX-SSPA system, we developed the Policies and Guidelines and the Operational Technical Guides for the improvedPEMEX-SSPA system. In developing the foregoing, we consulted and incorporated international best practices and we adhered to the PEMEX-SSPA System;General Administrative Provisions of ASEA and
Environmental Liabilities
As of December 31, 2016,2018, our estimated and accrued environmental liabilities totaled Ps. 8,230.511,219.3 million. Of this total, Ps. 1,014.91,671.7 million belong to Pemex Exploration and Production, Ps. 2,690.73,152.4 million to Pemex Industrial Transformation and Ps. 4,524.96,395.2 million to Pemex Logistics. The following tables detail our environmental liabilities by productive subsidiary entity and operating region at December 31, 2016.2018.
Pemex Exploration and Production(1)
Estimated Affected Area | Estimated Liability | Estimated Affected Area | Estimated Liability | |||||||||||||
(in hectares) | (in millions of pesos) | (in hectares) | (in millions of pesos) | |||||||||||||
Northern region | 131.39 | Ps. | 596.1 | 417.4 | Ps. | 1,135.2 | ||||||||||
Southern region | 89.89 | 149.7 | 228.3 | 366.7 | ||||||||||||
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Total | 221.28 | Ps. | 745.9 | 645.7 | Ps. | 1,501.9 | ||||||||||
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Note: | Numbers may not total due to rounding. |
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During |
Source: PEMEX.
Holding Ponds Drainage | ||||||||
Number of Holding Ponds Reported as Liabilities(1) | Estimated Liability | |||||||
(in millions of pesos) | ||||||||
Southern region | 11 | P | s.20.8 | |||||
Northern region | 69 | 248.2 | ||||||
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Total | 80 | 269.0 | ||||||
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Total estimated environmental liabilities of Pemex Exploration and Production | Ps. | 1,014.9 | ||||||
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Holding Ponds Drainage | ||||||||
Number of Holding Ponds Reported as Liabilities(1) | Estimated Liability | |||||||
(in millions of pesos) | ||||||||
Southern region | 11 | Ps. | 20.8 | |||||
Northern region | 69 | 149.0 | ||||||
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Total | 80 | Ps. 169.8 | ||||||
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Total estimated environmental liabilities of Pemex Exploration and Production | Ps. | 1,671.7 | ||||||
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Note:
Note: | Numbers may not total due to rounding. |
(1) | In |
Source: |
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Pemex Industrial Transformation(1)
Estimated Affected Area | Estimated Liability | |||||||
(in hectares) | (in millions of pesos) | |||||||
Refineries | 273.43 | Ps. | 2,665.3 | |||||
Reynosa Gas complex processor | 11.52 | 25.4 | ||||||
Total estimated environmental liabilities of Pemex Industrial Transformation | 284.95 | Ps. | 2,690.7 | |||||
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Estimated Affected Area | Estimated Liability | |||||||
(in hectares) | (in millions of pesos) | |||||||
Refineries | 285.5 | Ps. | 3,152.4 | |||||
Total estimated environmental liabilities of Pemex Industrial Transformation | 285.5 | Ps. | 3,152.4 | |||||
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Note:
Note: | Numbers may not total due to rounding |
(1) | In 2017, Pemex Industrial Transformation reported a total of 297.01 hectares of contaminated sites. Nevertheless, in 2018, the environmental liability of the Reynosa Gas Complex Processor (11.52 hectares) was transferred to the government of Tamaulipas, so the total environmental liabilities of Pemex Industrial Transformation at the end of 2018 is 285.5 hectares |
Source: | Pemex Industrial Transformation. |
Pemex Logistics
Estimated Affected Area | Estimated Liability | |||||||
(in hectares) | (in millions of pesos) | |||||||
Storage and Distribution Terminals | 67.8 | Ps. | 1,178.7 | |||||
Pipelines | 600.4 | 5,216.5 | ||||||
Total estimated environmental liabilities of Pemex Logistics | 668.2 | Ps. | 6,395.2 | |||||
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Note: | Numbers may not total due to rounding. |
Pemex |
Source: Pemex Industrial Transformation.
Pemex Logistics
Estimated Affected Area | Estimated Liability | |||||||
(in hectares) | (in millions of pesos) | |||||||
Storage and Distribution Terminals | 69.58 | Ps. | 343.1 | |||||
Pipelines | 21.88 | 4,181.8 | ||||||
Total estimated environmental liabilities of Pemex Logistics | 91.46 | Ps. | 4,524.9 | |||||
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Note: Numbers may not total due to rounding.
Source: Pemex Logistics.
Our estimates of environmental liabilities include cost estimates forsite-specific evaluation studies, which draw upon aspects ofare based on previous evaluations for sites with comparable characteristics and the corresponding remediation. The remediation sites consist of facilities identified in the audit process described above, as well as those previously identified sites in more mature petroleum operating areas that were not cleaned up in the past. Our environmental liabilities also include the elimination of holding ponds created by abandoned petroleum wells. Additionally, our environmental liabilities include an accrual based on information received periodically from field managers regarding probable environmental liabilities identified in their respective areas of responsibility. We accrue environmental liabilities when sufficient basic knowledge is available to form a preliminary estimation as to remediation cost. Although the full potential scope of the remediation cost may not be known with certainty, these accruals are made when the liability is probable and the amount may be reasonably estimated, in accordance with IAS 37 “Provisions, Contingent Liabilities and Contingent
Assets” for IFRS purposes. These estimated liabilities include assumptions resulting from an initial evaluation of damage, including land acreage to be remediated, depth and type of contamination. While the initial evaluation is extensive, there is a possibility that the actual scope of remediation could vary depending upon information gathered during the remediation process. For a further discussion of our environmental liabilities, see Note 3(l)3-K to our consolidated financial statements included herein.
Unasserted or additional claims are not reflected in our identified liabilities. We are not aware of any such claims that would be of such magnitude as to materially affect our estimates of environmental liabilities. At the end of 2016,2018, we were not aware of uncertainties with respect to joint and several liabilities that could affect our assessment of environmental contingencies or otherwise result in a major environmental liability. See “—History and Development—Energy Reform” above in this Item 4 for more information regarding the participation of other companies in the Mexican energy sector. As a result, we believe we are positioned to know immediately of any claims and are therefore directly accountable for any claims that may be brought against us.
Pemex Exploration and Production remains responsible for handling existing environmental liabilities—these responsibilities are not part of the Integrated E&P Contracts. Nevertheless, the Integrated E&P Contracts include environmental clauses related to contractors’ and Pemex Exploration and Production’s responsibility to ensure an adequate environmental performance, and also establish the terms for compensation and repair of any new environmental impacts.
The timing of remediation or cleanup of the sites to which these environmental liabilities relate is dependent upon the annual budget approved by the Mexican Congress.
On August 1, 2017, we were granted a favorable judgment by the Supreme Court of Justice of the Nation, which determined that we are not liable for material and environmental damages caused by hydrocarbons spills related to illegal tapping of pipelines, since the environmental damage was caused by third party criminal behavior. As of the date of this annual report, there has been no definitive resolution with respect to our liability for such damages.
Environmental Projects and Expenditures
In 2016,2018, we spent approximately Ps. 11,424.43,219.1 million on environmental projects and related expenditures, as compared to Ps. 9,917.15,760 million in 2015.2017. For 2017,2019, we have budgeted Ps. 5,707.6832.3 million for environmental projects and expenditures, including modernization of installations, implementation of systems and mechanisms to monitor and control atmospheric pollution, acquisition of equipment to address contingencies related to oil and gas spills, the expansion of water effluent systems, restoration and reforestation of affected areas, studies for environmental investigation and environmental audits. In addition, we continue to conduct research and development efforts to increase our capacity to produce gasoline, diesel and fuel oil with lower sulfur content at our refineries in Mexico.
We do not believe that the cost of complying with environmental laws or environmental requirements related to the North American Free Trade Agreement (NAFTA)NAFTA among the governments of Mexico, the United States and Canada, the Vienna Convention for the Protection of the Ozone Layer, the Agreement on Environmental Cooperation between the Governments of Mexico and Canada or Mexico’s membership in the Organization for Economic Cooperation and Development, has caused or will cause a significant increase in our environmental expenditures.
Social Responsibility
We haveDuring 2018, we implemented and continued various corporate social responsibility initiatives, primarily with respect to the protection and preservation of the environment, relations with communities where we operate, ethical work practices, respect for labor rights and the general promotion of quality of life for communities and employees.
Our corporate and social responsibility goals are carried out through the following mechanisms:
cash donations;
donations of movable properties;
mutually beneficial public works, or mutual benefit projects, which are projects we carry out in collaboration with local authorities and communities to improve infrastructure that is beneficial both to us and to the community;
• | thePrograma de apoyo a la comunidad y medio ambiente (Program to support communities and the environment, which we refer to as PACMA), which supports and implements social programs, actions and public works designed to promote the economic and social development of the communities in which we operate and to protect their environment; and |
other instruments that provide a positive impact our community,on communities, including our Integrated E&P contracts, FPWCsContracts and the sustainable development annexes and clauses to our contracts (which we refer to as SD Annexes), in which we and our contractors commit to improving the quality of life in communities where we operate.operate, directly or indirectly.
In 2016,2018, the total value of our social responsibility donations and contributions amounted to Ps. 1,649.22,103.8 million. Our cash donations amounted to approximately Ps. 63.5 million, our asphalt and fuel donations amounted to approximately Ps. 1,218.422.0 million and our movableasphalt, fuel and immovablemovable property donations amounted to approximately 28.3Ps. 1,300.5 million. Contributions made through provisions of our Integrated E&P Contracts FPWCs, SD Annexes and RS KMZ sustainable development clause amounted to Ps. 129.0120.5 million, SD Annexes amounted to Ps. 20.2 million and PACMA and mutual benefit project contributions amounted to Ps. 186.8592.6 million and Ps. 23.248.0 million, respectively.
Approximately 68.5%90.1% of our donations and contributions were assigned to twelve states with greater activity in the oil and gas industry (Campeche, Chiapas, Coahuila, Guanajuato, Hidalgo, Nuevo León, Oaxaca, Puebla, San Luis Potosí, Tabasco, Tamaulipas and Veracruz); 22.0% to the states with medium activity in the oil and gas industry (Coahuila, Guanajuato, Hidalgo, Nuevo Leon, Oaxaca, Puebla and San Luis Potosí); and the remaining 9.5%9.9% to the remaining states. Most importantly,Notably, we took the following specific actions in 2016:2018:
contributed Ps. 1,320.9 million in cash andin-kind donations. Of our 2018 cash andin-kind donations, 66.7% was concentrated in the states of Tabasco, Campeche, Veracruz and Tamaulipas. Cash donations made during 2018 were used for conservation of natural areas and scholarship programs;
contributed approximatelya total of fourteen movable properties, which were delivered to the following states: Tabasco (three), Veracruz (two), Sinaloa (two), Campeche (one), Oaxaca (one), Hidalgo (one), Puebla (one), Chiapas (one), Tlaxcala (one) and Coahuila (one);
contributed, via our SD Annexes, Ps. 463.816.4 million in Veracruz, which was used for community health, education, sports and environmental protection, and Ps. 3.8 million in Puebla, which was directed towards community health and education;
contributed a total of Ps. 48.0 via our mutual benefit projects, Ps. 47.4 million of which was directed towards the state of Tabasco. We also contributed Ps. 0.6 million to mutual benefit projects in Veracruz. These projects were mainly in infrastructure, such as the construction, improvement or pavement of roads, and highway infrastructure in 17 states;
carried out 66 projects related to Integrated E&P Contracts in the states of Campeche,Veracruz and Tamaulipas for a total amount of Ps. 120.5 million. In Veracruz, we contributed Ps.109.8 million and Veracruz;
In addition, in 2018 we made several donations under our PACMA program, approximately 38.8% of which were allocated to Tabasco, approximately 28.0% to Veracruz and approximately 14.0% to Campeche. The remainder, or approximately 19.2% was allocated to Tamaulipas, Oaxaca, Hidalgo, Guanajuato, Puebla, Nuevo León, San Luis Potosí, Chiapas, TabascoTlaxcala and Veracruz;
TRADE REGULATION AND EXPORT AGREEMENTS
Though Mexico is not a member of Organization of the Petroleum Exporting Countries (which we refer to as OPEC), it has periodically announced increases and decreases in our crude oil exports reflecting production revisions made by other oil producing countries, in order to contribute to crude oil prices stabilization. However, we have not changed our export goals because of announcements made by OPEC since 2004, and we believe that Mexico has no current plans to change our current level of crude oil exports.
NAFTA has not affected Mexico’s rights, through us or other companies, to explore and exploit crude oil and natural gas in Mexico, to refine and process crude oil and natural gas and to produce petrochemicals in Mexico. Since 2003, petrochemical products have enjoyed a zero tariff under NAFTA and, subject to limited exceptions, exports of crude oil and petroleum products from Mexico to the United States and Canada have been free or exempt from tariffs. Similarly, since 2003, Mexico’s imports of petroleum products from the United States and Canada have also been exempt from tariffs. In addition, in 2004, NAFTA approved lower tariffs on certain materials and equipment imported by Mexico. The zero tariff on Mexico’s imports of petrochemicals from the United States and Canada could have increased competition in the petrochemicals industry in Mexico. To the extent that domestic and international prices for our products remain constant, lower tariffs on products, materials and equipment that we import from and export to the United States and Canada, reduce our expenses and increase our revenue.
On November 30, 2018, the presidents of Mexico, the United States and Canada signed the UnitedStates-Mexico-Canada Agreement, or the USMCA, which, if ratified by the legislatures of the three countries, would replace NAFTA. As of the date of this annual report, there is uncertainty about whether the USMCA will be ratified, as well as the timing thereof, and the potential for furtherre-negotiation, or even termination, of NAFTA. See “Item 3—Key Information—Risk Factors—Risk Factors Related to Mexico—Economic and political developments in Mexico and the United States may adversely affect Mexican economic policy and, in turn, PEMEX’s operations.”
TAXES, DUTIES AND OTHER PAYMENTS TO THE MEXICAN GOVERNMENT
General
Taxes and duties applicable to us are a significant source of revenues to the Mexican Government. We contributed approximately 21%11.3% of the Mexican Government’s revenues in 20152017 and 8.6%11.0% in 2016.2018. In 2016,2018, we paid a number of special oil and gas taxes and duties, in addition to the other taxes and duties paid by some of the subsidiary companies, as described below under “—Other Taxes.” The fiscal regime in effect for Petróleos Mexicanos and the subsidiary entities for 20162018 (which we refer to as the 2016 fiscal regime) became effective in 20172015 and can be subsequently modified from time to time. The Secondary Legislationimplementing legislation published in August 2014 set forth a fiscal regime applicable to the new contractual arrangements that governs exploration and production activities conducted in Mexico beginning on January 1, 2015, as well as a new state dividend to be paid by Petróleos Mexicanos and the subsidiary entities beginning on January 1, 2016. See “—Fiscal Regime” and “—Other Payments to the Mexican Government” below.
Fiscal Regime for PEMEX
Fiscal Regime
The Hydrocarbons Revenue Law that was adopted as part of the Secondary Legislation sets forth, among other things, the following duties applicable to us in connection with our assignments granted by the Mexican Government:
• | Derecho por la Utilidad Compartida(Profit-Sharing Duty): As of January 1, 2015, this duty |
• | Derecho de Extracción de Hidrocarburos(Hydrocarbons Extraction Duty):This duty is to be determined based on a rate linked to the type of hydrocarbons (e.g., crude oil, associated natural gas,non-associated natural gas or condensates), the volume of production and the relevant market price. During |
• | Derecho de Exploración de Hidrocarburos(Exploration Hydrocarbons Duty): The Mexican Government is entitled to collect a monthly payment of Ps. |
• | In |
Under the 20162018 fiscal regime, some of our products are subject to the following IEPS Taxes, which we withhold from our customers and pay to the tax authorities. The IEPS tax is no longernot included in our sales or expenses. of gasoline and diesel before the of eac
• | IEPS sobre la venta de los combustibles automotrices (IEPS Tax on the Sale of Automotive Fuels): This tax is a fee on domestic sales of automotive fuels, gasoline and diesel, that Pemex Industrial Transformation collects on behalf of the Mexican Government. The applicable fees for this tax are Ps. |
• | IEPS |
• | IEPSa los combustibles fósiles(IEPS Tax on Fossil Fuels): This tax is a fee on domestic sales of fossil fuels that Pemex Industrial Transformation collects on behalf of the Mexican Government. The applicable fees for this tax are 6.93 cents per liter for propane, 8.98 cents per liter for butane, 12.17 cents per liter for gasoline and aviation gasoline, 14.54 cents per liter for jet fuel and other kerosene, 14.76 cents per liter for diesel, 15.76 cents per liter for fuel oil, Ps. 18.29 per ton for petroleum coke, Ps. 42.88 per ton for coal coke, Ps. 32.29 per ton for mineral carbon and Ps. 46.67 per ton for carbon from other fossil fuels. This fee changes yearly in accordance with inflation and applies to imports to Mexico. |
The Hydrocarbons Revenue Law also establishes the fiscal terms to be applied to the contracts for exploration and production granted by the Mexican Government to us or to other companies in connection with potential future competitive bidding rounds. Specifically, these fiscal terms contemplate the following taxes, duties, royalties and other payments to the Mexican Government (in addition to any taxes owed pursuant to theLey de Ingresos de la Federación (Federal Revenue Law) for the applicable year and other applicable tax laws):
• | Cuota Contractual para la Fase Exploratoria(Exploration Phase Contractual Fee): During the exploration phase of a project governed by a license,production-sharing contract orprofit-sharing contract, the Mexican Government is entitled to collect a monthly payment of Ps. |
• | Regalías (Royalties): Royalty payments to the Mexican Government are determined based on the “contractual value” of the relevant hydrocarbons, which is based on a variety of factors, including the type of underlying hydrocarbons (e.g., crude oil, associated natural gas,non-associated natural gas or condensates), the volume of production and the market price. Royalties are payable in connection with licenses,production-sharing contracts andprofit-sharing contracts. |
• | Pago del Valor Contractual (Contractual Value Payment): Licenses require a payment calculated as a percentage of the “contractual value” of the hydrocarbons produced, as determined by the Ministry of Finance and Public Credit on acontract-by-contract basis. |
• | Porcentaje a la Utilidad Operativa(Operating Profit Payment):Production-sharing contracts andprofit-sharing contracts require a payment equivalent to a specified percentage of operating profits. In the case ofproduction-sharing contracts, this payment is to be madein-kind through delivery of the hydrocarbons produced. In the case ofprofit-sharing contracts, this payment is to be made in cash. |
• | Bono a la Firma(Signing Bonus): Upon execution of a license or migration of an assignment, a signing bonus is to be paid to the Mexican Government in an amount specified by the Ministry of Finance and Public Credit. |
• | Impuesto por la actividad de Exploración y Extracción de Hidrocarburos (Hydrocarbons Exploration and Extraction Activities Tax): Contracts for exploration and extraction and assignments granted by the Mexican Government will include a specified tax on the exploration and extraction activities carried out in the relevant area. A monthly tax of Ps. |
Under the Hydrocarbons Revenue Law, exploration and production activities associated with contracts for exploration and production are not subject to a value added tax.
Fluctuating crude oil price levels directly affect the level of certain taxes and duties that we pay. See “Item 3—Key Information—Risk Factors—Risk Factors Related to our Relationship with the Mexican Government—We pay significant taxes and duties to the Mexican Government, and, if certain conditions are met, to pay a state dividend, which may limit our capacity to expand our investment program or negatively impact our financial condition generally.”
Other Payments to the Mexican Government
Pursuant to the Petróleos Mexicanos Law, as of January 1, 2016, Petróleos Mexicanos and the subsidiary entities are required to pay a state dividend to the Mexican Government on an annual basis. In July of each year, Petróleos Mexicanos and the subsidiary entities are required to provide the Ministry of Finance and Public Credit a report disclosing their financial results for the previous fiscal year and their investment and financing plans for the following five years, together with an analysis of the profitability of these investments and the relevant projections of their financial positions. The Ministry of Finance and Public Credit will rely on this report and a favorable opinion issued by a technical committee of the Mexican Petroleum Fund for Stabilization and Development to determine the amount of the state dividend to be paid by Petróleos Mexicanos and each of the subsidiary entities. The Petróleos Mexicanos Law provides that the aggregate amount of the state dividend to be paid in 2016 iswas to be equal to, at minimum, 30% of the total revenues of Petróleos Mexicanos and the subsidiary entities, after taxes, from the previous fiscal year. It further provides that that percentage will decrease in subsequent years, until reaching 15% in 2021 and 0% in 2026. In accordance with the Federal Revenue Law for 2016, the Federal Revenue Law for 2017, the Federal Revenue Law for 2018 and the Federal Revenue Law for 2017,2019, Petróleos Mexicanos was not required to pay a state dividend in 2016, 2017 and 2018 and will not be required to pay a state dividend in 2017.2019.
The following table sets forth the taxes and duties that we recorded for each of the past three years.
Year ended December 31, | ||||||||||||||||||||||||
2016 | 2017 | 2018 | ||||||||||||||||||||||
Year ended December 31, | ||||||||||||||||||||||||
2014 | 2015 | 2016 | (in millions of pesos)(1) | |||||||||||||||||||||
(in millions of pesos)(1) | ||||||||||||||||||||||||
Hydrocarbon extraction duties and others | Ps. | 760,912 | Ps. | 377,087 | Ps. | 304,813 | Ps. 277,162 | Ps. 338,044 | Ps. 469,934 | |||||||||||||||
Hydrocarbons income tax | (18,735 | ) | — | — | ||||||||||||||||||||
Income tax | 3,898 | (45,587 | ) | (40,292 | ) | (12,640 | ) | (5,064 | ) | (8,355 | ) | |||||||||||||
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Total | Ps. | 746,075 | Ps. | 331,500 | Ps. | 264,521 | Ps. 264,522 | Ps. 332,980 | Ps. 461,579 | |||||||||||||||
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(1) | Figures are stated in nominal pesos. |
Source: |
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Other Taxes
Since 1994, our interest payments on our external debt have been subject to Mexican Government withholding taxes. Nevertheless, withholding taxes do not represent a substantial portion of our total tax liability.
We are subject to municipal and state taxes, such as real property and payroll taxes. However, because most of our facilities are located on federal property, which is not subject to municipal taxation, real property taxes are not a significant part of our overall taxes. Similarly, payroll taxes do not represent a substantial portion of our total tax liability.
In addition, we have a number ofnon-Mexican subsidiary companies that may be subject to taxation in the jurisdiction of their incorporation or operations. The aggregate taxes paid by the subsidiary companies were Ps. 4,058.57,200.9 millionin 2016, Ps. 2,536.3 million in 2014, Ps. 6,833.4 millionin 20152017 and Ps. 7,200.91,616.7 million in 2016.2018.
No assurance can be given that our tax regime will not change in the future. See “Item 3—Key Information—Risk Factors—Risk Factors Related to our Relationship with the Mexican Government—We pay significant taxes and duties to the Mexican Government, and, if certain conditions are met, to pay a state dividend, which may limit our capacity to expand our investment program or negatively impact our financial condition generally.”
UNITED MEXICAN STATES
The information in this section with regard to Mexico has been derived from publicly available information published by, or on the websites of, the Comisión Nacional Bancaria y de Valores (National Banking and Securities Commission), Banco de México Banco (the Mexican central bank), the Ministry of Finance and Public Credit and the Instituto Nacional de Estadística y Geografía (INEGI).
Form of Government
The President of Mexico (or the President) is the chief of the executive branch of the Mexican Government. The President is elected by the popular vote of Mexican citizens who are 18eighteen years of age or older. The Mexican Constitution limits the President to onesix-year term; the President ismay not allowed to run for reelection. In accordance with Mexico’s electoral law, on August 31, 2012, theTribunal Electoral del Poder Judicial de la Federación (Federal Electoral Court) officially validated the results of the presidential electionGeneral elections were held in Mexico on July 1, 2012, and declared2018. Mr. Andrés Manuel López Obrador, the candidate from the National Regeneration Movement, was elected president. Mr. Andrés Manuel López Obrador took office on December 1, 2018, replacing President Enrique Peña Nieto, a member of thePartido Revolucionario Institucional (Institutional(Institutional Revolutionary Party, or PRI), President-elect. Mr. Enrique Peñ. President López Obrador will serve for five years and ten months due to a Nieto took office on December 1, 2012 and his term will expire on November 30, 2018.change of the inauguration date effective starting in 2024.
From 1929 to 1994, the PRI won all presidential elections, and, from 1929 until July 1997, the PRI held a majority of the seats in both chambers of the Mexican Congress. From 1929 until 1989, the PRI also won all of the state gubernatorial elections. In July 2000, the candidate from theAlianza por el Cambio (Alliance for Change), a coalition of thePartido Acción Nacional (National Action Party, or PAN), the oldest opposition party in the country, and thePartido Verde Ecologista de México (Ecological Green Party), won the presidential election.
Each of Mexico’s 31 states is headed by a state governor. Mexico’s Federal District, Mexico City, is headed by an elected mayor.
Legislative authority is vested in the Mexican Congress, which is composed of the Senate and the Chamber of Deputies. Members of the Mexican Congress are elected either directly or through a system of proportional representation by the popular vote of Mexican citizens who are 18 years of age or older. The Senate is composed of 128 members, 96 of whom are elected directly, while the other 32 are elected through a system of proportional representation. The Chamber of Deputies is composed of 500 members, 300 of whom are elected directly by national electoral districts, while the other 200 are elected through a system of proportional representation. Under this proportional representation system, seats are allocated to political party representatives based on the proportion of the votes cast for those parties that receive at least 3.0% of the national vote, among other requirements.
The Mexican Constitution provides that the President may veto bills and that the Mexican Congress may override such vetoes with atwo-thirds majority vote of each chamber.
Senators serve asix-year term and deputies serve a three-year term. Federal deputies are eligible for immediate reelection for up to four term periods and senators are eligible for immediate reelection for up to two term periods. Congressional elections for all 500 seats in the Chamber of Deputies were last held on June 7, 2015.July 1, 2018. The new Congress took office on September 1, 2018. The following table provides the distribution as of December 31, 2015March 29, 2019 of Congressional seats, reflecting certainpost-election changes in the party affiliations of certain senators and deputies.
Party Representation in the Mexican Congress
Party Representation in the Mexican Congress(1) | ||||||||||||||||
Senate | Chamber of Deputies | |||||||||||||||
Seats | % of Total | Seats | % of Total | |||||||||||||
National Regeneration Movement | 59 | 46.1% | 259 | 51.8% | ||||||||||||
National Action Party | 24 | 18.8% | 78 | 15.6% | ||||||||||||
Institutional Revolutionary Party | 14 | 10.9% | 47 | 9.4% | ||||||||||||
Citizen Movement Party | 8 | 6.3% | 28 | 5.6% | ||||||||||||
Labor Party | 6 | 4.7% | 28 | 5.6% | ||||||||||||
Ecological Green Party of Mexico | 6 | 4.7% | 11 | 2.2% | ||||||||||||
Social Encounter Party | 5 | 3.9% | 29 | 5.8% | ||||||||||||
Democratic Revolution Party | 5 | 3.9% | 11 | 2.2% | ||||||||||||
Unaffiliated | 1 | 0.8% | 9 | 1.8% | ||||||||||||
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Total | 128 | 100.0% | 500 | 100.0% | ||||||||||||
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Senate | Chamber of Deputies | |||||||||||||||
Seats | % of Total | Seats | % of Total | |||||||||||||
Institutional Revolutionary Party | 55 | 43.0 | % | 208 | 41.6 | % | ||||||||||
National Action Party | 38 | 29.7 | 109 | 21.8 | ||||||||||||
Democratic Revolution Party | 18 | 14.1 | 60 | 12.0 | ||||||||||||
Ecological Green Party of Mexico | 7 | 5.5 | 42 | 8.4 | ||||||||||||
Social Encounter Party | 0 | 0 | 9 | 1.8 | ||||||||||||
Labor Party | 7 | 5.5 | 0 | 0 | ||||||||||||
Citizen Movement Party | 0 | 0.0 | 24 | 4.8 | ||||||||||||
New Alliance Party | 0 | 0.0 | 11 | 2.2 | ||||||||||||
Unaffiliated National Regeneration Movement (New) | | 2 0 |
| | 1.6 0 |
| | 1 36 |
| | 0.2 7.2 |
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Total | 127 | 99.4 | % | 500 | 100.0 | % | ||||||||||
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Note: Numbers may not total due to rounding.
(1) As of March 29, 2019. Individual members of Congress may change party affiliations.
Source: Senate and Chamber of Deputies.
The Economy
General
According to World Bank data, the Mexican economy, as measured by 20152016 gross domestic product (GDP) (at current prices in U.S. dollars), is the 15th largest in the world. The Mexican economy had a real GDP of Ps. 14,110.118,157.0 billion in 2015 and an increase in GDP of Ps. 1,335.9 billion between 2011 and 2015.2017.
Gross Domestic Product
The following table sets forth the percentage change in Mexico’s real GDP by economic sector in percentage terms for the periods indicated.
Real GDP Growth by Sector
(% change against prior years)(1)
2011 | 2012 | 2013 | 2014 | 2015 | 2016(2) | 2013 | 2014 | 2015 | 2016 | 2017(2) | 2018(2) | |||||||||||||||||||||||||||||||
GDP (constant 2008 prices) | 4.0 | % | 4.0 | % | 1.4 | % | 2.2 | % | 2.6 | % | 2.4 | % | ||||||||||||||||||||||||||||||
GDP | 1.4% | 2.8% | 3.3% | 2.9 | % | 2.1 | % | 2.0 | % | |||||||||||||||||||||||||||||||||
Primary activities: | ||||||||||||||||||||||||||||||||||||||||||
Agriculture, forestry, fishing, hunting and livestock(3) | (2.3 | ) | 7.4 | 0.9 | 4.2 | 1.5 | 4.1 | 2.3 | 3.8 | 2.1 | 3.8 | 3.2 | % | 2.4 | % | |||||||||||||||||||||||||||
Secondary Activities: | ||||||||||||||||||||||||||||||||||||||||||
Mining | (0.4 | ) | 0.9 | (0.1 | ) | (1.5 | ) | (4.6 | ) | (6.4 | ) | (0.6) | (1.9) | (4.4) | (4.1 | ) | (8.2 | )% | (5.5 | )% | ||||||||||||||||||||||
Utilities | 6.9 | 2.1 | 0.5 | 8.2 | 2.3 | 3.3 | 0.6 | 8.1 | 1.7 | 0.1 | (0.4 | )% | 2.1 | % | ||||||||||||||||||||||||||||
Construction | 4.1 | 2.5 | (4.8 | ) | 2.0 | 2.5 | 1.8 | (1.6) | 2.7 | 2.4 | 2.0 | (0.9 | )% | 0.6 | % | |||||||||||||||||||||||||||
Manufacturing | 4.6 | 4.1 | 1.2 | 4.1 | 2.5 | 1.3 | 0.5 | 4.0 | 2.7 | 1.5 | 2.8 | % | 1.7 | % | ||||||||||||||||||||||||||||
Tertiary Activities: | ||||||||||||||||||||||||||||||||||||||||||
Wholesale and retail trade | 9.7 | 4.8 | 2.2 | 3.1 | 4.7 | 2.4 | 1.7 | 3.8 | 4.4 | 2.8 | 3.4 | % | 3.1 | % | ||||||||||||||||||||||||||||
Transportation and warehousing | 4.0 | 4.1 | 2.4 | 3.2 | 4.3 | 2.8 | 2.5 | 3.5 | 4.3 | 3.1 | 4.2 | % | 3.1 | % | ||||||||||||||||||||||||||||
Information | 4.4 | 16.3 | 5.0 | 0.2 | 7.8 | 10.1 | 4.3 | 4.5 | 716.9 | 19.1 | 8.5 | % | 6.0 | % | ||||||||||||||||||||||||||||
Finance and insurance | 7.1 | 7.7 | 10.4 | (0.9 | ) | 4.3 | 7.7 | 16.0 | 8.6 | 14.8 | 12.2 | 5.8 | % | 6.3 | % | |||||||||||||||||||||||||||
Real estate, rental and leasing | 2.9 | 2.5 | 1.0 | 2.0 | 2.5 | 1.9 | 0.9 | 1.8 | 2.5 | 2.0 | 1.6 | % | 1.9 | % | ||||||||||||||||||||||||||||
Professional, scientific and technical services | 5.1 | 1.1 | 1.2 | 1.7 | 4.2 | 7.0 | (1.2) | 1.7 | 4.2 | 7.5 | 0.4 | % | 1.3 | % | ||||||||||||||||||||||||||||
Management of companies and enterprises | 3.6 | 8.6 | (1.8 | ) | 7.2 | 3.5 | 4.7 | (1.7) | 7.2 | 4.3 | (0.2 | ) | 1.5 | % | (0.4 | )% | ||||||||||||||||||||||||||
Administrative support, waste management and remediation services | 6.0 | 4.4 | 4.3 | (0.2 | ) | 1.2 | 4.1 | 4.4 | (0.3) | (1.3) | 4.3 | 5.9 | % | 5.1 | % | |||||||||||||||||||||||||||
Education services | 1.6 | 2.2 | 0.8 | 0.1 | 0.0 | 1.0 | 0.5 | 0.5 | (0.1) | 1.0 | 1.2 | % | 0.2 | % | ||||||||||||||||||||||||||||
Health care and social assistance | 2.1 | 2.2 | 0.6 | (0.6 | ) | (2.3 | ) | 1.3 | 1.1 | (0.3) | (1.8) | 2.7 | 1.3 | % | 2.5 | % | ||||||||||||||||||||||||||
Arts, entertainment and recreation | (0.7 | ) | 2.9 | 3.4 | (1.5 | ) | 3.8 | 5.7 | 7.0 | (4.2) | 4.1 | 4.5 | 2.0 | % | 0.2 | % | ||||||||||||||||||||||||||
Accommodation and food services | 1.5 | 5.4 | 1.8 | 2.9 | 5.8 | 3.8 | 1.1 | 2.7 | 7.5 | 3.2 | 4.1 | % | 1.0 | % | ||||||||||||||||||||||||||||
Other services (except public administration) | 1.9 | 3.3 | 2.1 | 1.6 | 2.7 | 5.8 | 1.8 | 1.4 | 2.4 | 2.6 | (0.2 | )% | (1.1 | )% | ||||||||||||||||||||||||||||
Public administration | (1.4 | ) | 3.7 | (0.5 | ) | 1.9 | 2.7 | 0.0 | (1.4) | 2.0 | 2.4 | 0.3 | 0.2 | % | 1.8 | % |
Note: | Numbers may not total due to rounding. |
(1) | Based on GDP calculated in constant |
(2) | Preliminary figures. |
(3) | GDP figures relating to agricultural production set forth in this table and elsewhere herein are based on figures for “agricultural years,” with the definition of the relevant “agricultural year” varying from crop to crop based on the season during which it is grown. Calendar year figures are used for the other components of GDP. |
Source: INEGI.
According to preliminary figures, Mexico’s GDP increased by 2.4%2.0% in real terms during 20162018. This reflects slower growth as compared to 2015. This increase was due to an increase of 4.1%2.1% in 2017, mainly due to low industrial activity throughout the primary activities sector as well as important increasesyear and a negative trend in some tertiary activities such as 10.1%investment. In particular, investment was affected by a drop in information, 7.7%construction and production of machinery, global economic slowdown and a greater level of uncertainty regarding policies to be implemented by the administration. The decreases in financeindustrial activity and insurance, 7.0%investment were partially offset by an increase in professional, scientificinternal demand, which was boosted by increasing consumption of goods and technical services and 5.8% in other services (except public administration). Such increases compensated for the 6.4% decrease in the mining sector, the only sector that contracted in 2016.services.
Employment and Labor
According to preliminaryTasa de Desocupación Abierta (open unemployment rate) figures, Mexico’s unemployment rate was 3.5%3.4% as of December 31, 2016,2018, a 0.7% decrease0.3 percentage point increase from the rate registered on December 31, 2015.2017. As of December 31, 2016,2018, the economically active population in Mexico 15 years of age or older consisted of 54.0was 56.0 million individuals.
On December 20, 2018, President López Obrador, along with authorities of theSecretaría del Trabajo y Previsión Social (Ministry of Labor) and theComisión Nacional de los Salarios Mínimos (National Minimum Wage Commission), announced a new policy for determining the minimum wage. Under the new policy, Mexico will have two minimum wages: one rate applicable to municipalities located on the border with the United States, which were included in a newly created Northern Border Free Trade Zone, and a different rate applicable to the rest of Mexico.
Along with the new policy, the National Minimum Wage Commission announced the following new minimum wages, which have been in effect since January 1, 2019: Ps. 176.72 per day for municipalities in the Northern Border Free Trade Zone, a 100% increase from the minimum wage of Ps. 88.36 per day in effect prior to January 1, 2019, and Ps. 102.68 per day for the rest of Mexico, a 16.2% increase from the prior minimum wage.
Principal Sectors of the Economy
Manufacturing
The following table sets forth the change in industrial manufacturing output by sector for the periods indicated.
Industrial Manufacturing Output Differential by Sector
(% change against prior years)(1)
2011 | 2012(2) | 2013 | 2014 | 2015(2) | 2016(2) | 2013 | 2014 | 2015(2) | 2016(2) | 2017(2) | 2018(2) | |||||||||||||||||||||||||||||||||||||
Food | 2.2 | % | 2.6 | % | 0.9 | % | 0.6 | % | 2.0 | % | 4.7 | % | 0.9% | 0.2% | 2.2% | 2.7% | 1.8% | 1.8% | ||||||||||||||||||||||||||||||
Beverage and tobacco products | 4.6 | 2.6 | (0.5 | ) | 3.1 | 9.8 | 4.1 | 0.7 | 3.3 | 5.3 | 7.6 | 1.9 | 5.6 | |||||||||||||||||||||||||||||||||||
Textile mills | (4.4 | ) | 3.1 | (2.7 | ) | (1.7 | ) | 3.0 | (3.1 | ) | (2.4) | (1.9) | 5.0 | (0.7) | (0.8) | 2.0 | ||||||||||||||||||||||||||||||||
Textile product mills | (2.9 | ) | (0.1 | ) | 3.5 | 7.0 | 2.3 | 7.7 | 0.4 | 5.9 | 6.9 | 3.9 | (10.8) | 6.6 | ||||||||||||||||||||||||||||||||||
Apparel | 0.2 | (0.5 | ) | 3.3 | (2.8 | ) | 19.2 | (8.4 | ) | 3.5 | (0.2) | 4.1 | (1.7) | 0.5 | 0.8 | |||||||||||||||||||||||||||||||||
Leather and allied products | (0.7 | ) | 3.5 | (0.6 | ) | (1.7 | ) | 4.0 | 0.5 | (0.8) | (0.7) | 1.9 | (0.7) | �� | (1.3) | (1.9) | ||||||||||||||||||||||||||||||||
Wood products | 5.1 | 13.0 | (2.2 | ) | 1.0 | 0.6 | 0.1 | (2.5) | 1.4 | 3.8 | (4.7) | 4.8 | (2.1) | |||||||||||||||||||||||||||||||||||
Paper | (0.8 | ) | 4.8 | 2.1 | 3.1 | 3.3 | 2.2 | 2.3 | 2.7 | 3.5 | 3.5 | 2.1 | 1.2 | |||||||||||||||||||||||||||||||||||
Printing and related support activities | 4.2 | (4.1 | ) | (6.9 | ) | (2.7 | ) | 6.2 | (2.7 | ) | (7.8) | (0.2) | 2.0 | 0.4 | (1.7) | 7.4 | ||||||||||||||||||||||||||||||||
Petroleum and coal products | (3.6 | ) | 1.1 | 3.3 | (4.5 | ) | 1.7 | (25.6 | ) | 4.1 | (4.8) | (7.1) | (13.1) | (18.4) | (16.9) | |||||||||||||||||||||||||||||||||
Chemicals | (0.1 | ) | (0.3 | ) | 0.8 | (1.3 | ) | (1.7 | ) | (5.8 | ) | 1.2 | (1.3) | (3.6) | (2.8) | (1.7) | (0.5) | |||||||||||||||||||||||||||||||
Plastics and rubber products | 6.7 | 9.0 | (1.9 | ) | 6.5 | 4.5 | 1.6 | (5.4) | 2.5 | 5.8 | (0.9) | 3.4 | 1.3 | |||||||||||||||||||||||||||||||||||
Nonmetallic mineral products | 3.7 | 2.3 | (3.1 | ) | 2.7 | 3.3 | 4.9 | (2.5) | 2.8 | 6.6 | 2.3 | 2.4 | 0.8 | |||||||||||||||||||||||||||||||||||
Primary metals | 4.3 | 3.8 | 2.3 | 8.4 | (7.6 | ) | 7.8 | (0.1) | 8.1 | (5.6) | 1.9 | 1.5 | (1.8) | |||||||||||||||||||||||||||||||||||
Fabricated metal products | 7.0 | 3.9 | (3.3 | ) | 7.8 | 2.7 | 8.6 | (9.2) | 5.4 | 3.4 | 0.8 | 0.7 | 1.3 | |||||||||||||||||||||||||||||||||||
Machinery | 13.3 | 5.5 | 0.2 | 1.6 | (2.0 | ) | 9.4 | (11.9) | 9.0 | 0.9 | 1.6 | 8.3 | 1.4 | |||||||||||||||||||||||||||||||||||
Computers and electronic products | 6.7 | 0.5 | 3.6 | 11.1 | 9.8 | 5.8 | 5.1 | 12.7 | 7.5 | 6.1 | 6.8 | 3.7 | ||||||||||||||||||||||||||||||||||||
Electrical equipment, appliances and components | (1.1 | ) | 1.7 | (2.0 | ) | 8.8 | 7.1 | 4.7 | (1.9) | 6.8 | 5.8 | 4.5 | 1.0 | 1.9 | ||||||||||||||||||||||||||||||||||
Transportation equipment | 16.6 | 13.9 | 5.8 | 12.4 | 8.9 | 3.6 | 5.9 | 9.6 | 6.8 | 1.2 | 8.3 | 3.8 | ||||||||||||||||||||||||||||||||||||
Furniture and related products | 1.2 | 2.8 | (5.8 | ) | (1.8 | ) | (20.6 | ) | (9.4 | ) | (5.8) | (3.4) | 7.2 | (3.4) | (4.2) | 6.5 | ||||||||||||||||||||||||||||||||
Miscellaneous | 5.1 | 0.4 | 0.0 | 6.4 | 6.0 | (9.4 | ) | 0.3 | 3.2 | 3.3 | 3.9 | 6.1 | (2.9) | |||||||||||||||||||||||||||||||||||
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Total expansion/contraction | 4.6 | 4.1 | 1.2 | 4.1 | 3.1 | 1.8 | 0.5 | 4.0 | 2.7 | 1.5 | 2.8 | 1.7 | ||||||||||||||||||||||||||||||||||||
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(1) Percent change against prior years. Percent change reflects differential in constant 2013 pesos. |
(2) Preliminary figures.
Source: INEGI.
Financial System
Monetary Policy, Inflation and Interest Rates
TheBanco de México’s M1 money supply of Mexico is the summonetary aggregate consists of bills and coins held by the public,plus: (1) checking accounts denominated in local currency and foreign currency, pluscurrency; (2) interest-bearing deposits denominated in pesos and operated by debit cards, pluscards; and (3) savings and loan deposits. M2 consists of M1,plus: (1) bank deposits; (2) Mexican Government-issued securities; (3) securities issued by firms andnon-bank financial intermediaries; and (4) Mexican Government and INFONAVIT liabilities related to the Retirement Savings System. M3 consists of M2,plus financial assets issued in Mexico and held bynon-residents. M4 consists of M3,plus deposits abroad at foreign branches and agencies of Mexican banks.
The following table shows Mexico’s M1 and M4 money supply aggregates at each of the dates indicated. The data in this table was calculated in accordance with the methodology for calculating money supply aggregates adopted on January 31, 2018 to reflect the Monetary and Financial Statistics Manual and Compilation Guide published by the International Monetary Fund (IMF) in 2016 and applied to all historical figures from December 31, 2000.
Money Supply
Money Supply | ||||||||||||||||||||||||
December 31, | ||||||||||||||||||||||||
2013 | 2014 | 2015 | 2016 | 2017 | 2018(1) | |||||||||||||||||||
(in millions of nominal pesos) | ||||||||||||||||||||||||
M1: | ||||||||||||||||||||||||
Bills and coins | Ps. 792,928 | Ps. | 928,052 | Ps. | 1,087,271 | Ps. 1,261,697 | Ps. 1,372,884 | Ps. 1,494,949 | ||||||||||||||||
Checking deposits | ||||||||||||||||||||||||
In domestic currency | 1,080,978 | 1,168,417 | 1,299,508 | 1,472,683 | 1,630,929 | 1,746,611 | ||||||||||||||||||
In foreign currency | 189,020 | 232,467 | 333,094 | 469,185 | 537,826 | 506,151 | ||||||||||||||||||
Interest-bearing peso | 438,012 | 534,973 | 614,312 | 647,414 | 702,744 | 739,278 | ||||||||||||||||||
Savings and loan deposits | 11,097 | 12,598 | 14,560 | 17,332 | 19,635 | 23,797 | ||||||||||||||||||
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Total M1 | Ps. 2,511,369 | Ps. | 2,876,506 | Ps. | 3,348,743 | Ps. 3,868,311 | Ps. 4,264,018 | Ps. 4,510,786 | ||||||||||||||||
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M4 | Ps. 8,648,389 | Ps. | 9,630,957 | Ps. | 10,127,696 | Ps.10,818,147 | Ps.11,705,849 | Ps. 12,285,498 |
December 31, | ||||||||||||||||||||
2012 | 2013 | 2014 | 2015 | 2016(1) | ||||||||||||||||
(in millions of nominal pesos) | ||||||||||||||||||||
M1: | ||||||||||||||||||||
Bills and coins | Ps.734,034 | Ps.792,928 | Ps.928,777 | Ps.1,088,016 | Ps.1,263,001 | |||||||||||||||
Checking deposits | ||||||||||||||||||||
In domestic currency | 979,413 | 1,082,702 | 1,170,381 | 1,301,904 | 1,475,985 | |||||||||||||||
In foreign currency | 163,611 | 189,020 | 232,467 | 333,094 | 469,185 | |||||||||||||||
Interest-bearing peso deposits | 393,231 | 438,012 | 534,973 | 614,312 | 648,032 | |||||||||||||||
Savings and loan deposits | 9,760 | 11,097 | 12,598 | 14,560 | 16,614 | |||||||||||||||
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Total M1 | Ps.2,280,049 | Ps.2,513,758 | Ps.2,879,196 | Ps.3,351,975 | Ps. 3,872,817 | |||||||||||||||
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M4 | Ps.10,684,898 | Ps.11,658,729 | Ps.13,107,550 | Ps.13,858,271 | Ps.14,969,884 |
Note: Numbers may not total due to rounding.
During 2016, consumer(1) Preliminary figures.
Source: Banco de México.
Consumer inflation for 2018 was 3.4%4.8%, which was above theBanco de México’s 3.0% (+/- 1.0%) target inflation for the year and 1.32.0 percentage points higherlower than the 2.1%6.8% consumer inflation for 2015. According to2017. This was mainly a combined result of the monetary policy actions implemented byBanco de México, inflation was in the higher range of the expected deviationwhich helped anchor(+/-1.0%)mid- from the 3.0% target due mostly to a depreciation in the Mexican peso given the complicated external environment after the presidential election in the United States and inflation associated with the price increases in some agricultural productslong-term expectations, as well as lower annual growth rates in certain energy products,prices, such as was the case withLP gas, gasoline in the northern border.and electricity rates.
The following table shows, in percentage terms, the changes in price indices and annual increases in the minimum wage for the periods indicated.
Changes in Price Indices
National Producer Price Index(1)(2) | National Consumer Price Index(1) | Increase in Minimum Wage | National Producer Price Index(1)(3)(4)(5) | National Consumer Price Index(1)(2) | Increase in Minimum Wage(6) | |||||||||||||
2011 | 6.9 | 3.8 | 4.1 | |||||||||||||||
2012 | 1.8 | 3.6 | 4.6 | |||||||||||||||
2013 | 1.6 | 4.0 | 3.9 | 1.6 | 4.0 | 3.9 | ||||||||||||
2014 | 3.3 | 4.1 | 3.9 | 3.3 | 4.1 | 3.9 | ||||||||||||
2015 | 2.8 | 2.1 | 6.9 | 2.8 | 2.1 | 6.9 | ||||||||||||
2016 | 8.5 | 3.4 | 4.2 | 8.5 | 3.4 | 4.2 | ||||||||||||
2017 | 6.8 | 4.7 | 10.4 | |||||||||||||||
2018 | 4.8 | 6.4 | – | |||||||||||||||
2019 | – | |||||||||||||||||
January | 4.4 | 5.0 | – | |||||||||||||||
February | 3.9 | 4.5 | – |
(1) For annual figures, changes in price indices are calculated each December.
(2) For 2013, 2014, 2015, 2016 and 2017 National Consumer Price Index takes the second half of December 2010 as a base date. For 2018 and 2019 National Consumer Price Index uses the second half of July 2018 as a base date.
(3) National Producer Price Index figures represent the changes in the prices for basic merchandise and services (excluding oil prices). The index is based on a methodology implemented
in June 2012.
(4) 2018 and 2019 figures are preliminary
(5) National Producer Price Index takes June 2012 as a base date.
(6) Increase in Minimum Wage numbers for 2019 and 2019 not available.
Sources: INEGI; Ministry of Labor.
During 2016,2018, interest rates on28-dayCetes averaged 4.2%7.6%, as compared to 3.0% during 2015.6.7% in 2017. Interest rates on91-dayCetes averaged 4.4%7.8%, as compared to 3.1% during 2015.
OnFor March 9, 2017,28, 2019, the28-dayCetes rate was 6.3%7.9% and the91-dayCetes rate was 6.5%8.1%.
Exchange Controls and Foreign Exchange Rates
On March 15, 2017,28, 2019, the peso/dollar exchange rate closed at Ps. 19.580319.3793 = U.S. $1.00,$1.00, a 5.2%1.6% appreciation in dollar terms as compared to the rate on December 31, 2016.2018. The peso/U.S. dollar exchange rate announcedpublished byBanco de México on March 14, 201726, 2019 (which took effect on the second business day thereafter) was Ps. 19.688019.3500 = U.S. $1.00.$1.00.
Securities Markets
The BMVBolsa Mexicana de Valores (Mexican Stock Exchange, or BMV) is the onlylargest authorized stock exchange involved in the listing and trading of equity and debt securities in Mexico. Upon the consummation of the initial public offering of its shares on June 18, 2008, theThe BMV was transformed from asociedad anónima de capital variable (private company) tois asociedad anónima bursátil de capital variable (public company). In connection with the initial public offering of shares, certain of the former stockholders of the BMV (banks and brokerage houses) created a control trust into which they deposited more than 50% of the issued and outstanding shares of the BMV, for purposes of voting such shares in the future as a single block. Both debt and equity securities are listed and traded on the BMV, including stocks and bonds of private sector corporations, equity certificates or shares issued by banks, commercial paper, bankers’ acceptances, certificates of deposit, Mexican Government debt and special hedging instruments linked to the dollar. Currently, institutional investors are the most active participants in the BMV, although retail investors also play a role in the market. instruments.
The Mexican equity market is one of Latin America’s largest in terms of market capitalization, but it remains relatively small and illiquid compared to major world markets.
On August 29, 2017, as part of its program to develop the Mexican securities market, the Ministry of Finance and Public Credit published a concession for a new stock exchange. The newBolsa Institutional de Valores (Institutional Stock Exchange, or BIVA) began operations on July 26, 2018.
The BMV publishes theÍndice de Precios y Cotizaciones (Stock Market Index, or IPC) based on a group of the thirty-five most actively traded shares.
AtOn March 14, 2017,28, 2019, the IPC stood at 47,088.042,942 points, representing a 3.2%3.1% increase from the level at December 30, 2016.31, 2018.
Foreign Trade and Balance of Payments
Foreign Trade
The following table provides information about the value of Mexico’s merchandise exports and imports (excluding tourism) for the periods indicated.
Exports and Imports
2012 | 2013 | 2014 | 2015 | 2016(1) | 2013 | 2014 | 2015 | 2016 | 2017 | 2018(1) | ||||||||||||||||||||||||||||||||||
(in millions of dollars, except average price of the Mexican crude oil mix) | (in millions of U.S. dollars, except average price of the Mexican crude oil mix) | |||||||||||||||||||||||||||||||||||||||||||
Merchandise exports (f.o.b.) | ||||||||||||||||||||||||||||||||||||||||||||
Oil and oil products | $ | 52,956 | $ | 49,482 | $ | 42,586 | $ | 23,173 | $ | 18,743 | U.S.$ | 49,481 | U.S.$ | 42,369 | U.S.$ | 23,100 | U.S.$ | 18,825 | U.S.$ | 23,701 | U.S.$ | 30,572 | ||||||||||||||||||||||
Crude oil | 46,852 | 42,712 | 35,855 | 18,524 | 15,500 | 42,712 | 35,638 | 18,451 | 15,582 | 20,023 | 26,483 | |||||||||||||||||||||||||||||||||
Other | 6,103 | 6,770 | 6,731 | 4,648 | 3,243 | 6,770 | 6,731 | 4,648 | 3,243 | 3,678 | 4,089 | |||||||||||||||||||||||||||||||||
Non-oil products | 317,814 | 330,534 | 354,542 | 357,450 | 355,187 | 330,534 | 354,542 | 357,450 | 355,122 | 385,700 | 420,000 | |||||||||||||||||||||||||||||||||
Agricultural | 10,914 | 11,246 | 12,181 | 12,971 | 14,743 | 11,246 | 12,181 | 12,971 | 14,672 | 15,828 | 16,255 | |||||||||||||||||||||||||||||||||
Mining | 4,906 | 4,714 | 5,064 | 4,505 | 4,368 | 4,714 | 5,064 | 4,505 | 4,368 | 5,427 | 6,232 | |||||||||||||||||||||||||||||||||
Manufactured goods(2) | 301,993 | 314,573 | 337,297 | 339,975 | 336,076 | 314,573 | 337,297 | 339,975 | 336,081 | 364,445 | 397,514 | |||||||||||||||||||||||||||||||||
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Total merchandise exports | 370,770 | 380,015 | 397,129 | 380,623 | 373,930 | 380,015 | 396,912 | 380,550 | 373,947 | 409,401 | 450,572 | |||||||||||||||||||||||||||||||||
Merchandise imports (f.o.b.) | ||||||||||||||||||||||||||||||||||||||||||||
Consumer goods | 54,272 | 57,329 | 58,299 | 56,279 | 51,950 | 57,329 | 58,299 | 56,279 | 51,950 | 57,333 | 63,111 | |||||||||||||||||||||||||||||||||
Intermediate goods(2) | 277,911 | 284,823 | 302,031 | 297,253 | 294,994 | 284,823 | 302,031 | 297,713 | 295.395 | 322,022 | 355,280 | |||||||||||||||||||||||||||||||||
Capital goods | 38,568 | 39,057 | 39,647 | 41,700 | 40,120 | 39,057 | 39,647 | 41,240 | 39,719 | 41,014 | 45,885 | |||||||||||||||||||||||||||||||||
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Total merchandise imports | 370,752 | 381,210 | 399,977 | 395,232 | 387,065 | 381,210 | 399,977 | 395,232 | 387,064 | 420,369 | 464,277 | |||||||||||||||||||||||||||||||||
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Trade balance | $ | 18 | $ | (1,195 | ) | $ | (2,849 | ) | $ | (14,609 | ) | $ | (13,135 | ) | U.S.$ | (1,195 | ) | U.S.$ | (3,066 | ) | U.S.$ | (14,683 | ) | U.S.$ | (13,118 | ) | U.S.$ | (10,968 | ) | U.S.$ | (13,704 | ) | ||||||||||||
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Average price of Mexican oil mix(3) | $ | 102.0 | $ | 98.4 | $ | 86.0 | $ | 43.1 | $ | 35.6 | U.S.$ | 98.44 | U.S.$ | 85.48 | U.S.$ | 43.12 | U.S.$ | 35.65 | U.S.$ | 46.79 | U.S.$ | 61.34 |
Relation to the Mexican Government
Petróleos Mexicanos and the subsidiary entities are public entities of the Mexican Government, rather than Mexican corporations. Therefore, we do not have the power to issue shares of equity securities evidencing
ownership interests and are not required, unlike Mexican corporations, to have multiple shareholders. However, our financing obligations do not constitute obligations of and are not guaranteed by the Mexican Government. The President of Mexico appoints five of the ten members of the Board of Directors of Petróleos Mexicanos as representatives of the Mexican Government, including the Secretary of Energy, who serves as the Chairperson of the Board of Directors of Petróleos Mexicanos, and the Secretary of Finance and Public Credit. The President of Mexico also appoints five independent members to the Board of Directors of Petróleos Mexicanos, whose appointments are ratified by the Senate.
Pursuant to the Petróleos Mexicanos Law, the consolidated annual budget of Petróleos Mexicanos and the subsidiary entities, including our financing program, must be submitted to the Ministry of Finance and Public Credit, which has the authority to adjust our financial balance goal and the ceiling on our wage and salary expenditures for the fiscal year. The Mexican Government incorporates our consolidated annual budget and financing program into its budget, which the Chamber of Deputies must approve each year. The Mexican Congress has the authority to adjust our annual financial balance goal at any time by amending the applicable law. In addition, any adjustment proposed by the Board of Directors of Petróleos Mexicanos to change our annual financial balance goal or increase the limit on our wage and salary expenditures or our financing program must be approved by the Chamber of Deputies.
Inflation
Mexico experienced high inflation during the 1980s. The annual rate of inflation (as measured by the change in the NCPI) decreased from a high of 159.2% in 1987 to 11.9% in 1992, 8.0% in 1993 and 7.1% in 1994. However, the economic events that followed the devaluation of the peso against the U.S. dollar in late 1994 and 1995, along with turbulence in international financial markets, caused inflation to increase to 52.0% in 1995. After 1995, inflation decreased to 27.7% in 1996 and 15.7% in 1997. The annual inflation rate was 3.6% in 2012, 4.0% in 2013, 4.1% in 2014, 2.1% in 2015, and 3.4% in 2016.2016, 6.8% in 2017 and 4.8% in 2018.
We do not use inflation accounting, unless the economic environment in which we operate qualifies as “hyperinflationary,” as defined by IFRS. In accordance with IFRS, the threshold for considering an economy hyperinflationary, and consequently, adjusting certain line items in the financial statements for inflation, is reached when the cumulativethree-year inflation rate is 100% or more. Because the economic environment in thethree-year periods ended December 31, 2014, 20152016, 2017 and 20162018 did not qualify as hyperinflationary, we did not use inflation accounting to prepare our consolidated financial statements as of December 31, 2014, 20152016, 2017 and 20162018 included herein.
Consolidation
Our financial statements consolidate the results of Petróleos Mexicanos, the subsidiary entities and the subsidiary companies. For further information aboutCertainnon-material subsidiary companies are not consolidated and are accounted for under either the basis for our consolidation see Note 3(a).cost method or the equity method. For a list of ourthe consolidated subsidiary companies, seeNote 43-A and Note 5 to our consolidated financial statements included herein.
Export Agreements
Though Mexico is not a member of OPEC, it has periodically announced increases and decreases in our crude oil exports, reflecting production revisions made by other oil producing countries in order to contribute to crude oil prices stabilization. However, we have not changed our export goals because of announcements made by OPEC since 2004, and we believe that Mexico has no plans to change our current level of crude oil exports.
Results of Operations of Petróleos Mexicanos, the Subsidiary Entities and the Subsidiary Companies—For the Year Ended December 31, 20162018 Compared to the Year Ended December 31, 20152017
Total Sales
Total sales decreasedincreased by 7.4%20.3%, or Ps. 86.9284.1 billion, in 2016,2018, from Ps. 1,166.41,397.0 billion in 20152017 to Ps. 1,079.51,681.2 billion in 2015,2018, primarily due to a decreaseincreases in our domestic sales following the decrease in average sales prices of our petroleum products and the weighted average price of Mexican crude oil.
Domestic Sales
Domestic sales increased by 11.8%, from Ps. 877.4 billion in 2017 to Ps. 980.6 billion in 2018, primarily due to an increase in the average prices of gasoline, diesel, fuel oil and jet fuel. Domestic sales of petroleum products increased by 14.7% in 2018, from Ps. 738.9 billion in 2017 to Ps. 847.5 billion in 2018, primarily due to a 19.7% increase in the average price of gasoline, a 20.1% increase in the average price of diesel, a 46.0% increase in the average price of fuel oil and a 38.8% increase in the average price of jet fuel. These price increases were partially offset by a 14.0% decrease in the volume of sales of liquefiedpremium gasoline, primarily due to a decrease in demand from retail service stations. Domestic sales of natural gas decreased by 28.2% in Mexico,2018, from Ps. 70.9 billion in each case,2017 to Ps. 50.9 billion in 2018, primarily due to a 23.1% decrease in the average sales price of natural gas and a 6.6% decrease in the volume of sales of natural gas, mainly due to competition. Domestic petrochemical sales (including sales of certainby-products of the petrochemical production process) increased by 43.0%, from Ps. 16.0 billion in 2017 to Ps. 22.9 billion in 2018, primarily as a result of an increase in the volume of sales of polyethylene.
Export Sales
Export sales increased by 36.1%in peso terms in 2018 (with U.S.dollar-denominated export revenues translated to pesos at the exchange rate on the date of the corresponding export sale), from Ps. 508.5 billion in 2017 to Ps. 691.9 billion in 2018. This increase was primarily due to a 31.8% increase in the weighted average Mexican crude oil export price in 2018, from U.S. $47.26 per barrel in 2017 to U.S. $62.29 per barrel in 2018.
Excluding the trading activities of the Trading Companies (in order to show only the amount of export sales related to the subsidiary entities), export sales by the subsidiary entities to the Trading Companies and third parties increased by 32.8%in peso terms, from Ps. 430.6 billion in 2017 to Ps. 571.8 billion in 2018. In U.S. dollar terms, excluding the trading activities of the Trading Companies, total export sales (which are U.S.dollar-denominated) increased by 30.1% in 2018, from U.S. $22.7 billion in 2017 to U.S. $29.7 billion in 2018. This was primarily due to the 31.8% increase in the weighted average Mexican crude oil export price. The trading and export activities of the Trading Companies generated additional marginal revenues of Ps. 120.0 billion in 2018, 54.5% higher in peso terms than the Ps. 77.9 billion of additional revenues generated in 2017, mainly due to an increase in the average prices of diesel and gasoline. Export sales ofPMI-NASA, one of our principal Trading Companies, increased by 35.6% in 2018, from Ps. 65.8 billion in 2017 to Ps. 89.2 billion in 2018.
Crude oil and condensate export sales accounted for 89.7% of total export sales (excluding the trading activities of the Trading Companies) in 2018, as compared to 88.4% in 2017. These crude oil and condensate sales increased in peso terms by 34.9% in 2018, from Ps. 380.5 billion in 2017 to Ps. 513.2 billion in 2018, and in U.S. dollar terms by 32.3%, from U.S. $20.1 billion in 2017 to U.S. $26.6 billion in 2018. The weighted average Mexican crude oil export price in 2018 was U.S. $62.29 per barrel, 31.8% higher than the weighted average price of U.S. $47.26 per barrel in 2017.
Export sales of petroleum products, including natural gas and natural gas liquids, by our industrial transformation segment decreased from 10.7% of total export sales (excluding the trading activities of the Trading Companies) in 2017 to 9.2% of those export sales in 2018. Export sales of petroleum products, including products derived from natural gas and natural gas liquids, increased by 15.2%, from Ps. 46.0 billion in 2017 to Ps. 53.0 billion in 2018, primarily due to an increase in the average sales price of fuel oil and naphthas.
Export sales of petrochemical products (including certainby-products of the petrochemical process) increased by Ps. 1,043.4 million in 2018, from Ps. 4,625.3 million in 2017 to Ps. 5,668.7 million in 2018, primarily due to an increase in export sales by Fertinal in 2018.
Services Income
Services income decreased by 21.6% in 2018, from Ps. 11.1 billion in 2017 to Ps. 8.7 billion in 2018, primarily as a result of the recognition of transportation services as part of sales in 2018.
Cost of Sales
Cost of sales increased by 19.4%, from Ps. 1,004.2 billion in 2017 to Ps. 1,199.5 billion in 2018. This increase was mainly due to: (1) an increase of Ps. 175.0 billion in product purchases, mainly a Ps. 123.0 billion increase in the value of imports, primarily Magna gasoline, diesel and jet fuel, mainly due to an increase in the price of imports, (2) a Ps. 24.2 billion increase in hydrocarbon exploration and extraction duties and taxes due to higher average sales prices in 2018, (3) a Ps. 16.5 billion increase innon-operating losses resulting from the illicit market in fuels and (4) a Ps. 15.8 billion increase in the cost of unsuccessful wells and exploration expenses. This increase was partially offset by a Ps. 3.3 billion decrease in depreciation of fixed assets and amortization of wells, primarily due to the decreased value of assets to be depreciated as a result of the impairment recorded in 2017.
Impairment of Wells, Pipelines, Properties, Plant and Equipment
Impairment of wells, pipelines, properties, plant and equipment decreased by Ps. 172.8 billion in 2018, from a net impairment of Ps. 151.4 billion in 2017 to a net reversal of impairment of Ps. 21.4 billion in 2018, mainly due to a decrease in the discount rate used to calculate the value in use of our Cantarell business unit from 14.40% in 2017 to 7.03% in 2018, as well lower discount rates used to calculate the value in use of certain other business units, including Aceite Terciario del Golfo.
General Expenses
General expenses increased by Ps. 16.9 billion, from Ps. 141.8 billion in 2017 to Ps. 158.7 billion in 2018, mainly due to an increase in administrative expenses relating to the contributions to the defined contribution pension plan and incentives to encourage employees to migrate from the defined benefit pension plan to the defined contribution plan and the net periodic cost of employee benefits.
Other Revenues/Expenses, Net
Other revenues, net, increased by Ps. 17.9 billion in 2018, from other revenues, net, of Ps. 5.2 billion in 2017 to other revenues, net, of Ps. 23.1 billion in 2018. This increase was primarily due to contracts signed for participation rights in theCardenas-Mora, Misión, Santuario and Ogarrio blocks in the amount of Ps. 14.2 billion, partially offset by the recognition of a Ps. 12.5 billion loss in the disposal of wells, pipelines, property, plant and equipment.
Financing Income
Financing income increased by Ps. 15.4 billion in 2018, from Ps. 16.2 billion in 2017 to Ps. 31.6 billion in 2018, primarily due to: (1) the recognition of the premium from notes exchanged in February 2018, (2) interest income on the promissory notes issued by the Mexican Government in relation to our pension liabilities, (3) increased interest income on other financial products and securities as a result of higher interest rates and (4) gains on the plugging of wells as a result of a lower discount rate.
Financing Cost
Financing cost increased by 2.6% in 2018, from Ps. 117.6 billion in 2017 to Ps. 120.7 billion in 2018, primarily due to an increase in interest expense in 2018 following higher levels of indebtedness.
Derivative Financial Instruments Income (Cost)
Derivative financial instruments income, net, decreased by Ps. 47.6 billion, from a net income of Ps. 25.3 billion in 2017 to a net cost of Ps. 22.3 billion in 2018, primarily due to the appreciation of the U.S. dollar relative to other foreign currencies we hedge, such as euros, Japanese yen and pounds.
Exchange Gain, Net
A substantial portion of our indebtedness, 86.9% as of December 31, 2018, is denominated in foreign currencies. Our exchange gain, net, increased by Ps. 0.5 billion in 2018, from an exchange gain of Ps. 23.2 billion in 2017 to an exchange gain of Ps. 23.7 billion in 2018, primarily as a result of a 0.5% appreciation of the peso relative to the U.S. dollar in 2018. Due to the fact that 100.0% of our revenues from exports and domestic sales are referenced to prices denominated in U.S. dollars, and only 75.0% of our expenses, including financing costs, are linked to U.S. dollar prices, the appreciation of the peso relative to the U.S. dollar had a favorable effect on our ability to meetpeso-denominated obligations. The value of the peso in U.S. dollar terms appreciated by 0.5% in 2018, from Ps. 19.7867 per U.S. $1.00 on December 31, 2017 to Ps. 19.6829 per U.S. $1.00 on December 31, 2018, as compared to a 4.3% appreciation of the peso in U.S. dollar terms in 2017.
Taxes, Duties and Other
Hydrocarbon extraction duties and other duties and taxes paid increased by 38.6% in 2018, from Ps. 333.0 billion in 2017 to Ps. 461.6 billion in 2018, primarily due to the 38.6% increase in the weighted average price of the Mexican crude oil export price, from U.S. $47.26 per barrel in 2017 to U.S. $62.29 per barrel in 2018. Income related duties and taxes represented 27.5% of total sales in 2018, as compared to 23.8 % of total sales in 2017.
Net Income/Loss
In 2018, we had a net loss of Ps. 180.4 billion from Ps. 1,681.2 billion in total sales revenues, as compared to a net loss of Ps. 280.9 billion from Ps. 1,397.0 billion in total sales revenues in 2017. This decrease in net loss relative to 2017 was primarily explained by:
a Ps. 284.1 billion increase in total sales, mainly due to an increase in the average price of crude oil and natural gas;
a Ps. 172.9 billion decrease in impairment of wells, pipelines, properties, plant and equipment;
a Ps. 17.9 billion increase in other revenues, net;
a Ps. 1.2 billion increase in profit sharing in joint ventures, associates and other; and
a Ps. 0.5 billion increase in exchange gain, net.
These effects were partially offset by:
a Ps. 195.3 billion increase in cost of sales, mainly due to an increase in total sales;
a Ps. 128.6 billion increase in taxes and other duties;
a Ps. 35.3 billion increase in financing cost, net; and
a Ps. 16.8 billion increase in general expenses.
Other Comprehensive Results
In 2018, we had a net gain of Ps. 223.4 billion in other comprehensive results, as compared to a net gain of Ps. 11.5 billion in 2017, primarily due to a decrease in the reserve for employee benefits that resulted from the increase in the discount rate and expected rate of return on plan assets used in the actuarial computation method from 7.9% in 2017 to 9.3% in 2018.
Results of Operations of Petróleos Mexicanos, the Subsidiary Entities and the Subsidiary Companies—For the Year Ended December 31, 2017 Compared to the Year Ended December 31, 2016
Total Sales
Total sales increased by 30.1%, or Ps. 322.9 billion, in 2017, from Ps. 1,074.1 billion in 2016 to Ps. 1,397.0 billion in 2017, primarily due to an increase in the volume of our domestic and export sales, mainly due to an increase in the average sales prices of our petroleum products for the reasons explained in further detail below. This decrease in total sales was partially offset by a 12.7% increase in services income.
Domestic Sales
Domestic sales decreasedincreased by 10.2%30.9% in 2016,2017, from Ps. 746.2 billion in 2015 to Ps. 670.0 billion in 2016 to Ps. 877.4 billion in 2017, primarily due to a decreasean increase in the average prices of fuel oil, diesel, gasoline and liquefied natural gas. Domestic sales of petroleum products decreasedincreased by 9.5%39.6% in 2016,2017, from Ps. 585.0 billion in 2015 to Ps. 529.3 billion in 2016 to Ps. 738.9 billion in 2017, primarily due to a 5.5% decrease34.1% increase in the average price of gasoline, a 15.9% decrease60.7% increase in the average price of diesel, a 26.2% increase in the average price of jet fuel and a 36.5% decrease78.9% increase in the average price of fuel oil as a result of decreased demand from the CFE.oil. These price decreasesincreases were partially offset by a 4.3% increase27.1% decrease in the volume of sales of premium gasoline, primarily due to an increasea decrease in demand from retail service stations and an 8.1% increasea 15.8% decrease in the volume of sales of jet fuel.liquefied natural gas. Domestic sales of natural gas increased by 9.2%19.0% in 2017, from Ps. 59.6 billion in 2016 fromto Ps. 54.570.9 billion in 2015 to Ps. 59.5 billion in 2016,2017, primarily due to a 6.4% increase in the volume of sales of natural gas and a 2.9%43.0% increase in the average sales price of natural gas, partially offset by a 16.8% decrease in the volume of sales of natural gas. Domestic sales of liquefied natural gas decreased by 34.9%3.7% in 2016,2017, from Ps. 78.2 billion in 2015 to Ps. 50.9 billion in 2016 to Ps. 49.0 billion in 2017, primarily as a result of a 27.1%15.8% decrease in the volume of sales of liquefied natural gas due to the market share loss that resulted from increased competition due to the liberalization of imports that began in 2016, andwhich was partially offset by a 10.8% decrease14.4% increase in the average sales price of liquefied natural gas. Domestic petrochemical sales (including sales of certainby-products of the petrochemical production process) increaseddecreased by 6.0%47.0%, from Ps. 28.530.2 billion in 20152016 to Ps. 30.216.0 billion in 2017, primarily as a result of Ps. 2.6 billiona decrease in petrochemicalthe volume of sales by Grupo Fertinal.of polyethylene.
Export Sales
Export sales decreasedincreased by 3.0%28.7%in peso terms in 20162017 (with U.S.dollar-denominated export revenues translated to pesos at the exchange rate on the date of the corresponding export sale), from Ps. 407.2 billion in 2015 to Ps. 395.1 billion in 2016.2016 to Ps. 508.5 billion in 2017. This decreaseincrease was primarily due to a 7.4% decrease in the volume of petroleum product exports, a 17.4% decrease33.9% increase in the weighted average Mexican crude oil export price, an 18.5% decreasea 63.4% increase in the export sales of fuel oil, mainly due to a decreasean increase in the average sales price and volume of sales of fuel oil, and a 13.7% decrease4.5% increase in the export sales of naphthas.naphthas and a Ps. 1,087.8 million increase in the export sales of petrochemical products. This decreaseincrease in export sales was partially offset by a 2.1% increase2.7% decrease in the volume of export sales of crude oil and a Ps. 2,920.7 million increase in the volume of sales of petrochemicalpetroleum products.
Excluding the trading activities of the Trading Companies (in order to show only the amount of export sales related to the subsidiary entities), export sales by the subsidiary entities to the Trading Companies and third parties decreasedincreased by 0.5%31.4%in peso terms, from Ps. 329.6 billion in 2015 to Ps. 327.8 billion in 2016.2016 to Ps. 430.6 billion in 2017. In U.S. dollar terms, excluding the trading activities of the Trading Companies, total export sales (which are U.S.dollar-denominated) decreased increased by 16.2%29.7% in 2016,2017, from U.S. $20.9 billion in 2015 to U.S. $17.5 billion in 2016.2016 to U.S. $22.7 billion in 2017. This was primarily due to the 17.4% decrease33.9% increase in the weighted average Mexican crude oil export price and a 2.1% increase in the volume of crude oil exports.price. The trading and export activities of the Trading Companies generated additional marginal revenues of Ps. 67.477.9 billion in 2016, 13.2% lower2017, 15.6% higher in peso terms than the Ps. 77.567.4 billion of additional revenues generated in 2015,2016, mainly due to a decreasean increase in the average prices of diesel and gasoline. Export sales ofPMI-NASA, one of our principal Trading Companies, increased by 13.6% in 2017, from Ps. 57.9 billion in 2016 to Ps. 65.8 billion in 2017. The weighted average price per barrel of crude oil that PMI sold to third parties in 20162017 was U.S. $35.63,$47.73, or 17.4%33.9%, lowerhigher than the weighted average price of U.S. $43.12$35.63 in 2015.2016.
Crude oil and condensate export sales to PMI accounted for 88.1%88.4% of total export sales (excluding the trading activities of the Trading Companies) in 2016,2017, as compared to 87.4%88.1% in 2015.2016. These crude oil and condensate sales increased in peso terms by 0.2%31.8% in 2016,2017, from Ps. 288.2 billion in 2015 to Ps. 288.6 billion in 2016 to Ps. 380.5 billion in 2017, and decreasedincreased in U.S. dollar terms by 14.9%29.7 % in 2016,2017, from U.S. $18.2 billion in 2015 to U.S. $15.5 billion in 2016.2016 to U.S. $20.1 billion in 2017. The weighted average price per barrel of crude oil that Pemex Exploration and Production sold to PMI for export in 20162017 was U.S. $35.17, 17.6% lower$47.26, 34.4% higher than the weighted average price of U.S. $42.70$35.17 in 2015.2016.
Export sales of petroleum products, including natural gas and natural gas liquids, by our industrial transformation segment to the Trading Companies and third parties decreased from 12.4%10.9% of total export sales (excluding the trading activities of the Trading Companies) in 20152016 to 10.9%10.7% of those export sales in 2016.2017. Export sales of petroleum products, including products derived from natural gas and natural gas liquids, decreasedincreased by 13.0%29.2%, from Ps. 40.9 billion in 2015 to Ps. 35.6 billion in 2016 to Ps. 46.0 billion in 2017, primarily due to a 5.5% decreasean increase in the volume of exportsaverage sales prices of fuel oil and a 16.8% decrease in the volume of exports of naphtha, as well as a decrease in the average sales price for both products.naphthas. In U.S. dollar terms, export sales of petroleum products, including products derived from natural gas and natural gas liquids, decreasedincreased by 26.1%26.3%, from U.S. $2.6 billion in 2015 to U.S. $1.9 billion in 2016.2016 to U.S. $2.4 billion in 2017. Export sales of natural gas decreasedincreased by 23.1%3.3%, from Ps. 27.3 million in 2015 to Ps. 21.0 million in 2016. This was2016 to Ps. 21.7 million in 2017, primarily due to a decreasean increase in the productionaverage sales price ofnatural gas.
Petrochemical products accounted for the remainder of export sales in 20152016 and 2016.2017. Export sales of petrochemical products (including certainby-products of the petrochemical process) increased by Ps. 2,920.71,087.8 million in 2016,2017, from Ps. 616.8 million in 2015 to Ps. 3,537.5 million in 2016 to Ps. 4,625.3 million in 2017, primarily due to inclusion ofan increase in export sales of Grupo Fertinal during 2016.in 2017. In U.S. dollar terms, export sales of petrochemical products (including certainby-products of the petrochemical process) increaseddecreased by Ps. 6,208.82.7% in 2017, from U.S. $218.7 million in 2016 from Ps. 39.2to U.S. $212.8 million in 2015 to Ps. 6,248.0 million in 2016.2017.
Services Income
Services income increased by 11.7%23.3% in 2017, from Ps. 9.0 billion in 2016 fromto Ps. 12.911.1 billion in 2015 to Ps. 14.4 billion in 2016,2017, primarily as a result of an increase in transportation services suppliedprovided by Pemex Logistics to CENAGAS and an increase in freight services provided by Pemex Industrial Transformation to third parties.
Cost of Sales
Cost of sales decreasedincreased by 3.1%16.0%, from Ps. 895.1865.8 billion in 20152016 to Ps. 867.61,004.2 billion in 2016.2017. This decreaseincrease was mainly due to: (1) aan increase of Ps. 23.4131.2 billion decrease in operating expenses, primarily due to cost saving measures; (2) a Ps. 25.0 billion decrease in cost of employee benefits, mainly due to the ongoing benefits resulting from the modifications made to our pension regime in 2015; (3) a Ps. 16.9 billion decrease in the amortization of wells as a result of the net effect of the impairment recorded in 2015 of new investments made in 2016; and (4) a Ps. 5.5 billion decrease in hydrocarbon extraction and exploration duties and taxes due to decreased production and lower average sales prices in 2016 as compared to 2015. This decrease was partially offset by (1) a Ps. 46.9 billion increase in the purchases of imports, primarily Magna gasoline, diesel and diesel,natural gas, mainly due to an increase in the price of imports owing to the 20.1% appreciation of the U.S. dollar relative to the peso in 2016 and a 9.3%an increase in the volume of imports; andimports required to meet domestic demand; (2) a Ps. 5.915.5 billion increase in hydrocarbon exploration and extraction duties and taxes due to higher average sales prices in 2017; (3) a Ps. 9.5 billion increase in operating expenses, mainly due to an increase in expenses for materials and spare parts; and (4) a Ps. 6.2 billion increase in depreciation of fixed assets and amortization of wells, primarily due to the increased value of assets to be depreciated as a result of the partial reversal of the impairment recorded in 2016. This increase was partially offset by a Ps. 26.0 billion decrease in the cost of unsuccessful wells.wells, primarily due to a decrease in investment.
Impairment of Wells, Pipelines, Properties, Plant and Equipment
Impairment of wells, pipelines, properties, plant and equipment decreasedincreased by Ps. 809.3482.7 billion in 2016,2017, from an impairment of Ps. 477.9 billion in 2015 to a net reversal of impairment of Ps. 331.3 billion in 2016 to a net impairment of Ps. 151.4 billion in 2017, mainly due to: (1) the deferral of the development investments in the first five years of the economic horizon in the proved reserves, (2) insufficient cash flows to make up for costs recovery at the Burgos and Lakach projects resulting from the 4.3% appreciation of the Mexican peso against the U.S. dollar from a peso–U.S. dollar exchange rate of Ps. 20.6640 to U.S. $1.00 as of December 31, 2016 to a peso–U.S. dollar exchange rate of Ps. 19.7867 to U.S. $1.00 as of December 31, 2017, due to the changefact that cash inflows are denominated in U.S. dollars and then translated to the period used to estimate long-term prices of proved reserves andreporting currency using the recoverable amount of fixed assets from 20 to 25 years in accordance with changes to official guidelines;exchange rate at the appreciationend of the U.S. dollar relative to the peso; the reallocation of resources to the most highly profitable fields, particularly fields with lower production costs; and anperiod; (3) a 0.3% increase in the average price ofdiscount rate; (4) a 7.2% decrease in crude oil.
Net Periodic Cost of Employee Benefits
During 2015, we had a Ps. 196.1 billion increaseoil forward prices, and (5) the natural decline in employee benefitsproduction in connection with the negotiation of our pension regime in 2015 as described in “Item 6—Directors, Senior Management and Employees—Employees.” Ps. 92.2 billion of this benefit was recognized under net periodic cost of employee benefits, and Ps. 103.9 billion was recognized under general expenses. We do not have a similar benefit to record under net periodic cost of employee benefits for 2016.Macuspana project.
General Expenses
General expenses increased by Ps. 100.43.9 billion, from Ps. 37.5 billion in 2015 to Ps. 137.9 billion in 2016. This increase was primarily due to aone-time Ps. 103.9 billion benefit recognized in our cost of employee benefits in connection with the negotiation of our pension regime in 2015 as described in “Item 6—Directors, Senior Management and Employees—Employees.” Excluding thisone-time benefit to cost of employee benefits, general expenses decreased by Ps. 3.5 billion, from Ps. 141.4 billion in 2015 to Ps. 137.9 billion in 2016 primarilyto Ps. 141.8 billion in 2017, mainly due to an increase in administrative expenses relating to the effects of our 2016 Budget Adjustment Plan.contributions to the defined contribution pension plan and incentives to encourage employees to migrate from the defined benefit pension plan to the defined contribution plan.
Other Revenues/Expenses, Net
Other revenues, net, increaseddecreased by Ps. 21.417.5 billion in 2016,2017, from other expenses,revenues, net, of Ps. 2.422.7 billion in 20152016 to other revenues, net, of Ps. 19.05.2 billion in 2016.2017. This increasedecrease was primarily due to the recognition of a Ps. 28.48.4 billion fiscal support fromloss in the Ministrydisposal of Financewells, pipelines, properties, plant and Public Credit in connection with the Profit-Sharing Duty, due to the decrease in average prices and production of crude oil,equipment and a Ps. 15.23.3 billion profitloss in the sale of our shares in Repsol. The decrease in other revenues, net, was partially offset by a Ps. 3.1 billion gain from the sale of our 50% interest in Gasoductos de Chihuahua. This increase in other revenues, net was partially offset by an expense of Ps. 27.7 billion that was recognized following our transfer of pipelines and other assets to CENAGAS, due to the difference between the book value of these assetsDuctos y Energéticos del Norte and the amount paid by CENAGAS for these assets.recovery of a Ps. 13.6 million insurance payment relating to an accident that occurred on ourAbkatún-A platform in April 2015.
Financing Income
Financing income decreasedincreased by Ps. 1.22.4 billion in 2016,2017, from Ps. 15.0 billion in 2015 to Ps. 13.8 billion in 2016 to Ps. 16.2 billion in 2017, primarily due to a decrease in the amount we were able to invest during the year, which was partially offset by yield derived frominterest on the promissory notes issued by the Mexican Government in connection withrelation to our pension liabilities.
Financing Cost
Financing cost increased by 45.7%18.8% in 2016,2017, from Ps. 67.8 billion in 2015 to Ps. 98.8 billion in 2016 to Ps. 117.6 billion in 2017, primarily due to an increase in interest expense in 20162017 following higher levels of indebtedness and a 20.1% depreciationthe 4.3% appreciation of the peso againstrelative to the U.S. dollar in 20162017 as compared to 2015.2016.
Derivative Financial Instruments Income (Cost)
Derivative financial instruments income (cost), net, decreasedincreased by Ps. 7.439.3 billion, from a net cost of Ps. 21.4 billion in 2015 to a net cost of Ps. 14.0 billion in 2016 to a net income of Ps. 25.3 billion in 2017, primarily due to a decrease in the appreciationdepreciation of the U.S. dollar relative to other foreign currencies we hedge and the restructuring of certain of our derivative financial instruments and favorable changes in market variables involved in our calculation of fair value of these instruments, including exchange rates, foreign currency interest rates and our counterparties’ credit spread.instruments.
Exchange Loss,Gain, Net
A substantial portion of our indebtedness, 83.2%86.6% as of December 31, 2016,2017, is denominated in foreign currencies. Our exchange lossgain, net, increased by Ps. 99.2 billion, from an exchange loss of Ps. 154.8277.2 billion in 2015 to
2017, from an exchange loss of Ps. 254.0 billion in 2016 to an exchange gain of Ps. 23.2 billion in 2017, primarily as a result of the 5.3% increase in our indebtedness that is denominated in other currencies and the higher rate of depreciationa 4.3% appreciation of the peso againstrelative to the U.S. dollar which depreciated by 20.1% in 2016 as compared to 16.9% in 2015. However, due2017. Due to the fact that over 95.7%100.0% of our revenues from exports and domestic sales are referenced to prices denominated in U.S. dollars, and only 71.0 %74.0% of our expenses, including financing costs, are linked to U.S. dollar prices, the depreciationappreciation of the peso relative to the U.S. dollar did have a significanthad an unfavorable effect on our ability to meet U.S. dollar-denominated financial obligations and improved our ability to meet peso-denominated financial obligations in 2016. obligations. The value of the peso in U.S. dollar terms depreciatedappreciated by 20.1%4.3% in 2016,2017, from Ps. 17.2065 = U.S. $1.00 on December 31, 2015 to Ps. 20.6640 = U.S. $1.00 on December 31, 2016 to Ps. 19.7867 = U.S. $1.00 on December 31, 2017, as compared to a 16.9%20.1% depreciation of the peso in U.S. dollar terms in 2015.2016.
Taxes, Duties and Other
Hydrocarbon extraction duties and other duties and taxes paid decreasedincreased by 20.2%25.9% in 2015,2017, from Ps. 331.5 billion in 2015 to Ps. 264.5 billion in 2016 to Ps. 333.0 billion in 2017, primarily due to the 17.4% decrease34.4% increase in the weighted average price of the Mexican crude oil export price, from U.S. $43.12 per barrel in 2015 to U.S. $35.63 per barrel in 2016.2016 to U.S. $47.26 per barrel in 2017. Income related duties and taxes represented 24.9%23.8% of total sales in 2016,2017, as compared to 24.9%24.6 % of total sales in 2015.2016.
Net Income/Loss
In 2016,2017, we had a net loss of Ps. 191.1280.9 billion from Ps. 1,079.51,397.0 billion in total sales revenues, as compared to a net loss of Ps. 712.6191.1 billion from Ps. 1,166.41,074.1 billion in total sales revenues in 2015.2016. This decreaseincrease in net loss was primarily explained by:
a Ps. 809.2482.7 billion decreaseincrease in the impairment of fixed assets;
a Ps. 67.068.5 billion decreaseincrease in taxes and other duties, mainly due to the decreaseincrease in the weighted average price of the Mexican crude oil export price; and
a Ps. 21.417.5 billion increasedecrease in other revenues, net.
This decreaseincrease was partially offset byby:
a Ps. 172.3322.9 billion increase in the net periodic cost of employee benefits, mainly due to theone-time Ps. 196.0 billion decrease in pension liabilities recorded in 2015 as a result of modifications made to our pension regime;
a Ps. 24.9277.2 billion increase in financing costs,exchange gain, net; and
a Ps. 39.3 billion increase in derivative financial instruments income, net.
Other Comprehensive Results
In 2016,2017, we had a net gain of Ps. 127.911.5 billion in other comprehensive results, as compared to a net gain of Ps. 88.6127.9 billion in 2015,2016, primarily due to a decreasean increase in the reserve for employee benefits that resulted from the increasedecrease in the discount rate and expected rate of return on plan assets used in the actuarial computation method from 7.4% in 2015 to 8.2% in 2016 and Ps. 21.4to 7.9% in accumulated gains from the foreign currency translation effect.
Results of Operations of Petróleos Mexicanos, the Subsidiary Entities and the Subsidiary Companies—For the Year Ended December 31, 2015 Compared to the Year Ended December 31, 2014
Total Sales
Total sales decreased by 26.5%, or Ps. 420.3 billion, in 2015, from Ps. 1,586.7 billion in 2014 to Ps. 1,166.4 billion in 2015, primarily due to the decrease in average sales prices of Mexican crude oil, petroleum products and natural gas in the international markets. During 2015, the weighted average Mexican crude oil export price decreased by 50.3%, from U.S. $86.00 per barrel in 2014 to U.S. $42.70 per barrel in 2015. Crude oil export volumes increased by 2.3% in 20152017, as compared to 2014. The impact of price decreases on both domestic and export sales is explained in further detail below.
Domestic Sales
Domestic sales decreased by 21.0% in 2015, from Ps. 945.0 billion in 2014 to Ps. 746.2 billion in 2015, primarily due to a decrease in the average prices of gasoline, diesel, fuel oil and jet fuel. Domestic sales of petroleum products decreased by 20.3% in 2015, from Ps. 830.5 billion in 2014 to Ps. 662.3 billion in 2015, primarily due to decreases in the average prices of gasoline, diesel, turbosine and fuel oil. Domestic sales of natural gas and liquefied natural gas decreased by 30.0% in 2015, from Ps. 77.8 billion in 2014 to Ps. 54.5 billion in 2015, primarilywell as a result of lower prices for these products. Domestic petrochemical sales (including sales of certainby-products of the petrochemical production process) decreased by 19.4%, from Ps. 36.6 billion in 2014 to Ps. 29.5 billion in 2015, primarily as a result of lower prices for these products.
Export Sales
Export sales decreased by 35.4% in peso terms in 2015 (with U.S. dollar-denominated export revenues translated to pesos at the exchange rate on the date of the corresponding export sale), from Ps. 630.3 billion in 2014 to Ps. 407.2 billion in 2015. This decrease was primarily due to a 50.3% decrease in the weighted average Mexican crude oil export price. The decrease in export sales was partially offset by a 2.3% increase in the volume of crude oil exports in 2015.
Excluding the trading activities of the Trading Companies (in order to show only the amount of export sales related to the subsidiary entities), export sales by the subsidiary entities to the Trading Companies and third parties decreased by 39.8% in peso terms, from Ps. 546.6 billion in 2014 to Ps. 329.0 billion in 2015. In U.S. dollar terms, excluding the trading activities of the Trading Companies, total export sales (which are U.S. dollar-denominated) decreased by 49.4% in 2015, from U.S. $41.2 billion in 2014 to U.S. $20.9 billion in 2015. This was primarily due to the 50.5% decrease in the weighted average Mexican crude oil export price and a 2.3% increase in the volume of crude oil exports. The trading and export activities of the Trading Companies generated additional marginal revenues of Ps. 78.2 billion in 2015, 6.8% higher in peso terms than the Ps. 83.9 billion of additional revenues generated in 2014, mainly due to higher international prices of gasoline traded by the Trading Companies. The weighted average price per barrel of crude oil that the Trading Companies sold to third parties in 2015 was U.S. $43.29, or 49.6%, lower than the weighted average price of U.S. $86.00 in 2014.
Crude oil export sales to PMI accounted for 87.6% of total export sales (excluding the trading activities of the Trading Companies) in 2015, as compared to 87.0% in 2014. These crude oil sales decreased in peso terms by 39.3% in 2015, from Ps. 475.1 billion in 2014 to Ps. 288.2 billion in 2015, and decreased in U.S. dollar terms by 48.9% in 2015, from U.S. $35.8 billion in 2014 to U.S. $18.3 billion in 2015. The weighted average price per barrel of crude oil that Pemex Exploration and Production sold to PMI for export in 2015 was U.S. $42.70, 50.3% lower than the weighted average price of U.S. $86.0 in 2014.
Export sales of petroleum products, including natural gas and natural gas liquids, by our refining and gas and petrochemicals segments to the Trading Companies and third parties decreased from 12.7% of total export
sales (excluding the trading activities of the Trading Companies) in 2014 to 12.1% of those export sales in 2015. Export sales of petroleum products, including products derived from natural gas and natural gas liquids, decreased by 42.6%, from Ps. 69.5 billion in 2014 to Ps. 39.9 billion in 2015, primarily due to a decrease in prices and in the volume of fuel oil sold. In U.S. dollar terms, export sales of petroleum products, including products derived from natural gas and natural gas liquids, decreased by 52.8%, from U.S. $5.3 billion in 2014 to U.S. $2.5 billion in 2015. Export sales of natural gas decreased by 50.0%, from Ps. 0.06 billion in 2014 to Ps. 0.03 billion in 2015. This was primarily due to a decrease in the price and volume of sales of natural gas sold as a result of lower demand in the international market.
Petrochemical products accounted for the remainder of export sales in 2014 and 2015. Export sales of petrochemical products (including certainby-products of the petrochemical process) decreased by 47.0% in 2015, from Ps. 1.7 billion in 2014 to Ps. 0.9 billion in 2015, primarily as a result of decreases in the prices and volumes of sales of styrene, sulfur and ethylene. In U.S. dollar terms, export sales of petrochemical products (including certainby-products of the petrochemical process) decreased by 57.5% in 2015, from U.S. $131.2 million in 2014 to U.S. $55.8 million in 2015.
Services Income
Services income increased by 13.2% in 2015, from Ps. 11.4 billion in 2014 to Ps. 12.9 billion in 2015, primarily as a result of a Ps. 1.0 billion increase in services provided by Pemex Logistics to third parties, a Ps. 0.7 billion increase in revenues from freight and managerial services provided by Pemex Industrial Transformation and a Ps. 0.2 billion increase in insurance revenues from Kot Insurance Company, AG.
Cost of Sales, Impairment of Wells, Pipelines, Properties, Plant and Equipment, Cost of Employee Benefits and General Expenses
Cost of sales increased by 6.2%, from Ps. 842.6 billion in 2014 to Ps. 895.1 billion in 2015. This increase was mainly due to: (1) the recognition of Ps. 53.9 billion in new hydrocarbon extraction and exploration duties and taxes in connection with the new fiscal regime that took effect on January 1, 2015; (2) a Ps. 20.4 billion increase in the amortization of wells; and (3) an increase of Ps. 11.1 billion in the cost of unsuccessful wells. This increase was partially offset by a Ps. 54.5 billion decrease in the purchases of imports, primarily gasoline and diesel.
Impairment of wells, pipelines, properties, plant and equipment increased by Ps. 455.3 billion, from Ps. 22.6 billion in 2014 to Ps. 477.9 billion in 2015, mainly due to the decrease in future cash flows as a result of lower hydrocarbon prices, adjustments in the discount rates and changes in the criteria for identifying the cash-generating units of the refineries.
During 2015 we had a Ps. 103.9 billion decrease in net periodic cost of employee benefits recognized as a separate line item due to modifications to our pension regime.
General expenses decreased by 1.5%, from Ps. 143.5 billion in 2014 to Ps. 141.4 billion in 2015. This decrease was primarily due to a Ps. 2.5 billion decrease in the net periodic cost of employee benefits recognized under general expenses due to modifications to our pension regime.
Other Revenues/Expenses, Net
Other revenues, net, decreased by 106.4% in 2015, from other revenues, net, of Ps. 37.6 billion in 2014 to other expenses, net, of Ps. 2.4 billion in 2015. This decrease was primarily due to a Ps. 40.0 billion decrease in the credit attributable to the negative IEPS tax rate in 2015 as compared to 2014. The credit attributable to the negative IEPS tax rate is generated when the prices at which we sell gasoline and diesel in the domestic market are lower than the international market prices for such products. We recognized revenues from IEPS tax credits of Ps. 2.5 billion in 2015, as compared to Ps. 43.1 billion in 2014.
Financing Income
Financing income increased by Ps. 12.0 billion in 2015, from Ps. 3.0 billion in 2014 to Ps. 15.0 billion in 2015, primarily due to the effect of changesemployees migrating from the defined benefits pension plan to the discount rate used in the computation of the provision for the plugging of wells.defined contribution plan.
Financing Cost
Financing cost increased by 31.4% in 2015, from Ps. 51.6 billion in 2014 to Ps. 67.8 billion in 2015, primarily due to an increase in interest expense in 2015 following higher levels of indebtedness and the depreciation of the peso against the U.S. dollar in 2015 as compared to 2014.
Derivative Financial Instruments Income (Cost)
Derivative financial instruments income (cost), net, increased by Ps. 12.0 billion, from a net cost of Ps. 9.4 billion in 2014 to a net cost of Ps. 21.4 billion in 2015, primarily due to an increase in costs associated with certain derivative financial instruments as a result of the appreciation of the U.S. dollar relative to other foreign currencies that we hedge.
Exchange Loss, Net
A substantial portion of our indebtedness, 77.9% as of December 31, 2015, is denominated in foreign currencies. Our exchange loss increased by Ps. 77.8 billion, from an exchange loss of Ps. 77.0 billion in 2014 to an exchange loss of Ps. 154.8 billion in 2015, primarily as a result of the higher rate of depreciation of the peso against the U.S. dollar, which depreciated by 16.9% in 2015 as compared to 12.6% in 2014. However, due to the fact that over 93.7% of our revenues from exports and domestic sales are referenced to prices denominated in U.S. dollars, and only 68.2 % of our expenses, including financing costs, are linked to U.S. dollar prices, the depreciation of the peso relative to the U.S. dollar did have a significant effect on our ability to meet U.S. dollar-denominated financial obligations and improved our ability to meet peso-denominated financial obligations in 2015. The value of the peso in U.S. dollar terms depreciated by 16.9% in 2015, from Ps. 14.7180 = U.S. $1.00 on December 31, 2014 to Ps. 17.2065 = U.S. $1.00 on December 31, 2015, as compared to a 12.6% depreciation of the peso in U.S. dollar terms in 2014.
Taxes, Duties and Other
Hydrocarbon extraction duties and other duties and taxes paid decreased by 55.6% in 2015, from Ps. 746.1 billion in 2014 to Ps. 331.5 billion in 2015, primarily due to the 50.3% decrease in the weighted average price of the Mexican crude oil basket, from U.S. $86.00 per barrel in 2014 to U.S. $42.70 per barrel in 2015. Income related duties and taxes represented 28.4% of total sales in 2015, as compared to 47.0% of total sales in 2014, partly because certain hydrocarbon extraction and exploration duties and taxes under the new tax regime are recognized under cost of sales, as described above. Prior to January 1, 2015, all of our duties and taxes were income-based taxes and were therefore recognized under the “taxes, duties and other” line item.
Net Income/Loss
In 2015, we had a net loss of Ps. 712.6 billion (U.S. $41.4 billion) from Ps. 1,166.4 billion in total sales revenues, as compared to a net loss of Ps. 265.5 billion (U.S. $15.4 billion) from Ps. 1,586.7 billion in total sales revenues in 2014. This increase in net loss was primarily explained by: (1) a Ps. 455.3 billion increase in impairment of fixed assets, which was mainly due to the decrease in future cash flows as a result of lower hydrocarbon prices; (2) a Ps. 420.4 billion decrease in sales mainly due to a decrease in the Mexican crude oil export price and decrease in our crude oil production and domestic sales prices; (3) a Ps. 77.8 billion increase in foreign exchange loss; (4) a Ps. 39.9 billion decrease in other revenues, net; and (5) a Ps. 16.2 billion increase in
financing costs, net. This increase was partially offset by a Ps. 414.6 billion decrease in taxes and duties and a Ps. 184.3 billion decrease in the net periodic cost of employee benefits following modifications to our pension regime.
Other Comprehensive Results
In 2015, we had a net gain of Ps. 88.6 billion in other comprehensive results, as compared to a net loss of Ps. 265.3 billion in 2014, primarily due to a decrease in the reserve for employee benefits that resulted from the increase in the discount rate and expected rate of return on plan assets used in the actuarial computation method from 6.98% in 2014 to 7.41% in 2015.
Changes in Statement of Financial Position of Petróleos Mexicanos, the Subsidiary Entities and the Subsidiary Companies—from December 31, 20152017 to December 31, 20162018
Assets
Cash and cash equivalents increaseddecreased by Ps. 54.216.0 billion, or 49.5%16.3%, in 2016,2018, from Ps. 109.497.9 billion as of December 31, 20152017 to Ps. 163.581.9 billion as of December 31, 2016.2018. This increasedecrease was mainly due to an increase in net cash flows from financing activities,payments to suppliers and was partially offset by taxcontractors, payments on our debt instruments and debt payments and operating and investment commitments.taxes.
Accounts receivable, net, increaseddecreased by Ps. 54.01.0 billion, or 68.1%0.6%, in 2016,2018, from Ps. 79.2168.1 billion as of December 31, 20152017 to Ps. 133.2167.1 billion as of December 31, 2016, primarily explained by: (1)2018. This was mainly due to a Ps. 18.7 billion increasedecrease in our accounts receivable from tax credits associated with hydrocarbon extraction duties; (2)customers caused by a Ps. 17.7 billiondecrease in sales in the month of December 2018, which was partially offset by an increase in our accounts receivable from salessundry debtors (mainly IEPS tax) from larger gasoline imports at the end of the year.
The current portion of our promissory notes increased by Ps. 35.7 billion in 2018, mainly due to our international customers,recognition of the current portion of six promissory notes with original maturities ranging from 2032 to 2047.
Inventories increased by Ps. 18.1 billion, or 28.3%, in 2018, from Ps. 63.9 billion as of December 31, 2017, to Ps. 82.0 billion as of December 31, 2018, mainly due to an increase in the value of imports of refined products.
Derivative financial instruments decreased by Ps. 7.7 billion in 2018, from Ps. 30.1 billion as of December 31, 2017 to Ps. 22.4 billion as of December 31, 2018. This decrease was mainly due to the 20.1%decrease in the fair value ofcross-currency swaps as a result of the appreciation of the U.S. dollar relative to the peso during 2016 and the 56.1% increase in the weighted average market price per barrel of crude oil during 2016, from U.S. $28.69 per barrel in December 2015 to U.S. $44.79 per barrel in December 2016; (3) a Ps. 12.6 billion increase in accounts receivable from sales to domestic customers, mainly due to higher accounts receivable from gasoline distributors; and (4) a Ps. 7.9 billion increase in accounts receivable from sundry debtors, mainly due to Ps. 6.6 billion in customer services reimbursements and Ps. 3.7 billion as the current portionmost of the promissory notes issued by the Mexican Government in relation to our pension liabilities.
Held-for-salenon-financial assets decreased by Ps. 25.8 billion, or 77.5%, in 2016, from Ps. 33.2 billion as of December 31, 2015 to Ps. 7.5 billion as of December 31, 2016. This decrease was mainly due to the transfer of assets to CENAGAS for Ps. 33.2 billion and was partially offset by the reclassification of Ps. 7.5 billion from fixed assets toheld-for-sale currentnon-financial assets in connection with the delivery to third parties of 22 blocks of titles that were temporarily assigned to us in Round Zero pursuant to Round 1.3 on May 10, 2016. On June 29, 2016, we submitted an application for compensation for the fixed assets located in these blocks to the Ministry of Energy. For more information, see Note 9 to our consolidated financial statements included herein.
Derivative financial instruments increased by Ps. 3.3 billion in 2016, from Ps. 1.6 billion as of December 31, 2015 to Ps. 4.9 billion as of December 31, 2016. This increase was mainly due to the restructuring of certain derivative financial instruments and changes in market variables involved in the calculation of the fair value of derivative financial instruments, such as exchange rates, foreign currency interest rates and our counterparties’ credit spread.other relevant currencies.
Wells, pipelines, properties, plant and equipment increaseddecreased by Ps. 323.334.0 billion in 2016,2018, from Ps. 1,436.5 billion as of December 31, 2017 to Ps. 1,402.5 billion as of December 31, 2018. This decrease was primarily due to depreciation of Ps. 153.4 billion and disposals of wells, pipelines, property, plant and equipment of Ps. 16.8 billion, which were partially offset by acquisitions of wells, pipelines, properties, plant and equipment of Ps. 114.8 billion and a net reversal of impairment in the amount of Ps. 331.321.4 billion. See “—Results of Operations of Petróleos Mexicanos, the Subsidiary Entities and the Subsidiary Companies—For the Year Ended December 31, 2016 Compared to the Year Ended December 31, 2015—Impairment of Wells, Pipelines, Properties, Plant and Equipment” above in this Item 5 for more information.
Long-term notes receivable increasedDeferred taxes decreased by Ps. 98.623.4 billion, or 197.2%16.0%, in 2016,2018, from Ps. 50.0146.2 billion as of December 31, 20152017 to Ps. 148.6122.8 billion as of December 31, 2016,2018, mainly due to an increase in the Ps. 184.2 billion in promissory notes issued by the Mexican Government, which replaced the Ps. 50.0 billion promissory note issued to us in 2015 in connection withvaluation reserve for our pension liabilities.
Intangible assets decreased by Ps. 5.7 billion, or 39.6%, in 2016, from Ps. 14.3 billion as of December 31, 2015 to Ps. 8.6 billion as of December 31, 2016, mainly due to a decrease in wells under construction but not allocated to a reserve.deferredProfit-Sharing Duty assets.
Liabilities
Total debt, including accrued interest, increased by Ps. 489.844.4 billion, or 32.8%2.2%, in 2016,2018, from Ps. 1,493.42,037.9 billion as of December 31, 20152017 to Ps. 1,983.22,082.3 billion as of December 31, 2016,2018, mainly due to higher levels of indebtedness and a 20.1% depreciation of the peso against the U.S. dollar in 2016 as compared to 2015.indebtedness.
Line items related to suppliers and contractors decreasedincreased by Ps. 15.79.8 billion, or 9.4%7.0%, in 2016,2018, from Ps. 167.3140.0 billion as of December 31, 20152017 to Ps. 151.6149.8 billion as of December 31, 2016,2018, primarily due to an increase in our operations towards the payment programs established during 2016 to address the total outstanding balanceend of payments due to suppliers and contractors at year end.2018.
Taxes and duties payable increased by Ps. 5.814.3 billion, or 13.5%28.0%, in 2016,2018, from Ps. 43.051.0 billion as of December 31, 20152017 to Ps. 48.865.3 billion as of December 31, 2016,2018, primarily due to (1) a Ps. 8.99.6 billion increase in the value addedIEPS tax payable and the Profit-Sharing Duty and (2) a Ps. 2.04.6 billion decreaseincrease in the provision for income tax.Profit-Sharing Duty.
Derivative financial instruments liabilities increaseddecreased by Ps. 3.61.8 billion, or 13.1%10.2%, in 2016,2018, from Ps. 27.317.7 billion as of December 31, 20152017 to Ps. 30.915.9 billion as of December 31, 2016.2018. This increasedecrease was mainly due to the negotiation of new derivative financial instrumentsa decrease in 2016, the restructuring of certain existing derivative financial instruments and changes in market variables involved in the calculation of the fair value of derivative financial instruments, such as exchange rates, foreignour crude oil options and the termination of our currency interest rates andforwards, which was partially offset by the decrease in the fair value of our counterparties’ credit spread.cross-currency swaps.
Employee benefits liabilities decreased by Ps. 59.0177.9 billion, or 4.6%14.1%, in 2016,2018, from Ps. 1,279.41,258.4 billion as of December 31, 20152017 to Ps. 1,220.41,080.5 billion as of December 31, 2016.2018. This decrease was primarily due to (1) the effect of changes to the discount ratean increase in actuarial gains and expected rate of return on plan assets used in the actuarial computation method from 7.4% in 2015 to 8.2% in 2016; (2) contributions made to theFondo 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. This decrease was partially offset by the recognition of net cost of the period of employee benefits.trust.
Total Equity (Deficit), Net
EquityOur total equity (deficit), net, increased improved by Ps. 104.143.0 billion, or 7.8 %,2.9%, in 2016,2018, from negative Ps. 1,331.71,502.4 billion as of December 31, 20152017 to negative Ps. 1,233.01,459.4 billion as of December 31, 2016.2018. This increaseimprovement was mainly due to (1) the equity contributions made by the Mexican Government to Petróleos Mexicanos in 2016 in the form of Certificates of Contribution “A” in the total amount of Ps. 161.9 billion; (2) a Ps. 108.2222.5 billion increase in actuarial gains on employee benefits resulting from the increase in the discount rate used in the actuarial computation method from 7.4% in 2015 to 8.2% in 2016 and an increase in the expected returns for fixed assets; and (3)a Ps. 21.41.3 billion in accumulated gainsgain from the foreign currency translation effect. This increase waseffect, partially offset by our net loss for the year of Ps. 191.1180.4 billion.
Liquidity and Capital Resources
Overview
During 2016,2018, we were able to strengthen our liquidity position despite a 7.5% decrease in total sales, from Ps. 1,166.4 billion in 2015 to Ps. 1,079.5 billion in 2016, and a Ps. 100 billion budget reduction, by increasing our cash and cash equivalents and accounts receivable, decreasing our accounts payable to suppliers and increasingmanaging our borrowing base under lines of credit.liquidity risk through derivative financial instruments.
Our principal usesuse of funds in 2016 were primarily2018 was the repayment of debt, strengthening our cash flow through the actions listed below, and, to a lesser extent, the acquisition of wells, pipelines, properties, plant and equipment, sale ofnon-essential assets and business acquisitions, which collectively amounted to Ps. 134.5 billion. We met this requirement primarily with cash provided by cash flows from borrowings, which amounted to Ps. 842.02,082.3 billion. During 2016,2018, our net cash flow from operating activities, together with our funds from financing activities, was less than the resources neededsufficient to fund our capital expenditures and other expenses. See “—Overview—Redefinition of Petróleos Mexicanos as a State-Owned Productive Company”New Business Plan and Recent Initiatives” above for more information and a discussion of actions being taken in response to thisthe imbalance of our resources.
For 2016,2018, our capital expenditures decreasedincreased slightly by approximately 22.9%0.2% from 2015, primarily due to the expected price levels of our products in 2016 and our expected borrowing capacity. Additionally, one of the most critical problems we faced and sought to address in 2016 was our accounts payable to suppliers.2017. As of December 31, 2016,2018, we owed our suppliers approximately Ps. 151.6149.8 billion as compared to Ps. 167.3140.0 billion as of December 31, 2015.2017. As of December 31, 2016,2018, we have paid the total outstanding balance due to suppliers and contractors as of December 31, 2015 as part of our effort to repay such balances.2017. The average number of days outstanding of our accounts payable decreased from 9062 days as of December 31, 20152017 to 8153 days as of December 31, 2016.2018. Despite these obligations, we believe net cash flows from our operating and financing activities, together with available cash and cash equivalents, will be sufficient to meet our working capital, debt service and capital expenditure requirements in 20172019 because, since early 2015, we andin collaboration with the Mexican Government, we have adjusted investment, taxationbegun to implement initiatives intended to help us meet our working capital needs, continue to service our debt as it comes due and financing plans to address declining oil pricesimprove our capital expenditure programs and maintainwe are in the process of developing and refining our financial strength and flexibilitynewlong-term business plan, as described above under “Redefinition of Petróleos Mexicanos as a State-Owned Productive Company”“—Overview—New Business Plan and Recent Initiatives” and as further described below:
• | Changes to Our Business Plan.We |
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• | No Payment of Dividend.The Mexican Government announced that Petróleos Mexicanos was not required to pay a state dividend in 2016, 2017 and 2018 and will not be required to pay one in |
Moreover, on April 21, 2016, we received a capital contribution of Ps. 26.5 billion from the Ministry of Finance and Public Credit and, on August 3, 2016, the Ministry of Finance and Public Credit informed us that the Mexican Government will assume Ps. 184.2 billion in payment liabilities related to our pensions and retirement plans, following the review performed by an independent expert. See “—Equity Structure and Mexican Government Contributions” below.
Furthermore, the Mexican Government modified the fiscal regimeThe Federal Revenue Law applicable to us to enable us to deduct moreas of our exploration and production costs. Under the current low oil price environment, the amount of the hydrocarbon extraction duty we paid for the year ended December 31, 2016 was reduced by approximately Ps. 40.2 billion, as compared to the amount we would have had to pay for this duty if this change in the fiscal regime had not been implemented.
As noted above, successful completion of financings is an integral part of our plan to satisfy our working capital, capital expenditure, debt maturities and other requirements for the foreseeable future. Our financing program for 2017, included in theLey de Ingresos de la Federación para el Ejercicio Fiscal 2017 (Federal Revenues Law for the Fiscal Year 2017),January 1, 2019, provides for the incurrence of up to U.S. $15.7Ps. 112.8 billion in net indebtedness (i.e., U.S. $21.0 billion of new financings minus U.S. $5.3 billion of debt payments) 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, which we have incurred primarily to finance the capital expenditures needed to carry out our capital investment projects.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. The sharp decline inincreased and our working capital has deteriorated. Relatively low oil prices that began in late 2014 hasand declining production have also had a negative impact on our ability to generate positive cash flows, which, together with our continued heavy tax burden, has further exacerbated our ability to fund our capital expenditures and other expenses fromexpenses. Despite the relatively low and fluctuating oil prices and our heavy tax burden, our cash flow from operations. Therefore,operations in order2018, together with our funds from financing activities, was sufficient to developfund our hydrocarbon reservescapital expenditures and amortize scheduledother expenses. We expect that net cash flows from our operations and financing activities will also be sufficient to meet our working capital requirements, debt maturities, we will need to raise significant amounts of financing from a broad range of funding sources, in addition to the efficiencyservice and cost-cutting initiatives described in this annual report.capital expenditures for 2019.
As of December 31, 2016,2018, our total indebtedness, including accrued interest, was approximately Ps. 1,983.22,082.3 billion (U.S. $96.0$105.8 billion), in nominal terms, which represents a 32.8%2.2% increase compared to our total indebtedness, including accrued interest, of approximately Ps. 1,493.42,037.9 billion (U.S. $86.8$103.5 billion) as of December 31, 2015. Approximately 23.5%2017. 27.2% of our existing debt as of December 31, 2016,2018, or Ps. 465.7566.1 billion (U.S. $22.5$28.8 billion), is scheduled to mature in the next three years. Our working capital increaseddecreased from a negative working capital of Ps. 176.225.6 billion (U.S. $10.2$1.3 billion) as of December 31, 20152017 to a negative working capital of Ps. 70.8 million54.7 billion (U.S. $3.4 million)$2.8 billion) as of December 31, 2016.2018. 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 and the incurrence of additional indebtedness (including refinancings of existing indebtedness). In addition, we are taking actions to improve our financial position, such as those discussed above, particularly through our 2017-2021 Business Plan.above.
Certain rating agencies have expressed concerns regarding: (1) our heavy tax burden; (2) the total amount of our debt; (2)debt and the ratio of our debt to our proven reserves; (3) the significant increase in our indebtedness over the last several years; (3)(4) our negative free cash flow during 2015, primarily resulting fromflow; (5) the natural decline of certain of our significant capital investment projectsoil fields and the declining pricelower quality of crude oil; (4)(6) our substantial unfunded reserve for retirement pensions and seniority premiums, which was equal to Ps. 1,220.41,080.5 billion (U.S. $59.1$54.9 billion) as of December 31, 2016, and (5)2018; (7) the resiliencepersistence of our operating expenses notwithstanding the sharp declinedeclines in oil pricesprices; (8) the possibility that beganour budget for capital expenditures will be insufficient to maintain and exploit reserves; and (9) the involvement of the Mexican Government in late 2014. our strategy, financing and management.
On January 29, 2016, Standard & Poor’s announced the downgrade of ourstand-alone credit profile from “BB+” to “BB,” and affirmed its global foreign currency rating of “BBB+.” On March 31, 2016,April 12, 2018, Moody’s Investors Service announced the revision of its outlook for our credit ratings from negative to stable and affirmed our global foreign currency rating as Baa3 and local currency credit ratings from “Baa1” to “Baa3” and changed the outlook for its credit ratings to negative. On July 26, 2016, Fitch Ratings announced the downgrade of our global local currency credit rating as Aa3. On January 29, 2019, Fitch Ratings lowered our credit rating from BBB+ toBBB- in both global local and global foreign currency and affirmed the outlook for our credit ratings as negative. On March 4, 2019, Standard and Poor’s announced the revision of the outlook for our credit ratings from“A-“ stable to “BBB+”, citing its recent downgrade of Mexico’s sovereignnegative and affirmed our global foreign currency credit rating as BBB+ and our global local currency rating as its key factor. On August 23, 2016, Standard & Poor’s announced that it had revised the outlook of our corporate credit rating for our foreign currency and for our local currency from stable to negative.A-.
Any further lowering of our credit ratings, particularly below investment grade, may have material adverse consequences on our ability to access the financial markets and/or our cost of financing. If we were unable to obtain financing on favorable terms or at all,In turn, this could hamper our ability to obtain further financing on favorable terms as well as investment in projects financed through debt and impairsignificantly harm our ability to meet our principal and interest paymentexisting obligations, with our creditors. As a result, we may be exposed to liquidity constraints and may not be able to service our debt or make the capital expenditures needed to maintain our current production levels and to maintain, and increase, our proved hydrocarbon reserves, which may adversely affect our financial condition and results of operations.
If such constraints occur at a time when our cash flow from operations is less than the resources needed to fund our capital expenditures ornecessary to meet our debt service obligations, in order to provide additional liquidity to our operations, we could be forced to further reduce our planned capital expenditures, implement further austerity measures and/or sell additionalnon-strategic assets in order to raise funds. A reduction in our capital expenditure program could adversely affect our financial condition and results of operations. SuchAdditionally, such measures may not be sufficient to permit us to meet our obligations.
Going Concern
Our consolidated financial statements have been prepared under the assumptionon a going concern basis, which assumes that we willcan meet our payment obligations. As we describe in Note24-e to our consolidated financial statements, there exists substantial doubt about our ability to continue as a going concern. As we describe in Note 2 to our consolidated financial statements, we have experienced certain conditions that have generated important uncertainty and significant doubts concerning our ability to continue operating, including recurring net losses, negative working capital, negative equity and negative cash flows from operating activities. We discuss the circumstances that have caused these negative trends, as well our plans in regard to these matters in “Operating and Financial Review and Prospects—Overview” above in this Item 5 and Note 224-e to our consolidated financial statements included herein. We are currently evaluating our new business plan in light of the recent announcements by the Mexican Government in connection with the energy sector in Mexico, and we intend to continue taking actions to improve our results of operation, capital expenditures plans and financial condition. We continue operating as a going concern, and our consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Equity Structure and Mexican Government Contributions
Our total equity (deficit) as of December 31, 20162018 was negative Ps. 1,233.01,459.4 billion, and our total capitalization (long-term(long-term debt plus equity) totaled Ps. 574.01,555.5 billion. During 2016,2018, our total equity increased(deficit) improved by Ps. 98.743.0 billion from negative Ps. 1,331.7Ps 1,502.4 billion as of December 31, 2015,2017, primarily due to (1) the equity contributions in the total
amount of Ps. 161.9 billion made by the Mexican Government to Petróleos Mexicanos in 2016 in the form of Certificates of Contribution “A” described in greater detail above; (2) a Ps. 108.2222.5 billion increase in actuarial gains on employee benefits resulting from the increase in the discount rate and expected rate of return on plan assets used in the actuarial computation method from 7.4% in 2015 to 8.2% in 2016 and an increase in the expected returns for fixed assets; and (3)a Ps. 21.41.3 billion in accumulated gainsgain from the foreign currency translation effect. This increase waseffect, partially offset by our net loss for the year of Ps. 191.1180.4 billion. Under theLey deConcursos Mercantiles (Commercial Bankruptcy Law of Mexico), Petróleos Mexicanos and the subsidiary entities cannot be subject to a bankruptcy proceeding. In addition, our current financing agreements do not include financial covenants or events of default that would be triggered as a result of our having negative equity.
On April 21, 2016,
In 2018 and 2017, we received adid not receive any capital contribution of Ps. 26.5 billion from the Mexican Government.
On December 24, 2015, the Ministry of Finance and Public Credit and, on August 3, 2016,published in the MinistryOfficial Gazette of Finance and Public Credit informed us that the Mexican Government would assume Ps. 184.2 billion in payment liabilities related to our pensions and retirement plans, following the review performed by an independent expert. In accordance withFederation theDisposiciones 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 FederalMexican Government of the payment obligations related to pensions and retirement plans of Petróleos Mexicanos and its productivestate-owned subsidiaries) published in. On August 3, 2016, the Official GazetteMinistry of Finance and Public Credit informed us that the Federation on December 24, 2015, we receivedMexican Government would assume Ps. 184.2 billion in promissory notes issued by the Mexican Government, whichpayment liabilities related to our pensions and retirement plans, and accordingly replaced the Ps. 50.0 billion promissory note issued to us on December 24, 2015 and was recognized as an increase in equity in the amount of Ps. 135.4 billion in the form of Certificates of Contribution “A.” The Ps. 135.4 billion increase in equity was the result of thewith Ps. 184.2 billion value of thein promissory notes as of June 29, 2016, minus the Ps. 50.0 billion promissory note we received on December 24, 2015, plus a Ps. 1.2 billion increase in the value of the promissory notes from June 29, 2016 to August 15, 2016, which is the date on which we received the promissory notes. On August 15, 2016, we exchanged Ps. 47.0 billion of these promissory notes for short-term floating rate Mexican Government debt securities known asBonos de Desarrollo del Gobierno Federal (Development Bonds of the Federal Government, or BONDES D). We then sold the BONDES D to Mexican development banks for the same price at which we received them from the Mexican Government.
On January 19, 2015, the Mexican Government made an equity contribution of Ps. 10.0 billion to Petróleos Mexicanos in accordance with the Federal Law of Budget and Fiscal Accountability, as amended. This payment was recognized as a Ps. 10.0 billion increase in Mexican Government contributions to Petróleos Mexicanos.
As of December 31, 20152017 and 2016,2018, the balance of Mexican Government contributions to Petróleos Mexicanos was Ps. 140.643.7 billion. As of December 31, 20152017 and 2016,2018, the total amount of contributions in the form of Certificates of Contribution “A” was Ps. 194.6356.5 billion.
On January 31, 2019, the Mexican Government notified the Board of Directors of Petróleos Mexicanos that the Mexican Government would make payments to us through the SENER in a total amount of Ps. 25.0 billion. On March 8, 2018, we received a payment for Ps. 10.0 billion and on April 11, 2019, we received a payment for Ps. 356.5 billion, respectively.5.0 billion. These payments are part of the Mexican Government’s Strengthening Program for Petróleos Mexicanos. See “Item 5—Operating and Financial Review and Prospects—Overview.”
Cash Flows from Operating, Financing and Investing Activities
During 2016,2018, net funds provided by operating activities totaled negative Ps. 41.5141.8 billion, as compared to Ps. 102.363.4 billion in 2015. Net loss was2017, due to an increase in sales and a lower corresponding increase in cost of sales resulting from improvements in our operations. During 2018, our net cash flows used in investing activities totaled Ps. 191.1101.1 billion, in 2016, as compared to net losscash flows used in investing activities of Ps. 712.680.7 billion in 2015.2017. Our net cash flows fromused in financing activities totaled Ps. 213.456.6 billion in 2016,2018, as compared to Ps. 134.9 billion in 2015. During 2016, we applied net cash flows used in financing activities of Ps. 134.5 billion for net investments at cost in fixed assets, including exploration expenses, as compared to our application of cash flows of Ps. 254.846.3 billion in 2015 for net investments at cost in fixed assets, including exploration expenses.2017.
At December 31, 2016,2018, our cash and cash equivalents totaled Ps. 163.581.9 billion, as compared to Ps. 109.497.9 billion at December 31, 2015.2017. See Note 9 to our consolidated 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 December 31, 20152018 and 2016.2017.
As of December 31, | As of December 31, | |||||||||||||||
2016 | 2015 | 2018 | 2017 | |||||||||||||
(millions of pesos) | (millions of pesos) | |||||||||||||||
Borrowing base under lines of credit | Ps. 99,174 | Ps 11,337 | Ps.152,170 | Ps.130,348 | ||||||||||||
Cash and cash equivalents | 163,533 | 109,369 | 81,912 | 97,852 | ||||||||||||
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Liquidity | Ps. 262,707 | Ps 120,706 | Ps.235,082 | Ps.228,200 | ||||||||||||
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The following table summarizes our sources and uses of cash for the years ended December 31, 20152018 and 2016:2017.
For the years ended December 31, | ||||||||||||||||
2018 | 2017 | |||||||||||||||
For the years ended December 31, | ||||||||||||||||
2016 | 2015 | (millions of pesos) | ||||||||||||||
(millions of pesos) | ||||||||||||||||
Net cash flows (used in) from operating activities | Ps. (41,485) | Ps. 102,337 | Ps. | 141,787 | Ps. | 63,398 | ||||||||||
Net cash flows used in investing activities | (134,536) | (254,832) | (101,084 | ) | (80,690 | ) | ||||||||||
Net cash flows from financing activities | 213,360 | 134,915 | ||||||||||||||
Net cash flows (used in) financing activities | (56,554 | ) | (46,255 | ) | ||||||||||||
Effect of change in cash value | 16,804 | 8,960 | (88 | ) | (2,133 | ) | ||||||||||
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Net increase (decrease) in cash and cash equivalents | Ps. 54,143 | Ps. (8,620) | Ps. | (15,939 | ) | Ps. | (65,682 | ) | ||||||||
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Note: Numbers may not total due to rounding.
Investment Policies
Our Finance and Treasury Department maintains financial resources sufficient to meet our payment commitments and those of the subsidiary entities, as well as a comprehensive, consolidated cash position and related projections in anticipation of such commitments.
Our investment policies attempt to take advantage of favorable market conditions by accessing the most favorable terms offered to us by financial institutions. Investments of financial resources by our Finance and Treasury Department are made in accordance with the following policies:
Investments of Mexican Pesos
In connection with investments in Mexican pesos, we are obligated, during the structuring and development phase of our financial transactions, to observe and comply with the investment guidelines for resources in pesos that were approved by our Financial Resources Committee on December 21, 2006,July 24, 2017, as modified from time to time. We may only invest in the following:
(a) | securities issued or guaranteed by the Mexican Government; |
(b) | securities issued by Sociedades Nacionales de Crédito (National Credit Societies), the balance of which may not exceed 50% of our cash and cash equivalents; |
(c) | repurchase agreements that use securities issued or guaranteed by the Mexican Government; |
(d) | time deposits with major financial institutions, the balance of which may not exceed 30% of our cash and cash equivalents; and |
(e) | shares of mutual funds whose investments are limited to securities issued or guaranteed by the Mexican Government. |
In addition to the above limits, time depositsdemand deposit accounts must be traded with financial institutions that maintain, at a minimum, the following credit ratings as issued by the applicable rating agency:
Domestic scale | Fitch Ratings | S&P | Moody’s | |||
Long term | AA(mex) | mxAA | Aa2.mx | |||
Short term | F1(mex) | A-1 | Mx-1 |
Investments of Financial Resources in Dollars
Investments of financial resources in dollars must meet our operational and strategic requirements and must be previously approved byBanco de México on acase-by-case basis. Currently, our investments in dollars are limited to operational accounts,short-term money market funds and time deposits. Our dollar investments are managed byBanco de México.
Operational Currencies
The main currencies for investing cash and cash equivalents are pesos and dollars. Similarly, we generate revenues from the domestic and international sales of our products in those two currencies and our expenses, including those relating to our debt service, are payable in these two currencies.
Commitments for Capital Expenditures and Sources of Funding
Our current aggregate commitments for capital expenditures for 20172019 total approximately Ps. 109.0159.1 billion. For a general description of our current commitments for capital expenditures, see “Item 4—Information on the Company—History and Development—Capital Expenditures.” The amount of our aggregate capital expenditures commitments for 20172019 remains subject to adjustment by the Mexican Government. See “Item 3—Key Information—Risk Factors—Risk Factors Related to our Relationship with the Mexican Government—The Mexican Government controls us and it could limit our ability to satisfy our external debt obligations or could reorganize or transfer us or our assets.”
The following table sets forth our total capital expenditures, excludingnon-capitalizable maintenance, by segment for the year ended December 31, 2016,2018, and the budget for these expenditures for 2017.2019. Capital expenditure amounts are derived from our budgetary records, which are prepared on a cash basis. Accordingly, these capital expenditure amounts do not correspond to capital expenditure amounts included in our consolidated financial statements prepared in accordance with IFRS. For more information see “Item 4—History and Development—Capital Expenditures.”
Year ended December 31, 2016 | Budget 2017(1) | Year ended December 31, | Budget 2019(1) | |||||||||||||
2018 | ||||||||||||||||
(millions of pesos) | (millions of pesos) | |||||||||||||||
Exploration and Production | Ps. 137,242 | Ps. 73,927 | Ps.71,107 | Ps.98,226 | ||||||||||||
Industrial Transformation | 33,947 | 21,369 | 17,026 | 57,500 | ||||||||||||
Drilling and Services | 2,688 | 1,580 | 1,388 | 1,295 | ||||||||||||
Logistics | 7,015 | 4,449 | 5,042 | 1,200 | ||||||||||||
Ethylene | 975 | 300 | ||||||||||||||
Fertilizers | 379 | 444 | 331 | 500 | ||||||||||||
Ethylene | 746 | 1,786 | ||||||||||||||
Cogeneration and Services | — | — | ||||||||||||||
Corporate and other Subsidiaries | 1,004 | 5,422 | 893 | 107 | ||||||||||||
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Total | Ps. 183,021 | Ps. 108,977 | Ps.96,762 | Ps.159,128 | ||||||||||||
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Note: |
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(1) | Original budget published in the Official Gazette of the Federation on |
Petróleos Mexicanos. |
Our current commitments for capital expenditures have fluctuated in recent years as compared to previous years. Based on past experience, we expect to generate sufficient funds for our working capital, capital expenditures and investments through:
cash flow generated by operations;
• | the issuance ofcertificados bursátiles |
the issuance of debt securities in the international capital markets;
the renewal of existing lines of credit and the entering into of new lines of credit from international and local commercial banks; and
other financing activities.
The securities that we issue may vary in tenor, amount, currency and type of interest rate. We may issue debt securities in U.S. dollars, Japanese yen, euros, pounds, pesos or Swiss francs, among others; these securities may be issued with fixed or floating rates and with maturities of one or more years, including perpetual debt securities, depending on market conditions and funding requirements. We may issue securities in the international capital markets or in the Mexican domestic market, or in both markets. Commercial bank syndicated loans may be established with single or multiple tranches with varying maturities. Bilateral loans may vary in tenor and range, which may be of one year or more. See also “—Financing Activities” below.
In order to be able to carry out our planned capital expenditures program, we will need to seek financing from a variety of sources, and we cannot guarantee that we will be able to obtain financing on terms that would be acceptable to us. Our inability to obtain additional financing could have an adverse effect on our planned capital expenditures program and result in our being required to limit or defer this program.
Financing Activities
20172019 Financing Activity.Activities.During the period from January 1 to April 25,30, 2019, we did not participate in any material new financing activities.
2018 Financing Activities.During 2018, we participated in the following activities:
On February 12, 2018, Petróleos Mexicanos issued U.S. $4,000,000,000 of debt securities under its U.S. $92,000,000,000Medium-Term Notes Program, Series C, in two tranches: (1) U.S. $2,500,000,000 5.35% Notes due 2028 and (2) U.S. $1,500,000,000 6.35% Bonds due 2048. All debt securities under this program are guaranteed by Pemex Exploration and Production, Pemex Industrial Transformation, Pemex Drilling and Services and Pemex Logistics and their respective successors and assignees.
On February 12, 2018, Petróleos Mexicanos consummated an exchange offer pursuant to which it exchanged (1) U.S. $952,454,000 aggregate principal amount of its outstanding 5.500% Bonds due 2044 for U.S. $881,899,000 aggregate principal amount of its new 6.350% Bonds due 2048 and (2) U.S. $1,021,065,000 aggregate principal amount of its outstanding 5.625% Bonds due 2046 for U.S. $946,764,000 aggregate principal amount of its new 6.350% Bonds due 2048.
On February 12, 2018, Petróleos Mexicanos consummated a tender offer pursuant to which it purchased U.S.$ 2,052,000 aggregate principal amount of its outstanding 5.500% Bonds due 2044 and U.S.$ 2,488,000 aggregate principal amount of its outstanding 5.625% Bonds due 2046.
On March 5, 2018, Petróleos Mexicanos consummated a tender offer pursuant to which it purchased U.S. $138,598,000 aggregate principal amount of its outstanding 3.125% Notes due 2019, U.S. $558,644,000 aggregate principal amount of its outstanding 5.500% Notes due 2019, U.S. $91,843,000 aggregate principal amount of its outstanding 8.000% Notes due 2019, U.S. $183,017,000 aggregate principal amount of its outstanding 6.000% Notes due 2020 and U.S. $817,303,000 aggregate principal amount of its outstanding 3.500% Notes due 2020.
On March 27, 2018, Petróleos Mexicanos entered into a loan agreement in the amount of U.S. $181,101,291, which bears interest at a floating rate linked to LIBOR and matures in 2025.
On April 17, 2018, Petróleos Mexicanos increased itsMedium-Term Notes Program from U.S. $92,000,000,000 to U.S. $102,000,000,000.
On May 24, 2018, Petróleos Mexicanos issued €3,150,000,000 of debt securities under its U.S. $102,000,000,000 Medium Term Notes Program, Series C in four tranches: (1) €600,000,000 of its 2.500% Notes due 2022, (2) €650,000,000 of its Floating Rate Notes due 2023, (3) €650,000,000 of its 3.625% Notes due 2025 and (4) €1,250,000,000 of its 4.750% Notes due 2029. All debt securities issued under this program are guaranteed by Pemex Exploration and Production, Pemex Industrial Transformation, Pemex Drilling and Services and Pemex Logistics and their respective successors and assignees.
On June 4, 2018, Petróleos Mexicanos issued CHF365,000,000 of its 1.750% Notes due 2023 under its U.S. $102,000,000,000 Medium Term Notes Program, Series C. All debt securities issued under this program are guaranteed by Pemex Exploration and Production, Pemex Industrial Transformation, Pemex Drilling and Services and Pemex Logistics and their respective successors and assignees.
On June 26, 2018, one of our subsidiary companies,Pro-Agroindustrias, S.A. de C.V., refinanced a credit line for U.S. $250,000,000 by entering into a new credit line for the same amount, which bears interest at a floating rate linked to LIBOR and matures in 2025. This credit agreement is guaranteed by Petróleos Mexicanos.
On August 23, 2018, Petróleos Mexicanos entered into a loan agreement in the amount of U.S. $200,000,000, which bears interest at a floating rate linked to LIBOR and matures in 2023.
On October 23, 2018, Petróleos Mexicanos issued U.S. $2,000,000,000 of its 6.500% Notes due 2029 under its U.S. $102,000,000,000 Medium Term Notes Program, Series C. All debt securities issued under this program are guaranteed by Pemex Exploration and Production, Pemex Industrial Transformation, Pemex Drilling and Services and Pemex Logistics and their respective successors and assignees.
On November 9, 2018, Petróleos Mexicanos entered into a revolving credit facility in the amount of Ps. 9,000,000,000, which matures in 2023.
On November 30, 2018, Petróleos Mexicanos borrowed U.S. $250,000,000 from a bilateral credit line, which bears interest at a floating rate linked to LIBOR and matures in 2028.
As of December 31, 2018, Petróleos Mexicanos had U.S. $6,700,000,000 and Ps. 32,500,000,000 in available revolving credit lines in order to ensure liquidity, with U.S. $6,400,000,000 and Ps. 26,200,000,000 remaining available as of December 31, 2018, and U.S. $3,210,000,000 and Ps. 12,500,000,000 remaining available as of April 23, 2019.
2017 Financing Activities.During 2017 we participated in the following activity:activities:
On February 4,14, 2017, Petróleos Mexicanos issued € 4,250,000,000€4,250,000,000 of debt securities under its U.S. $72,000,000,000Medium-Term Notes Program, Series C, in three tranches: (1) € 1,750,000,000€1,750,000,000 of its 2.5% Notes due 2021; (2) € 1,250,000,000€1,250,000,000 of its 3.75% Notes due 2024; and (3) € 1,250,000,000€1,250,000,000 of its 4.875 %4.875% Notes due 2028. All debt securities issued under this program are guaranteed by Pemex Exploration and Production, Pemex Industrial Transformation, Pemex Drilling and Services and Pemex Logistics and their respective successors and assignees.
On April 6, 2017, Petróleos Mexicanos obtained a a loan from a line of credit for U.S. $132,000,000, which bears interest at a fixed rate of 5.25% and matures in 2024. The line of credit is guaranteed by Pemex CogenerationExploration and Production, Pemex Industrial Transformation, Pemex Drilling and Services as of the date of this annual report.and Pemex Logistics.
2016 Financing Activities.During 2016 we participated
On May 15, 2017, Petróleos Mexicanos entered into a term loan credit facility in the following activities:amount of U.S. $400,000,000, which bears interest at a floating rate linked to LIBOR and matures in 2020. The term loan is guaranteed by Pemex Exploration and Production, Pemex Industrial Transformation, Pemex Drilling and Services and Pemex Logistics.
On January 25, 2016,June 16, 2017, Petróleos Mexicanos increased itsMedium-Term Notes Program from U.S. $52,000,000,000$72,000,000,000 to U.S. $62,000,000,000 pursuant to an authorization by the Board of Directors of$92,000,000,000.
On July 17, 2017, Petróleos Mexicanos on August 18, 2015.
On February 4, 2016,July 18, 2017, Petróleos Mexicanos issued U.S. $5,000,000,000 of debt securities under its U.S. $62,000,000,000 $92,000,000,000Medium-Term Notes Program, Series C, in threetwo tranches: (1) U.S. $750,000,000$2,500,000,000 of its 5.500%6.50% Notes due 2019;2027 and (2) U.S. $1,250,000,000$2,500,000,000 of its 6.375% Notes6.75% Bonds due 2021; and (3) U.S. $3,000,000,000 of its 6.875% Notes due 2026.2047. All debt securities issued under this program are guaranteed by Pemex Exploration and Production, Pemex Industrial Transformation, Pemex Drilling and Services and Pemex Logistics and Pemex Cogenerationtheir respective successors and Services as of the date of this annual report.assignees.
On February 5, 2016,July 21, 2017, Petróleos Mexicanos obtainedconsummated a loan from a line of credit for Ps. 7,000,000,000 bearing interest at a floating rate linkedtender offer pursuant to the TIIE, plus 0.55%, which was repaid in full on January 27, 2017.
outstanding 3.125% Notes due 2019.
• | On |
On March 28, 2016,December 18, 2017, Petróleos Mexicanos borrowed Ps. 9,700,000,000 fromentered into a credit line facility in the amount of U.S. $200,000,000, which bears interest at a floating rate linked to the TIIE, which was repaidLIBOR and matures in full on March 28, 2017.2020.
On April 19, 2016, Petróleos Mexicanos borrowed € 500,000,000 from a credit line at a fixed rate of 5.11%, which matures on March 15, 2023.
On September 21, 2016, Petróleos Mexicanos issued U.S. $4,000,000,000 of its debt securities under its U.S. $62,000,000,000 Medium-Term Notes Program, Series C, in two tranches: (i) U.S. $2,000,000,000 of its 4.625% Notes due 2023 and (ii) U.S. $2,000,000,000 of its 6.750%2022.
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As of December 31, 2016,2017, Petróleos Mexicanos had U.S. $4,750,000,000$6,700,000,000 and Ps. 23,500,000,000 in available revolving credit lines in order to ensure liquidity, with U.S. $4,630,000,000$5,400,000,000 and Ps. 3,500,000,00023,500,000,000 remaining available.
2015 Financing Activities.During 2015 we participated in the following activities:
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On November 6, 2015, Petróleos Mexicanos issued € 100,000,000 of notes due 2030, which bear interest at a fixed rate of 4.625%. The notes are guaranteed by Pemex Exploration and Production,
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Indebtedness
During 2016,2018, our total debt increased by 32.8%2.2%, from Ps. 1,493.42,037.9 billion at December 31, 20152017 to Ps. 1,983.22,082.3 billion at December 31, 2016,2018, primarily due to the financing activities undertaken during this period, as described in Note 1518 to our consolidated financial statements included herein and to the 20.1% appreciation of the U.S. dollar relative to the peso in 2016.herein.
As of December 31, 20162018 and as of the date of this annual report, we were not in default on any of our financing agreements.
The following table sets forth the analysis of our total indebtedness (not including accrued interest) as of December 31, 20162018 based onshort- andlong-term debt and fixed or floating rates:
In millions of U.S. dollars | ||||
Short-term debt | ||||
Short-term bonds with floating interest rates | U.S. $ | |||
Lines of credit with variable interest rates established under committed credit facilities with various international commercial banks | ||||
Lines of credit with fixed interest rates | ||||
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Totalshort-term debt(1) | U.S. $ | |||
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Long-term debt | ||||
Fixed rate instruments | ||||
Instruments with fixed annual interest rates ranging from | U.S. $ | |||
Variable rate instruments | ||||
Drawings under lines of credit based on LIBOR and other variable rates with maturities ranging from | ||||
Floating rate notes with maturities ranging from | ||||
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Total variable rate instruments | U.S. $ | |||
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Totallong-term debt | U.S. $ | |||
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Total indebtedness(1) | U.S. $ | |||
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Note: |
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(1) | Excludes U.S. |
The table below sets forth our total indebtedness as of December 31 for each of the three years from 20142016 to 2016.2018.
Total Indebtedness of PEMEX
As of December 31,(1) | As of December 31,(1) | |||||||||||||||||||||||
2014 | 2015 | 2016 | 2016 | 2017 | 2018 | |||||||||||||||||||
(in millions of U.S. dollars)(2) | (in millions of U.S. dollars)(2) | |||||||||||||||||||||||
Domestic debt in various currencies | U.S. $ | 19,856 | U.S. $ | 19,415 | U.S. $ | 16,651 | U.S. $ | 16,651 | U.S. $ | 13,595 | U.S. $ | 13,669 | ||||||||||||
External debt in various currencies(3) | ||||||||||||||||||||||||
Bonds(4) | 44,445 | 52,981 | 67,523 | 67,523 | 76,007 | 80,134 | ||||||||||||||||||
Direct loans | 6,473 | 7,486 | 3,808 | 3,808 | 6,244 | 5,609 | ||||||||||||||||||
Project financing(5) | 4,916 | 4,816 | 4,125 | 4,125 | ,3,284 | 2,650 | ||||||||||||||||||
Financial leases | 263 | 536 | 2,181 | 2,181 | 2,036 | 1,878 | ||||||||||||||||||
Notes payable to contractors | 795 | 483 | 338 | 338 | 205 | 153 | ||||||||||||||||||
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Total external debt | U.S. $ | 56,892 | U.S. $ | 66,302 | U.S. $ | 77,975 | U.S. $ | 77,975 | U.S. $ | 87,776 | U.S. $ | 90,424 | ||||||||||||
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Total indebtedness | U.S. $ | 76,748 | U.S. $ | 85,717 | U.S. $ | 94,626 | U.S. $ | 94,626 | U.S. $ | 101,371 | U.S. $ | 104,093 | ||||||||||||
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Note: |
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(1) | Figures do not include accrued interest. Accrued interest was U.S. |
(2) | Indebtedness payable in currencies other than U.S. dollars was first converted into pesos for accounting purposes at the exchange rates set byBanco de México and then converted from pesos to U.S. dollars at the following exchange rates: |
(3) | Indebtedness payable other than in pesos and owed to persons or institutions having their head offices or chief places of business outside of Mexico and payable outside the territory of Mexico. |
(4) | Includes, as of December 31, |
(5) | All credits included in this line are insured or guaranteed by export credit agencies. |
Source: |
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Financing Activities of Pemex Finance, Ltd.
Commencing on December 1, 1998, Petróleos Mexicanos,Pemex-Exploration and Production, PMI and P.M.I. Services, B.V. have entered into several agreements with Pemex Finance, Ltd. Under these contracts, Pemex Finance, Ltd. purchases certain existing PMI accounts receivable for crude oil as well as certain accounts receivable to be generated in the future by PMI related to crude oil. The receivables sold are those generated by the sale of Maya and Altamira crude oil to designated customers in the United States, Canada and Aruba. The net proceeds obtained by Pemex Exploration and Production, which assumed all of the rights and obligations ofPemex-Exploration and Production under these agreements, from the sale of such receivables under the agreements are utilized for capital expenditures. Pemex Finance, Ltd. obtains resources for the acquisition of such accounts receivable through the placement of debt instruments in the international markets.
On July 1, 2005, we entered into an option agreement with BNP Paribas Private Bank and Trust Cayman Limited giving us an option to acquire 100% of the shares of Pemex Finance, Ltd. As a result, the financial results of Pemex Finance, Ltd. under IFRS are consolidated into our financial statements, and PMI’s sales of accounts receivable to Pemex Finance, Ltd. have been reclassified as debt. Our
On December 17, 2018, we exercised the option to purchaseacquire 100% of the shares of Pemex Finance, Ltd. can only be exercised once its remaining debt, approximately U.S. $162.5 million in aggregate principal amount as of December 31, 2016, has been redeemed.
As of December 31, 2016, the outstanding debt of2018, Pemex Finance, Ltd. was composedhad no outstanding debt.
2018 Financing Activities. During 2018, Pemex Finance, Ltd. made payments of U.S. $162.5$62.5 million in principal of its notes, thereby paying in full the remaining aggregate principal amount of fixed rateits notes with maturities ranging from 2017 to 2018 and interest rates between 9.15% and 10.61% and accrued interest of U.S. $0.7 million.outstanding. Pemex Finance, Ltd. did not incur any additional indebtedness during 2018.
2017 Financing Activities.During the first four months of 2017, Pemex Finance, Ltd. made payments of U.S. $28.1$100.0 million in principal of its notes. Pemex Finance, Ltd. did not incur any additional indebtedness during the first four months of 2017.
2016 Financing Activities.During 2016, Pemex Finance, Ltd. made payments of U.S. $28.1 million in principal of its notes. Pemex Finance, Ltd. did not incur any additional indebtedness during 2016.
2015 Financing Activities.During 2015, Pemex Finance, Ltd. made payments of U.S. $112.5 million in principal of its notes. Pemex Finance, Ltd. did not incur any additional indebtedness during 2015.
Contractual Obligations andOff-Balance Sheet Arrangements
Information about our long-term contractual obligations andAs of December 31, 2018, we did not have anyoff-balance sheet arrangements outstandingof the type that we are required to disclose under Item 5.E of Form20-F. See “Item 11—Quantitative and Qualitative Disclosures about Market Risk.”
Contractual Obligations
Information about ourlong-term contractual obligations as of December 31, 20162018 is set forth below. This information is important in understanding our financial position. In considering the economic viability of investment opportunities we view any source of financing, for example, operating leases or sales of future accounts receivable, as being economically equivalent to consolidated debt.
Contractual Obligations as of December 31, 20162018(1)
Payments due by period | Payments due by period | |||||||||||||||||||||||||||||||||||||||
Total | Less than 1 year | 1-3 years | 4-5 years | After 5 years | Total | Less than 1 year | 1 – 3 years | 4 – 5 years | After 5 years | |||||||||||||||||||||||||||||||
(in millions of U.S. dollars) | (in millions of U.S. dollars) | |||||||||||||||||||||||||||||||||||||||
Contractual obligations recognized in balance sheet: | ||||||||||||||||||||||||||||||||||||||||
Debt(2) | U.S.$ | 93,453 | U.S.$ | 8,174 | U.S.$ | 13,666 | U.S.$ | 16,485 | U.S.$ | 55,128 | U.S. $ | 103,761 | U.S.$ | 9,533 | U.S. $ | 18,691 | U.S. $ | 16,964 | U.S. $ | 58,573 | ||||||||||||||||||||
Notes payable to contractors(3) | 338 | 202 | 68 | 51 | 17 | 153 | 85 | 51 | 17 | – | ||||||||||||||||||||||||||||||
Capital lease obligations(4) | 2,181 | 149 | 279 | 273 | 1,480 | 1,878 | 127 | 273 | 303 | 1,175 | ||||||||||||||||||||||||||||||
Other long-term liabilities: | ||||||||||||||||||||||||||||||||||||||||
Dismantlement and abandonment costs obligations(5) | 3,144 | 13 | 478 | 543 | 2,110 | 4,270 | 39 | 715 | 331 | 3,185 | ||||||||||||||||||||||||||||||
Employee benefits plan(6) | 59,060 | 2,945 | 6,061 | 6,776 | 43,278 | 54,898 | 3,490 | 7,208 | 7,968 | 36,232 | ||||||||||||||||||||||||||||||
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Total contractual obligations recognized in balance sheet | 158,226 | 11,483 | 20,552 | 24,128 | 102,013 | 164,960 | 13,274 | 26,938 | 25,583 | 99,165 | ||||||||||||||||||||||||||||||
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Other contractual obligations not recognized in liabilities: | ||||||||||||||||||||||||||||||||||||||||
Infrastructure works contracts(7) | 39,585 | 16,822 | 13,626 | 3,365 | 5,572 | 24,574 | 1,724 | 16,410 | 2,817 | 3,623 | ||||||||||||||||||||||||||||||
Financed Public Works Contracts (FPWC)(8) | 799 | 356 | 122 | 120 | 201 | 508 | 227 | 77 | 76 | 128 | ||||||||||||||||||||||||||||||
Nitrogen supply contracts(9) | 419 | 39 | 79 | 80 | 221 | 2,149 | 238 | 505 | 509 | 897 | ||||||||||||||||||||||||||||||
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Total contractual obligations not recognized in liabilities(10) | 40,803 | 17,217 | 13,827 | 3,565 | 5,994 | 27,231 | 2,189 | 16,992 | 3,402 | 4,648 | ||||||||||||||||||||||||||||||
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Total contractual obligations | U.S. $ | 199,029 | U.S. $ | 28,700 | U.S. $ | 34,379 | U.S. $ | 27,693 | U.S. $ | 108,007 | U.S. $ | 192,191 | U.S. $ | 15,463 | U.S. $ | 43,930 | U.S. $ | 28,985 | U.S. $ | 103,813 | ||||||||||||||||||||
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Note: |
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(1) | All amounts calculated in accordance with IFRS. |
(2) | See Note |
(3) | See Note |
(4) | See Note 18 to our consolidated financial statements included herein. |
See |
See |
See Note |
(8) | The amounts presented for Financed Public Works Contracts in this table correspond to works the performance and delivery of which by the relevant contractors are pending. For more information on the FPWC program, see “Item 4—Information on the Company—Business Overview—Pemex Exploration and Production—Integrated Exploration and Production Contracts and Financed Public Works Contracts” and Note |
(9) | See |
(10) | No amounts have been included for Integrated E&P Contracts in this table, since payments for these contracts will be made on aper-barrel basis and performance and delivery by the relevant contractors is pending. For more information on the Integrated E&P Contracts program, see “Item 4—Information on the Company—Business Overview—Pemex Exploration and Production—Integrated Exploration and Production Contracts and Financed Public Works Contracts” and Note |
Source: |
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Results of Operations by Business Segment
This section presents the results of our operations by business segment, including our central corporate operations and the operations of the consolidated subsidiary companies.
As further described under “Item 4—Information on the Company—History and Development—Energy Reform—Corporate Reorganization” and in Note 1 and Note 5 to our consolidated financial statements included herein, as a result of the energy reform, we have undergone a corporate reorganization that created new business segments and redistributed the operation of certain business units to different business segments. Accordingly, the results for the business segments presented as of and for the years ended December 31, 2016 reflect different business segments from those presented as of and for the year ended December 31, 2015 and 2014. Further, as of 2016, the results for refining, gas and basic petrochemicals and petrochemicals, which were previously presented separately, are presented as part of the industrial transformation segment. For comparison purposes, we have consolidated 2015 results for these prior segments under “Total industrial transformation.”
Revenue by Business Segment
The following table sets forth our trade and intersegment net sales revenues by business segment for the fiscal years ended December 31, 2014, 20152016, 2017 and 20162018 as well as the percentage change in sales revenues for those years.
Year Ended December 31, | 2015 | 2016 | ||||||||||||||||||
2014 | 2015 | 2016 | vs. 2014 | vs. 2015 | ||||||||||||||||
(in millions of pesos)(1) | (%) | (%) | ||||||||||||||||||
Exploration and Production(4) | ||||||||||||||||||||
Trade sales(2) | — | — | — | — | — | |||||||||||||||
Intersegment sales | Ps.1,134,520 | Ps.690,642 | Ps.616,381 | (39.1 | ) | (10.8 | ) | |||||||||||||
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Total net sales | 1,134,520 | 690,642 | 616,381 | (39.1 | ) | (10.8 | ) | |||||||||||||
Industrial Transformation(5) | ||||||||||||||||||||
Refining(6) | ||||||||||||||||||||
Trade sales(2)(3) | 763,005 | 589,548 | n.a. | (22.7 | ) | n.a. | ||||||||||||||
Intersegment sales | 78,453 | 54,876 | n.a. | (30.0 | ) | n.a. | ||||||||||||||
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Total net sales | 841,458 | 644,424 | n.a. | (23.4 | ) | n.a. | ||||||||||||||
Gas and Basic Petrochemicals(7) | ||||||||||||||||||||
Trade sales(2)(3) | 159,754 | 137,456 | n.a. | (14.0 | ) | n.a. | ||||||||||||||
Intersegment sales | 84,198 | 55,594 | n.a. | (34.0 | ) | n.a. | ||||||||||||||
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Total net sales | 243,952 | 193,050 | n.a. | (20.9 | ) | n.a. | ||||||||||||||
Petrochemicals(8) | ||||||||||||||||||||
Trade sales(2) | 29,074 | 20,735 | n.a. | (28.7 | ) | n.a. | ||||||||||||||
Intersegment sales | 15,182 | 15,824 | n.a. | 4.2 | n.a. | |||||||||||||||
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Total net sales | 44,256 | 36,559 | n.a. | (17.4 | ) | n.a. | ||||||||||||||
Total Industrial Transformation | ||||||||||||||||||||
Total trade sales | n.a. | 747,739 | 653,654 | n.a. | (12.6 | ) | ||||||||||||||
Total intersegment sales | n.a. | 126,264 | 117,096 | n.a. | (7.3 | ) | ||||||||||||||
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Total net sales | n.a. | 874,033 | 770,750 | n.a. | (11.8 | ) |
Year Ended December 31, | 2015 | 2016 | Year Ended December 31, | 2017 | 2018 | |||||||||||||||||||||||||||||||||||
2014 | 2015 | 2016 | vs. 2014 | vs. 2015 | 2016 | 2017 | 2018 | vs. 2016 | vs. 2017 | |||||||||||||||||||||||||||||||
(in millions of pesos)(1) | (%) | (%) | (in millions of pesos)(1) | (%) | (%) | |||||||||||||||||||||||||||||||||||
Drilling and Services(9) | ||||||||||||||||||||||||||||||||||||||||
Exploration and Production | ||||||||||||||||||||||||||||||||||||||||
Trade sales(2) | n.a | n.a | 70 | n.a | 100.0 | Ps. — | Ps. — | Ps. 482,286 | n.a. | 100 | ||||||||||||||||||||||||||||||
Intersegment sales | n.a | 1,512 | 1,982 | 100.0 | 31.1 | 616,381 | 762,637 | 397,200 | 23.7 | (47.9) | ||||||||||||||||||||||||||||||
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Total net sales | 1,512 | 2,052 | 100.0 | 35.7 | 616,381 | 762,637 | 879,486 | 23.7 | 15.3 | |||||||||||||||||||||||||||||||
Logistics(10) | ||||||||||||||||||||||||||||||||||||||||
Industrial Transformation | ||||||||||||||||||||||||||||||||||||||||
Total trade sales | 653,654 | 863,573 | 961,104 | 32.1 | 11.3 | |||||||||||||||||||||||||||||||||||
Total intersegment sales | 117,096 | 150,360 | 141,997 | 28.4 | (5.6) | |||||||||||||||||||||||||||||||||||
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Total net sales | 770,750 | 1,013,933 | 1,103,101 | 31.6 | 8.8 | |||||||||||||||||||||||||||||||||||
Drilling and Services | ||||||||||||||||||||||||||||||||||||||||
Trade sales(2) | n.a | 10,356 | 2,814 | 100.0 | (72.8 | ) | 70 | 42 | 199 | (40.0) | 373.8 | |||||||||||||||||||||||||||||
Intersegment sales | n.a | 599 | 68,317 | 100.0 | 11,305.2 | 1,982 | 3,400 | 3,414 | 71.5 | 0.4 | ||||||||||||||||||||||||||||||
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Total net sales | 10,955 | 71,131 | 100.0 | 549.3 | 2,052 | 3,442 | 3,613 | 67.7 | 5.0 | |||||||||||||||||||||||||||||||
Cogeneration and Services(11) | ||||||||||||||||||||||||||||||||||||||||
Logistics | ||||||||||||||||||||||||||||||||||||||||
Trade sales(2) | n.a | 0 | 133 | n.a | 100.0 | 2,814 | 3,715 | 4,708 | 32.0 | 26.7 | ||||||||||||||||||||||||||||||
Intersegment sales | n.a | 0 | 52 | n.a | 100.0 | 68,317 | 70,672 | 63,673 | 3.4 | (9.9) | ||||||||||||||||||||||||||||||
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Total net sales | 0 | 184 | n.a | 100.0 | 71,131 | 74,387 | 68,381 | 4.6 | (8.1) | |||||||||||||||||||||||||||||||
Fertilizers(12) | ||||||||||||||||||||||||||||||||||||||||
Trade sales(2) | n.a | 1,496 | 3,875 | 100.0 | 159.0 | |||||||||||||||||||||||||||||||||||
Cogeneration and Services(3) | ||||||||||||||||||||||||||||||||||||||||
Trade sales(2) | 133 | 335 | — | 151.9 | n.a. | |||||||||||||||||||||||||||||||||||
Intersegment sales | n.a | 209 | 900 | 100.0 | 330.8 | 52 | 114 | — | 119.2 | n.a. | ||||||||||||||||||||||||||||||
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Total net sales | 1,705 | 4,776 | 100.0 | 180.1 | 184 | 449 | — | 142.7 | n.a. | |||||||||||||||||||||||||||||||
Ethylene(13) | ||||||||||||||||||||||||||||||||||||||||
Fertilizers | ||||||||||||||||||||||||||||||||||||||||
Trade sales(2) | 3,875 | 4,125 | 2,938 | 6.5 | (28.8) | |||||||||||||||||||||||||||||||||||
Intersegment sales | 900 | 643 | 66 | (28.6) | (89.7) | |||||||||||||||||||||||||||||||||||
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Total net sales | 4,776 | 4,768 | 3,004 | (0.1) | (37.0) | |||||||||||||||||||||||||||||||||||
Ethylene | ||||||||||||||||||||||||||||||||||||||||
Trade sales(2) | n.a | 4,569 | 15,453 | 100.0 | 238.2 | 15,453 | 12,648 | 12,822 | (18.2) | 1.4 | ||||||||||||||||||||||||||||||
Intersegment sales | n.a | 474 | 1,764 | 100.0 | 272.2 | 1,764 | 1,566 | 1,635 | (11.2) | 4.4 | ||||||||||||||||||||||||||||||
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Total net sales | 5,043 | 17,217 | 100.0 | 241.4 | 17,217 | 14,214 | 14,457 | (17.4) | 1.7 | |||||||||||||||||||||||||||||||
Trading Companies | ||||||||||||||||||||||||||||||||||||||||
Trade sales(2)(3) | 631,069 | 407,876 | 395,354 | (35.4 | ) | (3.1 | ) | |||||||||||||||||||||||||||||||||
Trade sales(2) | 395,354 | 508,606 | 204,168 | 28.6 | (59.9) | |||||||||||||||||||||||||||||||||||
Intersegment sales | 433,732 | 353,137 | 405,293 | (18.6 | ) | 14.8 | 405,293 | 539,193 | 640,382 | 33.0 | 18.8 | |||||||||||||||||||||||||||||
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Total net sales | 1,064,801 | 761,013 | 800,648 | (28.5 | ) | 5.2 | 800,648 | 1,047,799 | 844,550 | 30.9 | (19.4) | |||||||||||||||||||||||||||||
Corporate and other subsidiary companies | ||||||||||||||||||||||||||||||||||||||||
Trade sales(2)(3) | 3,826 | (5,673 | ) | 8,193 | (248.3 | ) | (244.4 | ) | ||||||||||||||||||||||||||||||||
Trade sales(2) | 2,740 | 3,985 | 12,893 | 45.4 | 223.5 | |||||||||||||||||||||||||||||||||||
Intersegment sales and eliminations | (1,746,085 | ) | (1,172,868 | ) | (1,211,786 | ) | (32.8 | ) | 3.3 | (1,211,785) | (1,528,585) | (1,248,367) | 26.1 | (18.3) | ||||||||||||||||||||||||||
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Total net sales | (1,742,259 | ) | (1,178,541 | ) | (1,203,593 | ) | (32.4 | ) | 2.1 | (1,209,045) | (1,524,600) | (1,235,474) | 26.1 | (19.0) | ||||||||||||||||||||||||||
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Total net sales | Ps. 1,586,728 | Ps. 1,166,362 | Ps.1,079,546 | (26.5 | ) | (7.4 | ) | Ps. 1,074,093 | Ps. 1,397,029 | Ps. 1,681,118 | 30.1 | 20.3 | ||||||||||||||||||||||||||||
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Note: |
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Income by Business Segment
The following table sets forth our net income (loss) by business segment for each year in thethree-year period ended December 31, 2016,2018, as well as the percentage change in income for the years 20142016 to 2016.2018.
Year Ended December 31, | 2015 vs. 2014 | 2016 vs. 2015 | ||||||||||||||||||
2014 | 2015 | 2016 | (%) | (%) | ||||||||||||||||
(in millions of pesos)(1) | ||||||||||||||||||||
Business Segment | ||||||||||||||||||||
Exploration and Production(2) | Ps. (153,377 | ) | Ps. (667,394 | ) | Ps. (45,879 | ) | (335.1 | ) | (93.1 | ) | ||||||||||
Industrial Transformation(3) | ||||||||||||||||||||
Refining(4) | (113,826 | ) | (113,147 | ) | n.a | (0.6 | ) | n.a. | ||||||||||||
Gas and Basic Petrochemicals(5) | 15,584 | 18,126 | n.a. | 16.3 | n.a. | |||||||||||||||
Petrochemicals(6) | (18,895 | ) | 7,812 | n.a. | 141.3 | n.a. | ||||||||||||||
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Total Industrial Transformation | n.a. | (87,209 | ) | (69,865 | ) | n.a. | (19.9 | ) | ||||||||||||
Drilling and Services(7) | n.a | 455 | (142 | ) | 100 | (131.3 | ) | |||||||||||||
Logistics(8) | n.a | (3,685 | ) | (10,018 | ) | 100 | 171.9 | |||||||||||||
Cogeneration and Services(9) | n.a | (57 | ) | (35 | ) | 100 | (39.1 | ) | ||||||||||||
Fertilizers(10) | n.a | (145 | ) | (1,659 | ) | 100 | 1,044.5 | |||||||||||||
Ethylene(11) | n.a | (1,755 | ) | 2,097 | 100 | (219.5 | ) | |||||||||||||
Trading Companies | 4,085 | 8,697 | 11,167 | 112.9 | 28.4 | |||||||||||||||
Corporate and other subsidiary companies(12) | 886 | 38,526 | (76,809 | ) | 4,245.3 | (299.4 | ) | |||||||||||||
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Total net income (loss) | Ps. (265,543 | ) | Ps. (712,567 | ) | Ps. (191,144 | ) | (168.3 | ) | (73.2 | ) | ||||||||||
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Year Ended December 31, | 2017 vs. 2016 | 2018 vs. 2017 | ||||||||||||||||||
2016 | 2017 | 2018 | ||||||||||||||||||
(in millions of pesos)(1) | (%) | (%) | ||||||||||||||||||
Business Segment | ||||||||||||||||||||
Exploration and Production | Ps. (45,879) | Ps. (151,037) | Ps. (8,147) | 229.2 | 94.6 | |||||||||||||||
Industrial Transformation | (69,865) | (55,787) | (57,049) | (20.2) | (2.3) | |||||||||||||||
Drilling and Services | (142) | 1,266 | 217 | (988.7) | 82.9 | |||||||||||||||
Logistics | (10,018) | (834) | (62,576) | (91.7) | (7,403.1) | |||||||||||||||
Cogeneration and Services(3) | (35) | (92) | — | 165.4 | n.a. | |||||||||||||||
Fertilizers | (1,659) | (4,270) | (5,330) | 157.3 | (24.8) | |||||||||||||||
Ethylene | 2,097 | (1,442) | (4,986) | (168.8) | (245.8) | |||||||||||||||
Trading Companies | 11,167 | 12,045 | 4,778 | 7.9 | 60.3 | |||||||||||||||
Corporate and other subsidiary | (76,809) | (80,699) | (47,330) | 5.1 | 41.3 | |||||||||||||||
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Total net income (loss) | Ps. (191,144) | Ps. 280,851 | Ps. (180,422) | 246.9 | 164.2 | |||||||||||||||
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Note: |
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n.a. | not available. |
(1) | Figures are stated in nominal pesos. See “Item 3—Key Information—Selected Financial Data.” |
(2) | Includes intersegment eliminations. |
(3) | This company was liquidated in 2018. See “Item 4—Information on the |
PEMEX’s consolidated financial statements, prepared in accordance with IFRS.
Source: PEMEX’s consolidated financial statements, prepared in accordance with IFRS.2018 compared to 2017
2016 Compared to 2015
Certain business units and assets that were operated byWe present below the refining, gas and basic petrochemicals and petrochemicals segments were transferred to our industrial transformation segment as a part of Pemex Industrial Transformation, on November 1, 2015. In order to provide investors with comparative information, we have consolidated 2015 results for these prior segments. Accordingly, in the case of our industrial transformation segment below, we present consolidated results for 2015 for the refining, gas and basic petrochemicals and petrochemicals segments under the heading “Industrial Transformation.”operations by business segment. For more information on our corporate restructuring and our operating segments, see “Item 4—Information on the Company—History and Development—Energy Reform—Corporate Reorganization”Structure” and Note 1 to our consolidated financial statements included herein. For a detailed description of the financial results of each segment, see Note 51 and Note 6 to our consolidated financial statements included herein.
Exploration and Production
In 2018, total sales increased by 15.3%, primarily due to the increase in crude oil export prices. In 2017, sales of crude oil to the Trading Companies were presented as intersegment sales but, as a result of our implementation of accounting standard IFRS 15 in 2018 and the determination that PMI is considered an agent of Pemex Exploration and Production, all of Pemex Exploration and Production’s crude oil export sales are recognized as sales to third parties in 2018. For further information on the impact of our implementation of IFRS 15, see Note4-A to our consolidated financial statements included herein. The weighted average price of crude oil sold by our exploration and production segment for export was U.S. $62.29 in 2018, as compared to U.S.$ 47.26 in 2017. Net loss related to exploration and production activities decreased by Ps. 142,890 million, from a Ps. 151,037 million loss in 2017 to a Ps. 8,147 million loss in 2018, primarily due to net reversal of impairment of our fixed assets in this segment.
Industrial Transformation
In 2018, trade sales related to industrial transformation activities increased by 11.3%, from Ps. 863,573 million in 2017 to Ps. 961,104 million in 2018, primarily due to an increase in the average sales prices of petroleum products. Intersegment sales decreased by 5.6%, from Ps. 150,360 million in 2017 to Ps. 141,997 million in 2018, primarily due to a decrease in sales of natural gas. In 2018, our net loss related to industrial transformation activities was Ps. 57,049 million, 2.3% higher than the loss of Ps. 55,787 million in 2017. The increase in loss was primarily due to an increase in operating expenses.
Drilling and Services
In 2018, total sales related to the drilling and services segment increased by 5.0%, from Ps. 3,442 million in 2017 to Ps. 3,613 million in 2018. This increase was primarily due to an increase in services provided to Pemex Exploration and Production. Net income related to drilling and services decreased by Ps. 1,048 million, from a net income of Ps. 1,266 million in 2017 to net income of Ps. 217 million in 2018, primarily due to an increase in operating expenses.
Logistics
In 2018, total sales related to the logistics segment decreased by 8.1%, from Ps. 74,387 million in 2017 to Ps. 68,381 million in 2018, primarily due to a decrease in the services provided to Pemex Industrial Transformation. In 2018, our net loss related to logistics activities was Ps. 62,576 million, which was Ps. 61,742 million more than our net loss of Ps. 834 million in 2017. The increase in net loss was primarily due to net impairment of our fixed assets in this segment.
Cogeneration and Services
In 2018 our cogeneration and services segment did not have operations, as all of the assets, liabilities, rights and obligations of Pemex Cogeneration and Services were assumed by, and transferred to, Pemex Industrial Transformation and Pemex Cogeneration and Services was subsequently dissolved. For further information on the dissolution of Pemex Cogeneration and Services, see “Item 4— Information on the Company—History and Development—Corporate Structure” and Notes 1 and 6 to our consolidated financial statements included herein.
Fertilizers
In 2018, total sales related to the fertilizers segment decreased by 37.0%, from Ps. 4,768 million in 2017 to Ps. 3,004 million in 2018. This decrease was primarily due to a decrease in the trade sales of ammonia. In 2018, our net loss related to our fertilizers activities increased by 24.8%, from a net loss of Ps. 4,270 million in 2017 to a net loss of Ps. 5,330 million in 2018, primarily due to a decrease in profit sharing in joint ventures and associates.
Ethylene
In 2018, total sales related to our ethylene segment increased by 1.7%, from Ps. 14,214 million in 2017 to Ps. 14,457 million in 2018, primarily due to an increase in sales of monoethylenglecol. In 2018, our net loss related to our ethylene activities increased by Ps. 3,544 million, from a net loss of Ps. 1,442 million in 2017 to a net loss of Ps. 4,986 million in 2018. This increase in loss was primarily due an increase in cost of sales and taxes.
Trading Companies
In 2018, total sales relating to the Trading Companies’ exports of crude oil and petroleum products to third parties (including services income) decreased in peso terms, from Ps. 508,606 million in 2017 to Ps. 204,168 million in 2018, primarily as a result of the derecognition of revenue from sales by Pemex Exploration and Production to the Trading Companies as a result of our implementation of IFRS 15 in 2018. For further information on the impact of our implementation of IFRS 15, see Note4-A to our consolidated financial statements included herein. In 2018, net income related to the Trading Companies decreased by 60.3%, from Ps. 12,045 million in 2017 to Ps. 4,778 million in 2018, primarily as a result of our implementation of IFRS 15.
Corporate and Other Subsidiary Companies
In 2018, the total sales relating to corporate and other subsidiary companies afterinter-company eliminations decreased from Ps. 1,524,600 million in 2017 to Ps. 1,235,474 million in 2018, primarily due to a decrease in total intercompany sales as a result of an increase in the import of products. Net loss related to corporate and other subsidiary companies afterinter-company eliminations decreased 41.3%, from a net loss of Ps. 80,699 million in 2017 to a net loss of Ps. 47,330 million in 2018, primarily due to favorable results from subsidiary companies.
2017 compared to 2016
We present below the results of our operations by business segment. For more information on our operating segments, see “Item 4— Information on the Company—History and Development—Corporate Structure” and Note 1 to our consolidated financial statements included herein. For a detailed description of the financial results of each segment, see Note 1 and Note 6 to our consolidated financial statements included herein.
Exploration and Production
In 2017, total intersegment sales, which include sales to our industrial transformation segment and the Trading Companies, decreasedincreased by 10.8%23.7%, primarily due to the decreaseincrease in crude oil export prices. As compared to 2015,2016, our exploration and production segment’s sales of crude oil to the Trading Companies in 2016 decreased2017 increased by 0.5% in peso terms and decreased by 16.2%40.0% in U.S. dollar terms, primarily due to a decreasean increase in exports to the United States and an increase in crude oil export prices. The weighted average price of crude oil sold by our exploration and production segment to the Trading Companies for export was U.S. $35.17$47.26 in 2016,2017, as compared to U.S. $42.70$35.17 in 2015.2016. Net loss related to exploration and production activities decreasedincreased by 91.3%229.2%, or Ps. 621,515105,158 million, from a Ps. 667,394 million loss in 2015 to a Ps. 45,879 million loss in 2016 to a Ps. 151,037 million loss in 2017, primarily due to a net reversal of impairment of our fixed assets in this segment.
Industrial Transformation
In 2016,2017, trade sales related to industrial transformation activities decreasedincreased by 12.6%32.1%, from Ps. 747,739 million in 2015 to Ps. 653,654 million in 2016 to Ps. 863,573 million in 2017, primarily due to a decreasean increase in the average sales prices of petroleum products. Intersegment sales decreasedincreased by 7.3%28.4%, from Ps. 126,264 million in 2015 to Ps. 117,096 million in 2016 to Ps. 150,360 million in 2017, primarily due to a decreasean increase in the prices of petroleum products sold. In 2016,2017, our net loss related to industrial transformation activities was Ps. 69,86555,787 million, 19.9%20.2% lower than the loss of Ps. 87,20969,865 million in 2015.2016. The decrease in loss was primarily due to a net reversal of impairment of our fixed assets in this segment and a decrease in cost and operating expenses, which was partially offset by an increase in crude oil purchases and an increase in material acquisitions.expenses.
Drilling and Services
In 2016,2017, total sales related to the drilling and services segment increased by 35.7%67.7%, from Ps. 1,512 million in 2015 to Ps. 2,052 million in 2016.2016 to Ps. 3,442 million in 2017. This increase was primarily due to an increase in services provided to Pemex Exploration and Production. Net lossincome related to drilling and services increased by Ps. 5971,408 million, from an income of Ps. 455 million in 2015 to a net loss of Ps. 142 million in 2016 to a net income of Ps. 1,266 million in 2017, primarily due to an increase in the expenses related to our intersegment services, an increase in the depreciation and maintenance required for our fixed assets, and a foreign exchange loss.income.
Logistics
In 2016,2017, total sales related to the logistics segment increased by Ps. 60,1763,256 million, from Ps. 10,955 million in 2015 to Ps. 71,131 million in 2016 to Ps. 74,387 million in 2017, primarily due to an increase in the services provided to Pemex Industrial
Transformation. In 2016,2017, our net loss related to logistics activities was Ps. 10,018834 million, 171.9% higher thana 91.7% decrease as compared to the loss of Ps. 3,68510,018 million in 2015.2016. The increasedecrease in net loss was primarily due to the transfer of certain of our assetsforeign exchange income.
Cogeneration and Services
In 2017, total sales related to CENAGAS, higher operating expenses,our cogeneration and services segment increased by Ps. 264 million from Ps. 185 million in 2016 to Ps. 449 million in 2017, primarily due to an increase in the services provided to Pemex Industrial Transformation. In 2017, our net loss related to our cogeneration and services activities increased by Ps. 57 million, from a net loss of Ps. 35 million in 2016 to a net loss of Ps. 92 million in 2017. This increase in loss was primarily due to an increase in costs and operating expenses as well as increased financing cost, and a foreign exchange loss.costs.
Fertilizers
In 2016,2017, total sales related to the fertilizers segment increaseddecreased by Ps. 3,0717 million, from Ps. 1,7054,775 million in 20152016 to Ps. 4,7764,768 million in 2016.2017. This increasedecrease was primarily due to an increasea decrease in the trade sales of ammonia. In 2016,2017, our net loss related to our fertilizers activities increased by Ps. 1,5142,611 million, from a net loss of Ps. 145 million in 2015 to a net loss of Ps. 1,659 million in 2016 to a net loss of Ps. 4,270 million in 2017, primarily due to costs related to the acquisitionnet impairment of Fertinal and an increaseour fixed assets in the cost of services received from Pemex Logistics and from maritime freights.this segment.
Ethylene
In 2016,2017, total sales related to our ethylene segment increaseddecreased by Ps. 12,1743,003 million, from Ps. 5,043 million in 2015 to Ps. 17,217 million in 2016 to Ps. 14,214 in 2017, primarily due to an increasea decrease in the sales of polyethylene, ethylene oxides, acrylonitrile and monoethylenglecol products. In 2016,2017, our net income related to our ethylene activities increaseddecreased by Ps. 3,8523,538 million, from a net loss of Ps. 1,755 million in 2015 to a net income of Ps. 2,097 million in 2016.2016 to a net loss of Ps. 1,442 in 2017. This increasedecrease in income was primarily due to a net reversal of impairment of our plants and an increasedecrease in sales..total sales.
Trading Companies
In 2016,2017, total sales relating to the Trading Companies’ exports of crude oil and petroleum products to third parties (including services income) decreasedincreased in peso terms, from Ps. 407,876 million in 2015 to Ps. 395,354 million in 2016 to Ps. 508,606 in 2017, primarily as a result of a decreasean increase in the prices of crude oil exports. In 2016,2017, net income related to the Trading Companies increased by 28.4%7.9%, from Ps. 8,69711,167 million in 20152016 to Ps. 11,16712,045 million in 2017, primarily due to an increase in the permanent investment in associates that was recognized at fair value.
Corporate and Other Subsidiary Companies
In 2016,2017, the total sales relating to corporate and other subsidiary companies afterinter-company eliminations increased from Ps. 1,178,5411,209,045 million in 20152016 to Ps. 1,203,5931,524,600 million in 2016,2017, primarily due to an increase in total intercompany sales as a result of an increase in the import of products. Net loss related to corporate and other subsidiary companies afterinter-company eliminations increaseddecreased by Ps. 115,3353,890 million, from a net income of Ps. 38,526 million in 2015 to a net loss of Ps. 76,809 million in 2016 to a net loss of Ps. 80,699 million in 2017, primarily due to unfavorable results from subsidiary companies an increaseand a loss in foreign exchange lossjoint ventures and an increaseassociates.
Research and Development
Our research and development activities are focused on developing the Mexican energy sector through advancing products and solutions that are intended to be high quality, high performance and technologically efficient.
TheInstituto Mexicano del Petróleo (Mexican Petroleum Institute or IMP) is a public research organization under the SENER. The objective of the IMP is to develop the Mexican petroleum, petrochemical and chemical industries and assist us in financing costs.the development of the Mexican energy sector. We work closely with the IMP on many of our research and development initiatives.
2015 Compared to 2014
Certain business units and assetsFor example, we collaborate with the IMP on the development of our gasoline additives. On October 11, 2018, we launched the seventh generation of our high end performance additive that were operated byblends with our exploration and production segment were transferred to our drilling and services segment upon the formation of Pemex Drilling and Services on August 1, 2015, and certain business units and assets that were operated by our exploration and production, refining and gas and basic petrochemicals segments were transferred to our logistics segment upon the formation of Pemex Logistics on October 1, 2015. Similarly, certain business units and assets that were operated by our petrochemicals segment were transferred to our ethylene and fertilizers segments upon the formation of Pemex EthyleneMagna and Pemex Fertilizers on August 1, 2015Premium gasolines. This additive will be promoted as Pemex Aditec. Pemex Aditec is a multifunctional additive and certain business unitsis formulated to obtain optimum performance, cleanliness and assets that were operatedprotection of the motor.
Additionally, we collaborate with the IMP through theirCentro de Tecnología para AguasProfundas (Deep-Water Technology Center or CTAP). The CTAP is equipped with various laboratories to research drilling of wells, characterization of natural and operational risks and qualification and design of production tools, equipment and systems for use by the gaspetroleum sector in deep water. The center is located in Boca del Río, Veracruz.
Item 6. Directors, Senior Management and basic petrochemicals segment were transferred to the cogeneration and services segment upon the formation of Pemex Cogeneration and Services on June 1, 2015. As detailed in the table above, we have started reporting financial information for these new segments from and after their formation in 2015.Employees
However, in order to provide investors with comparative information, we have consolidated these new segments into the segments that previously included the business units and assets of these new segments here and in Note 5 to our consolidated financial statements included herein. Accordingly, in the case of our exploration and production segment below, we present consolidated results for 2015 of the exploration and production segment, the drilling and services segment and the logistics segment under the heading “Exploration and Production”; in the case of our refining segment, we present consolidated results for 2015 of the refining segment and part of the logistics segment under the heading “Refining”; in the case of our petrochemicals segment below, we present consolidated results for 2015 of the petrochemicals segment, the ethylene segment and the fertilizers segment under the heading “Petrochemicals”; and in the case of our gas and basic petrochemicals segment below, we present consolidated results for 2015 of the gas and basic petrochemicals segment, part of the logistics segment and the cogeneration and services segment under the heading “Gas and Basic Petrochemicals.” For more information on our corporate restructuring and our new operating segments, see “Item 4—Information on the Company—History and Development—Energy Reform—Corporate Reorganization” and Note 1 to our consolidated financial statements included herein. For a detailed description of the financial results of each segment, see Note 5 to our consolidated financial statements included herein. The following sections compare results of operations for our main segments prior to our recent corporate reorganization for 2015 as compared to 2014.
Exploration and Production
As compared to 2014, our exploration and production segment’s sales of crude oil to the Trading Companies in 2015 decreased by 39.1% in peso terms and decreased by 49.4% in U.S. dollar terms, primarily due to a decrease in crude oil export prices. The weighted average price of crude oil sold by our exploration and production segment to the Trading Companies for export was U.S. $42.70 in 2015, as compared to U.S. $86.00 in 2014. Total intersegment sales, which include sales to our refining segment, our gas and basic petrochemicals segment and the Trading Companies, decreased by 39.1%, primarily due to the decrease in crude oil export prices. Net loss related to exploration and production activities increased by 335.1%, or Ps. 514,017 million, from a Ps. 153,377 million loss in 2014 to a Ps. 667,394 million loss in 2015, primarily due to a decrease in the average price of crude oil.
Refining
In 2015, trade sales related to refining activities (including services income) decreased by 22.7%, from Ps. 763,005 million in 2014 to Ps. 589,548 million in 2015, primarily due to a decrease in the average sales prices of petroleum products. Intersegment sales decreased by Ps. 23,577 million, or 30.0%, from Ps. 78,453 million in 2014 to Ps. 54,876 million in 2015, primarily due to a decrease in the prices of petroleum products sold. In 2015, our total loss related to refining activities was Ps. 113,148 million, 0.6% lower than the loss of Ps. 113,826 million in 2014. The decrease in loss was primarily due to higher prices of petroleum products during 2015, which was partially offset by a decrease in other income due to the negative IEPS tax.
Gas and Basic Petrochemicals
In 2015, trade sales related to the natural gas and basic petrochemical segment (including services income) decreased by 14.0%, from Ps. 159,754 million in 2014 to Ps. 137,456 million in 2015. LPG sales increased by 0.1%, from Ps. 78,084 million in 2014 to Ps. 78,194 million in 2015, primarily due to an increase in LPG prices. Natural gas sales decreased by 30.0%, from Ps. 77,813 million in 2014 to Ps. 54,498 million in 2015, primarily due to a decrease in the volume and prices of natural gas. Net income related to natural gas and basic petrochemicals increased by 16.3%, from Ps. 15,584 million in 2014 to Ps. 18,126 million in 2015, primarily due to a decrease in purchases of imported LPG and cost of employee benefits.
Petrochemicals
In 2015, trade sales related to the petrochemicals segment decreased by 28.7%, from Ps. 29,074 million in 2014 to Ps. 20,735 million in 2015. Prices for petrochemicals sold domestically decreased for a majority of our
petrochemical products. In 2015, the volume of petrochemical exports decreased by 40.4%, from 527.1 thousand tons in 2014 to 313.9 thousand tons in 2015. Losses related to petrochemical activities decreased by 141.3%, from Ps. 18,895 million in 2014 to profit Ps. 7,812 million in 2015, primarily due to: (1) a 24.9% decrease in the cost of sales in 2015; (2) a decrease in the prices of raw materials; and (3) a decrease in the cost of employee benefits.
Trading Companies
In 2015, trade sales relating to the Trading Companies’ exports of crude oil and petroleum products to third parties (including services income) decreased in peso terms, from Ps. 631,069 million in 2014 to Ps. 407,876 million in 2015, primarily as a result of a decrease in the prices of crude oil exports. In 2015, net income related to the Trading Companies increased by 112.9%, from Ps. 4,085 million in 2014 to Ps. 8,697 million, primarily due to lower taxes and sale.
Corporate and Other Subsidiary Companies
In 2015, the trade sales relating to corporate and other subsidiary companies after inter-company eliminations decreased, from Ps. 1,742,259 million in 2014 to Ps. 1,178,541 million in 2015, primarily due to lower revenues from services. Net income related to corporate and other subsidiary companies after inter-company eliminations increased, from Ps. 886 million in 2014 to Ps. 38,526 million in 2015, primarily due to favorable results from subsidiary companies.
Under the Petróleos Mexicanos Law, Petróleos Mexicanos is governed by aten-member Board of Directors composed as follows:
the Secretary of Energy, who serves as the Chairperson and has the right to cast atie-breaking vote;
the Secretary of Finance and Public Credit;
three Mexican Government representatives, who are appointed by the President of Mexico; and
• | five independent members, who are appointed by the President of Mexico, subject to ratification by the Senate. Independent members perform their duties on apart-time basis, are not public officials (i.e., individuals holding federal, state or municipal government positions in Mexico) and have not been employed by Petróleos Mexicanos or any of the subsidiary entities during the two years prior to their appointment. |
The Petróleos Mexicanos Law authorizes only the Secretary of Energy and the Secretary of Finance and Public Credit to designate an alternate to serve in his or her place, provided that the alternate is a public official at the undersecretary level, at minimum. This alternate may attend meetings of the Board of Directors of Petróleos Mexicanos and otherwise assume the duties of the director, except that the Chairperson’s designated alternate may not cast atie-breaking vote. In addition, anyministry-level secretary serving as a member of the Board of Directors of Petróleos Mexicanos may designate an alternate to attend meetings on his or her behalf, provided that such alternate is a public official at the undersecretary level, at minimum.
Under the Petróleos Mexicanos Law, all public officials serving as members of the Board of Directors of Petróleos Mexicanos are required to act impartially and for the benefit and in the best interests of Petróleos Mexicanos, separating at all times the interests of the ministry or governmental entity for which they work from their duties as members of the Board of Directors.
Except in the case of the independent members first appointed in 2014 under the Petróleos Mexicanos Law, the five independent members will beare appointed to staggeredfive-year terms, and may be appointed for an additional term of the same length. The remaining members of the Board of Directors of Petróleos Mexicanos are not appointed for a specific term.
In 2014, the following individuals were appointed to serve as independent members of the Board of Directors of Petróleos Mexicanos for the initial terms set forth below:
On February 17, 2015, Mr. Jaime Lomelín Guillén resigned from his position as independent member of the Board of Directors of Petróleos Mexicanos. On April 29, 2016, the Senate ratified the appointment of Mr. Felipe Duarte Olvera as an independent member to serve for the remainder of Mr. Lomelín Guillén’s term. Following the expiration of Mr. Alberto Tiburcio Celorio’s initial term as an independent director, Ms. María Teresa Fernández Labardini was appointed to an additional five-year term.
Under the Petróleos Mexicanos Law, each of the boards of directors of the subsidiary entities will consist of not less than five and no more than seven members. The majority of the members of each of the board of directors shall be appointed by and represent the Board of Directors of Petróleos Mexicanos. The Ministry of Energy and the Ministry of Finance and Public Credit may also appoint members to each board of directors of the subsidiary entities, subject to approval by the Board of Directors of Petróleos Mexicanos.
TheEstatuto Orgánico(Organic Statute) of Petróleos Mexicanos was published in the Official Gazette of the Federation on April 28, 2015. This Organic Statute establishes the structure, organizational basis and functions of the administrative units of Petróleos Mexicanos and also delineateseach of the duties and internal regulations of its Board of Directors. During 2016 and throughsubsidiary entities are established in the first quarter of 2017,Estatuto Orgánico (Organic Statute) approved by the Board of Directors of Petróleos Mexicanos approved several amendments to our organic structure. The management of Petróleos Mexicanos will task applicable areas with carrying out all of the necessary actions to implement these changes until a new Organic Statute is authorized and becomes effective.each entity.
The following tables set forth certain information with respect to directors and executive officers of Petróleos Mexicanos and each of the subsidiary entities as of April 3, 2017.10, 2019.
Petróleos Mexicanos—Directors and Executive Officers
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| Alternate Board Member of Petróleos Mexicanos and Undersecretary of Hydrocarbons of the Ministry of Energy
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Mr. | Board Member of Petróleos Mexicanos and Secretary of Finance and Public Credit
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Comercio Exterior, S.N.C. | 2018 |
Mr. Arturo Herrera Gutiérrez | Alternate Board Member of Petróleos Mexicanos and Undersecretary of Finance and Public Credit of the Ministry of Finance and Public Credit Born: 1966 Business experience: Practice Manager for East Asia at the World Bank; Practice Manager for Latin America and the Caribbean at the World Bank; and Public Sector Manager at the World Bank. Other board memberships: Agencia Mexicana de Cooperación Internacional para el Desarrollo; Casa de Moneda de México; Comisión Nacional para la Protección y Defensa de los Usuarios de Servicios Financieros (Alternate); Financiera Rural; Lotería Nacional para la Asistencia Pública (Alternate); Pronósticos para la Asistencia Pública (Alternate); Servicio de Administración y Enajenación de Bienes; Agroasemex, S.A.; Banco del Ahorro Nacional y Servicios Financieros, S.N.C.; Banco Nacional de Comercio Exterior, S.N.C., Institución de Banca de Desarrollo; Banco Nacional de Obras y Servicios Públicos; Banco Nacional del Ejército, Fuerza Aérea y Armada, S.N.C.; Nacional Financiera, S.N.C.; Seguros de Crédito a la Vivienda SHF, S.A. de C.V.; Sociedad Hipotecaria Federal, S.N.C.; Fondo de Capitalización e Inversión del Sector Rural: Fondo de Garantía y Fomento para la Agricultura, Ganadería y Avicultura; Fondo de Garantía y Fomento para Actividades Pesqueras; Fondo de Operación y Financiamiento Bancario a la Vivienda; CNBV; Comisión Nacional de Seguros y Fianzas; Comisión Nacional del Sistema de Ahorro para el Retiro; Servicio de Administración Tributaria (Alternate); Centro Nacional de Control de Gas Natural; Centro Nacional de Control de la Energía; CFE (Alternate); Comisión Nacional de la Vivienda (Alternate); Comisión de Comercio Exterior; Consejo Nacional de Armonización Contable; Comité Técnico del Fondo Mexicano del Petróleo para la Estabilización y el Desarrollo (Alternate); Consejo Consultivo Nacional del Sistema Nacional de Información Estadística y Geográfica; Comité Nacional de Productividad (Alternate) and; Comité de Representantes de la Comisión Nacional de Inversiones Extranjeras and Comisión Tripartita a que se refiere el artículo 15 de la Ley de Ayuda Alimentaria para los Trabajadores. | 2018 | ||
Ms. Graciela Márquez Colín | Board Member of Petróleos Mexicanos and Secretary of Economy Born: 1965 Business experience: Professor Researcher of El Colegio de México; Visiting Professor of the University of California; and Academic Coordinator of El Colegio de México. | 2018 | ||
Mr. José Francisco Quiroga Fernández | Alternate Board Member of Petróleos Mexicanos and Undersecretary of Mining of the Ministry of Economy | 2019 | ||
Born: 1973 Business experience: Director of Trading of Steelcom; Director of Operations of Coutinho & Ferrostaal; and Director of Human Resources and Chief of Staff of the Chief Executive Officer of ArcelorMittal Mexico. Other board memberships: CFE (Alternate); Comisión Nacional del Agua (Alternate); Chairman of Exportadora de la Sal; Fideicomiso de Fomento Minero (Alternate); and Servicio Geológico Mexicano (Alternate). |
Mr. | Board Member of Petróleos Mexicanos and Director General of CFE Born: 1936 Business experience: Senator of the LXIII and LXII Legislatures; Senator of the LVIII and LIX Legislatures; and Governor of Puebla. Other board memberships: Chairman of CFE Generación I; Chairman of CFE Generación II; Chairman of CFE Generación III; Chairman of CFE Generación IV; Chairman of CFE Generación V, Chairman of CFE Generación VI; Chairman of CFE Transmisión; Chairman of CFE Distribución; Chairman of Suministrador de Servicio Básico; Chairman of CFE Calificados; Chairman of CFEnergía; and Chairman of CFE Internacional. | 2018 | ||
Ms. Josefa González Blanco Ortiz Mena | Board Member of Petróleos Mexicanos and Secretary of the Environmental and Natural Resources
Business Other board |
Petróleos Mexicanos—Directors and Executive Officers
Ms. Katya Puga Cornejo |
Born: 1984 Business experience: Head of the Social Participation Coordination and Transparency of the Ministry of Environmental and Natural Resources; General Director of Social Impact and Superficial Occupation of the Ministry of Energy; and Deputy General Director of Social Impact Evaluation and Previous Enquiry of the Ministry of Energy. |
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Mr. Carlos Elizondo Mayer-Serra | Independent Board Member of Petróleos Mexicanos Other board | 2014 | ||||
Mr. Octavio Francisco Pastrana Pastrana | Independent Board Member of Petróleos Mexicanos
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Mr. | Chief Executive Officer/Director General
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Mr. | Chief Financial Officer / Corporate Director of Finance Business | |||
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| Corporate Director of Planning, Coordination and Performance
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Ms. | Acting Chief Information Officer/Acting Corporate Director of Information Technology and Deputy Director of
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| Corporate Director of Alliances and New Businesses
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Ms. Luz María Zarza Delgado |
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Petróleos Mexicanos—Directors and Executive Officers
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Pemex Exploration and Production—Directors and Executive Officers
Name | Position with Pemex Exploration and Production | Year | ||||
Mr. | Chairman of the Board of Pemex Exploration and Production (refer to Petróleos Mexicanos) | |||||
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Mr. |
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Petróleos Mexicanos—Directors and Executive Officers
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| Board Member of Pemex Exploration and Production (refer to Petróleos Mexicanos) | |||
Mr. | Board Member of Pemex Exploration and Production and Director General of Pemex Industrial Transformation
Business Other board memberships: Administración Portuaria Integral Dos Bocas; and | |||
Mr. | Board Member of Pemex Exploration and Production and Acting Operative Director of Procurement and Supply of Petróleos Mexicanos Born: 1965 Business experience: Director of Management of Xalapa, Veracruz; Chief of Staff of the Congress of the State of Tabasco; and Director General of Management of the Ministry of Health of the Tabasco Government. | 2019 |
Mr. Jorge Alberto Arévalo Villagrán | Board Member of Pemex Exploration and Production and Director General of Exploration and Extraction of Hydrocarbons of the Ministry of Energy Born: 1961 Business experience: Visiting Professor in Petroleum Engineering of Universidad Nacional Autónoma de México; Technical Director of Special Projects of Soluciones en Software Especializado Némesis, S.A. de C.V.; and Associate Managing Director of Strategies and Plans of Pemex Exploration and Production. Other board memberships: Fondo Sectorial CONACYT- Secretaria de Energia- Hidrocarburos. | 2018 | ||
Mr. Arturo Herrera Gutiérrez | Board Member of Pemex Exploration and Production and Acting Undersecretary of Income of the Ministry of Finance and Public Credit (refer to Petróleos Mexicanos) | |||
Mr. | Board Member of Pemex Exploration and Production, Acting Director General of Pemex Exploration and Production and Director of Resources, Reserves and Associations of Pemex Exploration and Production
Born: 1970 |
Pemex Industrial Transformation—Directors and Executive Officers
Pemex Industrial Transformation—Directors and Executive Officers | ||||
Name | Position with Pemex Industrial Transformation | Year | ||
Mr. | Chairman of the Board of Pemex Industrial Transformation (refer to Petróleos Mexicanos) | |||
Mr. | Board Member of Pemex Industrial Transformation (refer to Petróleos Mexicanos) |
Pemex Industrial Transformation—Directors and Executive Officers | ||||
Name | Position with Pemex Industrial Transformation | Year Appointed | ||
Mr. | Board Member of Pemex Industrial Transformation and Director General of
Business Other board memberships: Technical Advisor Committee of the National Contingency Plan to Fight and Control Hydrocarbons Spills and other Harmful Substances in the Sea of the Armada de México, | |||
Mr. | Board Member of Pemex Industrial Transformation (refer to Pemex Exploration and Production) | |||
Mr. | Board Member of Pemex Industrial Transformation (refer to Petróleos Mexicanos) | |||
Mr. | Board Member of Pemex Industrial Transformation (refer to | |||
Mr. | Board Member of Pemex Industrial Transformation and Director General of Pemex Industrial Transformation (refer to Pemex Exploration and Production) |
Pemex Cogeneration and Services—Directors and Executive Officers
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Pemex Drilling and Services—Directors and Executive Officers
Name | Position with Pemex Drilling and Services | Year | ||
Mr. | Chairman of the Board of Pemex Drilling and Services (refer to Petróleos Mexicanos) | |||
Mr. | Board Member of Pemex Drilling and Services (refer to Petróleos Mexicanos) | |||
Mr. | Board Member of Pemex Drilling and Services (refer to Petróleos Mexicanos) | |||
Board Member of Pemex Drilling and Services (refer to Petróleos Mexicanos) | ||||
Mr. | Board Member of Pemex Drilling and Services (refer to Pemex Exploration and Production) |
Pemex Drilling and Services—Directors and Executive Officers | ||||
Name | Position with Pemex Drilling and Services | Year Appointed | ||
Ms. Beatriz Eugenia Rebolledo Díaz | Board Member of Pemex Drilling and Services, Acting Deputy Director of Businesses Development of Exploration and Production of Petróleos Mexicanos and Associate Managing Director of New Models of Execution of Exploration and Production of Petróleos Mexicanos. Born: 1970 Business experience: Project Leader of Petróleos Mexicanos; Associate Managing Director of Economic and Technical Regulation of Petróleos Mexicanos; and Deputy Manager of Economic Regulatory Models of Pemex Industrial Transformation. | 2018 | ||
Mr. | ||||
Board Member of Pemex Drilling and Services and Coordinator of Procurement and Supply for Exploration and Production of Petróleos Mexicanos
Born: 1980 | ||||
Mr. | Acting Director General of Pemex Drilling and Services Born: 1960 Business experience: Deputy Director of Operations in Well
Other board memberships: Asociación de |
Pemex Logistics—Directors and Executive Officers
Pemex Logistics—Directors and Executive Officers | ||||
Name | Position with Pemex Logistics | Year Appointed | ||
Mr. | Chairman of the Board of Pemex Logistics (refer to Petróleos Mexicanos) | |||
Mr. | Board Member of Pemex Logistics (refer to Petróleos Mexicanos) | |||
Board Member of Pemex Logistics (refer to Petróleos Mexicanos) | ||||
Mr. Jorge Francisco Cuéllar Mata | Board Member of Pemex Logistics and Acting Deputy Director of Strategic Planning and Regulatory Analysis of Petróleos Mexicanos Born: 1955 Business experience: Associate Managing Director of Investment Portfolio Management of Petróleos Mexicanos; Associate Managing Director of Investment Portfolio of Petróleos Mexicanos; and Associate Managing Director of Investment Analysis of Petróleos Mexicanos. | 2018 |
Mr. Carlos Fernando Cortez González | Board Member of Pemex Logistics and Acting Deputy Director of Budget of Petróleos Mexicanos Born: 1971 Business experience: Associate Managing Director of Programming and Financial Analysis of Petróleos Mexicanos; Deputy Manager of Income and Operational Outcomes of Petróleos Mexicanos; and Technical Specialist “B” of the Deputy Associate Managing Direction of Financial Analysis of Petróleos Mexicanos. | 2019 | ||
Ms. | ||||
Board Member of Pemex Logistics and Coordinator of Procurement and Supply for Industrial Transformation of Petroleos Mexicanos
Born: 1961 | ||||
Mr. | Board Member of Pemex Logistics Born: 1976 | |||
Mr. | Director General of Pemex Logistics
Business |
Pemex Fertilizers—Directors and Executive Officers
Pemex Fertilizers—Directors and Executive Officers | ||||
Name | Position with Pemex Fertilizers | Year Appointed | ||
Mr. | Chairman of the Board of Pemex Fertilizers (refer to Petróleos Mexicanos) | |||
Mr. Luis Rodolfo Capitanachi Dagdug | Board Member of Pemex Fertilizers
Business | 2015 | ||
Board Member of Pemex Fertilizers and Deputy Director of Economic-Financial Performance of Petróleos Mexicanos. Born: 1967 Business experience: Associate Managing Director of Project Portfolio Analysis of Petróleos Mexicanos; Manager of IBM Global Services; and Technical Support Specialist of IBM Company. | 2017 | |||
Mr. Marco Manuel Herrería Alamina | Board Member of Pemex Fertilizers (refer to Petróleos Mexicanos) | |||
Mr. | ||||
Board Member of Pemex Fertilizers (refer to Pemex Logistics) | ||||
Mr. | Board Member of Pemex Fertilizers Born: 1951 Business experience: Analyst at Urvian Consulting; Deputy Director of Human Resources at the Cineteca Nacional; and Financial Resources Manager at the Collective Transport System. | |||
Mr. | Board Member of Pemex Fertilizers and Deputy Director of Gas and Petrochemicals Process of Pemex Industrial Transformation Born: 1960 Business experience: Acting Associate Managing Director of Salina Cruz Refinery of Pemex Industrial Transformation; Associate Managing Director of Nuevo Pemex GPC of Pemex Industrial Transformation; and Associate Managing Director of Cactus GPC of Pemex Industrial Transformation. Other board memberships: Instituto Mexicano de Ingenieros Químicos, A.C. (Chairman). | 2018 | ||
Mr. Rogelio Hernández Cázares | Director General of Pemex Fertilizers
Business |
Pemex Ethylene—Directors and Executive Officers
Pemex Ethylene—Directors and Executive Officers | ||||
Name | Position with Pemex Ethylene | Year Appointed | ||
Mr. | Chairman of the Board of Pemex Ethylene (refer to Petróleos Mexicanos) | |||
Mr. | ||||
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Board Member of Pemex Ethylene (refer to Pemex Logistics) | ||||
Mr. | Board Member of Pemex Ethylene and Acting Associate Managing Director of Alliances and New Business Development to Support Production of the Corporate Direction of Alliances and New Businesses of Petróleos Mexicanos Born: 1962 Business experience: Project Leader for the Development and Implementation of Integral Services Contracts for Exploration and Extraction of Pemex Exploration and Production; and Representative of Cinco Presidentes Business Unit of Pemex Exploration and Production. | 2018 | ||
Mr. Nazario Pérez Monsalvo | Board Member of Pemex Ethylene (refer to Pemex Fertilizers) | |||
Ms. Reyna María Basilio Ortiz | Board Member of Pemex Ethylene (refer to Pemex Logistics) | 2018 | ||
Mr. | Board Member of Pemex Ethylene
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Mr. | Board Member of Pemex Ethylene (refer to Pemex Fertilizers) | 2018 | ||
Mr. Manuel Antonio Mijares Bravo | Director General of Pemex Ethylene
Business |
Board Appointments On April 11, 2019, the Senate ratified the following independent members to the Board of Directors of Petróleos Mexicanos appointed by the President of Mexico: Mr. Juan José Paullada Figueroa, replacing Mr. Felipe Duarte Olvera, who resigned on December 17, 2018. Juan José Paullada Figueroa’s term will end on September 17, 2019; and Mr. José Eduardo Beltrán Hernandez, replacing Mr. Jorge José Borja Navarrete, whose term ended on September 18, 2018. Mr. José Eduardo Beltrán Hernandez’s term will end on April 11, 2024. As of the date of this annual report, one seat on the Board of Petróleos Mexicanos remains vacant following the resignation of Ms. María Teresa Fernández Labardini in March 2019. |
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Compensation of Directors and Officers
For the year ended December 31, 2016,2018, the aggregate compensation of executive officers of Petróleos Mexicanos and the existing subsidiary entities (49(17 people) paid or accrued in that year for services in all capacities was approximately Ps. 111.551.2 million. Except in the case of the independent members, with respect to the previous Board of Directors of Petróleos Mexicanos and the boards of directors of the existing subsidiary entities, and the independent members, with respect to the new Board of Directors of Petróleos Mexicanos, the members of our boards of directors do not receive compensation for their services. The compensation paid or accrued during 20162018 to the professional members of the previous Board of Directors of Petróleos Mexicanos and boards of directors of the existing subsidiary entities was approximately Ps. 7.78.9 million. See “Item 7—Major Shareholders and Related Party Transactions—Related Party Transactions” for information about the salary advances that we offer to our executive officers as an employee benefit.
Board Practices
Except in the case of the independent members with respect to the Board of Directors of Petróleos Mexicanos, neither the members of the boards of directors nor the executive officers of Petróleos Mexicanos or the productivestate-owned subsidiaries are appointed for a specific term. The length of the terms of the Secretary of Energy and the Secretary of Finance and Public Credit is, however, limited by the length of their respective positions in the Mexican Government. Except in the case of the independent members first appointed under the Petróleos Mexicanos Law, the five independent members of the Board of Directors of Petróleos Mexicanos will be appointed forfive-year terms, and may be appointed for an additional term of the same length.
The Mexican Government representatives that serve as members of the boards of directors of Petróleos Mexicanos and each of the existing subsidiary entities may be removed at the discretion of the President of Mexico. The independent members of the Board of Directors of Petróleos Mexicanos may be removed for cause, including failure to carry out the duties and obligations set forth in the Petróleos Mexicanos Law, by the President of Mexico upon Senate approval.
On October 14, 2014, the Board of Directors of Petróleos Mexicanos appointed members to and convened the four committees established by the new Petróleos Mexicanos Law to support its work. Unless otherwise specified in the new Petróleos Mexicanos Law, the memberships of these committees must consist of at least three, but no more than five, members of the Board of Directors of Petróleos Mexicanos. Each of these committees must include two independent members of the Board of Directors of Petróleos Mexicanos, with the exception of the Audit Committee, which must include three independent members. Each of the Secretary of Energy, the Secretary of Finance and Public Credit and anyministry-level secretary serving as a member of the Board of Directors of Petróleos Mexicanos may designate one or more alternates to take his or her place at committee meetings, provided that these alternates are public officials whose positions are not more than two levels below such secretary’s position in the Mexican Government.
The committees may authorize a representative of the Director General to attend their meetings as a guest with the right to participate, but not vote, when deemed advisable for the performance of their duties.
Audit Committee
The Audit Committee of the Board of Directors of Petróleos Mexicanos is required to, among other duties, oversee our management, evaluate our financial and operational performance, monitor the status of our internal control systems, as well as nominate our external auditors, whose appointments are approved by the Board of Directors of Petróleos Mexicanos. See “Item 16C—Principal Accountant Fees and Services.”
Each of the three members of the Audit Committee is “independent” of Petróleos Mexicanos within the meaning of Rule10A-3 under the Securities Exchange Act of 1934, as amended (the Exchange Act). In accordance with Pursuant to the Petróleos Mexicanos Law, theour Audit Committee consists ofmust include three independent membersmembers. As of the date of this annual report, our Audit Committee has not been constituted by the Board of Directors of Petróleos Mexicanos each of whom will serve asdue to the chairrecent appointments of the committee on a rotating, annual basis, as determined bynew independent members. Accordingly, the Board of Directors of Petróleos Mexicanos.
The Audit Committee consists of the following members:
A representative of the Director General, the Head of the Internal Auditing Area, the Legal Director or any other person may attend the Audit Committee’s meetings as a guest with the right to participate, but not vote, when deemed advisable and appropriate given the subject matter to be discussed.Exchange Act.
Human Resources and Compensation Committee
The Human Resources and Compensation Committee is chaired by an independent member of the Board of Directors of Petróleos Mexicanos and includes the Secretary of Finance and Public Credit as a permanent member. The duties of the Human Resources and Compensation Committee include, among others, proposing the compensation of the Director General and other members of senior management of Petróleos Mexicanos within three levels of the Director General, as well as proposing hiring policies, performance management guidelines and the compensation of all other employees of Petróleos Mexicanos.
The Human Resources and Compensation Committee of Petróleos Mexicanos consists of the following members:
Mr. Carlos ElizondoMayer-Serra, independent member of the Board of Directors of Petróleos Mexicanos and Chairperson of the Human Resources and Compensation Committee;
Mr. Octavio Francisco Pastrana Pastrana, independent member of the Board of Directors of Petróleos Mexicanos;
Mr. José Antonio Meade KuribreñCarlos Manuel Urzúa Macías, member of the Board of Directors of Petróleos Mexicanos;
Ms. Graciela Márquez Colín, member of the Board of Directors of Petróleos Mexicanos; and
Ms. Josefa González Blanco Ortiz Mena, member of the Board of Directors of Petróleos Mexicanos.
Strategy and Investment Committee
The Strategy and Investment Committee is chaired by an independent member of the Board of Directors of Petróleos Mexicanos on a rotating annual basis and is required to, among other duties, analyze our business plan
and assist the Board of Directors of Petróleos Mexicanos in the approval of guidelines, priorities and general policies related to investments made by Petróleos Mexicanos.
The Strategy and Investment Committee of Petróleos Mexicanos consists of the following members:
Mr. Octavio Francisco Pastrana Pastrana, independent member of the Board of Directors of Petróleos Mexicanos and Chairperson of the Strategy and Investment Committee;
Mr. Carlos ElizondoMayer-Serra, independent member of the Board of Directors of Petróleos Mexicanos;
Mr. Ildefonso Guajardo Villarreal,Carlos Manuel Urzúa Macías, member of the Board of Directors of Petróleos Mexicanos; and
Ms. Graciela Márquez Colín, member of the Board of Directors of Petróleos Mexicanos.
Acquisitions, Leasing, Public Works and Services Committee
The Acquisitions, Leasing, Public Works and Services Committee, is chaired by an independent member of the Board of Directors of Petróleos Mexicanos on a rotating annual basis and, among other duties, reviews, evaluates, monitors and develops recommendations regarding the annual programs of Petróleos Mexicanos for acquisition, construction and services contracts, and determines whether an exception to the public bidding process is applicable in specific cases.
The Acquisitions, Leasing, Public Works and Services Committee of Petróleos Mexicanos consists of the following members:
Mr. Rafael Pacchiano AlamáCarlos Manuel Urzúa Macías, member of the Board of Directors of Petróleos Mexicanos; and
Mr. Graciela Márquez Colín, member of the Board of Directors of Petróleos Mexicanos.
The two remaining seats are currently vacant.
Employees
Excluding employees employed by us on a temporary basis, at December 31, 2016,2018, Petróleos Mexicanos, its subsidiary entities and subsidiary companies had 130,333132,021 employees, as compared to 139,183127,941 at December 31, 2015.2017. During 2016,2018, Petróleos Mexicanos and the productivestate-owned subsidiaries employed an average of 9,2896,173 temporary employees.
The following table sets forth our employee numbers for the five years ended December 31, 2016:2018:
Year | Petróleos Mexicanos and Subsidiary Entities | Subsidiary Companies | Total | |||||||||
2012 | 150,697 | 416 | 151,113 | |||||||||
2013 | 154,474 | 764 | 155,538 | |||||||||
2014 | 153,085 | 804 | 153,889 | |||||||||
2015 | 138,397 | 786 | 139,183 | |||||||||
2016 | 126,940 | 3,393 | 130,333 |
Year | Petróleos Mexicanos and Subsidiary Entities | Subsidiary Companies | Total | |||
2014 | 153,085 | 804 | 153,889 | |||
2015 | 138,397 | 786 | 139,183 | |||
2016 | 126,940 | 3,393 | 130,333 | |||
2017 | 124,660 | 3,281 | 127,941 | |||
2018 | 124,818 | 3,203 | 128,021 |
Source: Petróleos Mexicanos and the subsidiary companies.
As of December 31, 2016,2018, the Petroleum Workers’ Union represented approximately 79%81.0% of the work force of Petróleos Mexicanos and the productivestate-owned subsidiaries. The members of the Petroleum Workers’ Union are PEMEX employees and they elect their own leadership from among their ranks. Our relationship with our employees is regulated by theLey Federal de Trabajo(which we refer to as the Federal Labor Law), a collective bargaining agreement between Petróleos Mexicanos and the Petroleum Workers’ Union and the Employment Reglamento de Trabajo del Personal de Confianza de Petróleos Mexicanos y Organismos Subsidiarios (Employment Regulation for White Collar Employees of PEMEX and Subsidiary Entities.Entities). The collective bargaining agreement is subject to renegotiation every two years, although salaries are reviewed annually. Since the Petroleum Workers’ Union’s was officially established in 1938, we have not experienced labor strikes; we have experienced work stoppages for short periods of time, but none of these stoppages had a material adverse effect on our operations.
On September 10, 2015,June 25, 2018, Petróleos Mexicanos and the Petroleum Workers’ Union executed a newamended their collective bargaining agreement, thatwhich amendment became effective on August 1, 2018. The amended agreement provides for a 3.42% increase in wages, and will regulate their labor relations until July 31, 2017. The new collective bargaining agreement provided for a 3.99% increase in wages and a 1.75% increase in benefits. On July 20, 2016, Petróleos Mexicanos and the Petroleum Workers’ Union revised their collective bargaining agreement, which revision became effective on August 1, 2016. The revised agreement provides for a 3.17% increase in wages.2019.
OnAs of November 11, 2015, Petróleos Mexicanos announced that it had signedpursuant to an agreement with the Petroleum Workers’ Union, to modify the pension regime applicable to current and new employees. Pursuant to the agreement, the retirement age for employees with less than 15 years of service has been increased fromis 60 (compared to 55 to 60.for employees with more than 15 years of service). Employees are still required tomust serve for at least 30 years in order to be eligible to receive full retirement benefits. In addition, newNew employees willhired as of that date receive individual defined contributions retirement plans, which will benefit from direct contributions from Petróleos Mexicanos, portabilityplans. Employees who began serving prior to that date are permitted and tax benefits applicable to retirement savings. Current employees will also be permittedincentivized to opt into the new defined contributions retirement plans from their existing defined benefits retirement plans.
On December 18, 2015, the Director General of Petróleos Mexicanos informed the Ministry of Finance and Public Credit that our pension liabilities were expected to decrease by Ps. 186.5 billion as a result of the modifications to our pension regime described above. As of December 31, 2015, our pension liabilities had decreased by Ps. 196.0 billion.
On December 24, 2015, the Ministry of Finance and Public Credit published in the Official Gazette of the Federation theDisposiciones 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 productivestate-owned subsidiaries). On August 3, 2016, the Ministry of Finance and Public Credit informed us that the Mexican Government would assume Ps. 184.2 billion in payment liabilities related to our pensions and retirement plans, and accordingly replaced the Ps. 5050.0 billion promissory note issued to us on December 24, 2015 with Ps. 184.2 billion in promissory notes. As of December 31, 2018, these promissory notes amounted to Ps. 157.0 billion.
On January 25, 2019, the Mexican Government prepaid promissory notes receivable 25 and 26A with original maturity dates of 2041 and 2042, respectively, for a total amount of Ps. 9.4 billion. On February 24, 2019, the Mexican Government prepaid promissory note receivable 24 with original maturity date of 2040, for a total amount of Ps. 5.9 billion. On March 20, 2019, the Mexican Government prepaid promissory note receivable 23 with an original maturity date of 2039, for a total amount of Ps. 6.2 billion. On April 17, 2019, the Mexican Government prepaid promissory note receivable 22 with an original maturity date of 2039, for a total amount of Ps. 6.5 billion. These prepayments were part of the Mexican Government’s Strengthening Program for Petróleos Mexicanos. See “Item 5—Operating and Financial Review and Prospects—Overview.”
In accordance with the Federal Labor Law and collective bargaining agreement in effect as of December 31, 2015,2018, Petróleos Mexicanos and the productivestate-owned subsidiaries are under an obligation to pay seniority premiums to retiring employees and pensions to retired employees, as well as death benefits and pensions to certain survivors of retired employees. Retirees are entitled to receive increases in their pensions, of at least the increase in NCPI, whenever salary increases are granted to current employees. We also provide health and medical benefits to employees, retired employees and their beneficiaries and, subject to our overall budgetary constraints, we provide aninterest-rate subsidy on employees’ mortgage loans.
On November 5, 1997, the Ministry of Finance and Public Credit and the Board of Directors of Petróleos Mexicanos authorized the formation of a trust called the Pemex Labor Fund. This fund is a vehicle to fund labor liabilities, current pension payments and seniority premiums. We have designed a contribution plan to increase the funds held in this trust and to continue to make payments on outstanding labor and pension liabilities. Our
contributions to the plan assets for our retirement benefits totaled Ps. 49,19051,952 million in 20152017 and Ps. 55,69355,654 million in 2016.2018. As of December 31, 20152017 and 2016,2018, the balance of the Pemex Labor Fund was Ps. 5,2298,485 million and Ps. 9,4907,200 million, respectively.
Item 7. Major Shareholders and Related Party Transactions
Major Shareholders
Petróleos Mexicanos and the subsidiary entities have no shareholders because they are public entities of the Mexican Government. The Mexican Government controls us and incorporates the consolidated annual budget and financing program of Petróleos Mexicanos and the subsidiary entities into its budget, which must be approved by the Chamber of Deputies each year. Any adjustment proposed by the Board of Directors of Petróleos Mexicanos to change our annual financial balance goal or increase the limit on our wage and salary expenditures budget or our financing program must be approved by the Chamber of Deputies. See “Item 4—Information on the Company—General Regulatory Framework” for more information about the Mexican Government’s authority with respect to our budget. Our operations in the oil and gas sector are also regulated by the Mexican Government and its ministries.
Mexican Government officials hold five of the ten seats on the Board of Directors of Petróleos Mexicanos, and the Secretary of Energy is the Chairperson of the Board of Directors of Petróleos Mexicanos with the power to cast atie-breaking vote. An additional five seats on the Board of Directors are held by independent members appointed by the President of Mexico and ratified by the Senate. The Director General of Petróleos Mexicanos is a member of the President of Mexico’s cabinet. See also “Item 3—Key Information—Risk Factors—Risk Factors Related to our Relationship with the Mexican Government.”
Related Party Transactions
Article 8, Section XIDirectors and employees of Petróleos Mexicanos and the Subsidiary Entities are subject to regulations addressing conflicts of interest, including thePetróleos Mexicanos Law,Ley Federal de Responsabilidades Administrativas de los Servidores Públicos (Federal Law of Administrative Responsibilities of Public Officials), requires all public officials and thePolíticas y Lineamientos Anticorrupción para Petróleos Mexicanos, sus Empresas Productivas Subsidiarias y, en su caso, Empresas Filiales (Anticorruption Policies and Guidelines for Petróleos Mexicanos, its Subsidiary Productive Companies and, where applicable, Subsidiary Companies). Under these provisions, directors and employees of Petróleos Mexicanos are obligated to “recuse themselves from intervening in any way in the attention to, processing or resolution of matters in which they might have personal, family or business interest, including those where some benefit can result for themselves, their spouse, blood or affinity relatives up to the fourth degree, or civil relatives, or for third parties with which they have professional, labor or business relations, or for partners or partnerships where the public officials or the persons referred above are or have been members thereof.”
The Board of Directors of Petróleos Mexicanos, including the independent members who are not public officials, are subject to the duties of loyalty and diligence. In accordance with the Petróleos Mexicanos Law, an independent member of the Board of Directors of Petróleos Mexicanos may be removed from his or her position for, among other causes: (1) utilizing for personal benefit or for the benefit of any third party the information made available to him or her in connection with the exercise of his or her duties as a board member; (2) disclosing such information in violation of applicable law; or (3) not recusing him or herself from discussion of and voting on matters in respect of which he or she has a conflict of interest. A member of the Board of Directors of Petróleos Mexicanos or of the board of directors of an existing subsidiary entity who acts in contravention of the Petróleos Mexicanos Law may be held liable for any damages that he or she caused to Petróleos Mexicanos or an existing subsidiary entity.
As an employee benefit, we offer salary advances to all of our eligible Petroleum Workers’ Union andnon-union workers, including our executive officers, pursuant to the programs set forth in the collective bargaining agreement and in the Employment Regulation of White Collar Employees of Petróleos Mexicanos and Subsidiary Entities, respectively. The salary advances, which arenon-interest bearing, are offered to each eligible employee in an amount up to a maximum of four months’ salary and are repaid through salary deductions in equal installments over a period of either one or two years, as elected by the employee. Most of our
employees take advantage of this benefit. The largest amount of salary advances outstanding to executive officers at any one time during 20162018 was Ps. 8.93.5 million. As of April 15, 2017,March 31, 2019, the aggregate amount of salary advances outstanding to our executive officers was Ps. 8.10.3 million.
Prior to his appointment as SecretaryMr. Manuel Bartlett Díaz, Chief Executive Officer of Energy, Mr. Pedro Joaquín Coldwell, ChairmanCFE, was appointed member of the Board of Directors of Petróleos Mexicanos sincein December 2012, as well as certain members of his family, held ownership interests in companies that have entered into2018. CFE has executed several purchase agreements with Pemex-Refining, now held by Pemex Industrial Transformation, forTransformation. During 2018, CFE acquired the sale and purchase of gasoline and otherfollowing products by certain retail service stations and a wholesale distributor, as well as the performance of other related activities. As of the date of this report, their ownership interests are as follows:from Pemex Industrial Transformation:
| 2018 | ||||
| Ps. (38,499,999) | ||||
| 135,667 | ||||
| (6,148,283) | ||||
| (154,115) | ||||
| (3,760,115) | ||||
87 octane gasoline | (707) | ||||
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| Ps. (48,427,552) |
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The rights of these companies to operate retail service stationsConsolidated Statements and distribute gasoline and other products on a wholesale basis in Mexico are dependent on these agreements, the expiration ornon-renewal of which may adversely affect their business. These agreements are based on our standard forms of agreements and contain the standard terms and conditions applicable to all of Pemex Industrial Transformation retail service stations and wholesale distributors.
Legal Proceedings
Labor-Related Proceedings
We are a party to various legal actions involving labor claims of former and present employees. These labor disputes relate to severance payments, life insurance benefits, extensions of labor contracts, level of wages, improper termination and employee housing. We do not expect these lawsuits to have a material adverse effect on our financial condition or future results of operations.
For information on our negotiations with the Petroleum Workers’ Union and collective bargaining agreements, see “Item 6—Directors, Senior Management and Employees—Employees.”
Ethics CommitteeAudits and Liabilities UnitOther Investigations by the Mexican Government
Certain rules have been enacted in order to promote TheAuditoría cultureSuperior de la Federación(Superior Audit Office of ethics and prevent corruption in our daily operations. On November 26, 2016, the Board of Directors of Petróleos Mexicanos issued theCódigo de Ética para Petróleos Mexicanos, sus empresas productivas subsidiarias y empresas filiales (Code of Ethics for Petróleos Mexicanos, its productive subsidiary entities and affiliates,Federation, or the CodeASF), annually reviews theCuenta Pública(Public Account) of Ethics), which applies to the members of the boards of directors ofMexican Government entities, including Petróleos Mexicanos and eachour subsidiary entities. This review focuses mainly on the entities’ compliance with budgetary benchmarks and budget and accounting laws. The ASF prepares reports of its observations based on this review. The reports are subject to our analysis and, if necessary, our clarification and explanation of any issues raised during the subsidiary entitiesaudit. Discrepancies in amounts spent may subject our officials to legal sanctions. However, in most instances, any observed issues are clarified and all of our employees, including the Director General (chief executive officer) ofdisposed of.
The Liabilities Unit at Petróleos Mexicanos, the Chief Financial Officer of Petróleos Mexicanos, the chief accounting officer of Petróleos Mexicanos and all other employees performing similar functions. This new code of ethics replaced the code of ethics that had been in place since 2014. On December 7, 2016, our Ethics Committee was formed to monitor the implementation and enforcement of the Code of Ethics. See “Item 4—Information on the Company—Business Overview—PEMEX Corporate Matters—Ethics Committee” for more information. See “Item 16B—Code of Ethics” for more information.
In addition, on December 9, 2016, the Ethic Committee reviewed the newCódigo de Conducta de Petróleos Mexicanos, sus empresas productivas subsidiarias y, en su caso, empresas filiales(Code of Conduct of Petróleos Mexicanos, its productive subsidiary entities and, where applicable, affiliated companies, or the Code of Conduct), which is scheduled to be approved and issued in 2017, replacing the code issued in 2015. This Code of Conduct delineates the code of conduct expected from all of our employees in the daily performance of their duties and is designed to promote transparency and prevent abuses.
On February 4, 2016, we launched an ethics and corporate integrity program, which incorporates high industry standards and practices related to ethics, integrity, conduct, anti-corruption strategies and institutional values. Several measures have been taken to ensure the successful implementation of the program, including the distribution of our Code of Ethics and Code of Conduct among personnel, the administration of trainings on risk management, internal control and integrity and the development of mechanisms to identify and combat corrupt practices. Additionally, we are developing tools to assess compliance with our internal ethics and integrity guidelines, and intend to launch an ethics support line and an anti-corruption webpage in the first half of 2017 to inform our partners, contractors and others about the policies and procedures to be applied to our business dealings.
Our Liabilities Unit, which is part of the SFP,Secretaría de la Función Pública (Ministry of Public Function, or the SFP), is responsible for receiving complaints and investigating violations of the FederalGeneral Law of Administrative Responsibilities of Public Officials,Liabilities, as well as imposing administrative penalties in accordance with the law.
Mexican Government Audits and Other Investigations
In March and April 2010, the SFP filed seven criminal complaints against officers and employees ofPemex-Refining, in connection with a pipeline rupture in Nanchital, Veracruz. The SFP imposed administrative penalties against these officers and employees, as well as against contractors. As of the date of this report, 28 appeals have been filed by these public sector employees, 27 of which have concludedLiabilities Unit at Petróleos Mexicanos provided us with the following results: 16 penalties were confirmed, nine penalties were declared nullinformation below regarding the main investigations and void and new resolutions were ordered with respect to two penalties, imposing new sanctions that are now final. As of the date of this report, a final resolution of the final outstanding appeal against the administrative penalties is still pending.
In May 2010, the SFP filed two criminal complaints and initiated two administrative proceedings against María Karen Miyazaki Hara, who served as PMI’s Deputy Director of Trading of Intermediate Distillates, for allegedly committing acts of corruption pursuant to which PMI lost revenues of approximately U.S. $13 million. The alleged acts involved the unauthorized sale of ULSD for the economic benefit of foreign companies, including Blue Oil Trading Ltd. During November 2010, the first administrative proceedings concluded, resulting in Ms. Miyazaki Hara being fined Ps. 164.2 millionour employees and banned from holding public sector positions for 20 years. Ms. Miyazaki Hara filed a motion before theSéptima Sala Regional Metropolitana(Seventh Regional Metropolitan Court) of the Federal Court of Fiscal and Administrative Justice seeking that this resolution be declared null and void. On July 2, 2015, theSegunda Sección de la Sala Superior(Second Section of the Superior Court) of the Tax and Administrative Federal Court declared the resolution null and void. The SFP filed a motion to review this judgment, which was granted on February 27, 2017 (file No.77/2017-II). As of the date of this report, a final resolution is still pending. In addition, on June 25, 2013, the second administrative proceeding concluded, and the SFP fined Ms. Miyazaki Hara for Ps. 59.3 million and banned her from holding public sector positions for 20 years. On September 23, 2013, Ms. Miyazaki Hara filed a motion against this resolution before theOctava Sala Regional Metropolitana (Eighth Regional Metropolitan Court) of the Federal Court of Fiscal and Administrative Justice seeking that this additional resolution also be declared null and void, which was granted on February 20, 2017 (file No.66/2017-V). As of the date of this report, a final resolution is still pending the Superior Court’s resolution.former employees.
In December 2010, the SFP fined 15 public sector employees for irregularities in Oceanografía bidding process related to the leasing of four vessels. These employees were barred from holding public sector positions for ten years and several monetary penalties were ordered. The public sector employees filed motions against these penalties. As of the date of this report, 13 of the motions were confirmed. The resolutions in ten motions were declared null and void, in four motions were declared valid and one motion is still pending. Mr. Zermeño Díaz filed anamparo against the judgment declaring the resolution valid before theDécimo Tercer Tribunal Colegiado en Materia Administrativa del Primer Circuito (Thirteenth Joint Administrative Court of the First Circuit), which, as of the date of this report, is still pending resolution.
On October 11, 2011, the SFP announced that it had fined three former officers of PMI an aggregate amount of Ps. 267.8 million, for allegedly improper contracting practices in the purchase and/or sale of petroleum products, which allegedly benefited certain of PMI’s commercial counterparties. The implicated former officers of PMI were also barred from public sector employment for a period of ten years. These former officers appealed the penalties. Two motions were granted and the resolutions declared null and void. On February 8, 2017, a judgment was issued by theSala Superior (Higher Court) of theTribunal Federal de Justicia Administrativa (Federal Court of Administrative Justice) declaring the third resolution null and void. On April 3, 2017, the SFP filed a motion to review this resolution and the former officer filed anamparo (file No. 198/2017) before theQuinto Tribunal Colegiado en Materia Administrativa del Primer Circuito (Fifth Joint Administrative Court of the First Circuit). As of the date of this report, a final resolution is still pending.
In July 2011, a criminal complaint was filed against Mario Blenda Ahumada, former Deputy Director of Trade and Refined Products of PMI, after a Ps. 11.0 million increase in his personal assets was detected. The Federal Attorney General’s Office concluded its investigation without filing a criminal complaint. The SFP filed a motion against this resolution, which was granted. As of the date of this report, this resolution is still being implemented.
On April 24, 2014, the SFP issued a resolution imposing penalties against several public sector employees in connection with operations executed with Oceanografía, S.A. de C.V. Four employees of Pemex-ExplorationPemex Exploration and Production were barred from public sector employment for six months to one year. The employees filed motions (filesNo. 14/8891-19-01-02-08-OT;10781/14-17-10-5;16172/14-17-04-7; and15972/14-17-11-4) before the Regional Court of Chiapas-Tabasco and theDécima Sala Regional Metropolitana (Tenth Regional Metropolitan Court), theCuarta Sala Regional Metropolitana (Fourth Regional Metropolitan Court) and theDécima Primera Sala Regional Metropolitana (Eleventh Regional Metropolitan Court) of the Federal Court of
Fiscal and Administrative Justice, respectively, requesting that the penalties be declared null and void. The following sets forth the status of these proceedings:the proceedings that were ongoing during 2018:
• | On April 4, 2015, a judgment was issued (file No. |
• | On May 9, 2015, a judgment was issued (fileNo. 10781/14-17-10-5) before theDécima Sala Regional Metropolitana (Tenth Regional Metropolitan Court) of the former Fiscal and Administrative Justice Court declaring the resolution valid. |
Key Energy Services
On August 11, 2016, the SEC announced that Key Energy Services, Inc. agreed to pay U.S. $5 million to settle SEC charges that it violated the internal controls andbooks-and-records provisions of the U.S. Foreign Corrupt Practices Act. These violations arose from payments allegedly made by its subsidiary, Key Mexico, to one of our employees to induce him to provide advice, assistance and inside information that was used by Key Energy Services, Inc. and Key Mexico in negotiating contracts with us. OurThe Liabilities Unit is currently investigating these allegations.at Petróleos Mexicanos conducted an investigation, and, on November 6, 2018, sent a report of alleged liability to the Liabilities Unit at Pemex Exploration and Production. The report of alleged liability indicated misuse ofnon-public information, fraudulent payments and fraudulent cost adjustments by several Pemex Exploration and Production employees. On November 29, 2018, the report was declared inadmissible due to limitations on the powers of the Liabilities Unit. As of the date of this annual report, this matter has concluded.
Odebrecht
On December 21, 2016, the U.S. Department of Justice publicly disclosed that Odebrecht, S.A. (Odebrecht), a global construction conglomerate based in Brazil, pledpleaded guilty to charges of bribery and corruption in connection with, among other things, bribes paid for more than 100 projects in twelve countries. The report further disclosed that, between 2010 and 2014, Odebrecht had bribed officials of the Mexican government for an amount equal to U.S. $10.5 million, including the payment to ahigh-level official of a Mexicanstate-owned andstate-controlled company of a bribe of U.S. $6 million.
On December 22, 2016, ourthe Liabilities Unit at Petróleos Mexicanos commenced an investigation into instances of bribery or corruption related to these allegations. On January 25, 2017, we filed a criminal complaint with the Federal Attorney General’s Office against any party for acts that may have been committed against PEMEX.
As a result of investigations being conducted by the Liabilities Unit at Petróleos Mexicanos, the SFP and the Federal Attorney General’s Office, agreements executed by Odebrecht and its affiliates with various public entities of the Mexican Government have been reviewed. As of the date of this annual report, the SFP has initiated a total of eight administrative sanctioning proceedings, four against Odebrecht and its affiliates, two against legal representatives of Odebrecht and two against employees of PEMEX. In addition, as of the date of this annual report, the SFP is preparing three additional administrative sanctioning proceedings against Odebrecht affiliates and an additional investigation is outstanding. The results of these investigations have resulted in the following actions:
On June 14, 2017, the Ministry of the Public Function, through the Liabilities Unit at Petróleos Mexicanos, initiated four administrative sanctioning proceedings against two affiliates of Odebrecht and its representatives for probable wrongful payments related to a public work contract in our Miguel Hidalgo refinery.
On June 16, 2017, we notified Odebrecht Ingeniería y Construcción Internacional de México, S.A. de C.V. (or ODM) of the termination of the engineering, procurement and construction contract between ODM and Pemex Industrial Transformation dated November 12, 2015. This contract was valued at Ps. 1.8 billion and covered works related to the construction of access ways and external works for the residual exploitation project for the Miguel Hidalgo refinery. We terminated this contract due to ODM’s failure to comply with its obligations. ODM filed a commercial claim (file No.564/2018-V) against Pemex Industrial Transformation seeking Ps. 1,838.7 million for failure to make payments and breach of contract. On March 6, 2019, Pemex Industrial Transformation filed a response to this claim. On March 29, 2019, ODM filed a reply to this response. As of the date of this annual report, a final resolution is still pending.
On September 11, 2017 and October 8, 2017, the SFP, through the Liabilities Unit at Petróleos Mexicanos, announced that it had identified additional irregularities in connection with payments of Ps. 119 million and Ps. 2.5 million, respectively, related to the execution of public work contracts in our Miguel Hidalgo refinery involving an affiliate of Odebrecht and an employee of Pemex Industrial Transformation. As a result of the administrative sanctioning proceedings initiated in September and October 2017, respectively, the SFP has issued a total of four sanctioning resolutions, two banning Constructora Norberto Odebrecht, S.A. from bidding for and entering into contracts with the Mexican Government and PEMEX for four years and two years, respectively, and two against the employee of Pemex Industrial Transformation, who was barred from public sector employment for a period of ten years and was fined Ps. 119 million and Ps. 2.5 million due to irregularities related to improper payments of indirect costs and duplicated services, respectively.
On April 17, 2018, the Liabilities Unit at Petróleos Mexicanos announced that it had banned each of ODM and Constructora Norberto Odebrecht, S.A for two years and six months from bidding for and entering into Mexican government contracts, including contracts with PEMEX, and fined each of them in an aggregate amount of Ps. 543.5 million for wrongful acts committed in connection with, and failure to comply with the requirements of, the contract executed with Pemex Industrial Transformation for the Miguel Hidalgo refinery. The SFP also announced it had banned each of the Director General, Mr. Luis Alberto de Meneses Weyll, and the Director of Management and Finance, Mr. Gleiber José de Faria, of ODM, for two years and three months and fined each of them in an aggregate amount of Ps. 1.26 million for wrongful acts committed in connection with, and failure to comply with the requirements of, the contract executed with Pemex Industrial Transformation for the Miguel Hidalgo refinery.
On August 16, 2018, the SFP announced it had initiated an administrative sanctioning proceeding against an Odebrecht affiliate for giving false information in connection with a SEMARNAT license related to the execution of works for our Miguel Hidalgo refinery. As of the date of this annual report, the SFP is in the process of preparing a resolution.
On October 29, 2018, the SFP announced it had initiated an administrative sanctioning proceeding against Constructora Norberto Odebrecht, S.A. for excess charges related to the execution of a contract for our Miguel Hidalgo refinery. As of the date of this annual report, the SFP is in the process of preparing a resolution.
• | On November 12, 2018, the Liabilities Unit at Pemex Industrial Transformation announced that the Decimocuarto Tribunal Colegiado en Materia Administrativa del Primer Circuito (Fourteenth Administrative Joint Court of the First Circuit) issued a resolution dated September 28, 2018 regarding a motion to review (R.A. 192/2018) filed by Constructora Norberto Odebrecht, S.A. in connection with a judgment issued on April 23, 2018 by the Juzgado Decimoquinto de Distrito en Materia Administrativa (Fifteenth Administrative District Court) in Mexico City in connection with the amparo 1252/2017. This judgment requested that one of the four sanctioning proceedings be replaced. The proceeding is in the evidentiary phase, and once the court has concluded its examination of the evidence, the SFP will issue a resolution. |
On November 27, 2018, the SFP announced it had barred an employee of Pemex Industrial Transformation from public sector employment for a period of ten years and imposed a fine of Ps. 8.3 million, for failure to apply conventional penalties to an affiliate of Odebrecht related to works performed at our Miguel Hidalgo refinery.
On April 26, 2019, the Liabilites Unit at Pemex Industrial Transformation announced that it had concluded an administrative sanctioning proceeding (file No.PTRI-S-001/2018) banning ODM for three years from bidding for and entering into Mexican government contracts.
The administrative sanctions imposed by the SFP are independent of any criminal charges that may be brought as a result of the criminal investigation that is being carried out by the Attorney General’s Office, which, as of the date of this annual report, is still ongoing.
We are collaborating with the SFP, the Liabilities Unit the SFPat Petróleos Mexicanos, and the Federal Attorney General’s Office in order to hold those responsible for these acts accountable and ensure that we recover any damages to which we are entitled.
Pemex Fertilizers
On September 9, 2018, the SFP announced that it had initiated, through the Liabilities Unit at Petróleos Mexicanos, an administrative sanctioning proceeding against a former employee of Pemex Fertilizers in connection with alleged irregularities in the 2016 acquisition of Fertinal by one of our subsidiary companies, PMX Fertilizantes Pacífico, S.A. de C.V. As of the date of this annual report, a resolution of this sanctioning proceeding is still pending.
On September 9, 2018, the SFP also announced that it had initiated an administrative sanctioning proceeding against a former employee of Pemex Fertilizers for alleged damages against PEMEX of U.S. $273 million in connection with the 2014 acquisition of assets from Agro Nitrogenados, S.A. de C.V., a subsidiary of Altos Hornos de México.
On November 30, 2018, the SFP announced that it had concluded its investigation and had initiated a liability proceeding against a former employee for alleged damages of U.S. $193.9 million. The proceedings relate to the rehabilitation of the Agro Nitrogenados plant for alleged damages of Ps. 4,206 million (U.S. $212 million). As of the date of this annual report, this proceeding is in the evidentiary stage, pleadings to be filed by the employee are still pending and a final resolution has not been issued.
Pemex Logistics
On September 18, 2018, the SFP announced that it had initiated, through the Liabilities Unit at Pemex Logistics, an administrative sanctioning proceeding against three employees of Pemex Logistics for alleged irregularities in connection with a payment of Ps. 6.3 million in 2015 related to dredging and underwater cleaning services at the Madero Maritime Terminal. On December 11, 2018, the Liabilities Unit at Petróleos Mexicanos issued a resolution temporarily suspending these three employees from public sector employment and imposing a fine of Ps. 2.1 million. As of the date of this annual report, final resolutions of the administrative proceedings filed by the employees against this resolution are still pending.
Actions Against the Illicit Market in Fuels
The illicit market in fuels in Mexico involves the theft, adulteration and illegal transport and distribution of the hydrocarbons that we and other companies produce. This criminal activity mainly consists of the following:
Illegal tapping of our pipelines, which threatens the integrity of our pipeline system, thereby increasing the associated risks for personnel, facilities, the general population and the environment. Illegal tapping of our pipelines has caused explosions, loss of life, injuries and environmental damage.
Tampering with product quality, which negatively impacts consumers and our reputation.
Theft and illegal trade in fuels, which reduces our revenues by the amount that would have been generated from the sale of the stolen products and reduces our net income because the production cost of stolen product is included in our cost of sales.
In orderrecent years we have experienced an increase in theft of and illegal trade in the fuels that we produce. We estimate that the average theft of fuel amounted to counteractapproximately 55.9 thousand barrels per day in 2018. For the illicityears ended December 31, 2018 and 2017,non-operating losses resulting from fuel market,theft amounted to Ps. 39,439.1 million and Ps. 22,945.4 million, respectively.
Given the sophistication and breadth of these illegal networks, in recent years we have implemented several initiatives that aim to develop a security strategy throughout our facilities that seekssustainable operating model to safeguard the areas in which we operate, which comprise approximately 2.0 million square kilometers of onshore fields and 3.2 million square kilometers of Mexican territorial waters. These initiatives have sought to:
integrate a strategic safeguard system, allowing us to respond in a timely manner to risks of illegal activity;
• | strengthen coordination and collaboration between Petróleos Mexicanos and our subsidiary entities, as well as with authorities in the three orders of government, including the Federal Attorney General’s Office, Federal Consumer’s Office, Tax Administration System, federal, state and municipal police, the |
modernize our information systems to improve our strategic decision making;making and our response time; and
revise our security strategy to incorporate innovations from the fields of industrial safety, civil protection and environmental preservation.
Our initiatives aim to develop a sustainable operating model to safeguardAdditionally, the areas innew administration has set forth thePlan Conjunto para el Combate al Robo de Combustibles (Joint Plan for Combating Fuel Theft ), which we operate, which comprise approximately 2.0 million square kilometers of onshore fieldsis aimed at further preventing and 3.2 million square kilometers of Mexican territorial waters.
These initiatives are intended to strengthen our ability to combateliminating the illicit market in fuels, and include our increased investments in surveillance technology for our facilities and pipelines, as well as the reinforcementfuels. The principal measures of equipment and resources available to protect our personnel, facilities, the general population and the environment. In particular, during 2016, we continued the following strategic measures in order to decrease incidents of criminal activity at our facilities:this plan are:
• | Support of fifteen government institutions and agencies, including the |
Removal of personnel involved in the rightsillicit market for fuels;
Improved monitoring of way and facilities through a total of 10,472,808 kilometers patrolled in 2016, at an average of 28,693 kilometers per dayour pipeline systems, supported by vehicle and 305 kilometers per day by foot, as compared to 29,317 kilometers per day by vehicles and 306 kilometers per day by foot during 2015. These surveillance activities were carried out in coordination with the Ministry of National Defense, the Mexican Navy and other governmental authorities. During 2016 we were able to patrol at levels similar to 2015, despite using only half of the number of vehicles as a result to budget cuts following the 2016 Budget Adjustment Plan.federal police;
Special attention to 58 facilities identified as requiring priority, including 39 storage and the Ministrydispatch terminals, 12 repumping stations, six refineries and one control center Mexico;
Closure of the Interior, among others, to share informationcertain pipelines and provide support to investigative teams focused on theft and illegal trade in fuels. We have also provided training for authorities responsibleincreased use of trucks for the prevention, detectiontransportation of fuel; and prosecution of criminal activities in the illicit market in fuels, particularly in the inspection of automobile tanks and the documentation needed to be able to transport fuel, in an effort to support intragovernmental coordination.
Identification and guard control of vehicle access to best use monitoring technologies along with our ground patrol, which has allowed us to detect a higher number of illegal drillingspriority facilities, control rooms and to prevent the illegal extraction of fuels.vertical tank areas.
These measures led to the recovery of 13.125.3 million liters of hydrocarbon product in 2016.2018, which represents an increase of approximately 11.9% as compared to the 22.6 million liters recovered in 2017.
These efforts also led to the identification and sealing of 6,87314,910 illegal pipeline taps in 2016,2018, as compared to the identification and sealing of 6,26010,316 illegal pipeline taps during 2015,2017, which represents a 9.8%44.5% increase. This increase resulted from both increased surveillance and an increase in the number of criminal attempts to divert our products. Our renewed focus on the detection of illegal pipeline taps in 20152018 enabled us to collect more
information and develop more effective strategies to combat fuel theft, which in turn improved our ability to deploy ground patrol for the immediate identification and sealing of pipeline taps and prevent additional extraction of our hydrocarbon products.
On June 1, 2017, we announced the cancellation of the franchise contracts of seven gas stations located in the state of Puebla, which allegedly committed irregularities in their fuel trade procedures and had tax inconsistencies. The announcement was the result of an operation involving PEMEX, theSecretaría de Hacienda y Crédito Público (Ministry of Finance and Public Credit) through the Tax Administration Service and its Financial Intelligence Unit, as well as theFiscalía General de la República (Attorney General’s Office), theSecretaría de la Defensa Nacional (Ministry of National Defense) and theComisión Nacional de Seguridad (National Security Commission), through the federal and state police. Through measures like these, we seek to provide certainty to our customers, as well as to combat the illicit market in fuels, tax evasion, money laundering and commercial fraud.
On January 12, 2016,18, 2019, at least 93 people lost their lives when a ruptured gas pipeline exploded in theLey State of Hidalgo. The pipeline rupture was the result of attempted fuel theft. The Federal para Prevenir y Sancionar los Delitos Cometidos en Materia de Hidrocarburos (Federal Law to PreventAttorney General’s Office is investigating the explosion.
Additionally, some of our personnel have been implicated for their involvement in organized fuel theft and Punish Crimestrade. The Liabilities Unit at Petróleos Mexicanos provided us with the following information regarding the main investigations and administrative proceedings against our employees and former employees related to Hydrocarbons Matters) was publishedthis issue.
On February 14, 2018, the Liabilities Unit at Petróleos Mexicanos imposed penalties on eight employees from the storage and distribution terminal of Pemex Logistics in the Official Gazettestate of Chihuahua for operating technological devices to alter the measurement parameters to fill fuel tankers and for deviating from expected routes. Three of these employees were dismissed and barred from holding public sector positions for one year and five employees were suspended. Three of these eight employees filed claims challenging the applicable resolutions. One resolution was declared null and void. Final judgments on the claims challenging the other two resoltuions are pending as of the Federation, along with several reformsdate of this annual report.
On March 14, 2018, the Liabilities Unit at Petróleos Mexicanos dismissed three employees from Sector Pipelines Bajío of Pemex Logistics and barred them from holding public sector positions for ten years for the tapping of diesel in the Tula-Salamanca pipeline in Celaya, Guanajuato. The three employees filed claims against the resolutions under which they were dismissed. Two resolutions have been ratified. A final judgment on the claim against the third resolution is still pending as of the date of this annual report.
On March 27, 2018, the Liabilities Unit at Petróleos Mexicanos suspended an employee from Sector Pipelines Minatitlán of Pemex Logistics. This employee allegedly belongs to related laws, includingan organized network that repeatedly manipulated and altered theCódigo Federal de Procedimientos Penales (Criminal Procedures Federal Code), valves of theMinatitlán-México pipeline in Acayucan, Veracruz. The suspension of the employee has since been lifted. An investigation by theCódigo Penal FederalSubprocuradur (Federal Criminal Code) and theLey Federal contra laía Especializada en Investigación de Delincuencia Organizada (Federal Law(Special Prosecutor’s Office in Organized Crime Investigation) is pending as of Organized Crime). This law and the related reforms establish additional civil and criminal penalties for the illegal tappingdate of pipelines, the theft of hydrocarbons and the alteration of hydrocarbons measurements systems, among other infractions.this annual report.
Civil Actions
In the ordinary course of our business, we are a party to a number of lawsuits of various types. We evaluate the merit of each claim and assess the likely outcome, accruing a contingent liability when an unfavorable decision is probable and the amount is reasonably estimable. At December 31, 20152017 and 2016,2018, we had accrued a reserve of Ps. 12.87.8 billion and Ps. 15.16.5 billion, respectively, for our contingent liabilities in connection with these lawsuits. Our material legal proceedings are described in Note 2529 and Note 2730 to our consolidatedaudited financial statements included in this report, and those descriptions are incorporated by reference under this Item.
Dividends
Pursuant to the Petróleos Mexicanos Law, as of January 1, 2016, Petróleos Mexicanos and its subsidiary entities are subject to a new dividend policy that will requirerequires them to pay a state dividend to the Mexican Government on an annual basis. In accordance with the Federal Revenue Law of 2016, the Federal Revenue Law of 2017, the Federal Revenue Law of 2018 and the Federal Revenue Law of 2017,2019, Petróleos Mexicanos was not required to pay a state dividend in 2016, 2017 and 2018 and will not be required to pay a state dividend in 2017.2019. For more information, see “Item 4—Taxes, Duties and Other Payments to the Mexican Government—Fiscal Regime for PEMEX—Other Payments to the Mexican Government.”
Trading in the debt securities issued by Petróleos Mexicanos takes place primarily in theover-the-counter market. All the debt securities issued by Petróleos Mexicanos that are registered pursuant to the U.S. Securities Act of 1933 (which we refer to as the Securities Act) are also listed on the Luxembourg Stock Exchange and traded on the Euro MTF market of the Luxembourg Stock Exchange.
Item 10. Additional Information
Memorandum and Articles of Association
The Mexican Congress established Petróleos Mexicanos by a decree dated June 7, 1938, effective July 20, 1938. None of Petróleos Mexicanos or the subsidiary entities has bylaws or articles of association. Petróleos Mexicanos and the subsidiary entities, are public entities of the Mexican Government and each is a legal entity empowered to own property and carry on business in its own name.
The activities of Petróleos Mexicanos and the subsidiary entities are regulated by the Mexican Constitution, the Petróleos Mexicanos Law, Regulations to the Petróleos Mexicanos Law, the Hydrocarbons Law and other federal laws and regulations. See “Item 4—Information on the Company—History and Development.” Under the Petróleos Mexicanos Law, the Board of Directors of Petróleos Mexicanos has the following committees: the Audit Committee, the Human Resources and Compensation Committee, the Strategy and Investment Committee and the Acquisitions, Leasing, Public Works and Services Committee. As of the date of this annual report, the entire Board of Directors of Petróleos Mexicanos is presently acting as our audit committee. See “Item 6—Directors, Senior Management and Employees.”
Under the Petróleos Mexicanos Law and the Regulations to the Petróleos Mexicanos Law, our directors are obligated to abstain from voting on a proposal, arrangement or contract in which they have a personal, family or business interest. Our directors do not have the power to vote compensation to themselves or any other member of the board. Except in the case of the independent board members, our directors do not receive compensation for their services as members of the boards of directors of Petróleos Mexicanos and the subsidiary entities. Under the Petróleos Mexicanos Law, our directors must perform their duties without obtaining or attempting to obtain any benefits greater than those granted by law. Therefore, our directors do not have borrowing powers exercisable by themselves. There is no requirement for early retirement for our directors.
Material Contracts
As of December 31, 20152017 and 2016,2018, we have entered into contracts with various contractors for approximate amounts of Ps. 987,674698,905 million and Ps. 817,994483,687 million, respectively. These contracts are for the development of investment projects. See Note 24(e)28 to our consolidated financial statements included herein.
On January 27, 2009, Petróleos Mexicanos entered into an indenture with Deutsche Bank Trust Company Americas, as Trustee. This agreement provides for the issuance by Petróleos Mexicanos from time to time of unsecured debt securities. On the same date, Petróleos Mexicanos entered into a distribution agreement with Calyon Securities (USA) Inc. (now known as Credit Agricole Securities (USA) Inc.), Citigroup Global Markets Inc., Citigroup Global Markets Limited, HSBC Securities (USA) Inc. and Santander Investment Securities Inc. pursuant to which Petróleos Mexicanos established a U.S. $7.0 billionmedium-term note, Series C, program. Pursuant to the 1996 guaranty agreement referred to above, Petróleos Mexicanos’ obligations under all notes issued under this program are jointly and severally guaranteed byPemex-Exploration and Production,Pemex-Refining andPemex-Gas and Basic Petrochemicals. In December 2010, Petróleos Mexicanos appointed Credit Suisse Securities (USA) LLC as an agent under the 2009 distribution agreement referred to above. In each of December 2010 and January 2010, Petróleos Mexicanos increased the size of this program to U.S. $12.0 billion and U.S. $22.0 billion, respectively. Petróleos Mexicanos issued U.S. $3.5 billion of notes and bonds under this program in 2011. In 2012, Petróleos Mexicanos issued U.S. $5.3 billion of notes and bonds under this program. In 2013, Petróleos Mexicanos increased the size of this program to U.S. $32.0 billion and issued U.S. $6.9 billion of notes and bonds under it. In 2014, Petróleos Mexicanos increased the size of this program to U.S. $42.0 billion and issued U.S. $7.9 billion of notes and bonds under it. During the first three months ofIn 2017, Petróleos Mexicanos increased the size of this program to U.S. $72.0$92.0 billion and issued € 4.3€4.3 billion, U.S. $5.0 billion and £450.0 million of notes and bonds under it. In 2018, Petróleos Mexicanos increased the size of this program to U.S. $102.0 billion and issued U.S. $6.0 billion, €3.15 billion and Swiss francs 365.0 million of notes and bonds under it. See “Item 5—Operating and Financial Review and Prospects—Liquidity and Capital Resources—Financing Activities.”
Exchange Controls
Mexico has had a free market for foreign exchange since 1991, and the Mexican Government has allowed the peso to float freely against the U.S. dollar since December 1994. We have no control over or influence on this exchange rate policy. The Mexican Government has announced that it does not intend to change its floating exchange rate policy, but there is no guarantee that the Mexican Government will not change this policy. See “Item 3—Key Information—Exchange Rates.”
Taxation
The 1997 Securities, the 1998 Securities, the 1999 Securities, the 2003 Securities, the 2004 Securities, the 2006 Securities, the 2008 Securities, the 2009 Securities, the 2010 Securities, the 2011 Securities, the 2012 Securities, the 2013 Securities, the 2014 Securities, the 2016 Securities and the 20172018 Securities.
As of the date of this annual report, we have registered the following securities with the Securities and Exchange Commission.
Pursuant to a registration statement on FormF-4 (FileNo. 333-7796), which was declared effective by the SEC on October 17, 1997, Petróleos Mexicanos,Pemex-Exploration and Production,Pemex-Refining andPemex-Gas and Basic Petrochemicals registered pursuant to the Securities Act up to U.S. $400,000,000 of 9.50%
Global Guaranteed Bonds due 2027, which we refer to as the 1997 Securities. In December 2004 and February 2006, an aggregate amount of U.S. $376,250,000 of the 1997 Securities were exchanged for bonds issued by the Pemex Project Funding Master Trust (which we refer to as the Master Trust).
Pursuant to a registration statement on FormF-4 (FileNo. 333-9310), which was declared effective by the SEC on August 24, 1998, Petróleos Mexicanos, Pemex-Exploration and Production, Pemex-Refining andPemex-Gas and Basic Petrochemicals registered pursuant to the Securities Act up to U.S. $350,000,000 of 9 1⁄4% Global Guaranteed Bonds due 2018, which we refer to as the 1998 Securities. In December 2004 and February 2006, an aggregate amount of U.S. $340,427,000 of the 1998 Securities were exchanged for bonds issued by the Master Trust.
Pursuant to a registration statement on FormF-4 (FileNo. 333-10706), which was declared effective by the SEC on October 1, 1999, Petróleos Mexicanos,Pemex-Exploration and Production,Pemex-Refining andPemex-Gas and Basic Petrochemicals registered pursuant to the Securities Act up to U.S. $500,000,000 of 9.50% Puttable or Mandatorily Exchangeable Securities (POMESSM) due 2027, which we refer to as the 1999 Securities. In December 2004 and February 2006, an aggregate amount of U.S. $421,522,000 of the 1999 Securities were exchanged for POMESSM issued by the Master Trust. All outstanding 1999 Securities of Petróleos Mexicanos were, on March 16, 2006, mandatorily exchanged for 9.50% Global Guaranteed Bonds due 2027 issued by Petróleos Mexicanos, thereby increasing the outstanding amount of the 1997 Securities.
Pursuant to a registration statement on FormF-4 (FileNo. 333-103197), which was declared effective by the SEC on February 24, 2003, the Master Trust, Petróleos Mexicanos,Pemex-Exploration and Production,Pemex-Refining andPemex-Gas and Basic Petrochemicals registered pursuant to the Securities Act up to U.S. $500,000,000 of 8.625% Bonds due 2022. Pursuant to a registration statement on FormF-4 (FileNo. 333-107905), which was declared effective by the SEC on August 21, 2003, the Master Trust, Petróleos Mexicanos,Pemex-Exploration and Production,Pemex-Refining andPemex-Gas and Basic Petrochemicals registered pursuant to the Securities Act up to U.S. $510,154,000 of 8.625% Bonds due 2022. We refer to the securities registered in 2003 under these registration statements as the 2003 Securities.
Pursuant to a registration statement on FormF-4 (FileNo. 333-118373), which was declared effective by the SEC on August 31, 2004, the Master Trust, Petróleos Mexicanos,Pemex-Exploration and Production,Pemex-Refining andPemex-Gas and Basic Petrochemicals registered pursuant to the Securities Act up to U.S. $47,085,000 of 8.625% Bonds due 2022. We refer to the securities registered in 2004 as the 2004 Securities.
Pursuant to a registration statement on FormF-4 (FileNo. 333-126941), which was declared effective by the SEC on January 13, 2006, the Master Trust, Petróleos Mexicanos,Pemex-Exploration and Production,Pemex-Refining andPemex-Gas and Basic Petrochemicals registered pursuant to the Securities Act up to U.S. $324,220,000 of 9 1⁄4% Bonds due 2018, U.S. $228,735,000 of 8.625% Bonds due 2023, U.S. $354,477,000 of 9.50% Bonds due 2027, U.S. $403,746,000 of POMESSM due 2027 and U.S. $500,000,000 of 6.625% Guaranteed Bonds due 2035. Pursuant to a registration statement on FormF-4 (FileNo. 333-126948), which was declared effective by the SEC on January 13, 2006, the Master Trust, Petróleos Mexicanos,Pemex-Exploration and Production,Pemex-Refining andPemex-Gas and Basic Petrochemicals registered pursuant to the Securities Act up to U.S. $25,780,000 of 9 1⁄4% Bonds due 2018, U.S. $21,265,000 of 8.625% Bonds due 2023, U.S. $45,523,000 of 9.50% Bonds due 2027 and U.S. $96,254,000 of POMESSM due 2027. All outstanding POMES registered under these registration statements were, on March 15, 2006, mandatorily exchanged for 9.50% Bonds due 2027. Pursuant to a registration statement on FormF-4 (FileNo. 333-136674), which was declared effective by the SEC on November 3, 2006, the Master Trust, Petróleos Mexicanos,Pemex-Exploration and Production,Pemex-Refining andPemex-Gas and Basic Petrochemicals registered pursuant to the Securities Act up to U.S. $751,995,000 of 6.625% Guaranteed Bonds due 2035. We refer to the securities registered in 2006 under these registration statements as the 2006 Securities.
Pursuant to a registration statement on FormF-4 (FileNo. 333-152486), which was declared effective by the SEC on December 18, 2008, the Master Trust, Petróleos Mexicanos,Pemex-Exploration and Production,
Pemex-Refining andPemex-Gas and Basic Petrochemicals registered pursuant to the Securities Act up to U.S. $2,500,000,000 of 5.75% Guaranteed Notes due 2018, up to U.S. $501,000,000 of 6.625% Guaranteed Bonds due 2035 and up to U.S. $500,000,000 of 6.625% Guaranteed Bonds due 2038. We refer to the securities registered in 2008 as the 2008 Securities.
Pursuant to a registration statement on FormF-4 (FileNo. 333-160799), which was declared effective by the SEC on August 25, 2009, Petróleos Mexicanos,Pemex-Exploration and Production,Pemex-Refining andPemex-Gas and Basic Petrochemicals registered pursuant to the Securities Act up to U.S. $2,000,000,000 of 8.00% Notes due 2019. We refer to the securities registered in 2009 as the 2009 Securities.
Effective as of September 30, 2009, Petróleos Mexicanos assumed, as primary obligor, all of the Master Trust’s obligations as issuer of the 2001 Securities, the 2003 Securities, the 2004 Securities, the 2006 Securities and the 2008 Securities. As a result, effective as of September 30, 2009, Petróleos Mexicanos is the issuer of all Registered Securities (as defined below).
Pursuant to a registration statement on FormF-4 (FileNo. 333-168326), which was declared effective by the SEC on August 31, 2010, Petróleos Mexicanos,Pemex-Exploration and Production,Pemex-Refining andPemex-Gas and Basic Petrochemicals registered pursuant to the Securities Act up to U.S. $63,314,000 of 8.00% Notes due 2019, up to U.S. $1,000,000,000 of 6.000% Notes due 2020, up to U.S. $2,000,000,000 of 5.50% Notes due 2021 and up to U.S. $1,000,000,000 of 6.625% Bonds due 2035. We refer to the securities registered in 2010 as the 2010 Securities.
Pursuant to a registration statement on FormF-4 (FileNo. 333-175821), which was declared effective by the SEC on August 31, 2011, Petróleos Mexicanos,Pemex-Exploration and Production,Pemex-Refining andPemex-Gas and Basic Petrochemicals registered pursuant to the Securities Act up to U.S. $1,000,000,000 of 5.50% Notes due 2021 and up to U.S. $1,250,000,000 of 6.500% Bonds due 2041. We refer to the securities registered in 2011 as the 2011 Securities.
Pursuant to a registration statement on FormF-4 (FileNo. 333-182553), which was declared effective by the SEC on July 23, 2012, Petróleos Mexicanos,Pemex-Exploration and Production,Pemex-Refining andPemex-Gas and Basic Petrochemicals registered pursuant to the Securities Act up to U.S. $2,100,000,000 of 4.875% Notes due 2022 and up to U.S. $1,750,000,000 of 5.500% Bonds due 2044. We refer to the securities registered in 2012 as the 2012 Securities.
Pursuant to a registration statement on FormF-4/A (FileNo. 333-189852), which was declared effective by the SEC on July 25, 2013, Petróleos Mexicanos,Pemex-Exploration and Production,Pemex-Refining andPemex-Gas and Basic Petrochemicals registered pursuant to the Securities Act up to U.S. $1,000,000,000 of 3.500% Notes due 2018, up to U.S. $500,000,000 of Floating Rate Notes due 2018, up to U.S. $2,100,000,000 of 3.500% Notes due 2023, up to U.S. $1,000,000,000 of 4.875% Notes due 2024, up to U.S. $500,000,000 of 6.500% Bonds due 2041 and up to U.S. $1,000,000,000 of 5.50% Bonds due 2044. We refer to the securities registered in 2013 as the 2013 Securities.
Pursuant to a registration statement on FormF-4 (FileNo. 333-198588), which was declared effective by the SEC on September 22, 2014, Petróleos Mexicanos,Pemex-Exploration and Production,Pemex-Refining andPemex-Gas and Basic Petrochemicals registered pursuant to the Securities Act up to U.S. $500,000,000 of 3.125% Notes due 2019, up to U.S. $500,000,000 of 4.875% Notes due 2024 and up to U.S. $3,000,000,000 of 6.375% Bonds due 2045. We refer to the securities registered in 2014 as the 2014 Securities.
Pursuant to a registration statement on FormF-4 (FileNo. 333-205763), which was declared effective by the SEC on February 22, 2016, Petróleos Mexicanos,Pemex-Exploration and Production, Pemex Industrial Transformation, Permex Drilling and Services, Pemex Logistics and Pemex Cogeneration and Services registered pursuant to the Securities Act up to U.S. $1,500,000,000 of 3.500% Notes due 2020, up to U.S. $1,000,000,000
of 4.250% Notes due 2025, $1,500,000,000 of 4.500% Notes due 2026, up to U.S. $1,500,000,000 of 5.50% Bonds due 2044 and up to U.S. $3,000,000,000 of 5.625% Bonds due 2046. We refer to the securities registered in 2016 as the 2016 Securities, and together with the 1997 Securities, the 1998 Securities, the 2003 Securities, the 2004 Securities, the 2006 Securities, the 2008 Securities, the 2009 Securities, the 2010 Securities, the 2011 Securities, the 2012 Securities, the 2013 Securities and the 2014 Securities as the Registered Securities.
Pursuant to a registration statement on FormF-4 (FileNo. 333-205763), which was declared effective by the SEC on February 22, 2016, Petróleos Mexicanos,Pemex-ExplorationExploration and Production, Pemex Industrial Transformation, Pemex Drilling and Services Pemex Logistics and Pemex Cogeneration and ServicesLogistics registered pursuant to the Securities Act up to U.S. $1,500,000,000 of 3.500% Notes due 2020, up to U.S. $1,000,000,000 of 4.250% Notes due 2025, $1,500,000,000 of 4.500% Notes due 2026, up to U.S. $1,500,000,000 of 5.50% Bonds due 2044 and up to U.S. $3,000,000,000 of 5.625% Bonds due 2046. Pursuant to a registration statement on FormF-4 (FileNo. 333-213351), which was declared effective by the SEC on November 11, 2016, Petróleos Mexicanos, Pemex Exploration and Production, Pemex Industrial Transformation, Pemex Drilling and Services Pemex Logistics and Pemex Cogeneration and ServicesLogistics registered pursuant to the Securities Act up to U.S. $750,000,000 of 5.500% Notes due 2019, up to U.S. $1,250,000,000 of 6.375% Notes due 2021, up to U.S. $2,069,302,000 of 4.625% Notes due 2023, up to U.S $3,000,000,000 of 6.875% Notes due 2026, and up to U.S.$3,500,000,000 of 6.750% Notes due 2047. We refer to the securities registered in 2016 as the 2016 Securities.
Pursuant to a registration statement on FormF-4 (FileNo. 333-220721), which was declared effective by the SEC on February 22, 2018, Petróleos Mexicanos, Pemex Exploration and Production, Pemex Industrial Transformation, Pemex Drilling and Services and Pemex Logistics registered pursuant to the Securities Act up to U.S. $1,500,000,000 5.375% Notes due 2022, up to U.S. $1,000,000,000 Floating Rate Notes due 2022, up to U.S. $5,500,000,000 6.500% Notes due 2027 and up to U.S. $2,500,000,000 6.750% Bonds due 2047. Pursuant to a registration statement on FormF-4/A (FileNo. 333-227508), which was declared effective by the SEC on November 16, 2018, Petróleos Mexicanos, Pemex Exploration and Production, Pemex Industrial Transformation, Pemex Drilling and Services and Pemex Logistics registered pursuant to the Securities Act up to U.S. $2,500,000,000 5.350% Notes due 2028, up to U.S. $2,000,000,000 6.500% Notes due 2029 and up to U.S. $3,328,663,000 6.350% Bonds due 2048. We refer to the securities registered in 2018 as the 2018 Securities and, together with the 1997 Securities, the 1998 Securities, the 2003 Securities, the 2004 Securities, the 2006 Securities, the 2008 Securities, the 2009 Securities, the 2010 Securities, the 2011 Securities, the 2012 Securities, the 2013 Securities, the 2014 Securities and the 20142016 Securities, as the Registered Securities.
Taxation Generally
The following summary contains a description of the principal Mexican and U.S. federal income tax consequences of the ownership and disposition of the Registered Securities, but it does not purport to be a comprehensive description of all of the tax considerations that may be relevant to a decision to invest in, or dispose of, the Registered Securities.
This summary is based on the federal tax laws of Mexico and the United States in force on the date of thisForm 20-F, including the provisions of the income tax treaty between the United States and Mexico together with related protocols (which are subject to change), and does not describe any tax consequences arising under the laws of any state or municipality in Mexico, the United States or any other jurisdiction, or the laws of any taxing jurisdiction other than the federal laws of Mexico and the United States.
Mexico has also entered into, or is negotiating, tax treaties with various countries that may have effects on holders of Registered Securities. This report does not discuss the consequences (if any) of such treaties.
Each holder or beneficial owner of Registered Securities should consult its tax advisor as to the Mexican, United States or other tax consequences of the ownership and disposition of those securities, including the effect of any foreign, state or municipal tax laws, and the consequences of the application of any tax treaty to which Mexico is a party.
Mexican Taxation
This summary of certain Mexican federal tax considerations refers only to holders of Registered Securities that are not residents of Mexico for Mexican tax purposes and that will not hold the Registered Securities or a beneficial interest therein through a permanent establishment for tax purposes (we refer to any suchnon-resident holder as a Foreign Holder).
For purposes of Mexican taxation, an individual is a resident of Mexico if he/she has established his/her domicile in Mexico. When an individual also has a place of residence in another country, that individual will be considered a resident of Mexico for tax purposes, if such individual has his/her center of vital interest in Mexico. An individual would be deemed to have his/her center of vital interest in Mexico if, among
other things: (a) more than 50% of his/her total income for the year were derived from Mexican sources, or (b) his/her principal center of professional activities were located in Mexico.
A legal entity is a resident of Mexico if:
it maintains the principal administration of its business in Mexico; or
it has established its effective management in Mexico.
A Mexican national is presumed to be a resident of Mexico unless such person can demonstrate the contrary. If a legal entity or individual has a permanent establishment in Mexico, such permanent establishment shall be required to pay taxes in Mexico on income attributable to such permanent establishment in accordance with Mexican federal tax law.
Taxation of Interest.Under. Under the Mexican Income Tax Law and rules issued by the Ministry of Finance and Public Credit applicable to PEMEX, payments of interest (which are deemed to include any amounts paid in excess of the original issue price of the relevant securities), made by a Mexican issuer (including Petróleos Mexicanos) in respect of notes or bonds and other debt securities to a Foreign Holder will generally be subject to a Mexican withholding tax assessed at a rate of 4.9%, if the following requirements are met:
notice relating to the offering of such notes or bonds is given to the CNBV as required under the Securities Market Law and evidence of such notice is timely filed with the Ministry of Finance and Public Credit;
such notes or bonds are placed outside of Mexico through banks or brokerage houses in a country that is party to a treaty to avoid double taxation with Mexico; and
the issuer duly complies with the information requirements established in the general rules issued by the Ministry of Finance and Public Credit for such purposes.
If the effective beneficiaries, directly or indirectly, individually or jointly with related parties, receive more than 5% of the interest paid on such notes or bonds and are holders, directly or indirectly, individually or jointly, with related parties of more than 10% of the voting stock of the issuer or entities 20% or more of whose stock is owned directly or indirectly, individually or jointly, by parties related to the issuer, the withholding tax rate applicable to payment of interest on such notes or bonds may be significantly higher.
Payments of interest made by Petróleos Mexicanos or the subsidiary entities, except for Pemex Fertilizers and Pemex Ethylene, in respect of the Registered Securities tonon-Mexican pension or retirement funds will be exempt from Mexican withholding taxes, provided that:
such fund is duly organized pursuant to the laws of its country of origin and is the effective beneficiary of the interest payment;
the income from such interest payment is exempt from income tax in its country of residence; and
such fund delivers certain information as per rules issued by the Ministry of Finance and Public Credit.
Additional Amounts.Petró. Petróleos Mexicanos and the subsidiary entities, except for Pemex Fertilizers and Pemex Ethylene, have agreed, subject to specified exceptions and limitations, to:
pay Additional Amounts (as defined in the indenture dated as of September 18, 1997, as supplemented, between Petróleos Mexicanos and Deutsche Bank) to the holders of the 1997 Securities in respect of the Mexican withholding taxes mentioned above;
pay Additional Amounts (as defined in the indenture dated as of August 7, 1998, as supplemented, between Petróleos Mexicanos and Deutsche Bank) to the holders of the 1998 Securities in respect of the Mexican withholding taxes mentioned above;
pay Additional Amounts (as defined in the indenture dated as of July 31, 2000, as supplemented, between Petróleos Mexicanos and Deutsche Bank) to the holders of the 2003 Securities and the 2004 Securities in respect of the Mexican withholding taxes described above;
pay Additional Amounts (as defined in the indenture dated as of December 30, 2004, as supplemented, between Petróleos Mexicanos and Deutsche Bank) to the holders of the 2006 Securities and the 2008 Securities in respect of the Mexican withholding taxes described above; and
pay Additional Amounts (as defined in the indenture dated as of January 27, 2009, as supplemented, between Petróleos Mexicanos and Deutsche Bank) to the holders of the 2009 Securities, the 2010 Securities, the 2011 Securities, the 2012 Securities, the 2013 Securities, the 2014 Securities and the 2016 Securities in respect of the Mexican withholding taxes described above.
If Petróleos Mexicanos pays Additional Amounts in respect of such Mexican withholding taxes, any refunds received with respect to such Additional Amounts will be for the account of Petróleos Mexicanos.
Holders or beneficial owners of the Registered Securities may be required to provide certain information or documentation necessary to enable Petróleos Mexicanos and the subsidiary entities to apply the appropriate Mexican withholding tax rate applicable to holders or beneficial owners of the Registered Securities. In the event that the specified information or documentation concerning such holder or beneficial owner, if requested, is not provided on a timely basis, the obligation of Petróleos Mexicanos and the subsidiary entities to pay Additional Amounts may be limited.
Taxation of Dispositions.Capital. Capital gains resulting from the sale or other disposition of the Registered Securities by a Foreign Holder will not be subject to Mexican income or withholding taxes.
Other Mexican Tax Considerations.Under. Under the Income Tax Law, any discount received by anon-resident upon purchase of the notes or bonds from a Mexican resident or anon-resident with a permanent establishment in Mexico is deemed interest income, and therefore, subject to taxes in Mexico. Such interest income results from the difference between the face value (plus accrued interest not subject to withholding) and the purchase price of such notes or bonds.
Transfer and Other Taxes.There. There are no Mexican stamp, registration or similar taxes payable by a Foreign Holder in connection with the purchase, ownership or disposition of the Registered Securities. A Foreign Holder of the Registered Securities will not be liable for Mexican estate, succession, gift, inheritance or similar tax with respect to such securities.
United States Taxation
This summary of certain U.S. federal income tax considerations deals principally with persons that hold the Registered Securities as capital assets and whose functional currency is the U.S. dollar. As used in this section “Taxation,” the term “United States Holder” means a beneficial owner of a Registered Security that is an individual who is a citizen or resident of the United States, a U.S. domestic corporation or any other person that is subject to U.S. federal income taxation on a net income basis in respect of its investment in the Registered Securities.
This summary does not purport to be a comprehensive description of all the tax considerations that may be relevant to any particular investor, including tax considerations that arise from rules of general application or that are assumed to be known to investors. This summary generally does not address the tax treatment of holders that may be subject to special tax rules, such as banks, insurance companies,tax-exempt organizations, dealers in securities or currencies, certainshort-term holders of Registered Securities, traders in securities electing tomark-to-market, or persons that hedge their exposure in the Registered Securities or hold the Registered Securities as a position in a “straddle” for tax purposes or as part of a “synthetic security” or a “hedging” or “conversion” transaction or other integrated investment comprised of such Registered Securities and one or more
other investments, nonresident aliens present in the United States for more than 182 days in a taxable year, U.S. expatriates, entities taxed as partnerships or the partners therein, persons that have a “functional currency” other than the U.S. dollar, nor does it address the tax treatment of holders that did not acquire the Registered Securities at their issue price as part of the initial distribution. Investors who purchased the Registered Securities at a price other than the issue price should consult their tax advisor as to the possible applicability to them of the amortizable bond premium or market discount rules.
In addition, this summary does not discuss the application of the Medicare contribution tax on net investment income or the alternative minimum tax. United States Holders should consult their own tax advisers concerning the U.S. federal, state, local, and other tax consequences of purchasing, owning, and disposing of a Registered Security in their particular circumstances.
United States Holders that use an accrual method of accounting for tax purposes (“accrual method holders”) generally are required to include certain amounts in income no later than the time such amounts are reflected on certain financial statements (the “book/tax conformity rule”). The application of the book/tax conformity rule thus may require the accrual of income earlier than would be the case under the general tax rules described below. It is not clear to what types of income the book/tax conformity rule applies, or in some cases, how the rule is to be applied if it is applicable. Accrual method holders should consult with their tax advisors regarding the potential applicability of the book/tax conformity rule to their particular situation.
Taxation of Interest and Additional Amounts.A. A United States Holder will treat the gross amount of interest and Additional Amounts (i.e., without reduction for Mexican withholding taxes) as ordinary interest income in respect of the Registered Securities. Mexican withholding taxes paid at the appropriate rate applicable to the United States Holder will be treated as foreign income taxes eligible, subject to generally applicable limitations and conditions, for credit against such United States Holder’s U.S. federal income tax liability, at the election of such United States Holder, or for deduction in computing such United States Holder’s taxable income, provided that the United States Holder does not elect to claim a foreign tax credit for any foreign income taxes paid or accrued for the relevant taxable year. Interest and Additional Amounts will constitute income from sources without the United States and generally will be treated separately along with other items of “passive” income for purposes of determining the credit for foreign income taxes allowed under the Internal Revenue Code of 1986, as amended.
The calculation and availability of foreign tax credits or deductions involves the application of rules that depend on a United States Holder’s particular circumstances. United States Holders should consult their own tax advisors regarding the availability of foreign tax credits and the treatment of Additional Amounts.
Taxation of Dispositions.Upon. Upon the sale, exchange or retirement of a Registered Security, a United States Holder will generally recognize a gain or loss equal to the difference between the amount realized (less any amounts attributable to accrued and unpaid interest not previously includible in gross income, which will be taxable as ordinary income) and the holder’s tax basis in such security, which is generally equal to the cost of the Registered Security to the United States Holder. Gain or loss recognized by a United States Holder on the sale, redemption or other disposition of the Registered Securities generally will belong-term capital gain or loss if, at the time of disposition, the securities have been held for more than one year.Long-term capital gain realized by an individual United States Holder is generally taxed at lower rates thanshort-term capital gains or ordinary income.
NonNon-United-United States Holders.Subject. Subject to the discussion below under “Backup Withholding and Information Reporting,” holders of the Registered Securities that are not United States Holders (which we refer to asNon-United States Holders) generally will not be subject to U.S. federal income or withholding tax on interest income in respect of the Registered Securities or on any gain realized on the disposition of the Registered Securities.
Backup Withholding and Information Reporting.Information. Information returns may be filed with the Internal Revenue Service with respect to payments made to certain United States Holders of the Registered Securities. In addition, certain United States Holders may be subject to a backup withholding tax in respect of such payments, unless they (1) provide their accurate taxpayer identification numbers to the principal paying agent and certify that they are not subject to backup withholding or (2) otherwise establish an exemption from the backup withholding tax. Backup withholding is not an additional tax.Non-United States Holders may be required to comply with applicable certification procedures to establish that they are not United States Holders in order to avoid the application of such information reporting requirements and backup withholding tax.
Specified Foreign Financial Assets.Certain. Certain United States Holders that own “specified foreign financial assets” with an aggregate value in excess of U.S. $50,000 are generally required to file an information statement along with their tax returns, currently on Form 8938, with respect to such assets. “Specified foreign financial assets” include any financial accounts held at anon-U.S. financial institution, as well as securities issued by anon-U.S. issuer (which would include the Registered Securities) that are not held in accounts maintained by financial institutions. Higher reporting thresholds apply to certain individuals living abroad and to certain married individuals. Regulations extend this reporting requirement to certain entities that are treated as formed or availed of to hold direct or indirect interests in specified foreign financial assets based on certain objective criteria. United States Holders who fail to report the required information could be subject to substantial penalties. In addition, the statute of limitations for assessment of tax would be suspended, in whole or part. Prospective investors should consult their own tax advisors concerning the application of these rules to their investment in the Registered Securities, including the application of the rules to their particular circumstances.
Documents on Display
We are subject to the information requirements of the Exchange Act. In accordance with these requirements, we file reports, including annual reports on Form20-F, and other information with the SEC. These materials, including this report, and the exhibits thereto, may be inspected and copied at the SEC’s public reference room at 100 F Street, N.E., Washington, D.C. 20549. Please call the SEC at1-800-SEC-0330 for further information on the public reference rooms. In addition, anyAny filings we make electronically with the SEC will be available to the public over the Internet at the SEC’s web sitewebsite at http://www.sec.gov.
QUALITATIVE DISCLOSURE
Policies for Risk Management and the Use of Derivative Financial Instruments
We face market risk caused by the volatility of hydrocarbon prices, exchange rates and interest rates, credit risk associated with investments and financial derivatives, as well as liquidity risk. In order to monitor and manage these risks, we have approved general provisions relating to financial risk management, which are comprised of policies and guidelines that promote an integrated framework for risk management, regulate the use of Derivative Financial Instruments (“DFIs”),DFIs, and guide the development of risk mitigation strategies.
This regulatory framework establishes that DFIs should be used only for the purpose of mitigating financial risk. The use of DFIs for any other purpose must be approved in accordance with our current internal regulation. We have a Financial Risk Committee,Working Group (FRWG) which is a joint body for consultation, opinion and decisionsspecialized working group with decision-making authority on financial risk exposure, financial risk mitigation schemes, and negotiationDFIs trading of DFIs.Petróleos Mexicanos, the subsidiary entities and, where applicable, the subsidiary companies.
In addition, certain of the PMI subsidiariesSubsidiaries have implemented a regulatory framework for risk management with respect to its activities, which consists of policies, guidelines and procedures to manage the market risk associated with its commodity trading activities in accordance with industry best practices, such as: 1) the use of DFIs for financial risk mitigation purposes; 2) the segregation of duties; 3) valuation and monitoring mechanisms, such as the generation of a daily portfolio risk report, value at risk (VaR) computation; and 4) VaR limits, both at a global and business unit level and the implementation of stop loss mechanisms. In addition, PMI Trading also has its own risk management subcommittee that supervises the trading of DFIs.
Approved DFIs are mainly traded on the OTC (Over the Counter)over-the-counter (OTC) market; however, exchange traded instruments may also be used. In the case of PMI Trading, DFIs are traded onCME-Clearport.CME-ClearPort.
The different types of DFIs that we trade are described below in the subsections corresponding to each type of risk and the applicable trading markets. See Note 1619 to our consolidated financial statements included herein.
One of our policies is to contribute to minimizing the impact that unfavorable changes in financial risk factors have on our financial results by promoting an adequate balance between expected incoming cash flows from operations and outgoing cash flows related to our liabilities.
As part of the regulatory framework for financial risk management, we have established in our internal guidelines the counterparties that are eligible towith which we may trade DFIs and other financial instruments.
Given that the outstanding DFIs of Petróleos Mexicanos have been entered into for risk mitigation purposes, particularly with economic hedging purposes, there is no need to establish and monitor market risk limits.
For those portfolios with an open market risk exposure, our financial risk management regulatory framework establishes the implementation and monitoring of market risk limits such as VaR and capital at risk (an aggregation of fair value ormark-to-market (“MtM”)(MtM) and profit and loss (P&L), or CaR).
We have also established credit guidelines for DFIs that Pemex Industrial Transformation offers to its domestic customers, which include the use of guarantees and credit lines. For exchange traded DFIs, we trade under the margin requirements of the corresponding exchange market, and therefore do not have internal policies for these DFIs.
DFIs held with financial counterparties do not require collateral exchange clauses. Notwithstanding, our regulatory framework promotes credit risk mitigation strategies such as collateral exchange
We do not have an independent third party to verify the compliance with these internal standards; however, we have internal control procedures that certify our compliance with existing policies and guidelines.
Description about Valuation Techniques
Fair Value of DFIs
We periodically evaluate our exposure to international hydrocarbon prices, interest rates and foreign currencies, and we use derivative instruments as a mitigation mechanism when potential sources of market risk are identified.
We monitor the fair value of our 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.
Our DFI portfolio is composed primarily of swaps, the prices of which are estimated by discounting flows using the appropriate factors, and contains no exotic instruments that require numerical approximations for their valuation.
We value our DFIs under standard methodologies commonly applied in the financial markets, thereby As such, we do not have an independent third party to value our DFIs. Nonetheless, we
We calculate the fair value of our DFIs through the tools developed by our market information providers such as Bloomberg, and through valuation models implemented in software packages used to integrate all of our business areas and accounting, such as System ApplicableApplications Products (SAP). We do not have no policies to designate a calculation or valuation agent.
Our DFI portfolio is composed primarily of swaps, for which fair value is estimated by projecting future cash flows and discounting them by the corresponding discount factor. For currency options, this is done through the Black Scholes model and, for crude oil options, through the Levy model for Asian options.
Because our 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.
Fair value hierarchy
OurWe value our DFIs using standard methodologies commonly applied in the financial markets. The fair-value assumptions fall under Level 1 and 2inputs utilized are classified in 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 financial markets for identical assets or liabilities. Fair values determined by Level 2 inputs are based on quoted prices for similar assets or liabilities in financial 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 our applicable assets and liabilities.
When available, we measure fair value using Level 1 inputs, because they generally provide the most reliable evidence of fair value.
The fair-value assumptions and inputs utilized in the valuation of our DFIs’ fair value, fall under Level 2 of the fair value hierarchy.
Liquidity Sources
Liquidity Risk
Our main internal source of liquidity comes from our operations. Additionally, through our debt planning and the purchase and sale of U.S. dollars, we currently preserve a cash balance at a level of liquidity in domestic currency and U.S. dollars that is considered adequate to cover our investment and operating expenses, as well as other payment obligations, such as those related to DFI’s.DFIs.
In addition, as of December 31, 2018, we have acquired committed revolving credit lines in order to mitigate liquidity risk, twothree of which provide access to Ps. 3,500 million, Ps. 20,000 million and Ps. 20,0009,000 million with expiration dates in June 2019, November 2019 and November 2019,2023, respectively, and twothree others that provide access to U.S. $1,500 million, U.S. $3,250 million and U.S. $3,250$1,950 million with expiration dates in December 2019, February 2020 and January 2020,2021, respectively.
Finally, the investment strategies of our portfolios are structured by selecting time horizons that consider each currency’s cash flow requirements in order to preserve liquidity.
Certain of the PMI subsidiariesSubsidiaries mitigate their liquidity risk through several mechanisms, the most important of which is the centralized treasury or“in-house bank,” which provides access to a syndicated credit line for up to U.S. $700$ 700 million and cash surplus capacity in the custody of the centralized structure. In addition, certain of the PMI subsidiariesSubsidiaries have access to bilateral credit lines from financial institutions for up to U.S. $1,450$500 million.
These companies monitor their cash flow on a daily basis and protect their creditworthiness in the financial markets. Liquidity risk is mitigated by monitoring the maximum/minimum permissible financial ratios as set forth in the policies approved by each company’s board of directors.
Changes in Exposure to Main Risks
Market Risk
(i) | Interest Rate Risk |
We are exposed to fluctuations in floating interest rate liabilities. We are exposed to U.S. dollar LIBOR and to Mexican peso TIIE. As of December 31, 2016, approximately 18.2%2018, 15.3% of our total net debt outstanding, including DFIs, consisted of floating rate debt.
Moreover, we invest in pesos and U.S. dollars in compliance with applicable internal regulations, through portfolios that have different purposes that seek an adequate return subject to risk parameters that reduce the probability of capital losses. The objective of the investments made through these portfolios is to meet our obligations payable in pesos and U.S. dollars.
The investments made through our portfolios are exposed to domestic and international interest rate risk and credit spread risk derived from government and corporate securities, and inflation risk arising from the relationship between UDIs and pesos. However, these risks are mitigated by established limits on exposure to market risk.
Interest Rate Swaps
Occasionally, for strategic reasons or in order to offset the expected inflows and outflows, we have entered into interest rate swaps. Under our interest rate swap agreements, we acquire the obligation to make payments based on a fixed interest rate and are entitled to receive floating interest rate payments based on LIBOR, TIIE or a rate referenced to or calculated from TIIE.
As of December 31, 2016,2018, we were a party to four interest rate swap agreements denominated in U.S. dollars for an aggregate notional amount of U.S. $1,846.3$1,401.3 million at a weighted average fixed interest rate of 2.35%2.4% and a weighted average term of 8.36.3 years.
Similarly, in order to eliminate the volatility associated with variable interest rates of long-term financing operations, PMI NASA has executed interest rate swap agreements denominated in U.S. dollars for an outstanding aggregate notional amount of U.S. $86.6$56.7 million, at a weighted average fixed interest rate of 4.17%4.2% and a weighted average term of 5.43.4 years.
(ii) | Exchange Rate Risk |
AMost of our revenues are denominated in U.S. dollars, a significant amount of our revenueswhich is derived from exports of crude oil and petroleum products, which are priced and payable in U.S. dollars. Moreover,Additionally, our revenues from domestic sales of gasoline and diesel, net of IEPS Tax, tax duties, incentives, and other related taxes, petrochemicals andas well as domestic sales of natural gas and ourits byproducts, are
related to international U.S. dollar-denominated prices, except for domestic sales of LPG which were priced in pesos and represented less than 5% of our revenues. Nevertheless, as of 2017, these salespetrochemicals, are referenced to international U.S. dollar-denominated prices.
Our expenses related to hydrocarbon duties are calculated based on international U.S. dollar-denominated prices and the cost of hydrocarbon imports that we acquire for resale in Mexico or use in our facilities are indexed to international U.S. dollar-denominated prices. By contrast, our capital expenditure and operating expenses are established in pesos.
As a result of this cash flow structure, the depreciation of the peso against the U.S. dollar increases our financial balance. The appreciation of the peso relative to the U.S. dollar has the opposite effect. We manage this risk without the need for hedging instruments, because the impact on our revenues of fluctuations in the exchange rate between the U.S. dollar and the peso is offset in whole or in part by its impact on our obligations.
Cross-Currency Swaps
In order to favor the cash flow structure described above, most of ourWe prioritize debt issuances denominated in U.S. dollars; nonetheless, this is not always achievable. As such,non-U.S. dollar denominated debt issued in U.S. dollars orinternational currencies is hedged through DFIs to mitigate its exchange rate exposure, either by with swaps to convert the debt into U.S. dollars or through other DFIs to mitigate our exchange rate risk exposure.derivative structures. The rest of the debt is denominated in pesos or in UDIs, for which most of the debt denominated in UDIs has been converted into pesos through DFIs in order to eliminate the inflationary risk exposure.
As a consequence of the above, our debt issued in international currencies other than U.S. dollars has exchange rate risk mitigation strategies. Through theseWe have selected strategies we havethat further soughtseek to reduce our cost of funding by leaving, in some cases, part of this exchange rate exposure unhedged when assessed appropriate to reduce our cost of funding.as appropriate.
The underlying currencies of our DFIs are the euro, Swiss franc, Japanese yen Pound sterling and Australian dollar, which are each swappedpound against the U.S. dollar and UDIs which are swapped against the peso.
In 2016,As of December 31, 2018, we entered into various cross-currency swaps to hedge currencyinflation risk arising from debt obligations denominated in euros and Swiss francsUDIs for an aggregate notional amount of U.S. $3,459.2Ps. 6,844.9 million and, during 2017, we entered into the same kind of instruments to hedge inflation risk arising from debt denominated in UDIs, for an aggregate notional amount of Ps. 1,077.16,292.0 million. During 2015, we entered into the same kind of instruments
In 2018, in order to hedge currencythe notional risk arising fromof four debt obligations denominatedissues in euros and Swiss francs, for an aggregate notional amount of U.S. $3,109.3€ 3,150 million and an issue of debt in Swiss Francs for Fr. 365 million, we entered into, without cost, structures which are composed of a cross-currency swap and the inflationsale of a call option, guaranteeing complete protection up to a certain exchange rate and partial protection above that level.
Moreover, in 2017 we entered into, without cost, three options structures called“Seagull Option” to hedge the notional risk arising fromof three debt denominatedissues in UDIs,euros for an aggregate notional amount of Ps. 9,706.9€ 4,250 million.
Most These structures protect the short exposure in euros against an appreciation of our cross-currency swaps are plain vanilla exceptthe euro versus the U.S. dollar in a specific range, and recognize a benefit if the euro depreciates up to a certain exchange rate, for one swapeach debt issue. In order to mitigate the exchange rate risk caused by the coupons of these issues we entered into only coupon swaps.
Additionally, in 2004 to hedge our exposure to euros, which expired in 2016. This swap was referred to as an “extinguishing swap” and was obtained in order to hedge long-term obligations. The main characteristic of extinguishing swaps is that these DFIs terminate upon the occurrence of any of the credit default events specified in the DFI contract confirmation, without any payment obligation by either party. This swap had a notional amount of U.S. $1,146.4 million.
Moreover, in 20162017, we entered into, without cost, an optionsa structure calledwhich is composed of a cross-currency swap and the “Seagull Option”sale of a call option, in order to coverhedge the notional risk of a debt issuedissue in Japanese yenspounds for ¥80,000,000, keeping the coupons in the original currency (0.5% annual coupon rate). This structure protects our short exposure to the Japanese yen against an appreciation of the Japanese yen relative to the U.S. dollar from JPY 83.70 = U.S. $1.00 and£ 450 million, guaranteeing complete protection up to JPY 75.00 = U.S. $1.00, with the benefit of its depreciation to an average of 117.39 Japanese Yen/U.S. Dollar.a certain exchange rate and partial protection above that level.
We recorded a total net foreign exchange gain of Ps. 23,659.5 million for the year ended December 31, 2018, a total net foreign exchange gain of Ps. 23,184.1 million for the year ended December 31, 2017 and a total net foreign exchange loss of Ps. 254,012.7 million in 2016, as compared to a total netfor the year ended December 31, 2016. These gains and losses include unrealized foreign exchange lossgains associated with debt of Ps. 154,765.619,762.2 million in 2015for the year ended December 31, 2018 and to a total net foreign exchange loss of Ps. 76,999.216,685.4 million in 2014, which includesfor the year ended December 31, 2017 and unrealized foreign exchange loss associated with debt of Ps.
243,182.8 million, Ps. 152,554.5 million, and Ps. 78,884.7 million for the yearsyear ended December 31, 2016, 2015 and 2014, respectively.2016. The depreciationappreciation of the peso during 2018 and 2017 caused a total net foreign exchange lossgain in 20162018 because a significant portion of our debt, (83.0%89.8% (principal only) as of December 31, 2016)2018, is denominated in foreign currency. Unrealized foreign exchange lossesgains and gainslosses do not impact our cash flows. Due to the cash flow structure described above, the depreciation of the peso relative to the U.S. dollar does not affect our ability to meet U.S. dollar-denominated financial obligations and it improves our ability to meet peso-denominated financial obligations. On the other hand, the appreciation of the peso relative to the U.S. dollar may increase our peso-denominated debt service costs on a U.S. dollar basis. Our foreign exchange gain in 2018 was due to the appreciation of the peso, from Ps. 19.7867 per U.S. $1.00 on December 31, 2017 to Ps. 19.6829 per U.S. $1.00 on December 31, 2018. Our foreign exchange gain in 2017 was due to the appreciation of the peso, from Ps. 20.6640 per U.S. $1.00 on
December 31, 2016 to Ps. 19.7867 per U.S. $1.00 on December 31, 2017. Our foreign exchange loss in 2016 was due to the depreciation of the peso, from Ps. 17.2065 =per U.S. $1.00 on December 31, 2015 to Ps. 20.6640 =per U.S. $1.00 on December 31, 2016. Our foreign exchange loss in 2015 was due to the depreciation of the peso, from Ps. 14.7180 = U.S. $1.00 on December 31, 2014 to Ps. 17.20650 = U.S. $1.00 on December 31, 2015. Our foreign exchange loss in 2014 was due to the depreciation of the peso, from Ps. 13.0765 = U.S. $1.00 on December 31, 2013 to Ps. 14.7180 = U.S. $1.00 on December 31, 2014.
Certain of the PMI subsidiariesSubsidiaries face market risks generated by fluctuations in foreign exchange rates. In order to mitigate these risks, the boards of directors of several of these companies have authorized a policy which stipulates that no more than 5% of a company’s total financial assets may be denominated in a currency other than its functional currency, unless the company owes a duty or expected payment in a currency other than its functional one. Accordingly, certain of thesome PMI subsidiariesSubsidiaries will, from time to time, enter into DFIs in order to mitigate the risk associated with financing operations denominated in currencies other than a company’s functional currency.
Finally, a significant amount of PMI Trading’s income and expenses, including the cost of sales and related sales costs, is derived from the trade of refined products, petrochemicals and gas liquids to our subsidiaries and third parties, whose prices are determined and are payable in U.S. dollars. PMI Trading’s exposure to foreign currency risk results primarily from the need to fund tax payments denominated in domestic currency, and secondarily from the need to purchase products in domestic currency for sale in U.S. dollars in the international market, as well as from certain related sales costs denominated in domestic currency.
PMI Trading believes it can adequately manage the risk created by the payment of taxes in domestic currency without the need to enter into hedging instruments because the exposure to this risk is marginal relative to the total flows of U.S. dollar. In addition, in the event that a potential foreign exchange risk arises in connection with a commercial transaction, PMI Trading may implement risk mitigation measures by entering into DFIs.
(iii) | Hydrocarbon Price Risk |
We periodically assess our revenues and expenditures structure in order to identify the main market risk factors that our cash flows are exposed to in connection with international hydrocarbon prices. Based on this assessment, we monitor our exposure to the most significant risk factors and quantify their impact on our financial balance.
Our exports and domestic sales are directly or indirectly related to international hydrocarbon prices. Therefore, we are exposed to fluctuations in these prices. In terms of crude oil and natural gas, part of this risk is transferred to the Mexican Government under our current fiscal regime.
WeOur exposure to hydrocarbon prices is partly mitigated by natural hedges between our inflows and outflows.
Additionally, we continuously evaluate the implementation of risk mitigation strategies, including those involving the use of DFIs, while taking into account operationalconsideration their operative and economic constraints.budgetary feasibility.
Our exposure to crude oil prices is partly mitigated by natural hedges between our inflows and outflows. During 2016, as a result of the changes in our fiscal regime, our sensitivity to crude oil prices decreased. Nonetheless, we have been working on a hedging strategy for the coming years in order to reduce our exposure to drops in crude oil price.
Commodity Derivatives
In 2017, the Board of Directors of Petróleos Mexicanos approved the establishment of an annual oil hedging program. Since then, we have implemented hedging strategies to partially protect our cash flows from falls in the Mexican crude oil basket price below the one established in the Federal Revenue Law.
In April 2017, we entered into a crude oil hedge for fiscal year 2017, pursuant to partially protect our cash flows from a decrease in the Mexican crude oil basket price established in the Federal Revenue Law. Through this instrument,which we hedged 409 thousand barrels per day from May to December 2017of that fiscal year, for U.S. $133.5 million dollars. This hedging strategy provides PEMEX with protection whenmillion. Subsequently, during the monthly average pricesecond half of the Mexican crude oil basket price is between U.S. $42 and U.S. $37 dollars per barrel, which is the likely price range for an adverse scenario.
In 2015,2017, we entered into various swaps in ordera crude oil hedge for fiscal year 2018, pursuant to which we hedged 440 thousand barrels per day from January to December of that fiscal year, for U.S. $449.9 million.
During 2018, the crude oil hedge for fiscal year 2019 was implemented, pursuant to which we hedged 320 thousand barrels per day for the risk arising from the variations in the propane import price. These DFIs were held over a percentage of the total imports volume, with maturity dates in 2015. Although we entered into these contracts with economic hedging purposes,period between December 2018 and December 2019, for accounting purposes, these DFIs do not qualify as hedges and were recorded as trading instruments in the financial statements. During 2016 we did not enter in any propane import price swap.U.S. $149.6 million.
In addition to supplying natural gas, Pemex Industrial Transformation offers DFIs to its domestic customers in order to provide them with support to mitigate the risk associated with the volatility of natural gas prices. Until 2016, Pemex Industrial Transformation entersentered into DFIs with Mex Gas Supply, S.L. under the opposite position to those DFIs offered to its customers in order to mitigate the market risk it bears under such offered DFIs. Mex Gas Supply, S.L. then transferstransferred the related price risk derived from the DFI position held with Pemex Industrial Transformation to international financial counterparties by entering into these opposite position DFIs with such parties. ThroughAs of 2017, Pemex Industrial Transformation must enter into DFIs with Petróleos Mexicanos under the above mechanism, opposite position to those DFIs offered to its customers, thereby replacing Mex Gas Supply, S.L. However, as of December 31, 2018, no DFIs had been carried out under this mechanism.
Pemex Industrial Transformation maintains a negligible or even null exposure to market risk. These portfolios have VaR and CaR limits in order to limit market risk exposure.
PMI Trading faces market risk generated by the terms of the purchase and sale of refined products and natural gas liquids, as well as the volatility of oil prices. Accordingly, it frequently enters into DFIs in order to mitigate this risk, thereby reducing the volatility of its financial results.
In accordance with the risk management regulatory framework that PMI Trading has implemented, VaR and the change in profit and loss by portfolio are calculated daily and compared to the maximum applicable limits in order to implement risk mitigation mechanisms as necessary.
As of December 31, 2016, Petróleos Mexicanos does not hold any third-party shares of companies that do not report on the financial markets and, therefore, does not hold any related DFIs. On May 2014, we held a synthetic long position on 67,969,767 shares of Repsol, with the objective of maintaining corporate and economic rights over these shares. We accomplished this by using a total return swap under which we paid variable amounts and received a total return on the Repsol shares. Under these DFIs, we were entitled to any capital gains associated with the Repsol shares and agreed to cover our counterparties for any capital losses relating to those shares in reference to an exercise price, as well as to make payments at a floating interest rate. On June 3, 2014, we made an early termination of this DFI. Following this termination, Petróleos Mexicanos no longer directly participates in Repsol.
As of December 31, 2016, PMI HBV owned 22,221,893 Repsol shares and P.M.I. Holdings Petróleos España, S.L. holds one for a total of 22,221,894 shares. These shares have no related DFIs.
Counterparty or Credit Risk
When the fair value of a DFI is favorable to us, we face the risk that the counterparty will not be able to meet its obligations. We monitor our counterparties’ creditworthiness and calculate the credit risk exposure for our DFIs. As a risk mitigation strategy, we only enter into DFIs with major financial institutions with a minimum credit rating ofBBB-. These ratings are issued and revised periodically by risk rating agencies. Furthermore, we seek to maintain a diversified portfolio of counterparties.
In order to estimate our credit risk exposure to each financial counterparty, the potential future exposure is calculated by projecting the risk factors used in the valuation of each DFI in order to estimate the MtM value for different periods, taking into account any credit risk mitigation provisions.
Moreover, we have entered into various long-term cross-currency swaps agreements with “recouponing” provisions (pursuant to which the payments on the swaps are adjusted when the MtM exceeds the relevant threshold specified in the swap), thereby limiting our exposure with our counterparties to a specific threshold amount. The specified thresholds were reached in fiveseven cross-currency swaps from the first to the fourth quarter of 2016,2018, which were used to hedge the exchange rate exposure to the euro and to the Pound sterling,pound, and in ninethree cross-currency swaps during 2015,2017, which were used to hedge the exchange rate exposure to the euro and the Australian dollar.euro. This resulted in the cash settlement of such swaps and the resetting of swap terms to return theirmark-to-market value to zero. During 2016,2018, we did not enter into any cross-currency swap with these characteristics.
In addition, during 2016 we have entered into long-term DFIs with mandatory early termination clauses (pursuant to which, at a given date, and irrespective of the then current MtM, the DFI will terminate and settle at the corresponding MtM, and we can either enter into a new DFI with the same counterparty or a new counterparty), which reduces the credit risk generated by the term of the DFI by bounding it to a specific date. As of December 31, 2016,2018, we have entered into three euro swaps and two Japanese yen Seagull Option structures, with termination clauses in 2018 and 2021, respectively.2021.
According to IFRS 13 “Fair Value Measurement,” the fair value or 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. In accordance with market best practices,Due to the above, we apply the credit value adjustment (“CVA”) method to calculate the fair value of our DFIs.
For each DFI, the CVA is calculated by determining the difference between the MtM and the estimated MtM adjusted for credit risk. In determining the credit risk, the CVA method takes into account the current market perception about the credit risk of both counterparties, using the following inputs: (a)a) the MtM projection for each payment date based on forward yield curves; (b)b) the implied default probability obtained from both usour and the counterparty’s credit default swaps at each payment date; and (c)c) the default recovery rates of each counterparty.
Furthermore, by means of its credit guidelines for DFI operations, Pemex Industrial Transformation has significantly reduced its credit risk exposure related to the DFIs offered to its customers to assist them in mitigating the risk associated with the price volatility of the natural gas.gas price.
In order to qualify for these DFIs, Pemex Industrial Transformation’s customers must be party to a current natural gas supply contract and sign a domestic master derivative agreement.
Additionally, beginning on October 2, 2009, DFIs with these customers must be initially secured by cash deposits, letters of credit or other collateral provisions, as required. In accordance with these guidelines, in the event that a client does not meet its payment obligations, DFIs related to
this client are terminated, rights to collateral are exercised and, if the collateral is insufficient to cover the fair value, natural gas supply is suspended until the payment is made.
On August 20, 2014, certain amendments to the credit guidelines were enacted, which allowedPemex-Gas and Petrochemicals, and now Pemex Industrial Transformation, to offer to its clients with an adequate credit rating, based on an internal financial and credit assessment, DFIs with an exemption from collateral requirements up to certain amount through a credit line approved by the credit committee. Moreover, if the credit line is insufficient to cover each client’s exposure, the client is obligated to deposit collateral. If a client suffers an event of default, DFIs related to this client are terminated early and natural gas supply is suspended until the payment is made.
PMI Trading’s credit risk associated with DFI transactions is minimizedmitigated through the use of futures and standardized instruments that are cleared throughCME-Clearport.CME-ClearPort.
Accounting Standards Applied and the Impact on Results
We enter into derivatives transactions with the sole purpose of hedging financial risks related to our operations, firm commitments, planned transactions and assets and liabilities recorded on our 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 being designated as hedges. They are therefore recorded in the financial statements asnon-hedge instruments or 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 are related. As a result, the changes in their fair value are recognized in the “Derivative financial instruments (cost) income—income, net” line item in the consolidated statement of comprehensive income.
As of December 31, 20162018 and 2015,2017, the net fair value of our DFIs including(including both DFIs that have not reached maturity and those that have reached maturity but have not been settled,settled), recognized in our consolidated statement of financial position, was Ps. (26,010.5)6,487.0 million and Ps. (25,699.6)12,367.5 million, respectively. As of December 31, 20162018 and 2015,2017, we did not have any DFIs designated as hedges. See Note 1619 to our consolidated financial statements included herein.
For the yearsyear ended December 31, 2016, 20152018, we recognized a net loss of Ps. 22,258.6 million, for the year ended December 31, 2017, we recognized a net gain of Ps. 25,338.3 million and 2014,for the year ended December 31, 2016, we recognized a net loss of Ps. 14,001.0 Ps. 21,449.9 million, and Ps. 9,438.6 million, respectively, in the “Derivative financial instruments (cost) income, net” line item with respect to DFIs treated as instruments entered into for trading purposes.
According to established accounting policies, we have analyzed the different contracts that we have entered into and have determined that according to the terms thereof none of these agreements meet the criteria to be classified as embedded derivatives. Accordingly, as of December 31, 20162018 and 2015,2017, we did not recognize any embedded derivatives (foreign currency or index).
As of December 31, 2018, we recognized a loss of Ps. 3,412.7 million in the “Derivative financial instruments (cost) income, net” line item which resulted from changes in the fair value of 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.
QUANTITATIVE DISCLOSURE
Fair Value
The following tables show our cash flow maturities as well as the fair value of our debt and DFI portfolios as of December 31, 2016.2018. It should be noted that:
For debt obligations, these tables present principal cash flow and the weighted average interest rates for fixed rate debt.
For interest rate swaps, cross-currency swaps, currency options and currency options,forwards, these tables present notional amounts and weighted average interest rates by expected (contractual) maturity dates.
Weighted average variable rates are based on implied forward rates obtained from the interbank market yield curve at the reporting date.
For natural gas DFIs, volumes are presented in millions of British thermal units (MMBtu), and fixed average and strike prices are presented in U.S. dollars per MMBtu.
For crude oil, volumes are presented in millions of barrels, and fixed average and strike prices are presented in U.S. dollars per barrel.
A DFI’s fair value includes CVA and is calculated based on market quotes obtained from market sources such as Reuters and Bloomberg. Forward curves and implied volatilities for natural gas and crude oil are supplied by the Kiodex Risk Workbench platform.Bloomberg.
For PMI Trading, the prices used in commercial transactions and DFIs are published by reputable sources that are widely used in international markets, such asCME-NYMEX, Platts and Argus, among others.
For all instruments, the tables are based on the contract terms in order to determine the future cash flows that are categorized by expected maturity dates.
This information is presented in thousands of pesos (except as noted).
*Quantitative Disclosure of Debt Cash Flow’s Maturities as of December 31, 2016(1)
Year of expected maturity date | 2022 Thereafter | Total carrying value | Fair value | |||||||||||||||||||||||||||||
2017 | 2018 | 2019 | 2020 | 2021 | ||||||||||||||||||||||||||||
Liabilities | ||||||||||||||||||||||||||||||||
Outstanding debt | ||||||||||||||||||||||||||||||||
Fixed rate (U.S. dollars) | Ps. 15,759,027 | Ps. 86,161,096 | Ps. 65,642,616 | Ps. 62,440,943 | Ps. 98,858,992 | Ps. 826,093,574 | Ps.1,154,956,248 | Ps.1,137,936,275 | ||||||||||||||||||||||||
Average interest rate (%) | 5.6541 | % | ||||||||||||||||||||||||||||||
Fixed rate (Japanese yen) | 517,286 | — | — | — | — | 19,459,306 | 19,976,592 | 17,336,203 | ||||||||||||||||||||||||
Average interest rate (%) | 1.3665 | % | ||||||||||||||||||||||||||||||
Fixed rate (Pounds) | — | — | — | — | — | 8,825,434 | 8,825,434 | 11,373,345 | ||||||||||||||||||||||||
Average interest rate (%) | 8.2500 | % | ||||||||||||||||||||||||||||||
Fixed rate (pesos) | — | — | — | 10,048,950 | 20,457,671 | 90,393,507 | 120,900,128 | 160,930,040 | ||||||||||||||||||||||||
Average interest rate (%) | 7.4878 | % | ||||||||||||||||||||||||||||||
Fixed rate (UDIs) | — | — | 17,319,897 | 4,464,787 | 3,630,557 | 28,288,180 | 53,703,421 | 50,809,979 | ||||||||||||||||||||||||
Average interest rate (%) | 4.0559 | % | ||||||||||||||||||||||||||||||
Fixed rate (euros) | 26,006,880 | — | 29,198,138 | 28,061,554 | — | 123,886,644 | 207,153,216 | 216,100,006 | ||||||||||||||||||||||||
Average interest rate (%) | 3.9581 | % | ||||||||||||||||||||||||||||||
Fixed rate (Swiss Francs) | — | 4,539,022 | 6,056,338 | 12,102,748 | 3,031,480 | — | 25,729,588 | 26,469,543 | ||||||||||||||||||||||||
Average interest rate (%) | 1.8385 | % | ||||||||||||||||||||||||||||||
Fixed rate (Australian dollars) | 2,232,195 | — | — | — | — | — | 2,232,195 | 2,346,390 | ||||||||||||||||||||||||
Average interest rate (%) | — | — | — | — | — | — | 6.1250 | % | — | |||||||||||||||||||||||
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Total fixed rate debt | 44,515,388 | 90,700,118 | 118,216,989 | 117,118,982 | 125,978,700 | 1,096,946,645 | 1,593,476,822 | 1,623,301,781 | ||||||||||||||||||||||||
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|
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|
|
|
|
|
| |||||||||||||||||
Variable rate (U.S. dollars) | 38,811,320 | 27,907,661 | 15,984,547 | 52,726,647 | 13,366,336 | 45,385,885 | 194,182,396 | 195,838,382 | ||||||||||||||||||||||||
Variable rate (Japanese yen) | — | — | — | 11,341,440 | — | — | 11,341,440 | 11,025,531 | ||||||||||||||||||||||||
Variable rate (euros) | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||
Variable rate (pesos) | 65,024,075 | 8,742,191 | 28,007,709 | 18,347,822 | 8,468,176 | 27,764,693 | 156,354,666 | 158,109,920 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total variable rate debt | 103,835,395 | 36,649,852 | 43,992,256 | 82,415,909 | 21,834,512 | 73,150,578 | 361,878,502 | 364,973,833 | ||||||||||||||||||||||||
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total debt | Ps. 148,350,783 | Ps.127,349,970 | Ps.162,209,245 | Ps.199,534,891 | Ps.147,813,212 | Ps.1,170,097,223 | Ps.1,955,355,324 | Ps.1,988,275,614 | ||||||||||||||||||||||||
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|
|
|
|
information is presented in thousands of pesos, except as noted. |
Quantitative Disclosure of Debt Cash Flow’s Maturities as of December 31, 2018(1) | ||||||||||||||||||||||||||||||||
Year of expected maturity date | ||||||||||||||||||||||||||||||||
2019 | 2020 | 2021 | 2022 | 2023 | 2024 thereafter | Total carrying value | Fair value | |||||||||||||||||||||||||
Liabilities | ||||||||||||||||||||||||||||||||
Outstanding debt | ||||||||||||||||||||||||||||||||
Fixed rate (U.S. dollars) | Ps. 53,962,520 | Ps. 40,098,959 | Ps. 94,686,304 | Ps. 83,674,076 | Ps. 91,790,092 | Ps. 827,719,134 | Ps. 1,191,931,085 | Ps. 1,084,252,622 | ||||||||||||||||||||||||
Average interest rate (%) | 5.8927% | |||||||||||||||||||||||||||||||
Fixed rate (Japanese yen) | - | - | - | - | 5,379,000 | 14,317,126 | 19,696,126 | 16,603,524 | ||||||||||||||||||||||||
Average interest rate (%) | 1.3484% | |||||||||||||||||||||||||||||||
Fixed rate (pounds) | - | - | - | 8,763,410 | - | 11,205,575 | 19,968,985 | 20,257,139 | ||||||||||||||||||||||||
Average interest rate (%) | 5.7248% | |||||||||||||||||||||||||||||||
Fixed rate (pesos) | - | 10,017,084 | 20,257,747 | 1,999,192 | - | 88,324,131 | 120,598,154 | 101,639,764 | ||||||||||||||||||||||||
Average interest rate (%) | 7.4872% | |||||||||||||||||||||||||||||||
Fixed rate (UDIs) | 19,386,459 | 4,999,710 | 4,066,182 | - | - | 31,275,418 | 59,727,769 | 51,079,974 | ||||||||||||||||||||||||
Average interest rate (%) | 2.7362% | |||||||||||||||||||||||||||||||
Fixed rate (euros) | 21,466,509 | 29,215,492 | 39,343,306 | 35,884,701 | 31,437,421 | 173,348,554 | 330,695,983 | 325,772,611 | ||||||||||||||||||||||||
Average interest rate (%) | 3.7123% | |||||||||||||||||||||||||||||||
Fixed rate (Swiss Francs) | 5,991,035 | 11,966,770 | 3,001,116 | - | 7,264,850 | - | 28,223,771 | 27,916,889 | ||||||||||||||||||||||||
Average interest rate (%)
|
| 1.8697%
|
| |||||||||||||||||||||||||||||
|
| |||||||||||||||||||||||||||||||
Total fixed rate debt | 100,806,523 | 96,298,015 | 161,354,655 | 130,321,379 | 135,871,363 | 1,146,189,938 | 1,770,841,873 | 1,627,522,522 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Variable rate (U.S. dollars) | 23,231,281 | 63,823,350 | 14,517,807 | 32,878,778 | 11,136,784 | 17,616,801 | 163,204,801 | 169,873,202 | ||||||||||||||||||||||||
Variable rate (Japanese yen) | - | 11,475,200 | - | - | - | - | 11,475,200 | 11,264,120 | ||||||||||||||||||||||||
Variable rate (euros) | - | - | - | - | 14,601,014 | - | 14,601,014 | 16,093,157 | ||||||||||||||||||||||||
Variable rate (pesos) | 34,322,574 | 18,352,215 | 8,456,465 | 8,407,405 | 6,968,237 | 12,220,826 | 88,727,722 | 88,624,217 | ||||||||||||||||||||||||
|
|
|
|
|
|
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|
|
|
|
|
|
|
|
| |||||||||||||||||
Total variable rate debt | 57,553,855 | 93,650,765 | 22,974,272 | 41,286,183 | 32,706,035 | 29,837,627 | 278,008,737 | 285,854,697 | ||||||||||||||||||||||||
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|
|
|
|
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|
|
|
|
|
|
|
|
| |||||||||||||||||
Total debt | Ps. 158,360,378 | Ps. 189,948,780 | Ps. 184,328,927 | Ps. 171,607,562 | Ps. 168,577,398 | Ps. 1,176,027,565 | Ps. 2,048,850,610 | Ps. 1,913,377,218 | ||||||||||||||||||||||||
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note: Numbers may not total due to rounding.
(1) | The information in this table has been calculated using exchange rates at December 31, |
Source: PEMEX.Petróleos Mexicanos
Quantitative Disclosure of Cash Flow’s Maturities from Derivative Financial Instruments Held or Issued for
Purposes otherOther than Trading as of December 31, 20162018(1)(2)
Year of expected maturity date | Total notional amount | Fair value(4) | Year of expected maturity date | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2017 | 2018 | 2019 | 2020 | 2021 | 2022 Thereafter | 2019 | 2020 | 2021 | 2022 | 2023 | 2024 Thereafter | Total Notional Amount | Fair Value(3) | |||||||||||||||||||||||||||||||||||||||||||||||||||
Hedging instruments(2)(4) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Interest rate DFIs | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Interest rate swaps (U.S. dollars) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Variable to fixed | Ps.4,899,645 | Ps.4,912,743 | Ps.4,926,477 | Ps.4,940,613 | Ps. 4,894,180 | Ps. 15,365,634 | Ps.39,939,292 | Ps.164,716 | Ps. 4,692,574 | Ps. 4,706,039 | Ps. 4,661,811 | Ps. 4,546,095 | Ps. 4,406,561 | Ps. 5,683,437 | Ps. 28,696,517 | Ps. 644,746 | ||||||||||||||||||||||||||||||||||||||||||||||||
Average pay rate | 2.76 | % | 2.66 | % | 3.35 | % | 3.83 | % | 4.04 | % | 4.57 | % | N.A. | N.A. | 3.18% | 3.20% | 3.22% | 3.25% | 3.37% | 3.74% | N.A. | N.A. | ||||||||||||||||||||||||||||||||||||||||||
Average receive rate | 2.95 | % | 2.99 | % | 3.03 | % | 3.06 | % | 3.11 | % | 3.33 | % | N.A. | N.A. | 4.22% | 4.07% | 3.94% | 4.08% | 4.40% | 5.25% | N.A. | N.A. | ||||||||||||||||||||||||||||||||||||||||||
Interest rate swaps (pesos) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Variable to fixed | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Average pay rate | N.A. | N.A. | N.A. | N.A. | N.A. | N.A. | N.A. | N.A. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Average receive rate | N.A. | N.A. | N.A. | N.A. | N.A. | N.A. | N.A. | N.A. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Currency DFIs | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Cross-currency swaps | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Receive euros/Pay U.S. dollars | 34,775,198 | — | 31,223,821 | 29,992,556 | — | 133,024,913 | 229,016,488 | (16,484,533 | ) | 20,782,857 | 28,568,548 | 36,709,101 | 35,121,361 | 45,930,033 | 175,091,781 | 342,203,681 | 5,495,541 | |||||||||||||||||||||||||||||||||||||||||||||||
Receive Japanese yen/ Pay U.S. dollars | 532,711 | — | — | 17,697,534 | — | 4,987,289 | 23,217,534 | (6,132,633 | ) | - | 12,971,158 | - | - | 4,750,499 | - | 17,721,657 | (1,112,629) | |||||||||||||||||||||||||||||||||||||||||||||||
Receive Pounds sterling/ Pay U.S. dollars | — | — | — | — | — | 10,767,349 | 10,767,349 | (211,207 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Receive pounds/ Pay U.S. dollars | - | - | - | 9,819,995 | - | 11,645,585 | 21,465,580 | (297,318) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Receive UDI/ Pay pesos | — | — | 23,740,341 | 3,540,220 | 3,000,000 | 14,313,198 | 44,593,759 | (2,132,236 | ) | 23,740,341 | 7,292,520 | 3,000,000 | - | - | 27,450,032 | 61,482,893 | (4,392,093 | |||||||||||||||||||||||||||||||||||||||||||||||
Receive Swiss francs/ Pay U.S. dollars | — | 4,736,567 | 6,789,326 | 12,060,700 | 3,127,139 | — | 26,713,732 | (789,449 | ) | 6,466,978 | 11,488,074 | 2,978,666 | - | 7,184,259 | - | 28,117,977 | 486,310 | |||||||||||||||||||||||||||||||||||||||||||||||
Receive Australian dollars/ Pay U.S. dollars | 2,459,429 | — | — | — | — | — | 2,459,429 | (126,796 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Currency Options | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Buy Put, Sell Put and sell Call on yen | — | — | — | — | — | 14,133,580 | 14,133,580 | (301,131 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Buy Put, Sell Put and sell Call on Japanese yen | - | - | - | - | - | 14,355,685 | 14,355,685 | 222,491 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Buy call, Sell call and Sell put on euros | - | - | 39,497,823 | 13,542,111 | 14,670,620 | 99,308,812 | 167,019,366 | 165,458 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Sell Call on pound | - | - | - | - | - | 11,296,695 | 11,296,695 | (232,636) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Sell Call on Swiss Francs | - | - | - | - | 7,315,424 | - | 7,315,424 | (183,093) |
= not applicable. |
Numbersmay not total due to rounding.
N.A. = not applicable.
(1) | The information in this table has been calculated using |
(2) | We use these DFIs to hedge market risk; however, these DFIs do not qualify for accounting purposes as hedges and are recorded in the financial statements as entered into for trading purposes. |
(3) | Positive numbers represent a favorable fair value to us. |
(4) | PMI’s risk management policies and procedures establish that DFIs should be used only for hedging purposes; however DFIs are not recorded as hedges for accounting purposes. |
Source: PEMEX.Petróleos Mexicanos
Quantitative Disclosure of Cash Flow’s Maturities from Derivative Financial Instruments (Natural Gas) Held or
Issued for Purposes other than Trading as of December 31, 20162018(1)(2)
2017 | 2018 | 2019 | 2020 | 2021 | 2022 Thereafter | Total Volume | Fair Value(2) | 2019 | 2020 | 2021 | 2022 | 2023 | 2024 Thereafter | Total Volume | Fair Value(2) | |||||||||||||||||||||||||||||||||||||||||||||||||
(in MMBtu, except that average fixed and strike prices are in U.S. $ per MMBtu) | (in thousands of nominal pesos) | (in MMBtu, except that average fixed and strike prices are in U.S. $ per MMBtu) | (in thousands of nominal pesos) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Derivatives entered into with Customers of Pemex Industrial Transformation | Derivatives entered into with Customers of Pemex Industrial Transformation |
| Derivatives entered into with Customers of Pemex Industrial Transformation |
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Short | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
European Call Option | (789,475 | ) | (270,200 | ) | (13,750 | ) | — | — | — | (1,073,425 | ) | (11,488 | ) | (13,750) | - | - | - | - | - | (13,750) | 3.74 | |||||||||||||||||||||||||||||||||||||||||||
Average strike price | 3.32 | 3.29 | 3.81 | — | — | — | 3.32 | n.a. | 3.65 | - | - | - | - | - | 3.65 | |||||||||||||||||||||||||||||||||||||||||||||||||
Variable to Fixed Swap(3) | (1,899,650 | ) | (738,488 | ) | (62,364 | ) | — | — | — | (2,700,502 | ) | (25,145 | ) | (62,364) | - | - | - | - | - | (62,364) | 135.72 | |||||||||||||||||||||||||||||||||||||||||||
Average fixed price | 2.89 | 2.80 | 2.96 | — | — | — | 2.87 | n.a. | 2.99 | - | - | - | - | - | 2.99 | |||||||||||||||||||||||||||||||||||||||||||||||||
Long | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
European Call Option | — | — | — | — | — | — | — | — | 13,750 | - | - | - | - | - | 13,750 | (3.74) | ||||||||||||||||||||||||||||||||||||||||||||||||
Average strike price | — | — | — | — | — | — | — | — | 3.65 | - | - | - | - | - | 3.65 | |||||||||||||||||||||||||||||||||||||||||||||||||
Variable to Fixed Swap(4) | 62,364 | - | - | - | - | - | 62,364 | (107.57) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Average fixed price | 2.96 | - | - | - | - | - | 2.96 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Derivatives entered into with Third Parties to Offset Transactions entered into with Customers | Derivatives entered into with Third Parties to Offset Transactions entered into with Customers |
| Derivatives entered into with Third Parties to Offset Transactions entered into with Customers |
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Short | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
European Call Option | — | — | — | — | — | — | — | — | (13,750) | - | - | - | - | - | 13,750 | 3.74 | ||||||||||||||||||||||||||||||||||||||||||||||||
Average strike price | — | — | — | — | — | — | — | n.a. | 3.65 | - | - | - | - | - | 3.65 | |||||||||||||||||||||||||||||||||||||||||||||||||
Variable to Fixed Swap(3) | (62,364) | - | - | - | - | - | 62,364 | 107.57 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Average fixed price | 2.96 | - | - | - | - | - | 2.96 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Long | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
European Call Option | 789,475 | 270,200 | 13,750 | — | — | — | 1,073,425 | 11,548 | 13,750 | - | - | - | - | - | (13,750) | (3.74) | ||||||||||||||||||||||||||||||||||||||||||||||||
Average strike price | 3.32 | 3.29 | 3.81 | — | — | — | 3.32 | n.a. | 3.65 | - | - | - | - | - | 3.65 | |||||||||||||||||||||||||||||||||||||||||||||||||
Variable to Fixed Swap(4) | 1,899,650 | 738,488 | 62,364 | — | — | — | 2,700,502 | 27,869 | 62,364 | - | - | - | - | - | (62,364) | (94.14) | ||||||||||||||||||||||||||||||||||||||||||||||||
Average fixed price | 2.85 | 2.75 | 2.93 | — | — | — | 2.82 | n.a. | 2.95 | - | - | - | - | - | 2.95 |
Notes: | Numbers may not total due to rounding. |
N.A. = not applicable.
(1) | The information in this table has been calculated using the exchange rate at December 31, |
(2) | Positive numbers represent a favorable fair value to us. |
(3) | Under short variable to fixed swaps entered into with customers of Pemex Industrial Transformation, we will pay a variable price and receive the fixed price specified in the contract. |
(4) | Under long variable to fixed swaps entered into with customers of Pemex Industrial Transformation, we will pay the fixed price specified in the contract and receive a variable price. |
Source: | Pemex Industrial Transformation |
Source: Pemex Industrial Transformation
Quantitative Disclosure of Cash Flows’ Maturities from Derivative Financial Instruments (Petroleum Products)
Held or Issued for Purposes other than Trading as of December 31, 20162018(1)
2017 | 2018 | 2019 | 2020 | 2021 | 2022 Thereafter | Total Volume | Fair Value(2) | 2019 | 2020 | 2021 | 2022 | 2023 | 2023 Thereafter | Total Volume | Fair Value(2) | |||||||||||||||||||||||||||||||||||||||||||||||||
(in thousands of barrels) | (in thousands of nominal pesos) | (in thousands of barrels) | (in of nominal pesos) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Hedging Instruments | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Exchange-traded futures(3) (5) | — | — | — | — | — | — | — | — | 2.60 | - | - | - | - | - | 2.60 | 441,954 | ||||||||||||||||||||||||||||||||||||||||||||||||
Exchange-traded swaps(4) (5) | 4.1 | — | — | — | — | — | 4.1 | (688,016 | ) | 4.92 | - | - | - | - | - | 4.92 | 760,603 |
Note: |
|
(1) | The information in this table has been calculated using the exchange rate at December 31, |
(2) | Positive numbers represent a favorable fair value to PMI Trading. |
(3) | Net position. |
(4) | Swaps registered in CME |
(5) | The balance of these financial instruments is recognized as cash and cash equivalents. PMI Trading considered these financial assets to be fully liquid. |
Source: P.M.I.PMI Trading Ltd.
Sensitivity Analysis
We have entered into DFIs with the purpose to completely mitigate the market risk for specific flows or predetermined volumes associated with our operations. Our DFIs have the same characteristics (e.g. underlying assets, payment dates, amounts, or volumes) as the hedged position, but with the opposite exposure to the market risk factors. As a result of these mitigation strategies, we have a negligible sensitivity to the hedged market risk factors. See Note 1619 from our consolidated financial statements included herein.
As discussed above, becauseGiven that our hedges are cash flow hedges, their effectiveness is maintained regardless of variations in the underlying assets or reference variables. Accordingly, overvariables since, through time, asset flows are fully offset by liabilities flows. Therefore, it is not necessary to measure or monitor the hedge effectiveness.
Natural gas DFIs that Pemex Industrial Transformation offers to its domestic customers are reported as transactions with trading purposes. However, such operations are fully compensated by the operations entered into with their financial counterparts through Petróleos Mexicanos, which replaced Mex Gas Supply, S.L. as of 2017. Through this mechanism(back-to-back), Pemex Industrial Transformation maintains a negligible or even null market risk exposure, so we do not consider it necessary to conduct either a sensitivity analysis or to measure or monitor the hedge effectiveness.
Other DFIs seek to fix hydrocarbons prices,hedge the changes in the price of the commercialized products, such that the DFIs’ underlying assets arehave correlations with the same as thoseprices of the products involved in commercialization. PMI Trading estimates the commercialization, so we do not consider it necessary to conduct either a sensitivity analysis or to measure or monitor the hedge effectiveness.VaR of these DFIs. Notably, the price fixing DFIs of PMI Trading (crude and oil)(all of them related to petroleum derivatives), are classified under cash and cash equivalents for accounting purposes due to their liquidity.
Item 12. Description of Securities Other than Equity Securities
Not applicable.
PART II
Item 13. Defaults, Dividend Arrearages and Delinquencies
None.
Item 14. Material Modifications to the Rights of Security Holders and Use of Proceeds
None.
Item 15. Controls and Procedures
(a) Disclosure Controls and Procedures
We carried out an evaluation under the supervision and with the participation of our management, including ourDirector General (chief executive officer)(Chief Executive Officer or CEO) and our ChiefDirector Corporativo de Finanzas (Chief Financial Officer or CFO), of the effectiveness of the design and operation of our disclosure controls and procedures as of December 31, 2016.2018. There are inherent limitations to the effectiveness of any system of disclosure controls and procedures, including the possibility of human error and the circumvention or overriding of the controls and procedures. Accordingly, effective disclosure controls and procedures can provide only reasonable assurance of achieving their control objectives.
Based upon our evaluation, and because of the material weaknessweaknesses in internal control over financial reporting described below, our Director GeneralCEO and our Chief Financial OfficerCFO concluded that our disclosure controls and procedures as of December 31, 20162018 were not effective to provide reasonable assurance that information required to be disclosed in the reports we filedfile and submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including Director Generalto our CEO and our Chief Financial Officer,CFO, as appropriate, to allow timely decisions regarding required disclosures.
(b) Management’s Annual Report on Internal Control over Financial Reporting
Management is responsible for establishing and maintaining adequate internal control over financial reporting. Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with IFRS. Our internal control over financial reporting includes those policies and procedures that:
(1) | pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets; |
(2) | provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with IFRS |
(3) | provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on our financial statements. |
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness tofor future periods are subject to the risk that the related controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
We conducted an assessment of the effectiveness of our internal controls over financial reporting as of December 31, 2016.2018. In making this assessment, management used the criteria set for in the “Internal Control—Integrated Framework” published by the Committee of Sponsoring Organizations of the Treadway Commission
in 2013, supplemented for information technologies with the guidelines suggested byIT Control Objectives for Sarbanes-Oxley (3rd Edition)Edition), published by the Information Systems Audit and Control Association, which were in effect as of December 31, 2015. Management relied on Auditing StandardsStandard No. 2 and 52201 of the PCAOB in order to create an appropriate framework to evaluate the effectiveness of the design and operation of our internal control over financial reporting.
Management concluded that our internal control over financial reporting was not effective as of December 31, 2016.2018. Based on our assessment and criteria, management concluded that two material weaknesses existed in connection with our internal control over financial reporting as of December 31, 2018.
Our management concluded that, as of December 31, 2018, a material weakness existed in our internal control over financial reporting due to the ineffectiveness of the design and implementation of controls providing reasonable assurances regarding prevention of unauthorized disposition of assets by having certain employees involved in the illicit market in fuels, which could have a material effect on our financial statements. During 2018, we have experienced a significant increase in non-operating losses resulting from the illicit market in fuels due in part to the ineffectiveness of our internal controls. Although formal governmental procedures exist for reporting illegal activity to the authorities, we did not have in place internal procedures to detect and investigate such matters. For the year ended December 31, 2018, we recognized losses in the amount of Ps. 39.4 billion resulting from the illicit market in fuels.
In response to the material weakness described above, we are in the process of executing a remediation plan that includes, among other things, designing and implementing formal internal procedures to detect and investigate incidents related to the illicit market in fuels in our facilities in order to mitigate the risk that our financial reporting could be affected. We have created a special tip line for the reporting of complaints and put in place further mechanisms dedicated to monitoring and investigating these incidents, and we have allocated additional capital and human resources to these remediation plans. In addition, the Mexican Government has announced additional measures aimed at further preventing and eliminating the illicit market in fuels. See “Item 8—Financial Information—Legal Proceedings—Actions Against the Illicit Market in Fuels.”
Our management also concluded that, as of December 31, 2016, because, when we calculated2018, a material weakness existed in our internal control over financial reporting associated with a change in the accounting principle related to the discount rate of long-lived assets, which is used in the calculation of impairment. As a consequence of the lack of consistency in the reporting of, and the failure to timely determine, the amounts of the variables used to calculate the impairment effectof assets of Ps. 26.0 billion and to review and authorize such calculations, and, in turn, deferred taxes, we were unable to ascertain with reasonable assurance the amount of impairment of assets and deferred taxes at the time that we filed our unaudited consolidated financial statements for the year ended December 31, 2018 with the Mexican Stock Exchange. In connection with the preparation of our unauditedaudited consolidated financial statements, we were able to determine the definitive amounts of the variables used in the calculation of the impairment of assets and, in turn, deferred taxes. As a result, we recognized additional deferred taxes in the amount of Ps. 20.4 billion in our audited consolidated financial statements included herein, which were not reflected in our unaudited consolidated financial statements filed with the Mexican Stock Exchange.
In response to the material weakness described above, we are in the process of executing a remediation plan that includes the following actions:
(1) | Strengthening of the process for consolidating, reviewing and finalizing the financial statements of Petróleos Mexicanos and its subsidiary entities. |
(2) | Strengthening of our controls over changes in accounting policies that may affect our consolidated financial statements so that such changes are disseminated and implemented in a timely manner. |
(3) | Updating the relevant internal procedures to ensure the responsibility and oversight of the specific operational areas involved in reporting the underlying information necessary to calculate impairment of assets, including deferred taxes. |
(4) | Updating our evaluation and monitoring of the existing internal controls, pursuant to which we submit quarterly reports to our audit committee, in order to ensure that our remediating actions are implemented effectively. |
Remediation
We also reported material weaknesses in internal control over financial reporting in our annual reports on Form20-F for the years ended December 31, 2015 and 2016, both of which related to the calculation of the impairment of our assets, and the year ended December 31, 2017, related to our calculation of recognized deferred taxes at the time that we filed our unaudited consolidated financial statements with the Mexican Stock Exchange.
2017
For the year ended December 31, 2017, we lacked consistency in the reporting of, and failed to timely determine, the amounts of the variables used in the calculation of deferred taxes, and our controls to review and authorize such calculation were ineffective. We were therefore unable to ascertain with reasonable assurance the amount of deferred taxes for the fiscal year ended December 31, 2017. In addition, the calculation of deferred taxes included in our unaudited consolidated financial statements did not take into account new regulations issued by the Ministry of Finance and Public Credit. As a result, our unaudited consolidated financial statements as of and for the year ended December 31, 2017 reflected a net loss in the amount of Ps. 333.4 billion. In connection with the preparation of our audited consolidated financial statements, we were able to determine the definitive amounts of the variables used in the calculation of deferred taxes and performed the calculation in accordance with the new regulations. As a result, we reported a net loss of Ps. 280.9 billion, or Ps. 52.5 billion less than the Ps. 333.4 billion we reported in our unaudited consolidated financial statements. This favorable effect was primarily due to the Ps. 37.2 billion increase in deferred taxes resulting from the implementation of the new regulations issued by the Ministry of Finance and Public Credit.
In response to the material weaknesses described above, we executed remediation plans that, among other things, ensure that we respond adequately and in a timely manner to updated regulatory criteria for the calculation of deferred taxes that may affect our financial reporting, such that this material weakness no longer exists.
2016
For the year ended December 31, 2016, we incorrectly assumed, for purposes of the impairment analysis of our exploration and production cash generating units, the economic landscape related to thetwo-yearlife-of-field for thosecertain fields assigned to Petróleos Mexicanos on a temporary basis pursuant to Round Zero rather than25-yearlife-of-field allowed by the CNH. As a result, our unaudited consolidated financial statements as of and for the year ended December 31, 2016 only reflected a net reversal of impairment in the amount of Ps. 246.3 billion. In connection with the preparation of our audited consolidated financial statements as of and for the year ended December 31, 2016, we applied the25-yearlife-of-field assumption allowed by the CNH which, combined with the certified reserves data, resulted in a net reversal of impairment in the amount of Ps. 331.3 billion. Although the effect isbillion, a difference, while favorable, the difference between the net reversal of impairment that we disclosed in our unaudited and audited financial statements as of and for the year ended December 31, 2016 – an amount equal to Ps. 85.0 billion—is material and reflects a failure of our internal controls to include a mechanism to ensure that the period allowed by the authorities is properly applied and that the disclosure of our unaudited results in respect of our impairment assessment is consistent with the disclosure of our audited results.billion.
In response to the material weakness described above, in 2017 we executed a remediation plan, with oversight from our audit committee which includes the following actions:
1. We are strengthening controls focused on generating adequate and timely policies related to updated regulatory criteria that may affect our financial reporting.
2. We are strengthening our procedures relating to compliance with general policies. We are designing procedures to ensure that regulatory criteria, legal aspects, business rules are disseminated in a timely manner and implemented.
3. Moreover, and in order to assist us in addressingremediated the material weakness related to long-lived impairment calculations,by executing remediation plans that, among other things, ensure that we are improving our internal procedures to appropriately prepare documentation that keeps trackapply the accurate life-of-field criteria in the calculation of the process forimpairment of our assets such calculations.
We did report athat this material weakness in internal control over financial reporting in our Annual Report on Form 20-F forno longer exists.
2015
For the year ended December 31, 2015, as we had not, at the relevant time, established an effective design of processes and procedures to effectively respond to the nature and magnitude of the changes in the economic landscape at such time. In particular, the sharp decline in the price of crude oil in the fourth quarter of 2015 triggered the need to test carrying amounts of our wells, pipelines, properties, plant and equipment for impairment. In performing the tests, the discount rates used were lower than those required by IFRS and those used by peers in the sector and categorized our entire refinery system as a single cash generating unit instead of viewing each refinery as an independent cash-generating unit in order to determine impairment charges with respect to our wells, pipelines, properties, plant and equipment, as required by IFRS. That resulted in an estimation of recoverable amounts of assets that did not accurately reflect operating and economic conditions as of the date of our consolidated financial statements. For the reasons set forth above, those unaudited financial statements reflected only a Ps. 229.1 billion impairment of wells, pipelines, properties, plant and equipment in 2015, Ps. 248.8 billion less than the actual impairment of Ps. 477.9 billion. In addition, at that time, our internal controls did not provide a mechanism that enabled us to ensure that our disclosure regarding our impairment evaluation and our liquidity condition complied with IFRS. In our unaudited financial statements as of and for the fiscal year ended December 31, 2015, we did not appropriately disclose the assumptions for the computation
of the impairment, the uncertainties about the estimates used to calculate impairment and the relevant assets impacted by the impairment and issues related to significant doubt about our ability to continue operating as a going concern in accordance with IFRS.
In response to the material weakness described above, we executed a remediation plan, with oversight from our audit committeeplans that, tookamong other things, put in place adequate procedures to respond to the following actions:
1. We re-designed our controls,nature and magnitude of changes in the economic environment, including the executionuse of a walkthrough of the long-lived impairment calculation process, identifying new controls in their determination. In addition we implemented new controls relating to (1) the long-lived impairment analysis, including the enhancement of the evaluation of the components of future cash flows, particularly the assumptions utilized and the comparison to the requirements of IFRS in order to allows us timely identify events that may impact the assumptions and criteria for the computation, and (2) the assessment of our ability to continue operating as a going concern and our process for making the appropriate corresponding disclosure in accordance with IFRS.
2. We have updated our internal control assessment methodology in order to enhance the design and documentation of management review controls by including new internal control elements to oversee and monitor and are verifying the appropriate design and effectiveness of the internal controls over (1) our asset impairment testsindependent cash-generating units to determine the recoverable amountsamount of our wells, pipelines, properties, plant and equipment, review of criteria and variables for the homologation and determination of the discount rate and (2) the assessment of uncertainties regarding our ability to continue operating as a going concern and other liquidity issues.
3. We updated our oversight and monitoring program for 2016 in order to perform timely tests of the effectiveness of the internal controls in connection with our (1) asset impairment, tests to determine the recoverable amounts of our wells, pipelines, properties, plant and equipment and (2) assessment of our ability to continue operating as a going concern and other liquidity issues. We completed our remediation plan and have fully established enhanced controls designed to address thesuch that this material weakness for each of the quarters reported during 2016.no longer exists.
4. We have strengthened our internal controls to establish the process for determining impairment charges. During 2016, this resulted in an estimation of recoverable amounts that accurately reflected operating and economic conditions as of the date of our consolidated financial statements, and we have reviewed the assumptions we use to calculate impairment in order to ensure that the criteria and variables used in that calculation accurately reflect the operating and economic conditions as of the date of our calculations and will include the appropriate disclosure in accordance with IFRS.
5. We have strengthened our internal controls to properly assess each of the relevant factors that could create uncertainty as to our ability to continue operating as a going concern, our liquidity condition and corresponding disclosure.
6. Moreover, and in order to assist us in addressing the material weakness related to long-lived impairment calculation, we are preparing documentation that memorializes the process for such calculations.
(c) | Attestation Report of the Independent Registered Public Accounting Firm |
Not applicable.
(d) | Changes in Internal Control over Financial Reporting |
As discussed above, during 2016,2018, we completedconducted remediation actions intended to help ensure that we adequately calculate the design, updateimpairment of our assets and, strengthening ofas a result, deferred taxes, as well as to respond promptly to changes in accounting policies. We also continued to execute the changes made to our internal controls proceduresin 2017 and assessment methodology2016 in order to ensure that we effectively respond to changes in regulatory criteria and business rules for the calculation of impairment of our assets and the nature and magnitude of the changes in the economic landscape. We have updated the internal control processes and procedures that have been affected by these activities.
Except for these changes, there has been no change in our internal control over financial reporting during 20162018 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
Item 16A. Audit Committee Financial Expert
We do not currently have the necessary number of independent members to form the Audit Committee of our Board of Directors in accordance with the Petróleos Mexicanos Law. Thus, the entire Board of Directors of Pétroleos Mexicanos is presently acting as our audit committee as specified by Section 3(a)(58)(B) of the Exchange Act.
The Board of Directors of Petróleos Mexicanos has determined that it does not have an “audit committee financial expert” within the meaning of this Item 16A serving on its Audit Committee.16A. We believe that the combined knowledge, skills and experience of the members of the Audit Committeeour Board of Directors enable them, as a group, to act effectivelyperform their acting responsibilities as members of the audit committee. In addition, the Board of Directors can consult with outside experts as it deems appropriate in the fulfillment of theirorder to provide it with advice on matters related to its tasks and responsibilities. See “Item 6—Directors, Senior Management and Employees.” Because we do not have securities listed or quoted on a U.S. exchange, we are not required to comply with the independence requirements established by Rule10A-3 of the Exchange Act.
In accordance with the Petróleos Mexicanos Law, on November 2016, we adoptedissued theCódigo de Ética para Petróleos Mexicanos, sus empresas productivas subsidiarias y empresas filiales (Code of Ethics for Petróleos Mexicanos, its productive subsidiary entities and affiliates, or the Code of Ethics), a new code of ethics as defined in Item 16B of Form20-F under the Exchange Act, which took effect on November 26, 2016 and replaced the codeAct. Our Code of ethics that had been in place since 2014. Our code of ethicsEthics applies to the members of the Boards Directors of Petróleos Mexicanos and the subsidiary entities and all of our employees, including our Director General, (chief executive officer), our Chief Financial Officer, our chief accounting officer and all other employees performing similar functions, as well as other individuals and companies whose actions may affect our reputation. The Code of Ethics defines values such as respect,non-discrimination, honesty, loyalty, responsibility, legality, impartiality and integrity, among others, that we expect will help us achieve our goals and which should be reflected in the daily behavior of employees of Petróleos Mexicanos.
Our codeCode of ethicsEthics is available on our website at http://www.pemex.com. If we amend the provisions of our Code of Ethics or if we grant any waiver of such provisions, we will disclose such amendment or waiver on our website at the same address.
On December 7, 2016, our Ethics Committee was formed to monitor the implementation and enforcement of the Code of Ethics. See “Item 4—Information on the Company—Business Overview—PEMEX Corporate Matters—Ethics Committee” for more information.
On August 28, 2017, theCódigo de Conducta de Petróleos Mexicanos, sus empresas productivas subsidiarias y, en su caso, empresas filiales(Code of Conduct of Petróleos Mexicanos, its productive subsidiary entities and, where applicable, affiliated companies, or the Code of Conduct) was published in the Official Gazette of the Federation. This Code of Conduct delineates behaviors expected of and banned for our employees, in accordance with the values established in the Code of Ethics approved by the Board of the Directors of Petróleos Mexicanos in November 2016.
On September 11, 2017, the Políticas y Lineamientos Anticorrupción para Petróleos Mexicanos, sus empresas productivas subsidiarias y, en su caso, Empresas Filiales (Anticorruption Policies and Guidelines for Petróleos Mexicanos, its productive subsidiary entities and, where applicable,
affiliated companies) and the Políticas y Lineamientos para el desarrollo de la Debida Diligencia en Petróleos Mexicanos, sus empresas productivas subsidiarias y, en su caso, Empresas Filiales, en Materia de Ética e Integridad Corporativa (Policies and Guidelines to carry out Due Diligence in Petróleos Mexicanos, its productive subsidiary entities and, where applicable, affiliated companies, in Ethics and Corporate Integrity matters) became effective.
Additionally, we have an Ethics Line and a telephone number available on our website, as a mechanism to provide advice to address questions on ethics and integrity issues within PEMEX and to facilitate receipt of complaints about possible violations to our Code of Ethics or our Code of Conduct. The information received is channeled to the Ethics Committee and the appropriate areas authorized to investigate and, if applicable, pursue cases in accordance with the applicable laws.
We believe that the regulations and mechanisms mentioned above, along with the legal framework applicable to PEMEX, will allow us to improve our ability to mitigate our exposure to bribery and corruption risks in our relationships with third parties. See “Item 3—Key Information—Risk Factors—Risk Factors Related to Our Operations—We are subject to Mexican and internationalanti-corruption,anti-bribery andanti-money laundering laws. Our failure to comply with these laws could result in penalties, which could harm our reputation, prevent us from obtaining governmental authorizations needed to carry out our operations and have an adverse effect on our business, results of operations and financial condition.”
Item 16C. Principal Accountant Fees and Services
In its meeting held on October 24, 2016,5, 2017, the Board of Directors of Petróleos Mexicanos appointed BDO Mexico as external auditor of Petróleos Mexicanos, its productivestate-owned subsidiaries and subsidiary companies for the fiscal year 20162017 based on the proposal of the Audit Committee.audit committee. The Board of Directors of Petróleos Mexicanos also appointed KPMG Mexico as external auditor of Petróleos Mexicanos, its productivestate-owned subsidiaries and subsidiary companies for the fiscal year 2018 based on the proposal of the audit committee. See “Item 6—Directors, Senior Management and Employees—Audit Committee.”
Audit andNon-Audit Fees
The following table sets forth the aggregate fees billed to us for the fiscal years 2015 and 2016year 2017 by BDO Mexico, our independent registered public accounting firm for the yearsyear ended December 31, 20162017, and 2015.by KPMG Mexico, our independent registered public accounting firm for the year ended December 31, 2018.
Year ended December 31, | Year ended December 31, | |||||||||||||||
2015 | 2016 | 2017 | 2018 | |||||||||||||
(in thousands of nominal pesos) | (in thousands of nominal pesos) | |||||||||||||||
Audit fees | Ps. 33,704 | Ps. 46,587 | Ps. | 42,507 | Ps. | 75,511 | ||||||||||
Audit-related fees | — | — | — | 10,167 | ||||||||||||
Tax Fees | — | — | — | 5,409 | ||||||||||||
All other fees | — | — | — | — | ||||||||||||
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Total fees | Ps. 33,704 | Ps. 46,587 | Ps. | 42,507 | Ps. | 91,087 | ||||||||||
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Audit fees for the year ended December 31, 2017 in the table above are the aggregate fees billed by BDO Mexico and audit fees for the year ended December 31, 2018 in the table above are the aggregate fees billed by KPMG Mexico, in each case for services provided in connection with the audits of our annual financial statements, in each year, statutory filings and statutory audits, filings with financial regulators, regulatory filings, limited review of interim financial information, review of public filings of financial information and reviews of documents related to offerings of securities, as well as comfort and consent letters, and services provided in accordance with the instructions of the Audit Committee.audit committee.
Audit Committee Approval Policies and Procedures
In accordance with the Petróleos Mexicanos Law, the Audit Committeeaudit committee nominates the external auditor for approval by the Board of Directors of Petróleos Mexicanos and issues an opinion regarding the external auditor’s report on our financial statements. As we currently do not have the necessary number of independent members to form an the Aaudit Committee, the entire Board of Directors of Petróleos Mexicanos is presently acting as our audit committee within the meaning of Section 3(a)(58)(B) of the Exchange Act. See “Item 6—Directors, Senior Management and Employees—Audit Committee.”
On December 8, 2009, the former Audit and Performance Evaluation Committee issued criteria, which have not been reviewed by the new Audit Committee, for the performance of services by the external auditor. In accordance with these criteria, the external auditor may audit the financial statements of Petróleos Mexicanos and its subsidiary entities and subsidiary companies for no more than four consecutive fiscal years as of the date these criteria were issued, except in special circumstances. An auditing firm that has performed such services may again be considered in the selection process for our external auditor after a period of at least two years since concluding such services.
Item 16D. Exemptions from the Listing Standards for Audit Committees
Not applicable.
Item 16E. Purchases of Equity Securities by the Issuer and Affiliated Purchasers
Not applicable.
Item 16F. Change in Registrant’s Certifying Accountant
Not applicable.BDO Mexico previously served as our independent registered public accounting firm for the fiscal years ended December 31, 2013 through 2017. In a meeting held on October 5, 2017, the Board of Directors of Petróleos Mexicanos appointed KPMG Mexico as independent registered public accounting firm of Petróleos Mexicanos, its productivestate-owned subsidiaries and subsidiary companies for the fiscal year ended December 31, 2018 based on the proposal of the Audit Committee. Ourauditor-client relationship with BDO Mexico formally ceased on July 20, 2018. The change of auditor was due to BDO Mexico’s completion of the maximum time period for an external auditor to render services to us, as set forth in the criteria issued by the Audit Committee for the performance of services by the external auditor in accordance with Article 23 of the Petróleos Mexicanos Law. See “Item 16C—Principal Accountant Fees and Services—Audit Committee Approval Policies and Procedures.”
BDO Mexico’s reports with respect to our consolidated financial statements as of and for the years ended December 31, 2016 and 2017 did not contain any adverse opinion or disclaimer of opinion and were not qualified or modified as to uncertainty, audit scope or accounting principles.
During the fiscal years ended December 31, 2016 and 2017 and the subsequent interim period through March 31, 2018, there were no disagreements with BDO Mexico, whether or not resolved, on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedures, which if not resolved to BDO Mexico’s satisfaction would have caused it to make reference to the subject matter of the disagreements in connection with any reports it would have issued.
During the fiscal years ended December 31, 2016 and 2017, there were no “reportable events” as that term is defined in Item 16F(a)(1)(v) of Form20-F other than the identification of material weaknesses in our internal control over financial reporting as described in our annual report on Form20-F for the year ended December 31, 2016 (the “201620-F”) and our annual report on Form20-F for the year ended December 31, 2017 (the “201720-F”).
As more fully disclosed in the 201720-F, our management concluded that our internal control over financial reporting was not effective as of December 31, 2017 due to a material weakness that affected our calculation of recognized deferred taxes at the time that we filed our unaudited consolidated financial statements with the Mexican Stock Exchange. Due to the lack of consistency in the reporting of, and the failure to timely determine, the amounts of the variables used in the calculation of deferred taxes, and the ineffectiveness of controls to review and authorize such calculation, we were unable to ascertain with reasonable assurance the amount of deferred taxes for the fiscal year ended December 31, 2017. In addition, the calculation of deferred taxes included in our unaudited consolidated financial statements did not take into account new regulations issued by the Ministry of Finance and Public Credit.
Further, as more fully disclosed in the 201620-F, our management concluded that our internal control over financial reporting was not effective as of December 31, 2016 due to a material weakness because, when we calculated the impairment effect at the time of our unaudited financial statements, we incorrectly assumed, for purposes of the impairment analysis of our exploration and production cash generating units, the economic landscape related to thetwo-yearlife-of-field for those fields assigned to Petróleos Mexicanos on temporary basis pursuant to Round Zero rather than25-yearlife-of-field allowed by the CNH.
Our Board of Directors has discussed these material weaknesses with BDO Mexico and we have authorized BDO Mexico to respond fully to the inquiries of the successor independent registered public accounting firm concerning these matters.
We have provided BDO Mexico with a copy of the foregoing disclosure and have requested that BDO Mexico furnish us a letter addressed to the SEC stating whether or not BDO Mexico agrees with such disclosure. A copy of BDO Mexico’s letter, dated April 30, 2019, is filed as Exhibit 15.1 to this report.
During the fiscal years ended December 31, 2016 and 2017, we did not consult with KPMG Mexico regarding either (i) the application of accounting principles to a specified transaction, either completed or proposed, or the type of audit opinion that might be rendered on our consolidated financial statements or (ii) any matter that was either the subject of a disagreement or a “reportable event” as that term is defined in Item 16F(a)(1)(v) of Form20-F. Further, during the fiscal years ended December 31, 2016 and 2017, KPMG Mexico did not provide any written report or oral advice that was an important factor considered by us in reaching a decision as to any such accounting, auditing or financial reporting issue.
Item 16G. Corporate Governance
Not applicable.
Item 16H. Mine Safety Disclosure
Not applicable.
PART III
Not applicable.
See pagesF-1 throughF-146, F-144, incorporated herein by reference.
Item 19. Exhibits. Documents filed as exhibits to this Form20-F:
1.1 | Ley de Petróleos Mexicanos (Petróleos Mexicanos Law), effective October 7, 2014 (English translation) (previously filed as Exhibit 1.1 to Petróleos Mexicanos’ annual report on Form20-F (FileNo. 0-99) on April 30, 2015 and incorporated by reference herein). | |
1.2 | Reglamento de la Ley de Petróleos Mexicanos(Regulations to the Petróleos Mexicanos Law), effective November 1, 2014 and as amended as of February 9, 2015 (English translation) (previously filed as Exhibit 1.2 to Petróleos Mexicanos’ annual report on Form20-F (FileNo. 0-99) on April 30, 2015 and incorporated by reference herein). | |
1.3 | Acuerdo de Creación de la Empresa Productiva del Estado Subsidiaria de Petróleos Mexicanos, denominada Pemex Exploración y Producción(Creation Resolution of the ProductiveState-Owned Subsidiary of Petróleos Mexicanos, denominated Pemex Exploration and Production), effective June 1, 2015 (English translation) (previously filed as Exhibit 3.4 to the Petróleos Mexicanos Registration Statement on FormF-4 (FileNo. 333-205763) on July 21, 2015 and incorporated by reference herein). | |
1.4 | Acuerdo de Creación de la Empresa Productiva del Estado Subsidiaria de Petróleos Mexicanos, denominada Pemex Cogeneración y Servicios(Creation Resolution of the ProductiveState-Owned Subsidiary of Petróleos Mexicanos, denominated Pemex Cogeneration and Services), effective June 1, 2015 (English translation) (previously filed as Exhibit 3.5 to the Petróleos Mexicanos Registration Statement on FormF-4 (FileNo. 333-205763) on July 21, 2015 and incorporated by reference herein). | |
1.5 | Acuerdo de Creación de la Empresa Productiva del Estado Subsidiaria de Petróleos Mexicanos, denominada Pemex Perforación y Servicios(Creation Resolution of the ProductiveState-Owned Subsidiary of Petróleos Mexicanos, denominated Pemex Drilling and Services), effective August 1, 2015 (English translation) (previously filed as Exhibit 3.5 to Amendment No. 1 to the Petróleos Mexicanos Registration Statement on FormF-4 (FileNo. 333-205763) on February 8, 2016 and incorporated by reference herein). | |
1.6 | Acuerdo de Creación de la Empresa Productiva del Estado Subsidiaria de Petróleos Mexicanos, denominada Pemex Logística(Creation Resolution of the ProductiveState-Owned Subsidiary of Petróleos Mexicanos, denominated Pemex Logistics), effective October 1, 2015 (English translation) (previously filed as Exhibit 3.6 to Amendment No. 1 to the Petróleos Mexicanos Registration Statement on FormF-4 (FileNo. 333-205763) on February 8, 2016 and incorporated by reference herein). | |
1.7 | Acuerdo de Creación de la Empresa Productiva del Estado Subsidiaria de Petróleos Mexicanos, denominada Pemex Transformación Industrial(Creation Resolution of the ProductiveState-Owned Subsidiary of Petróleos Mexicanos, denominated Pemex Industrial Transformation), effective November 1, 2015 (English translation) (previously filed as Exhibit 3.7 to Amendment No. 1 to the Petróleos Mexicanos Registration Statement on FormF-4 (FileNo. 333-205763) on February 8, 2016 and incorporated by reference herein). |
1.8 |
1.9 | Adecuación al Acuerdo de Creación de la Empresa Productiva del Estado Subsidiaria de Petróleos Mexicanos, denominada Pemex Exploración y Producción (Amendment to Creation Resolution of the ProductiveState-Owned Subsidiary of Petróleos Mexicanos, denominated Pemex Exploration and Production), effective May 12, 2016 (English translation) (previously filed as Exhibit 3.4 to the Petróleos Mexicanos Registration Statement on FormF-4 (FileNo. 333-213351) on November 30, 2016 and incorporated by reference herein). | |
1.10 | Declaratoria de Liquidación y Extinción de Pemex Cogeneración y Servicios, (Declaration of Liquidation and Extinction of Pemex Cogeneration and Services), effective July 27, 2018 (English Translation). | |
2.1 | Indenture, dated as of September 18, 1997, between Petróleos Mexicanos and Deutsche Bank Trust Company Americas (formerly known as Bankers Trust Company) (previously filed as Exhibit 4.1 to the Petróleos Mexicanos Registration Statement on FormF-4 (FileNo. 333-7796) on October 17, 1997 and incorporated by reference herein). (P) | |
2.2 | Indenture, dated as of August 7, 1998, between Petróleos Mexicanos and Deutsche Bank Trust Company Americas (formerly known as Bankers Trust Company) (previously filed as Exhibit 4.1 to the Petróleos Mexicanos Registration Statement on FormF-4 (FileNo. 333-9310) on August 24, 1998 and incorporated by reference herein). (P) | |
2.3 | Indenture, dated as of July 31, 2000, among the Pemex Project Funding Master Trust, Petróleos Mexicanos and Deutsche Bank Trust Company Americas (formerly known as Bankers Trust Company) (previously filed as Exhibit 2.5 to the Petróleos Mexicanos Annual Report on Form20-F (FileNo. 0-99) on June 28, 2001 and incorporated by reference herein). (P) | |
2.4 | First supplemental indenture dated as of September 30, 2009, between Petróleos Mexicanos and Deutsche Bank Trust Company Americas, to the indenture dated as of July 31, 2000 (previously filed as Exhibit 2.4 to the Petróleos Mexicanos Annual Report onForm20-F (FileNo. 0-99) on June 29, 2010 and incorporated by reference herein). | |
2.5 | Indenture, dated as of December 30, 2004, among the Pemex Project Funding Master Trust, Petróleos Mexicanos and Deutsche Bank Trust Company Americas (previously filed as Exhibit 2.7 to Petróleos Mexicanos’ Annual Report on Form20-F (FileNo. 0-99) on June 30, 2005 and incorporated by reference herein). | |
2.6 | First supplemental indenture dated as of September 30, 2009, between Petróleos Mexicanos and Deutsche Bank Trust Company Americas, to the indenture dated as of December 30, 2004 (previously filed as Exhibit 2.6 to the Petróleos Mexicanos Annual Report on Form20-F (FileNo. 0-99) on June 29, 2010 and incorporated by reference herein). | |
2.7 | Indenture, dated as of January 27, 2009, between Petróleos Mexicanos and Deutsche Bank Trust Company Americas (previously filed as Exhibit 2.5 to the Petróleos Mexicanos Annual Report on Form | |
2.8 | Fiscal Agency Agreement between Petróleos Mexicanos and Deutsche Bank Trust Company Americas (formerly known as Bankers Trust Company), dated as of June 16, 1993, and amended and restated as of February 26, 1998 (previously filed as Exhibit 3.1 to the Petróleos Mexicanos Annual Report on Form20-F (FileNo. 0-99) on June 29, 2000 and incorporated by reference herein). (P) | |
2.9 | Trust Agreement, dated as of November 10, 1998, among The Bank of New York, The Bank of New York (Delaware) and Petróleos Mexicanos (previously filed as Exhibit 3.1 to the Petróleos Mexicanos Annual Report on Form20-F (FileNo. 0-99) on June 30, 1999 and incorporated by reference herein). (P) | |
2.10 | Amendment No. 1, dated as of November 17, 2004, to the Trust Agreement among The Bank of New York, The Bank of New York (Delaware) and Petróleos Mexicanos dated as of November 10, 1998 (previously filed as Exhibit 2.10 to the Petróleos Mexicanos Annual Report on Form20-F (FileNo. 0-99) on June 30, 2005 and incorporated by reference herein). |
2.11 | Amendment No. 2, dated as of December 22, 2004, to the Trust Agreement among The Bank of New York, The Bank of New York (Delaware) and Petróleos Mexicanos dated as of November 10, 1998 (previously filed as Exhibit 2.11 to the Petróleos Mexicanos Annual Report on Form20-F (FileNo. 0-99) on June 30, 2005 and incorporated by reference herein). | |
2.12 | Amendment No. 3, dated as of August 17, 2006, to the Trust Agreement among The Bank of New York, The Bank of New York (Delaware) and Petróleos Mexicanos dated as of November 10, 1998 (previously filed as Exhibit 3.4 to the Petróleos Mexicanos Registration Statement on FormF-4/A (FileNo. 333-136674) on October 27, 2006 and incorporated by reference herein). | |
2.13 | Assignment and Indemnity Agreement, dated as of November 10, 1998, among Petróleos Mexicanos,Pemex-Exploración y Producción,Pemex-Refinación,Pemex-Gas y Petroquímica Básica and the Pemex Project Funding Master Trust (previously filed as Exhibit 3.2 to the Petróleos Mexicanos Annual Report on Form20-F (FileNo. 0-99) on June 30, 1999 and incorporated by reference herein). (P) | |
2.14 | Amendment No. 1, dated as of August 17, 2006, to the Assignment and Indemnity Agreement among Petróleos Mexicanos,Pemex-Exploración y Producción,Pemex-Refinación,Pemex-Gas y Petroquímica Básica,Pemex-Petroquímica, and the Pemex Project Funding Master Trust dated as of November 10, 1998 (previously filed as Exhibit 4.7 to the Petróleos Mexicanos Registration Statement on FormF-4/A (FileNo. 333-136674-04) on October 27, 2006 and incorporated by reference herein). | |
2.15 | Guaranty Agreement, dated July 29, 1996, among Petróleos Mexicanos,Pemex-Exploración y Producción,Pemex-Refinación andPemex-Gas y Petroquímica Básica (previously filed as Exhibit 4.4 to the Petróleos Mexicanos Registration Statement on FormF-4 (FileNo. 333-7796) on October 17, 1997 and incorporated by reference herein). (P) | |
2.16 | Amendment Agreement dated as of June 24, 2014, between Petróleos Mexicanos and Deutsche Bank Trust Company Americas, amending the terms and conditions of the Petróleos Mexicanos 8.625% Bonds due 2023 issued pursuant to the Fiscal Agency Agreement between Petróleos Mexicanos and Deutsche Bank Trust Company (as amended and restated) (previously filed as Exhibit 4.9 to the Petróleos Mexicanos Registration Statement on FormF-4 (FileNo. 333-198588) on September 5, 2014 and incorporated by reference herein). | |
2.17 | First supplemental indenture dated as of June 24, 2014, between Petróleos Mexicanos and Deutsche Bank Trust Company Americas, to the indenture dated as of September 18, 1997 (previously filed as Exhibit 4.10 to the Petróleos Mexicanos Registration Statement on FormF-4 (FileNo. 333-198588) on September 5, 2014 and incorporated by reference herein). | |
2.18 | First supplemental indenture dated as of June 24, 2014, between Petróleos Mexicanos and Deutsche Bank Trust Company Americas, to the indenture dated as of August 7, 1998 (previously filed as Exhibit 4.11 to the Petróleos Mexicanos Registration Statement on FormF-4 (FileNo. 333-198588) on September 5, 2014 and incorporated by reference herein). | |
2.19 | Second supplemental indenture dated as of June 24, 2014, between Petróleos Mexicanos and Deutsche Bank Trust Company Americas, to the indenture dated as of July 31, 2000 (previously filed as Exhibit 4.12 to the Petróleos Mexicanos Registration Statement on FormF-4 (FileNo. 333-198588) on September 5, 2014 and incorporated by reference herein). | |
2.20 | Second supplemental indenture dated as of June 24, 2014, between Petróleos Mexicanos and Deutsche Bank Trust Company Americas, to the indenture dated as of December 30, 2004 (previously filed as Exhibit 4.13 to the Petróleos Mexicanos Registration Statement on FormF-4 (FileNo. 333-198588) on September 5, 2014 and incorporated by reference herein). | |
2.21 | Fourth supplemental indenture dated as of June 24, 2014, between Petróleos Mexicanos and Deutsche Bank Trust Company Americas, to the indenture dated as of January 27, 2009 (previously filed as Exhibit 4.14 to the Petróleos Mexicanos Registration Statement on FormF-4 (FileNo. 333-198588) on September 5, 2014 and incorporated by reference herein). |
2.22 | Third supplemental indenture dated as of September 10, 2014, between Petróleos Mexicanos and Deutsche Bank Trust Company Americas, to the indenture dated as of July 31, 2000 (previously filed as Exhibit 2.22 to Petróleos Mexicanos’ annual report on Form20-F (FileNo. 0-99) on April 30, 2015 and incorporated by reference herein). | |
2.23 | Fifth supplemental indenture dated as of October 15, 2014, between Petróleos Mexicanos and Deutsche Bank Trust Company Americas, to the indenture dated as of January 27, 2009 previously filed as Exhibit 2.23 to Petróleos Mexicanos’ annual report on Form20-F (FileNo. 0-99) on April 30, 2015 and incorporated by reference herein). | |
2.24 | Sixth supplemental indenture dated as of December 8, 2015 between Petróleos Mexicanos and Deutsche Bank Trust Company Americas, to the indenture dated as of January 27, 2009 (previously filed as Exhibit 4.17 to Amendment No. 1 to the Petróleos Mexicanos Registration Statement on FormF-4 (FileNo. 333-205763) on February 8, 2016 and incorporated by reference herein). | |
2.25 | Seventh supplemental indenture dated as of June 14, 2016 between Petróleos Mexicanos and Deutsche Bank Trust Company Americas, to the indenture dated as of January 27, 2009 (previously filed as Exhibit 4.18 to Amendment No. 1 to the Petróleos Mexicanos Registration Statement on FormF-4 (FileNo. 333-213351) on August 26, 2016 and incorporated by reference herein). | |
2.26 | Eighth supplemental indenture dated as of February 16, 2018 between Petróleos Mexicanos and Deutsche Bank Trust Company Americas, to the indenture dated as of January 27, 2009. | |
2.27 | Ninth Supplemental Indenture dated as of June 4, 2018 between Petróleos Mexicanos and Deutsche Bank Trust Company Americas, to the indenture dated as of January 27, 2009. |
The registrant agrees to furnish to the U.S. Securities and Exchange Commission, upon request, copies of any instruments that define the rights of holders oflong-term debt of the registrant that are not filed as exhibits to this report.
8.1 | For a list of subsidiaries, their jurisdiction of incorporation and the names under which they do business, see “Consolidated Structure of PEMEX” on page 4. | |
10.1 | Consent letters of | |
10.2 | Reports on Reserves Data by | |
10.3 | Consent letters of Netherland, Sewell International, S. de R.L. de C.V. | |
10.4 | Reports on Reserves Data by Netherland, Sewell International, S. de R.L. de C.V., Independent Qualified Reserves Evaluator or Auditor, as of January 1, | |
10.5 | Consent letters of DeGolyer and MacNaughton. | |
10.6 | Reports on Reserves Data by DeGolyer and MacNaughton, Independent Qualified Reserves Evaluator or Auditor, as of January 1, | |
12.1 | CEO Certification pursuant toRule 13a-14(a)/15d-14(a). | |
12.2 | CFO Certification pursuant toRule 13a-14(a)/15d-14(a). | |
13.1 | Certification pursuant toRule 13a-14(b)/15d-14(b) and 18 U.S.C. §1350. | |
15.1 | Letter from Castillo Miranda y Compañía, S.C. addressed to the U.S. Securities and Exchange Commission. | |
101.INS | XBRL Instance Document. | |
101.SCH | XBRL Taxonomy Extension Schema Document. | |
101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document. |
101.DEF | XBRL Taxonomy Extension Definition Linkbase Document. | |
101.LAB | XBRL Taxonomy Extension Label Linkbase Document. | |
101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document. |
(P) Filed via paper.
SIGNATURE
Pursuant to the requirements of Section 12 of the Securities Exchange Act of 1934, as amended, the registrant hereby certifies that it meets all of the requirements for filing on Form20-F and has duly caused and authorized the undersigned to sign this annual report on its behalf.
PETRÓLEOS MEXICANOS | ||
By: | /S/ | |
Name: Alberto Velázquez García | ||
Title: Chief Financial | ||
Director of Finance |
Date: April 28, 201730, 2019
PETRÓLEOS MEXICANOS,
PRODUCTIVE STATE-OWNED SUBSIDIARIES
AND SUBSIDIARY COMPANIES
CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2018, 2017 AND 2016 2015 AND 2014 AND
REPORT OF INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMReport of Independent Registered Public Accounting Firm
To the Board of Directors of
Petróleos Mexicanos:Mexicanos, Productive State-Owned Company:
(figures stated in thousands of pesos)
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated statementsstatement of financial position of Petróleos Mexicanos, Productive State-Owned Subsidiaries and Subsidiary Companies (“PEMEX”)(PEMEX) as of December 31, 2016 and 2015, and2018, the related consolidated statements of comprehensive income, changes in equity (deficit), and cash flows for each of the three years in the periodyear ended December 31, 2016. 2018, and the related notes collectively, the consolidated financial statements. In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of PEMEX as of December 31, 2018, and the results of its operations and its cash flows for the year ended December 31, 2018, in conformity with International Financial Reporting Standard as issued by the International Accounting Standards Board.
Going Concern
The accompanying consolidated financial statements have been prepared assuming that PEMEX will continue as a going concern. As discussed in Note 24 e) to the consolidated financial statements, PEMEX has suffered recurring losses from operations, has a net capital deficiency and net equity deficit. These issues, together with its fiscal regime, the significant increase in its indebtedness and the reduction of its working capital raise substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 24 e). The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Change in Accounting Principle
As discussed in note 15 to the consolidated financial statements, in 2018 PEMEX has elected to change its method of computing the discount rate applied to cash flows derived from its oil and gas production activities for the impairment calculation of long lived assets, related to exploration and production cash generating units.
Illicit fuel market Non-operating losses
As discussed in note 25 to the consolidated financial statements, transportation of hydrocarbons and other products through the pipeline network is affected by unauthorized subtractions resulting in an illicit fuel market risk. These non-operating losses significantly increased 71.8% during 2018, representing a total cost of $39,439,107 at December 31, 2018.
(Continued)
Basis for Opinion
These consolidated financial statements are the responsibility of PEMEX’sthe Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our auditsaudit in accordance with the standards of the Public Company Accounting Oversight Board (United States).PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement.misstatement, whether due to error or fraud. PEMEX is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included considerationAs part of our audit, we are required to obtain an understanding of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of PEMEX’sthe Company’s internal control over financial reporting. Accordingly, we express no such opinion. An
Our audit also includesincluded performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence supportingregarding the amounts and disclosures in the consolidated financial statements, assessingstatements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
/s/ KPMG CÁRDENAS DOSAL, S.C. |
We have served as PEMEX’s auditor since 2018
Mexico City, April 30, 2019
Report of Independent Registered Public Accounting Firm
The Board of Directors
Petróleos Mexicanos
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated statement of financial position of Petróleos Mexicanos, Productive State-Owned Subsidiaries and Subsidiary Companies (“PEMEX”) as of December 31, 2017 and 2016, and the related consolidated statements of comprehensive income, changes in equity (deficit), and cash flows for each of the two years in the period ended December 31, 2017, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Petróleos Mexicanos, Productive State-Owned Subsidiaries and Subsidiary Companies as of December 31, 20162017 and 2015,2016, and the consolidated results of their operations and their cash flows for each of the threetwo years in the period ended December 31, 2016,2017, in conformity with International Financial Reporting Standards as issued by the International Accounting Standards Board.Board (“IASB”).
Going concern
The accompanying consolidated financial statements have been prepared assuming that PEMEX will continue as a going concern. As described in Note 2-b to the consolidated financial statements, PEMEX has suffered recurring losses from operations, has a negative cash flows from operating activities and has a working capital deficiency and a net equity deficit. As stated in Note 2-b, these events or conditions, along with other matters as set forth in such Note, indicate that a material uncertainty exists that may cast significant doubt on the PEMEX’s ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 2-b. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the PEMEX’s consolidated financial statement based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB and in accordance with International Standards on Auditing issued by International Federation of Accountants. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audit included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audit provides a reasonable basis for our opinion.
CASTILLO MIRANDA Y COMPAÑÍA, S. C.
/s/ JOSE LUIS VILLALOBOS ZUAZUA
C.P.C. Jose Luis Villalobos Zuazua
Mexico City,
April 28, 201730, 2018
PETRÓLEOS MEXICANOS, PRODUCTIVE STATE-OWNED SUBSIDIARIES
AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
AS OF DECEMBER 31, 20162018 AND 20152017
(FIGURES STATED IN THOUSANDS, EXCEPT AS NOTED)
Note | December 31, 2016 | December 31, 2016 | December 31, 2015 | |||||||||||||
(Unaudited; U.S. dollars) | ||||||||||||||||
ASSETS | ||||||||||||||||
Current assets: | ||||||||||||||||
Cash and cash equivalents | 6 | U.S. $ | 7,913,885 | Ps. | 163,532,513 | Ps. | 109,368,880 | |||||||||
Accounts receivable, net | 7 | 6,446,986 | 133,220,527 | 79,245,821 | ||||||||||||
Inventories, net | 8 | 2,220,870 | 45,892,060 | 43,770,928 | ||||||||||||
Held-for-sale current non-financial assets | 9 | 361,047 | 7,460,674 | 33,213,762 | ||||||||||||
Available-for-sale financial assets | 10 | 21,078 | 435,556 | — | ||||||||||||
Derivative financial instruments | 16 | 235,069 | 4,857,470 | 1,601,106 | ||||||||||||
|
|
|
|
|
| |||||||||||
Total current assets | 17,198,935 | 355,398,800 | 267,200,497 | |||||||||||||
|
|
|
|
|
| |||||||||||
Non-current assets: | ||||||||||||||||
Available-for-sale financial assets | 10 | 291,693 | 6,027,540 | 3,944,696 | ||||||||||||
Permanent investments in associates and other | 11 | 1,120,530 | 23,154,632 | 24,165,599 | ||||||||||||
Wells, pipelines, properties, plant and equipment, net | 12 | 80,707,619 | 1,667,742,248 | 1,344,483,631 | ||||||||||||
Long-term notes receivable | 14 | 7,191,618 | 148,607,602 | 50,000,000 | ||||||||||||
Deferred taxes | 20 | 4,855,047 | 100,324,689 | 54,900,384 | ||||||||||||
Restricted cash | 6 | 507,096 | 10,478,626 | 9,246,772 | ||||||||||||
Intangible assets | 13 | 418,082 | 8,639,242 | 14,304,961 | ||||||||||||
Other assets | 14 | 460,349 | 9,512,645 | 7,407,660 | ||||||||||||
|
|
|
|
|
| |||||||||||
Totalnon-current assets | 95,552,034 | 1,974,487,224 | 1,508,453,703 | |||||||||||||
|
|
|
|
|
| |||||||||||
Total assets | U.S. $ | 112,750,969 | Ps. 2,329,886,024 | Ps. 1,775,654,200 | ||||||||||||
|
|
|
|
|
| |||||||||||
LIABILITIES | ||||||||||||||||
Current liabilities: | ||||||||||||||||
Short-term debt and current portion of long-term debt | 15 | U.S. $ | 8,525,270 | Ps. 176,166,188 | Ps. 192,508,668 | |||||||||||
Suppliers | 7,338,828 | 151,649,540 | 167,314,243 | |||||||||||||
Taxes and duties payable | 20 | 2,363,511 | 48,839,595 | 43,046,716 | ||||||||||||
Accounts and accrued expenses payable | 903,339 | 18,666,607 | 13,237,407 | |||||||||||||
Derivative financial instruments | 16 | 1,493,804 | 30,867,956 | 27,300,687 | ||||||||||||
|
|
|
|
|
| |||||||||||
Total current liabilities | 20,624,752 | 426,189,886 | 443,407,721 | |||||||||||||
|
|
|
|
|
| |||||||||||
Long-term liabilities: | ||||||||||||||||
Long-term debt | 15 | 87,446,987 | 1,807,004,542 | 1,300,873,167 | ||||||||||||
Employee benefits | 17 | 59,059,690 | 1,220,409,436 | 1,279,385,441 | ||||||||||||
Provisions for sundry creditors | 18 | 4,273,997 | 88,317,878 | 73,191,796 | ||||||||||||
Other liabilities | 814,844 | 16,837,893 | 8,288,139 | |||||||||||||
Deferred taxes | 20 | 200,084 | 4,134,536 | 2,183,834 | ||||||||||||
|
|
|
|
|
| |||||||||||
Total long-term liabilities | 151,795,602 | 3,136,704,285 | 2,663,922,377 | |||||||||||||
|
|
|
|
|
| |||||||||||
Total liabilities | U.S. $ | 172,420,354 | Ps. 3,562,894,171 | Ps. 3,107,330,098 | ||||||||||||
|
|
|
|
|
| |||||||||||
EQUITY (DEFICIT), NET | 21 | |||||||||||||||
Controlling interest: | ||||||||||||||||
Certificates of Contribution “A” | 17,254,377 | 356,544,447 | 194,604,835 | |||||||||||||
Mexican Government contributions | 2,116,269 | 43,730,591 | 43,730,591 | |||||||||||||
Legal reserve | 48,496 | 1,002,130 | 1,002,130 | |||||||||||||
Accumulated other comprehensive result | (7,907,445 | ) | (163,399,441 | ) | (306,022,973 | ) | ||||||||||
Accumulated deficit: | ||||||||||||||||
From prior years | (61,953,977 | ) | (1,280,216,973 | ) | (552,808,762 | ) | ||||||||||
Net loss for the year | (9,274,371 | ) | (191,645,606 | ) | (712,434,997 | ) | ||||||||||
|
|
|
|
|
| |||||||||||
Total controlling interest | (59,716,651 | ) | (1,233,984,852 | ) | (1,331,929,176 | ) | ||||||||||
Totalnon-controlling interest | 47,266 | 976,705 | 253,278 | |||||||||||||
|
|
|
|
|
| |||||||||||
Total equity (deficit), net | U.S. $ | (59,669,385 | ) | (1,233,008,147 | ) | (1,331,675,898 | ) | |||||||||
|
|
|
|
|
| |||||||||||
Total liabilities and equity (deficit), net | U.S. $ | 112,750,969 | Ps. 2,329,886,024 | Ps. 1,775,654,200 | ||||||||||||
|
|
|
|
|
|
Note | December 31, 2018 | December 31, 2018 | December 31, 2017 | |||||||||||||
(Unaudited; U.S. dollars) | ||||||||||||||||
ASSETS | ||||||||||||||||
Current assets: | ||||||||||||||||
Cash and cash equivalents | 8,9 | U.S. $ | 4,161,603 | Ps. | 81,912,409 | Ps. | 97,851,754 | |||||||||
Accounts receivable, net | 8,10 | 8,491,624 | 167,139,778 | 168,123,028 | ||||||||||||
Inventories | 11 | 4,167,199 | 82,022,568 | 63,858,930 | ||||||||||||
Current portion of notes receivable | 8,17-a | 1,938,426 | 38,153,851 | 2,522,206 | ||||||||||||
Held—for—sale non—financial assets | 13 | 63,692 | 1,253,638 | — | ||||||||||||
Equity instruments | 8,12 | 12,470 | 245,440 | 1,056,918 | ||||||||||||
Derivative financial instruments | 8,19 | 1,137,143 | 22,382,277 | 30,113,454 | ||||||||||||
|
|
|
|
|
| |||||||||||
Total current assets | 19,972,157 | 393,109,961 | 363,526,290 | |||||||||||||
Non-current assets: | ||||||||||||||||
Investments in joint ventures and associates | 14 | 855,643 | 16,841,545 | 16,707,364 | ||||||||||||
Wells, pipelines, properties, plant and equipment, net | 15 | 71,254,037 | 1,402,486,084 | 1,436,509,326 | ||||||||||||
Long-term notes receivable, net of current portion | 8,17-a | 6,087,954 | 119,828,598 | 148,492,909 | ||||||||||||
Deferred income taxes and duties | 23 | 6,238,142 | 122,784,730 | 146,192,485 | ||||||||||||
Intangible assets, net | 16 | 697,079 | 13,720,540 | 14,678,640 | ||||||||||||
Other assets | 17-b | 326,467 | 6,425,810 | 5,895,100 | ||||||||||||
|
|
|
|
|
| |||||||||||
Totalnon-current assets | 85,459,322 | 1,682,087,307 | 1,768,475,824 | |||||||||||||
|
|
|
|
|
| |||||||||||
Total assets | U.S. $ | 105,431,479 | Ps. | 2,075,197,268 | Ps. | 2,132,002,114 | ||||||||||
|
|
|
|
|
| |||||||||||
LIABILITIES | ||||||||||||||||
Current liabilities: | ||||||||||||||||
Short-term debt and current portion of long—term debt | 8,18 | U.S. $ | 9,744,281 | Ps. | 191,795,709 | Ps. | 157,209,467 | |||||||||
Suppliers | 7,612,837 | 149,842,712 | 139,955,378 | |||||||||||||
Taxes and duties payable | 23 | 3,318,869 | 65,324,959 | 51,004,960 | ||||||||||||
Accounts and accrued expenses payable | 8 | 1,265,955 | 24,917,669 | 23,211,401 | ||||||||||||
Derivative financial instruments | 8,19 | 807,566 | 15,895,245 | 17,745,979 | ||||||||||||
|
|
|
|
|
| |||||||||||
Total current liabilities | 22,749,508 | 447,776,294 | 389,127,185 | |||||||||||||
|
|
|
|
|
| |||||||||||
Long-term liabilities: | ||||||||||||||||
Long-term debt, net of current portion | 8,18 | 96,047,351 | 1,890,490,407 | 1,880,665,604 | ||||||||||||
Employee benefits | 20 | 54,897,502 | 1,080,542,046 | 1,258,436,122 | ||||||||||||
Provisions for sundry creditors | 21 | 5,169,627 | 101,753,256 | 87,677,423 | ||||||||||||
Other liabilities | 484,095 | 9,528,385 | 14,194,237 | |||||||||||||
Deferred taxes | 23 | 229,250 | 4,512,312 | 4,253,928 | ||||||||||||
|
|
|
|
|
| |||||||||||
Total long-term liabilities | 156,827,825 | 3,086,826,406 | 3,245,227,314 | |||||||||||||
|
|
|
|
|
| |||||||||||
Total liabilities | U.S. $ | 179,577,333 | Ps. | 3,534,602,700 | Ps. | 3,634,354,499 | ||||||||||
|
|
|
|
|
| |||||||||||
EQUITY (DEFICIT) | ||||||||||||||||
Controlling interest: | ||||||||||||||||
Certificates of Contribution “A” | U.S. $ | 18 114 427 | Ps. | 356,544,447 | Ps. | 356,544,447 | ||||||||||
Mexican Government contributions | 2,221,755 | 43,730,591 | 43,730,591 | |||||||||||||
Legal reserve | 50,914 | 1,002,130 | 1,002,130 | |||||||||||||
Accumulated other comprehensive result | 3,655,308 | 71,947,067 | (151,887,182 | ) | ||||||||||||
Accumulated deficit: | ||||||||||||||||
From prior years | (89,048,485 | ) | (1,752,732,435 | ) | (1,471,862,579 | ) | ||||||||||
Net loss for the year | (9,164,013 | ) | (180,374,350 | ) | (280,844,899 | ) | ||||||||||
|
|
|
|
|
| |||||||||||
Total controlling interest | (74,170,094 | ) | (1,459,882,550 | ) | (1,503,317,492 | ) | ||||||||||
Totalnon-controlling interest | 24,240 | 477,118 | 965,107 | |||||||||||||
|
|
|
|
|
| |||||||||||
Total equity (deficit) | U.S. $ | (74,145,854 | ) | Ps. | (1,459,405,432 | ) | Ps. | (1,502,352,385 | ) | |||||||
|
|
|
|
|
| |||||||||||
Total liabilities and equity (deficit) | U.S. $ | 105,431,479 | Ps. | 2,075,197,268 | Ps. | 2,132,002,114 | ||||||||||
|
|
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The accompanying notes are an integral part of these consolidated financial statements.
PETRÓLEOS MEXICANOS, PRODUCTIVE STATE-OWNED SUBSIDIARIES
AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
FOR THE YEARS ENDED DECEMBER 31, 2016, 20152018, 2017 AND 20142016
(Figures stated in thousands, except as noted)
Note | 2016 | 2016 | 2015 | 2014 | ||||||||||||||||
(Unaudited; U.S. dollars) | ||||||||||||||||||||
Net sales: | ||||||||||||||||||||
Domestic | 5 | U.S. $ | 32,423,561 | Ps. | 670,000,473 | Ps. | 746,235,912 | Ps. | 944,997,979 | |||||||||||
Export | 5 | 19,121,086 | 395,118,117 | 407,214,445 | 630,291,313 | |||||||||||||||
Services income | 5 | 698,175 | 14,427,081 | 12,912,112 | 11,438,582 | |||||||||||||||
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|
|
|
| |||||||||||||
Total of sales | 52,242,822 | 1,079,545,671 | 1,166,362,469 | 1,586,727,874 | ||||||||||||||||
(Reversal) Impairment of wells, pipelines, properties, plant and equipment | 12-d | (16,033,408 | ) | ( 331,314,343 | ) | 477,944,690 | 22,645,696 | |||||||||||||
Benefit from change in pension plan | 17 | — | — | (92,177,089 | ) | — | ||||||||||||||
Cost of sales | 41,985,126 | 867,580,634 | 895,068,904 | 842,634,784 | ||||||||||||||||
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|
|
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| |||||||||||||
Gross income (loss) | 26,291,104 | 543,279,380 | (114,474,036 | ) | 721,447,394 | |||||||||||||||
Other revenues (expenses), net | 22 | 917,324 | 18,955,580 | (2,373,266 | ) | 37,552,397 | ||||||||||||||
General expenses: | ||||||||||||||||||||
Distribution, transportation and sale expenses | 1,221,024 | 25,231,240 | 28,928,639 | 32,182,666 | ||||||||||||||||
Administrative expenses | 5,451,681 | 112,653,533 | 112,472,095 | 111,337,114 | ||||||||||||||||
Benefit from change in pension plan | 17 | — | (103,860,955 | ) | — | |||||||||||||||
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|
|
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| |||||||||||||
Operating income (loss) | 20,535,723 | 424,350,187 | (154,387,081 | ) | 615,480,011 | |||||||||||||||
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| |||||||||||||
Financing income1 | 665,372 | 13,749,255 | 14,990,859 | 3,014,187 | ||||||||||||||||
Financing cost2 | (4,783,414 | ) | (98,844,464 | ) | (67,773,593 | ) | (51,559,060 | ) | ||||||||||||
Derivative financial instruments cost, net | 16 | (677,555 | ) | (14,000,987 | ) | (21,449,877 | ) | (9,438,570 | ) | |||||||||||
Foreign exchange loss, net | 16 | (12,292,525 | ) | (254,012,743 | ) | (154,765,574 | ) | (76,999,161 | ) | |||||||||||
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| |||||||||||||
(17,088,122 | ) | (353,108,939 | ) | (228,998,185 | ) | (134,982,604 | ) | |||||||||||||
Profit sharing in associates and other, net | 11 | 103,361 | 2,135,845 | 2,318,115 | 34,368 | |||||||||||||||
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| |||||||||||||
Income(loss) before duties, taxes and other | 3,550,962 | 73,377,093 | (381,067,151 | ) | 480,531,775 | |||||||||||||||
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| |||||||||||||
Hydrocarbon extraction duties and others | 20 | 14,750,938 | 304,813,375 | 377,087,514 | 760,912,095 | |||||||||||||||
Income tax | 20 | (1,949,862 | ) | (40,291,940 | ) | (45,587,267 | ) | (14,837,331 | ) | |||||||||||
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| |||||||||||||
Total duties, taxes and other | 12,801,076 | 264,521,435 | 331,500,247 | 746,074,764 | ||||||||||||||||
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|
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| |||||||||||||
Net loss | (9,250,114 | ) | (191,144,342 | ) | (712,567,398 | ) | (265,542,989 | ) | ||||||||||||
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| |||||||||||||
Other comprehensive results: | ||||||||||||||||||||
Items that will be reclassified subsequently to profit or loss: | ||||||||||||||||||||
Available-for-sale financial assets | 10 | 10,057 | 207,817 | (3,206,316 | ) | (765,412 | ) | |||||||||||||
Currency translation effect | 19 | 1,034,984 | 21,386,903 | 13,262,101 | 11,379,657 | |||||||||||||||
Items that will not be reclassified subsequently to profit or loss: | ||||||||||||||||||||
Actuarial gains (losses) — employee benefits | 17 | 5,143,136 | 106,277,761 | 78,556,569 | (275,962,370 | ) | ||||||||||||||
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|
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|
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| |||||||||||||
Total other comprehensive results | 6,188,177 | 127,872,481 | 88,612,354 | (265,348,125 | ) | |||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||
Total comprehensive loss | U.S. $ | (3,061,937 | ) | Ps. | (63,271,861 | ) | Ps. | (623,955,044 | ) | Ps. | (530,891,114 | ) | ||||||||
|
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|
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| |||||||||||||
Net loss attributable to: | ||||||||||||||||||||
Controlling interest | U.S. $ | (9,274,371 | ) | Ps. | (191,645,606 | ) | Ps. | (712,434,997 | ) | Ps. | (265,203,213 | ) | ||||||||
Non-controlling interest | 24,258 | 501,264 | (132,401 | ) | (339,776 | ) | ||||||||||||||
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|
|
|
|
|
|
| |||||||||||||
Net loss | U.S. $ | (9,250,113 | ) | Ps. | (191,144,342 | ) | Ps. | (712,567,398 | ) | Ps. | (265,542,989 | ) | ||||||||
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|
|
|
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|
| |||||||||||||
Other comprehensive results attributable to: | ||||||||||||||||||||
Controlling interest | U.S. $ | 6,177,425 | Ps. | 127,650,318 | Ps. | 88,571,493 | Ps. | (265,528,837 | ) | |||||||||||
Non-controlling interest | 10,751 | 222,163 | 40,861 | 180,712 | ||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||
Total other comprehensive results | U.S. $ | 6,188,176 | Ps. | 127,872,481 | Ps. | 88,612,354 | Ps. | (265,348,125 | ) | |||||||||||
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|
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| |||||||||||||
Comprehensive (loss) income: | ||||||||||||||||||||
Controlling interest | U.S. $ | (3,096,946 | ) | Ps. | (63,995,288 | ) | Ps. | (623,863,504 | ) | Ps. | (530,732,050 | ) | ||||||||
Non-controlling interest | 35,009 | 723,427 | (91,540 | ) | (159,064 | ) | ||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||
Total comprehensive loss | U.S. $ | (3,061,937 | ) | Ps. | (63,271,861 | ) | Ps. | (623,955,044 | ) | Ps. | (530,891,114 | ) | ||||||||
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Note | 2018 | 2018 | 2017 | 2016 | ||||||||||||||||
(Unaudited; U.S. dollars) | ||||||||||||||||||||
Net sales: | ||||||||||||||||||||
Domestic | 7 | U.S. $ | 49,817,839 | Ps. | 980,559,538 | Ps. | 877,360,038 | Ps. | 670,000,473 | |||||||||||
Export | 7 | 35,151,660 | 691,886,610 | 508,539,112 | 395,118,117 | |||||||||||||||
Services income | 7 | 440,636 | 8,673,002 | 11,130,569 | 8,974,642 | |||||||||||||||
|
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|
|
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|
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| |||||||||||||
Total of sales | 85,410,135 | 1,681,119,150 | 1,397,029,719 | 1,074,093,232 | ||||||||||||||||
(Reversal) impairment of wells, pipelines, properties, plant and equipment, net | 15-e | (1,088,203 | ) | (21,418,997 | ) | 151,444,560 | (331,314,343 | ) | ||||||||||||
Cost of sales | 25 | 60,941,810 | 1,199,511,561 | 1,004,204,880 | 865,822,221 | |||||||||||||||
|
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|
|
|
|
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| |||||||||||||
Gross income | 25,556,528 | 503,026,586 | 241,380,279 | 539,585,354 | ||||||||||||||||
Other revenues, net | 26 | 1,171,195 | 23,052,511 | 5,174,076 | 22,649,606 | |||||||||||||||
General expenses: | ||||||||||||||||||||
Distribution, transportation and sale expenses | 25 | 1,207,868 | 23,774,354 | 21,889,670 | 25,231,240 | |||||||||||||||
Administrative expenses | 25 | 6,824,273 | 134,321,481 | 119,939,454 | 112,653,533 | |||||||||||||||
Impairment of accounts receivables | 10 | 29,613 | 582,855 | — | — | |||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||
Operating income | 18,665,969 | 367,400,407 | 104,725,231 | 424,350,187 | ||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||
Financing income1 | 1,603,276 | 31,557,122 | 16,165,853 | 13,749,255 | ||||||||||||||||
Financing cost2 | (6,133,599 | ) | (120,727,022 | ) | (117,644,548 | ) | (98,844,464 | ) | ||||||||||||
Derivative financial instruments (cost) income, net | (1,130,860 | ) | (22,258,613 | ) | 25,338,324 | (14,000,987 | ) | |||||||||||||
Foreign exchange gain (loss), net | 1,202,032 | 23,659,480 | 23,184,122 | (254,012,743 | ) | |||||||||||||||
|
|
|
|
|
|
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| |||||||||||||
(4,459,151 | ) | (87,769,033 | ) | (52,956,249 | ) | (353,108,939 | ) | |||||||||||||
Profit sharing in joint ventures and associates | 14 | 77,581 | 1,527,012 | 360,440 | 2,135,845 | |||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||
Income before duties, taxes and other | 14,284,399 | 281,158,386 | 52,129,422 | 73,377,093 | ||||||||||||||||
|
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|
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|
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| |||||||||||||
Profit sharing duty, net | 23 | 23,875,221 | 469,933,595 | 338,044,209 | 277,161,804 | |||||||||||||||
Income tax benefit | 23 | (424,499 | ) | (8,355,372 | ) | (5,064,168 | ) | (12,640,369 | ) | |||||||||||
|
|
|
|
|
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|
| |||||||||||||
Total duties, taxes and other | 23,450,722 | 461,578,223 | 332,980,041 | 264,521,435 | ||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||
Net loss | (9,166,323 | ) | (180,419,837 | ) | (280,850,619 | ) | (191,144,342 | ) | ||||||||||||
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|
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|
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| |||||||||||||
Other comprehensive results: | ||||||||||||||||||||
Items that will be reclassified subsequently to profit or loss: | ||||||||||||||||||||
Currency translation effect | 42,991 | 846,191 | (6,096,459 | ) | 21,386,903 | |||||||||||||||
Available-for-sale financial assets | — | — | 5,564,130 | 207,817 | ||||||||||||||||
Items that will not be reclassified subsequently to profit or loss: | ||||||||||||||||||||
Actuarial gains—employee benefits | 11,306,543 | 222,545,556 | 12,038,710 | 106,277,761 | ||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||
Total other comprehensive results | 11,349,534 | 223,391,747 | 11,506,381 | 127,872,481 | ||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||
Total comprehensive loss | U.S. $ | 2,183,211 | Ps. | 42,971,910 | Ps. | (269,344,238 | ) | Ps. | (63,271,861 | ) | ||||||||||
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|
|
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| |||||||||||||
Net loss attributable to: | ||||||||||||||||||||
Controlling interest | U.S. $ | (9,164,013 | ) | Ps. | (180,374,350 | ) | Ps. | (280,844,899 | ) | Ps. | (191,645,606 | ) | ||||||||
Non-controlling interest | (2,310 | ) | (45,487 | ) | (5,720 | ) | 501,264 | |||||||||||||
|
|
|
|
|
|
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| |||||||||||||
Net loss | U.S. $ | (9,166,323 | ) | Ps. | (180,419,837 | ) | Ps. | (280,850,619 | ) | Ps. | (191,144,342 | ) | ||||||||
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| |||||||||||||
Other comprehensive results attributable to: | ||||||||||||||||||||
Controlling interest | U.S. $ | 11,372,016 | Ps. | 223,834,249 | Ps. | 11,512,259 | Ps. | 127,650,318 | ||||||||||||
Non-controlling interest | (22,482 | ) | (442,502 | ) | (5,878 | ) | 222,163 | |||||||||||||
|
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|
|
|
|
|
| |||||||||||||
Total other comprehensive results | U.S. $ | 11,349,534 | Ps. | 223,391,747 | Ps. | 11,506,381 | Ps. | 127,872,481 | ||||||||||||
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|
|
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| |||||||||||||
Comprehensive (loss) income: | ||||||||||||||||||||
Controlling interest | U.S. $ | 2,208,003 | Ps. | 43,459,899 | Ps. | (269,332,640 | ) | Ps. | (63,995,288 | ) | ||||||||||
Non-controlling interest | (24,792 | ) | (487,989 | ) | (11,598 | ) | 723,427 | |||||||||||||
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|
|
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| |||||||||||||
Total comprehensive loss | U.S. $ | 2,183,211 | Ps. | 42,971,910 | Ps. | (269,344,238 | ) | Ps. | (63,271,861 | ) | ||||||||||
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The accompanying notes are an integral part of these consolidated financial statements.
1 | Includes financing income from investments and gain on discount rate of plugging of wells in |
2 | Mainly interest on debt. |
PETRÓLEOS MEXICANOS, PRODUCTIVE STATE-OWNED SUBSIDIARIES
AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (DEFICIT), NET
FOR THE YEARS ENDED DECEMBER 31, 2016, 20152018, 2017 AND 20142016
(Figures stated in thousands, except as noted)
(See Note 21)24)
Controlling interest | ||||||||||||||||||||||||||||||||||||||||||||
Accumulated other comprehensive income (loss) | Accumulated deficit | Total | Non controlling interest | Total Equity (deficit), net | ||||||||||||||||||||||||||||||||||||||||
Certificates of Contribution “A” | Mexican Government contributions | Legal reserve | Available- for sale financial assets | Cumulative currency translation effect | Actuarial (losses) gains on employee benefits effect | For the year | From prior years | |||||||||||||||||||||||||||||||||||||
Balances as of January 1, 2014 | Ps. | 114,604,835 | Ps. | 115,313,691 | Ps. | 1,002,130 | Ps. | (1,800,219 | ) | Ps. | 5,127,480 | Ps. | (132,392,890 | ) | Ps. | — | Ps. | (287,605,549 | ) | Ps. | (185,750,522 | ) | Ps. | 503,882 | (185,246,640 | ) | ||||||||||||||||||
Increase in Certificates of Contribution “A” | 20,000,000 | — | — | — | — | — | — | — | 20,000,000 | — | 20,000,000 | |||||||||||||||||||||||||||||||||
Increase in Mexican Government Contributions | — | 2,000,000 | — | — | — | — | — | — | 2,000,000 | — | 2,000,000 | |||||||||||||||||||||||||||||||||
Decrease in Mexican Government Contributions | — | (73,583,100 | ) | — | — | — | — | — | — | (73,583,100 | ) | — | (73,583,100 | ) | ||||||||||||||||||||||||||||||
Total comprehensive income (loss) | — | — | — | (765,412 | ) | 11,192,953 | (275,956,378 | ) | (265,203,213 | ) | — | (530,732,050 | ) | (159,064 | ) | (530,891,114 | ) | |||||||||||||||||||||||||||
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Balances as of December 31, 2014 | Ps. | 134,604,835 | Ps. | 43,730,591 | Ps. | 1,002,130 | Ps. | (2,565,631 | ) | Ps. | 16,320,433 | Ps. | (408,349,268 | ) | Ps. | (265,203,213 | ) | Ps. | (287,605,549 | ) | Ps. | (768,065,672 | ) | Ps. | 344,818 | (767,720,854 | ) | |||||||||||||||||
Transfer to accumulated deficit | — | — | — | — | — | — | 265,203,213 | (265,203,213 | ) | — | — | — | ||||||||||||||||||||||||||||||||
Increase in Certificates of Contribution “A” | 60,000,000 | — | — | — | — | — | — | — | 60,000,000 | — | 60,000,000 | |||||||||||||||||||||||||||||||||
Total comprehensive income (loss) | — | — | — | (3,206,316 | ) | 13,229,927 | 78,547,882 | (712,434,997 | ) | — | (623,863,504 | ) | (91,540 | ) | (623,955,044 | ) | ||||||||||||||||||||||||||||
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Balances as of December 31, 2015 | Ps. | 194,604,835 | Ps. | 43,730,591 | Ps. | 1,002,130 | Ps. | (5,771,947 | ) | Ps. | 29,550,360 | Ps. | (329,801,386 | ) | Ps. | (712,434,997 | ) | Ps. | (552,808,762 | ) | Ps. | (1,331,929,176 | ) | Ps. | 253,278 | Ps. | (1,331,675,898 | ) | ||||||||||||||||
Transfer to accumulated deficit | — | — | — | — | — | — | 712,434,997 | (712,434,997 | ) | — | — | — | ||||||||||||||||||||||||||||||||
Increase in Certificates of Contribution “A” | 161,939,612 | — | — | — | — | — | — | — | 161,939,612 | — | 161,939,612 | |||||||||||||||||||||||||||||||||
Reclassification of other comprehensive income | — | — | — | — | — | 14,973,214 | — | (14,973,214 | ) | — | — | |||||||||||||||||||||||||||||||||
Total comprehensive income (loss) | — | — | — | 207,817 | 21,169,662 | 106,272,839 | ( 191,645,606 | ) | — | ( 63,995,288 | ) | 723,427 | ( 63,271,861 | ) | ||||||||||||||||||||||||||||||
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| |||||||||||||||||||||||
Balances as of December 31, 2016 | Ps. | 356,544,447 | Ps. | 43,730,591 | Ps. | 1,002,130 | Ps. | (5,564,130 | ) | Ps. | 50,720,022 | Ps. | (208,555,333 | ) | Ps. | (191,645,606 | ) | Ps. | (1,280,216,973 | ) | Ps. | ( 1,233,984,852 | ) | Ps. | 976,705 | Ps. | (1,233,008,147 | ) | ||||||||||||||||
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| |||||||||||||||||||||||
Balances as of December 31, 2016 (Unaudited U.S. dollars) | U.S.$ | 17,254,377 | U.S.$ | 2,116,269 | U.S.$ | 48,496 | U.S.$ | (269,267) | U.S.$ | 2,454,512 | U.S.$ | (10,092,690) | U.S.$ | (9,274,371 | ) | U.S.$ | (61,953,977 | ) | U.S.$ | (59,716,651 | ) | U.S.$ | 47,266 | U.S.$ | (59,669,385) | |||||||||||||||||||
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Controlling interest | ||||||||||||||||||||||||||||||||||||||||||||
Certificates of Contribution “A” | Mexican Government contributions | Legal reserve | Accumulated other comprehensive income (loss) | Accumulated deficit | ||||||||||||||||||||||||||||||||||||||||
Available-for sale financial assets | Cumulative currency translation effect | Actuarial (losses) gains on employee benefits effect | Total | Non controlling interest | Total Equity (deficit), net | |||||||||||||||||||||||||||||||||||||||
For the year | From prior years | |||||||||||||||||||||||||||||||||||||||||||
Balances as of January 1, 2016 | Ps. | 194,604,835 | Ps. | 43,730,591 | Ps. | 1,002,130 | Ps. | (5,771,947 | ) | Ps. | 29,550,360 | Ps. | (329,801,386 | ) | Ps. | (712,434,997 | ) | Ps. | (552,808,762 | ) | Ps. | (1,331,929,176 | ) | Ps. | 253,278 | Ps. | (1,331,675,898 | ) | ||||||||||||||||
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| |||||||||||||||||||||||
Transfer to accumulated deficit | — | — | — | — | — | — | 712,434,997 | (712,434,997 | ) | — | — | — | ||||||||||||||||||||||||||||||||
Increase in Certificates of Contribution “A” | 161,939,612 | — | — | — | — | — | — | — | 161,939,612 | — | 161,939,612 | |||||||||||||||||||||||||||||||||
Reclassification of other comprehensive income | — | — | — | — | — | 14,973,214 | — | (14,973,214 | ) | — | — | — | ||||||||||||||||||||||||||||||||
Total comprehensive income (loss) | — | — | — | 207,817 | 21,169,662 | 106,272,839 | (191,645,606 | ) | — | (63,995,288 | ) | 723,427 | (63,271,861 | ) | ||||||||||||||||||||||||||||||
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Balances as of December 31, 2016 | Ps. | 356,544,447 | Ps. | 43,730,591 | Ps. | 1,002,130 | Ps. | (5,564,130 | ) | Ps. | 50,720,022 | Ps. | (208,555,333) | Ps. | (191,645,606 | ) | Ps. | (1,280,216,973 | ) | Ps. | (1,233,984,852 | ) | Ps. | 976,705 | Ps. | (1,233,008,147 | ) | |||||||||||||||||
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Transfer to accumulated deficit | — | — | — | — | — | — | 191,645,606 | (191,645,606 | ) | — | — | — | ||||||||||||||||||||||||||||||||
Total comprehensive income (loss) | — | — | — | 5,564,130 | (6,087,010 | ) | 12,035,139 | (280,844,899 | ) | — | (269,332,640 | ) | (11,598 | ) | (269,344,238 | ) | ||||||||||||||||||||||||||||
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Balances as of December 31, 2017 | Ps. | 356,544,447 | Ps. | 43,730,591 | Ps. | 1,002,130 | Ps. | — | Ps. | 44,633,012 | Ps. | (196,520,194 | ) | Ps. | (280,844,899 | ) | Ps. | (1,471,862,579 | ) | Ps. | (1,503,317,492 | ) | Ps. | 965,107 | Ps. | (1,502,352,385 | ) | |||||||||||||||||
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Initial effect by the adoption of IFRS 9 (Note4-b) | — | — | — | — | — | — | — | (24,957 | ) | (24,957 | ) | — | (24,957 | ) | ||||||||||||||||||||||||||||||
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Balances adjusted as of January 1, 2018 | Ps. | 356,544,447 | Ps. | 43,730,591 | Ps. | 1,002,130 | Ps. | — | Ps. | 44,633,012 | Ps. | (196,520,194 | ) | Ps. | (280,844,899 | ) | Ps. | (1,471,887,536 | ) | Ps. | (1,503,342,449 | ) | Ps. | 965,107 | Ps. | (1,502,377,342 | ) | |||||||||||||||||
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Transfer to accumulated deficit | — | — | — | — | — | — | 280,844,899 | (280,844,899 | ) | — | — | — | ||||||||||||||||||||||||||||||||
Total comprehensive income (loss) | — | — | — | — | 1,287,215 | 222,547,034 | (180,374,350 | ) | — | 43,459,899 | (487,989 | ) | 42,971,910 | |||||||||||||||||||||||||||||||
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Balances as of December 31, 2018 | Ps. | 356,544,447 | Ps. | 43,730,591 | Ps. | 1,002,130 | Ps. | — | 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 | ) | ||||||||||||||||||
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Balances as of December 31, 2018 (Unaudited U.S. dollars) | U.S.$ | 18,114,427 | U.S.$ | 2,221,755 | U.S.$ | 50,914 | U.S.$ | — | U.S.$ | 2,333,001 | U.S.$ | 1,322,307 | U.S.$ | (9,164,013 | ) | U.S.$ | (89,048,485 | ) | U.S.$ | (74,170,094 | ) | U.S.$ | 24,240 | U.S.$ | (74,145,854 | ) | ||||||||||||||||||
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The accompanying notes are an integral part of these consolidated financial statements.
PETRÓLEOS MEXICANOS, PRODUCTIVE STATE-OWNED SUBSIDIARIES
AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2016, 20152018, 2017 AND 20142016
(Figures stated in thousands, except as noted)
2016 | 2016 | 2015 | 2014 | 2018 | 2018 | 2017 | 2016 | |||||||||||||||||||||||||
(Unaudited; U.S. dollars) | (Unaudited; U.S. dollars) | |||||||||||||||||||||||||||||||
Operating activities | ||||||||||||||||||||||||||||||||
Net (loss) income | U.S. $ | (9,250,114 | ) | Ps. 191,144,342 | ) | Ps. (712,567,398 | ) | Ps. (265,542,989 | ) | |||||||||||||||||||||||
Net loss | (9,166,323 | ) | (180,419,837 | ) | (280,850,619 | ) | (191,144,342 | ) | ||||||||||||||||||||||||
Items related to investment activities | ||||||||||||||||||||||||||||||||
Depreciation and amortization | 7,280,270 | 150,439,491 | 167,951,250 | 143,074,787 | 7,792,655 | 153,382,040 | 156,704,513 | 150,439,491 | ||||||||||||||||||||||||
Amortization of intangible assets | 134,296 | 2,643,326 | — | — | ||||||||||||||||||||||||||||
(Reversal) impairment of wells, pipelines, properties, plant and equipment | (16,033,408 | ) | (331,314,343 | ) | 477,944,690 | 22,645,696 | (1,088,203 | ) | (21,418,997 | ) | 151,444,560 | (331,314,343 | ) | |||||||||||||||||||
Unsuccessful wells | 1,408,541 | 29,106,084 | 23,213,519 | 12,148,028 | 784,594 | 15,443,086 | 6,164,624 | 29,106,084 | ||||||||||||||||||||||||
Disposal of wells, pipelines, properties, plant and equipment | 182,505 | 3,771,287 | 24,638,537 | 6,370,937 | ||||||||||||||||||||||||||||
Exploration costs | (110,310 | ) | (2,171,218 | ) | (1,447,761 | ) | (2,022,826 | ) | ||||||||||||||||||||||||
Loss from derecognition of disposal of wells, pipelines, properties, plant and equipment | 857,865 | 16,885,264 | 17,063,671 | 3,771,287 | ||||||||||||||||||||||||||||
Disposal of held—for—sale current non—financial assets | — | — | 2,808,360 | — | ||||||||||||||||||||||||||||
Loss in sale of fixed assets | 193,913 | 27,882,480 | — | — | — | — | — | 27,882,480 | ||||||||||||||||||||||||
Gain on sale of share in associates and other | 1,349,326 | (15,211,039 | ) | — | — | |||||||||||||||||||||||||||
Profit (loss) share in associates | (103,361 | ) | (2,135,845 | ) | (2,318,115 | ) | (34,368 | ) | ||||||||||||||||||||||||
Net loss onavailable-for-sale financial assets | — | — | 3,523,748 | — | ||||||||||||||||||||||||||||
Decrease onavailable–for-sale financial assets | — | — | 1,360,205 | — | ||||||||||||||||||||||||||||
(Gain) on sale of share in joint ventures and associates | (35,623 | ) | (701,171 | ) | (3,139,103 | ) | (15,211,039 | ) | ||||||||||||||||||||||||
Impairment of goodwill | (736,113 | ) | 4,007,018 | (680,630 | ) | — | — | — | — | 4,007,018 | ||||||||||||||||||||||
Effects of net present value of reserve for well abandonment | (353,261 | ) | (6,953,200 | ) | 7,774,000 | 11,968,966 | ||||||||||||||||||||||||||
Profit sharing in joint ventures and associates | (77,581 | ) | (1,527,012 | ) | (360,440 | ) | (2,135,845 | ) | ||||||||||||||||||||||||
Dividends | (14,198 | ) | (293,397 | ) | (359,941 | ) | (736,302 | ) | — | — | (180,675 | ) | (293,397 | ) | ||||||||||||||||||
Effects of net present value of reserve for well abandonment | 579,218 | 11,968,966 | (608,160 | ) | 9,169,327 | |||||||||||||||||||||||||||
Net loss onavailable-for-sale financial assets | — | — | — | 215,119 | ||||||||||||||||||||||||||||
Amortization expenses related to debt issuance | (77,922 | ) | (1,610,183 | ) | (2,299,657 | ) | 312,296 | |||||||||||||||||||||||||
Unrealized foreign exchange loss | 11,768,426 | 243,182,764 | 152,676,256 | 78,884,717 | ||||||||||||||||||||||||||||
Items related to financing activities | ||||||||||||||||||||||||||||||||
Unrealized foreign exchange (income) loss | (1,004,029 | ) | (19,762,208 | ) | (16,685,439 | ) | 243,182,764 | |||||||||||||||||||||||||
Interest expense | 4,783,414 | 98,844,464 | 67,773,593 | 50,909,624 | 6,133,599 | 120,727,022 | 117,644,548 | 98,844,464 | ||||||||||||||||||||||||
Interest income | (483,717 | ) | (9,520,962 | ) | — | — | ||||||||||||||||||||||||||
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1,330,497 | 27,493,405 | 195,363,944 | 57,416,872 | 3,383,962 | 66,606,133 | 161,824,192 | 27,080,762 | |||||||||||||||||||||||||
Funds used in operating activities | ||||||||||||||||||||||||||||||||
Profit sharing duty and income tax | 22,690,377 | 446,612,429 | 375,258,833 | 311,015,217 | ||||||||||||||||||||||||||||
Taxes and duties paid | (22,546,741 | ) | (443,785,240 | ) | (372,240,560 | ) | (303,593,175 | ) | ||||||||||||||||||||||||
Derivative financial instruments | 15,046 | 310,905 | 9,802,397 | 16,354,342 | 298,759 | 5,880,442 | (38,377,961 | ) | 310,905 | |||||||||||||||||||||||
Accounts receivable | (2,666,688 | ) | (55,104,439 | ) | 33,003,083 | 9,261,025 | (14,556 | ) | (286,509 | ) | (27,124,228 | ) | (55,104,439 | ) | ||||||||||||||||||
Long-term accounts receivable | — | — | 114,693 | (3,277,724 | ) | |||||||||||||||||||||||||||
Intangible assets | — | — | (5,166,184 | ) | (19,745,821 | ) | ||||||||||||||||||||||||||
Inventories | (65,761 | ) | (1,358,879 | ) | 6,167,728 | 6,975,844 | (922,813 | ) | (18,163,638 | ) | (17,966,870 | ) | (1,358,878 | ) | ||||||||||||||||||
Long-term receivables | (158,620 | ) | (3,277,724 | ) | — | — | ||||||||||||||||||||||||||
Intangible assets | (955,566 | ) | (19,745,821 | ) | — | — | ||||||||||||||||||||||||||
Other assets | (101,867 | ) | (2,104,985 | ) | (16,602,365 | ) | (18,984,877 | ) | (26,963 | ) | (530,711 | ) | (1,972,532 | ) | (2,104,985 | ) | ||||||||||||||||
Accounts payable and accrued expenses | 149,906 | 3,097,660 | 1,002,403 | (1,959,714 | ) | 86,688 | 1,706,268 | 4,544,794 | 3,097,660 | |||||||||||||||||||||||
Taxes paid | 280,337 | 5,792,879 | 626,626 | 1,130,595 | ||||||||||||||||||||||||||||
Suppliers | (758,067 | ) | (15,664,703 | ) | 51,135,948 | 9,433,102 | 502,331 | 9,887,334 | (11,694,162 | ) | (15,664,703 | ) | ||||||||||||||||||||
Provisions for sundry creditors | 754,228 | 15,585,374 | (9,126,733 | ) | 356,582 | (302,311 | ) | (5,950,348 | ) | (7,266,629 | ) | 15,585,374 | ||||||||||||||||||||
Employee benefits | 2,288,670 | 47,293,069 | (116,022,232 | ) | 78,970,008 | 2,723,424 | 53,604,884 | 50,065,396 | 47,293,069 | |||||||||||||||||||||||
Deferred taxes | (2,119,734 | ) | (43,802,181 | ) | (53,014,159 | ) | (24,597,648 | ) | ||||||||||||||||||||||||
Other taxes and duties | 1,331,386 | 26,205,546 | (46,601,312 | ) | (45,431,344 | ) | ||||||||||||||||||||||||||
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Net cash flows (used in) from operating activities | (2,007,619 | ) | (41,485,440 | ) | 102,336,640 | 134,356,131 | ||||||||||||||||||||||||||
Net cash flows from (used in) operating activities | 7,203,544 | 141,786,590 | 63,397,470 | (41,898,082 | ) | |||||||||||||||||||||||||||
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Investing activities | ||||||||||||||||||||||||||||||||
Long-term receivables from the Mexican Government | 120,107 | 2,364,053 | — | — | ||||||||||||||||||||||||||||
Resources from the sale of available-for-sale financial assets | — | — | 8,026,836 | — | ||||||||||||||||||||||||||||
Interest received for long-term receivable from the Mexican Government | 9,532 | 187,615 | — | — | ||||||||||||||||||||||||||||
Other notes receivable | 63,342 | 1,246,763 | — | — | ||||||||||||||||||||||||||||
Proceeds from the sale of associates | 207,202 | 4,078,344 | 3,141,710 | 22,684,736 | ||||||||||||||||||||||||||||
Proceeds from the sale of fixed assets | — | — | — | 560,665 | ||||||||||||||||||||||||||||
Business acquisition | — | — | — | (4,329,769 | ) | |||||||||||||||||||||||||||
Acquisition of wells, pipelines, properties, plant and equipment | (7,327,162 | ) | (151,408,480 | ) | (253,514,001 | ) | (230,678,870 | ) | (4,775,902 | ) | (94,003,596 | ) | (91,859,465 | ) | (151,408,481 | ) | ||||||||||||||||
Exploration costs | (97,891 | ) | (2,022,826 | ) | (5,698,511 | ) | (1,593,706 | ) | ||||||||||||||||||||||||
Received dividends | — | — | — | 336,095 | ||||||||||||||||||||||||||||
Resources from the sale on share in associates | 1,097,790 | 22,684,736 | 4,417,138 | — | ||||||||||||||||||||||||||||
Proceeds from the sale of fixed assets | 27,132 | 560,665 | — | — | ||||||||||||||||||||||||||||
Investments in associates | — | — | (36,214 | ) | (3,466,447 | ) | ||||||||||||||||||||||||||
Business acquisition | (209,532 | ) | (4,329,769 | ) | — | |||||||||||||||||||||||||||
Available-for-sale financial assets | — | — | — | 12,735,337 | ||||||||||||||||||||||||||||
Intangible assets | (759,903 | ) | (14,957,093 | ) | — | — | ||||||||||||||||||||||||||
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Net cash flows used in investing activities | (6,509,663 | ) | (134,515,674 | ) | (254,831,588 | ) | (222,667,591 | ) | (5,135,622 | ) | (101,083,914 | ) | (80,690,919 | ) | (132,492,849 | ) | ||||||||||||||||
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Excess cash to apply in financing activities | 2,067,922 | 40,702,676 | (17,293,449 | ) | (174,390,931 | ) | ||||||||||||||||||||||||||
Financing activities | ||||||||||||||||||||||||||||||||
Increase in equity due to Certificates of Contributions “A” | 3,556,911 | 73,500,000 | 10,000,000 | 22,000,000 | ||||||||||||||||||||||||||||
Decrease in equity Mexican Government contributions | — | — | — | (73,583,100 | ) | |||||||||||||||||||||||||||
Increase in equity due to Certificates of Contribution “A” | — | — | — | 73,500,000 | ||||||||||||||||||||||||||||
Loans obtained from financial institutions | 40,746,795 | 841,991,767 | 378,971,078 | 423,399,475 | 45,713,234 | 899,769,012 | 704,715,468 | 841,991,767 | ||||||||||||||||||||||||
Debt payments, principal only | (29,683,369 | ) | (613,377,146 | ) | (191,318,841 | ) | (207,455,492 | ) | (42,729,140 | ) | (841,033,392 | ) | (642,059,819 | ) | (614,987,329 | ) | ||||||||||||||||
Interest paid | (4,295,109 | ) | (88,754,141 | ) | (62,737,150 | ) | (47,248,478 | ) | (5,857,338 | ) | (115,289,389 | ) | (108,910,417 | ) | (88,754,141 | ) | ||||||||||||||||
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Net cash flows from financing activities | 10,325,228 | 213,360,480 | 134,915,087 | 117,112,405 | (2,873,244 | ) | (56,553,769 | ) | (46,254,768 | ) | 211,750,297 | |||||||||||||||||||||
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Net increase (decrease) in cash and cash equivalents | 1,807,946 | 37,359,366 | (17,579,861 | ) | 28,800,945 | |||||||||||||||||||||||||||
Effects of change in cash value | 813,213 | 16,804,267 | 8,960,213 | 8,441,864 | ||||||||||||||||||||||||||||
Cash and cash equivalents at the beginning of the year | 5,292,726 | 109,368,880 | 117,988,528 | 80,745,719 | ||||||||||||||||||||||||||||
Net (decrease) increase in cash and cash equivalents | (805,322 | ) | (15,851,093 | ) | (63,548,217 | ) | 37,359,366 | |||||||||||||||||||||||||
Effects of foreign exchange on cash balances | (4,484 | ) | (88,252 | ) | (2,132,542 | ) | 16,804,267 | |||||||||||||||||||||||||
Cash and cash equivalents at the beginning of the period | 4,971,409 | 97,851,754 | 163,532,513 | 109,368,880 | ||||||||||||||||||||||||||||
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Cash and cash equivalents at the end of the year (Note 6) | U.S. $ | 7,913,885 | Ps. 163,532,513 | Ps. 109,368,880 | Ps.117,988,528 | |||||||||||||||||||||||||||
Cash and cash equivalents at the end of the period (Note 9) | 4,161,603 | 81,912,409 | 97,851,754 | 163,532,513 | ||||||||||||||||||||||||||||
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The accompanying notes are an integral part of these consolidated financial statements.
PETRÓLEOS MEXICANOS, PRODUCTIVE STATE-OWNED SUBSIDIARIES
AND SUBSIDIARY COMPANIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2016, 20152018, 2017 AND 20142016
(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 theDiario Oficial de la Federación (Official (“Official Gazette of the Federation)Federation”) on July 20, 1938 and came into effect on that date.
On December 20, 2013, theDecreto 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, and came into effect on December 21, 2013 (the “Energy Reform Decree”). In accordance withand included transitional articles setting forth the Energy Reform Decree,general framework for implementing legislation relating to the Mexican Government will carry out the exploration and extraction of hydrocarbons in the United Mexican States (“Mexico”) through assignments to productive state-owned companies, as well as through agreements with productive state-owned companies and with other companies.energy sector.
As part of the secondary legislation enacted in accordance with the Energy Reform Decree,this legal framework, on August 11, 2014, theLey de Petróleos Mexicanos (the Petró“Petróleos Mexicanos Law)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(“Ministry of Energy)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 levels came into effect. On June 10, 2015 theDisposiciones 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 the day after.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 Mexico. In addition, Petróleos Mexicanos is entitled to performperforms activities related to refining, gas processing and engineering and research projects to create economic value and profitability forto increase the income of the Mexican Government, as its owner, while adhering to principles of equity and social and environmental responsibility.
The Subsidiary Entities,Pemex Exploración y Producción (Pemex Exploration and Production),Pemex Transformación Industrial (Pemex Industrial Transformation),Pemex Perforación y Servicios (Pemex Drilling and Services),Pemex Logística (Pemex Logistics),Pemex Cogeneración y Servicios (Pemex Cogeneration and Services),Pemex Fertilizantes (Pemex Fertilizers) andPemex Etileno (Pemex Ethylene), are productive state-owned subsidiaries empowered to own property and carry on business in their own name, subject to the direction and coordination of Petróleos Mexicanos (the “Subsidiary Entities”).
The Subsidiary Entities of Petróleos Mexicanos prior to the Corporate Reorganization (defined below) werePemex-Exploración y Producción, Pemex-Refinación (Pemex-Refining),Pemex-Gas and Petroquímica Básica(Pemex-Gas and Basic Petrochemicals) andPemex-Petroquímica (Pemex-Petrochemicals), which were
PETRÓLEOS MEXICANOS, PRODUCTIVE STATE-OWNED SUBSIDIARIES
AND SUBSIDIARY COMPANIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2016, 2015 AND 2014
(FIGURES STATED IN THOUSANDS, EXCEPT AS NOTED)
decentralized public entities with a technical, industrial and commercial nature with their own corporate identity and equity, with the legal authority to own property and conduct business in their own names, and were 100% owned by Petróleos Mexicanos and controlled by the Mexican Government; they had been consolidated into and had the characteristics of subsidiaries of Petróleos Mexicanos.
The Board of Directors of Petróleos Mexicanos, in its meeting held on November 18, 2014, approved the Corporate Reorganization proposed by the Chief Executive OfficerDirector General of Petróleos Mexicanos.
Pursuant to the recent corporate reorganization, (the “Corporate Reorganization”), the existing four Subsidiary Entities were transformed into two new productive state-owned subsidiaries, which will have assumed all of the rights and obligations of the existing Subsidiary Entities (the “Corporate Reorganization”).Entities. Pemex-Exploration and Production was transformed into Pemex Exploration and Production, a productive state-owned subsidiary, and Pemex-Refining,Pemex-Gas and Basic Petrochemicals and Pemex-Petrochemicals were transformed into the productive state-owned subsidiary Pemex Industrial Transformation.
The Board of Directors of Petróleos Mexicanos also approved the creation of the following new Subsidiary Entities: Pemex Drilling and Services, Pemex Logistics, Pemex Cogeneración y Servicios (Pemex Cogeneration and Services,Services), Pemex Fertilizers and Pemex Ethylene.Ethylene (the "Corporate Reorganization"). Each of these productive state-owned subsidiaries may be transformed into an affiliate of Petróleos Mexicanos if certain conditions set forth in the Petróleos Mexicanos Law are met.
On March 27, 2015, the Board of Directors of Petróleos Mexicanos approved the acuerdos de creación (creation resolutions) of each productive state-owned subsidiary. The Subsidiary Entities mainly perform the following activities:
PETRÓLEOS MEXICANOS, PRODUCTIVE STATE-OWNED SUBSIDIARIES
AND SUBSIDIARY COMPANIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2016, 2015 AND 2014
(FIGURES STATED IN THOUSANDS, EXCEPT AS NOTED)
On April 28, 2015 the creation resolutions of the seven productive state-owned subsidiaries were published in the Official Gazette of the Federation.
On May 29, 2015 the statements related to the creation resolution of the productive state-owned subsidiary Pemex Exploration and Production and the productive state-owned subsidiary Pemex Cogeneration and Services issued by the Board of Directors of Petróleos Mexicanos were published in the Official Gazette of the Federation and, accordingly, these creation resolutions came into effect on June 1, 2015.
On December 29, 2015 and May 12, 2016, a modificationmodifications to the creation resolution of the productive state-owned subsidiary Pemex Exploration and Production waswere published in the Official Gazette of the Federation and became effective that same date.date, respectively.
On July 31, 2015, the statements related to the creation resolution of the productive state-owned subsidiary Pemex Drilling and Services, the productive state-owned subsidiary Pemex Fertilizers and the productive state-owned subsidiary Pemex Ethylene issued by the Board of Directors of Petróleos Mexicanos were published in the Official Gazette of the Federation and, accordingly, these creation resolutions came into effect on August 1, 2015.
On October 1, 2015, the statement related to the creation resolution of the productive state-owned subsidiary Pemex Logistics issued by the Board of Directors of Petróleos Mexicanos was published in the Official Gazette of the Federation and, accordingly, these creation resolutions came into effect on October 1, 2015.
On October 6, 2015, the statement related to the creation resolution of the productive state-owned subsidiary Pemex Industrial Transformation issued by the Board of Directors of Petróleos Mexicanos was published in the Official Gazette of the Federation and, accordingly, these creation resolutions came into effect on November 1, 2015.
The terms in capital letters not defined in these financial statements shall be understood as establishedOn July 13, 2018, the Board of Directors of Petróleos Mexicanos issued the Declaration of Liquidation and Extinction of Pemex Cogeneration and Services, which was published in the Petróleos Mexicanos Law.Official Gazette of the Federation and became effective on July 27, 2018. As of July 27, 2018, Pemex Industrial Transformation assumed all of the assets, liabilities, rights and obligations, and became, as a matter of Mexican law, the successor to Pemex Cogeneration and Services.
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.
Pemex Industrial Transformation: This entity performs activities related to refining, processing, importing, exporting, trading and the sale of hydrocarbons.
Pemex Drilling and Services: This entity performs drilling services and repair and services of wells.
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.
Pemex Ethylene: This entity commercializes, distributes and trades methane, ethane and propylene, directly or through others.
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 affiliatesaffiliate 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 (see Note3-a)3-A).
“Associates,” as used herein, means those companies in which Petróleos Mexicanos doeshas significant influence but not have effective control or joint control over its financial and operating policies (see Note 3 a)3-A).
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, DelegaciónAlcaldía Miguel Hidalgo, 11300 Ciudad de México, México.
PETRÓLEOS MEXICANOS, PRODUCTIVE STATE-OWNED SUBSIDIARIES
AND SUBSIDIARY COMPANIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2016, 2015 AND 2014
(FIGURES STATED IN THOUSANDS, EXCEPT AS NOTED)
NOTE 2. AUTHORIZATION AND BASIS OF PREPARATION
PEMEX prepared its consolidated financial statements as of December 31, 2016 and 2015, and for the years ended December 31, 2016, 2015 and 2014, in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”).Authorization
On April 20, 2017,30, 2019, these consolidated financial statements under IFRS and the notes hereto were authorized for issuance by the following officers: Mr. José Antonio González Anaya,Octavio Romero Oropeza, Chief Executive Officer, Mr. Juan Pablo Newman Aguilar,Alberto Velázquez García, Chief Financial Officer, Mr. Manuel Salvador Cruz Flores, Deputy Director of Accounting and Tax Matters, and Mr. Francisco J. Torres Suárez,Oscar René Orozco Piliado, Associate Managing Director of Accounting.
These consolidated financial statements and the notes hereto as of December 31, 20162018 were approved by the Board of Petróleos Mexicanos on April 27, 2017 with prior approval from the Audit Committee of the report of the Independent Registered Public Accountant,23, 2019, pursuant to the terms of Article 13 Fraction VI of the Petróleos Mexicanos Law, Article 104 Fraction III, paragraph a, of theLey del Mercado de Valores (Securities Market Law), and of Article 33 Fraction I, paragraph a, section 3 and Article 78 of theDisposiciones de carácter general aplicables a las emisoras de valores y a otros participantes del mercado de valores (General (“General provisions applicable to securities´ issuers and other participants of the securities market)market”).
Audit appraisal matters are reported to the Audit Committee.
These consolidated financial statements are PEMEX’s first annual consolidated financial statements in whichIFRS 15, Revenue from Contract with Customers(“IFRS 15”) andIFRS 9, Financial Instruments (“IFRS 9”) have been applied. Changes to significant accounting policies are described in Note 4.
Basis of accounting
A. Statement of compliance
PEMEX prepared its consolidated financial statements as of December 31, 2018 and 2017, and for the years ended December 31, 2018, 2017 and 2016, in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”).
B. Basis of measurement
These consolidated financial statements have been prepared using the historical cost basis method, except where it is indicated that certainwith the exception of the following items, which have been measured using the fair value model, amortized cost, present value or value in use. The principal items measured at fair value are derivative financial instruments (“DFIs”); the principal item measured at amortized cost is debt, the principal item measured at present value is the provision for employee benefits and some components of wells, pipelines, properties, plant and equipment are measured at value in use.an alternative basis.
Item | Basis of measurement | |
Derivative Financial Instruments (“DFIs”) | Fair Value | |
Debt | Amortized Cost | |
Employee Benefits | Fair Value of plan assets less present value of the obligation | |
Wells, pipelines, properties, plant and equipment | Some components at value in use |
C. Going concern
The consolidated financial statements have been prepared on a going concern basis, which assumes that PEMEX can meet its payment obligations. (See Note24-E)
For the years ended December 31, 2016D. Functional and 2015, PEMEX recognized net losses of Ps. 191,144,342 and Ps.712,567,398, respectively, caused mainly by the decrease in international oil prices that commenced in August 2014, the high tax burden applicable to the industry and the depreciation of the peso relative to the U.S. dollar. Additionally, as of December 31, 2016 and December 31, 2015, PEMEX had a negative equity of Ps. 1,233,008,147 and Ps. 1,331,675,898, respectively, and a negative working capital of Ps. 70,791,086 and Ps. 176,207,224, respectively; and net cash flows used in operating activities for Ps.41,485,440 for the year ended December 31, 2016.reporting currency
PEMEX believes net cash flows from its operating and financing activities for 2017, including the use of lines of credit with certain banks, will be sufficient to meet its working capital needs, debt service and capital expenditure requirements and maintain its financial strength and flexibility in the twelve months following from the date of issuance of these consolidated financial statements.
PETRÓLEOS MEXICANOS, PRODUCTIVE STATE-OWNED SUBSIDIARIES
AND SUBSIDIARY COMPANIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2016, 2015 AND 2014
(FIGURES STATED IN THOUSANDS, EXCEPT AS NOTED)
PEMEX is continuing to implement a business strategy that redefines it as a state-owned productive company and that enables it to operate competitively and efficiently and take advantage of benefits of the Energy Reform. PEMEX began taking certain of these actions in 2016 and will continue in 2017 as further described below:
The business plan was prepared with realistic and conservative premises, which does not include additional income from the disposal of assets.
|
PETRÓLEOS MEXICANOS, PRODUCTIVE STATE-OWNED SUBSIDIARIES
AND SUBSIDIARY COMPANIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2016, 2015 AND 2014
(FIGURES STATED IN THOUSANDS, EXCEPT AS NOTED)
|
In addition, PEMEX foresees a more stable scenario for the hydrocarbons market, which may allow for an improvement in its revenues. A result of this stability was the effect of the reversal of the impairment experienced in 2016, which resulted in an improvement in the financial position of PEMEX by Ps. 331.3 billion, compared to the impairment of Ps.477.9 billion in 2015.
Petróleos Mexicanos and its Subsidiaries Entities are not subject to theLey de Concursos Mercantiles (the Bankruptcy Law) and none of PEMEX’S existing financing agreements include any clause that could lead to the demand for immediate payment of the respective debt due to having negative equity.
PEMEX prepared its consolidated financial statements as of December 31, 2016 and 2015 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, negative equity and negative cash flows from operating activities in 2016. PEMEX has disclosed the existence of these uncertainties, the circumstances that have caused these negative trends and the concrete actions it is taking to face them, improve its results and strengthen the feasibility to continue operating, achieving maximization and efficiencies in an economic environment which is showing recovery and some stability. These financial statements do not contain any adjustments that would be required if they were not prepared on a going concern basis.
These consolidated 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; |
PETRÓLEOS MEXICANOS, PRODUCTIVE STATE-OWNED SUBSIDIARIES
AND SUBSIDIARY COMPANIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2016, 2015 AND 2014
(FIGURES STATED IN THOUSANDS, EXCEPT AS NOTED)
ii. | Petróleos Mexicanos and its Subsidiary Entities have budgetary autonomy, subject only to maintaining the financial balance (the difference between income and total net spending, including the financial cost of the public debt of the Mexican Government and the entities directly controlled by the Mexican Government) and the spending cap of personnel services proposed by SHCP and approved by the Mexican Congress, in Mexican pesos. |
iii. | Employee benefits provision was approximately |
iv. | Cash flows for payment of general expenses, taxes and duties are realized in Mexican pesos. |
Although the sales prices of several 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.
TranslationTerms definition
References in these consolidated financial statements and the related notes to “pesos” or “Ps.” refers to Mexican pesos, “U.S. dollars” or “US$” 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.
E. Use of judgments and estimates
The preparation of the consolidated 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 consolidated financial statements, as well as the recorded amounts of income, costs and expenses during the year. Actual results may differ from these estimates.
Significant estimates and underlying assumptions are reviewed, and the effects of such revisions are recognized in the years in which any estimates are revised and in any future periods affected by such revision.
Information about estimates, assumptions and critical accounting policies that have the most significant effects on the amounts recognized in the consolidated financial statements are described in the following notes:
Note 3-C Financial instruments – Fair Value and expected credit losses
Note 3-E Wells, pipelines, properties, plant and equipment – Value in use
Note 3-F Intangible assets and oil and natural gas exploration and license, appraisal and development expenditure; successful efforts method
Note 3-H Impairment ofnon-financial assets – cash flow estimates and discount rates determination
Note 3-K Provisions - Environmental liabilities and retirement of assets
Note 3-L Employee benefits – actuarial assumptions
Note 3-M Income taxes, duties and royalties – recoverably assesment of deferred tax assets
Note 3-N Contingencies – probalility assessment
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
PEMEX has consistently applied the following accounting policies to each of the periods presented in the preparation of its consolidated financial statements, except for what is mentioned in Note 4, Accounting changes.
Below is a summary of the principal accounting policies:
A. | Basis of consolidation |
The consolidated financial statements include the financial statements of Petróleos Mexicanos and those of its subsidiaries over which it has control.
i. | Subsidiaries |
Subsidiaries are entities controlled by PEMEX. PEMEX “controls” an entity when it is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. The financial statements of subsidiaries are included in the consolidated financial statements from the date on which control commences until the date on which control ceases.
For more information about the Subsidiary Companies, see Note 5.
ii. | Non-controlling interests (NCI) |
NCI are measured initially at their proportionate share of the acquiree’s identifiable net assets at the date of acquisition.
Changes in the ownership interest in a subsidiary that do not result in a loss of control are accounted for as equity transactions.
iii. | Loss of control |
When PEMEX loses control over a subsidiary, it derecognizes the assets and liabilities of the subsidiary, and any related NCI and other components of equity. Any resulting gain or loss is recognized in profit or loss. Any interest retained in the former subsidiary is measured at fair value when control is lost.
iv. | Interests in equity-accounted investees |
PEMEX’s interests in equity-accounted investees comprise interests in associates and a joint venture.
Associates are those entities in which PEMEX has significant influence, but not control or joint control, over the financial and operating policies. A joint venture is an arrangement in which PEMEX has joint control, whereby PEMEX has rights to the net assets of the arrangement, rather than rights to its assets and obligations for its liabilities (joint operation).
Interests in associates and the joint venture are accounted for using the equity method. They are initially recognized at cost, which includes transaction costs. Subsequent to initial recognition, the consolidated financial statements include PEMEX’s share of the profit or loss and other comprehensive income (OCI) of equity accounted investees, until the date on which significant influence or joint control ceases.
When the value of the share of losses exceeds the value of PEMEX’s investment in an associate or joint venture, the carrying value of the investment, including any long-term investment, is reduced to zero and PEMEX ceases to recognize additional losses, except in cases where PEMEX is liable for obligations incurred by those associates and joint ventures.
For more information about associates and joint ventures, see Note 14.
v. | Transactions eliminated on consolidation |
Intra-group balances and transactions, and any unrealized income and expenses arising from intra-group transactions, are eliminated. Unrealized gains arising from transactions with equity-accounted investees are eliminated against the investment to the extent of the PEMEX interest in the investee. Unrealized losses are eliminated in the same way as unrealized gains, but only to the extent that there is no evidence of impairment.
B. | Foreign currency |
i. | Foreign currency transactions |
Transactions in foreign operationscurrencies are translated into the respective functional currencies of PEMEX companies at the exchange rates at the dates of the transactions.
Monetary assets and liabilities denominated in foreign currencies are translated into the functional currency at the exchange rate at the reporting date.Non-monetary assets and liabilities that are measured at fair value in a foreign currency are translated into the functional currency at the exchange rate when the fair value was determined.Non-monetary items that are measured based on
historical cost in a foreign currency are translated at the exchange rate at the date of the transaction. Foreign currency differences are generally recognized in consolidated statements of comprehensive income and presented within foreign exchange.
Foreign currency differences arising from the translation of investment in equity are designated at fair value in OCI. For 2017,available-for-sale equity investments are recognized in OCI (except for impairment, in which case foreign currency differences that have been recognized in OCI are reclassified to profit or loss).
ii. | Foreign operation |
The financial statements of foreign subsidiaries and associates are translated into the reporting currency by first identifying if the functional currency is different from the currency for recording the foreign operations, and, if so, the recording currency is translated into the functional currency and then into the reporting currency using theyear-end exchange rate of each period for assets and liabilities reported in the consolidated statements of financial position; the historical exchange rate at the date of the transaction for equity items; and the weighted average exchange rate of the periodyear for income and expenses reported in the consolidated statement of comprehensive income.
Foreign currency differences are recognized in OCI and accumulated in the currency translation effect, except to the extent that the translation difference is allocated to NCI.
When a foreign operation is disposed of in its entirety or partially such that control, significant influence or joint control is lost, the cumulative amount in the translation reserve related to that foreign operation is reclassified to the consolidated statement of comprehensive income as part of the gain or loss on disposal. If PEMEX disposes of part of its interest in a subsidiary but retains control, the relevant portion of the cumulative amounts is reclassified to the consolidated statement of comprehensive income.
Financial instruments |
References
i. | Recognition and initial measurement |
Financial assets and liabilities, including accounts receivable and payable, are initially recognized when these assets are contractually originated or acquired, or when these liabilities are contractually issued or assumed.
Financial assets and financial liabilities (unless it is an account receivable or account payable without a significant financing component) are measured and initially recognized at fair value, in these consolidatedthe case of financial statements andassets or liabilities not measured at fair value with changes through OCI, plus the related notestransaction costs directly attributable to “pesos”acquisition or “Ps.” refers to Mexican pesos, “U.S. dollars”issuance, when subsequently measured at amortized cost. An account receivable or “US$” refers to dollars ofaccount payable without a significant financing component is initially measured at 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, “Swiss francs” or “CHF” refers to the legal currency of the Swiss Confederation, “Canadian dollars” or “CAD” refers to the legal currency of Canada and “Australian dollars” or “AUD” refers to the legal currency of Australia. Figures in all currencies are presented in thousands of the relevant currency unit, except exchange rates and product and share prices.transaction price.
Classification and subsequent measurement |
These consolidatedFinancial Assets- Applicable policy beginning January 1, 2018
On initial recognition, a financial statementsasset is classified as measured at: Amortized Cost; Fair Value Through Other Comprehensive Income (“FVTOCI”)-debt investment; FVTOCI–equity investment; or FVTPL.
Financial assets are presentednot reclassified subsequent to their initial recognition unless PEMEX changes its business model for managing financial assets, in Mexican pesos (reporting currency), which iscase all affected financial assets are reclassified on the same asfirst day of the recording currency andfirst reporting period following the functional currency of PEMEX. The U.S. dollar amounts shownchange in the consolidated statementsbusiness model.
FINANCIAL ASSETS: | MEASUREMENT: | |
Amortized Cost | A financial asset is measured at amortized cost if it meets both of the following conditions and is not designated as at FVTPL: • it is held within a business model that has the objective of holding assets to collect contractual cash flows; and • its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. | |
Debt investment | A debt instrument is measured at FVTOCI only if it meets both of the following conditions and is not designated as at FVTPL: • it is held within a business model that has the objective of both collecting contractual cash flows and selling financial assets; and • its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. | |
Equity investment | On initial recognition of an equity investment that is not held for trading, PEMEX may irrevocably elect to present subsequent changes in fair value in OCI. This election is made on aninvestment-by-investment basis. |
All financial position,assets not classified as measured at amortized cost or FVTOCI (as described above) are measured at FVTPL. This includes all derivative financial assets (see Note 19). On initial recognition, PEMEX may irrevocably designate a financial asset that otherwise meets the consolidated statements of comprehensive income, the consolidated statements of changes in equity (deficit) and the consolidated statements of cash flows have been included solely for the conveniencerequirements to be measured at amortized cost or at FVOCI as FVTPL, if doing so eliminates or significantly reduces an accounting mismatch that would otherwise arise.
Financial assets - Business model assessment: Applicable policy beginning January 1, 2018
PEMEX makes an assessment of the reader and are unaudited. Such amounts have been translated from amounts in pesos, as a matter of arithmetic computation only, at the exchange rate for the settlement of
PETRÓLEOS MEXICANOS, PRODUCTIVE STATE-OWNED SUBSIDIARIES
AND SUBSIDIARY COMPANIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2016, 2015 AND 2014
(FIGURES STATED IN THOUSANDS, EXCEPT AS NOTED)
obligations in foreign currencies provided by Banco de México and SHCP at December 31, 2016 of Ps. 20.6640 per U.S. dollar. Translations herein 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.
NOTE 3. Significant accounting policies
The preparationobjective of the consolidated 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 consolidated financial statements, as well as the recorded amounts of income, costs and expenses during the year.
Significant estimates and underlying assumptions are reviewed, and the effects of such revisions are recognized in the periodbusiness model in which any estimates are reviseda financial asset is held at a portfolio level because this best reflects the way the business is managed and in any future periods affected by such revision.
Information about estimates, assumptions and critical accounting policies that have the most significant effects on the amounts recognized in the consolidated financial statements are described in the following notes:information is provided to management. The information considered includes:
the stated policies and objectives for the portfolio and the operation of those policies in practice, which include whether management’s strategy focuses on earning contractual interest income, maintaining a particular interest rate profile, matching the duration of the financial assets to the duration of any related liabilities or expected cash outflows or realizing cash flows through the sale of the assets;
how the performance of the portfolio is evaluated and equipment; Successful efforts methodreported to PEMEX management;
the risk that affects the performance ofnon-financial the business model (and the financial assets held within that business model) and how those risks are managed;
Actual results could differ from those estimates and assumptions.
Below is a summaryhow managers of the principal accounting policies, which have been consistently applied to each of the years presented and followed by PEMEX in the preparation of its consolidated financial statements:
The consolidated financial statements include those of Petróleos Mexicanos, the Subsidiary Entities and the Subsidiary Companies. All intercompany balances and transactions of the consolidated companies; income and expenses, as well as unrealized profits and losses resulting from operations between them have been eliminated in the preparation of the consolidated financial statements pursuant to IFRS 10, “Consolidated Financial Statements” (“IFRS 10”).
Unrealized gains arising from transactions with entities whose investmentbusiness are compensated (e.g., whether compensation is accounted for using the equity method are eliminated against the investment to the extent of PEMEX’s participation in such entities. Unrealized losses are eliminated in the same way as unrealized gains but only to the extent that there is no evidence of impairment.
PETRÓLEOS MEXICANOS, PRODUCTIVE STATE-OWNED SUBSIDIARIES
AND SUBSIDIARY COMPANIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2016, 2015 AND 2014
(FIGURES STATED IN THOUSANDS, EXCEPT AS NOTED)
Investment in subsidiaries
The Subsidiary Entities and Subsidiary Companies are consolidated from the date that control commences until the date that control ceases.
Petróleos Mexicanos controls a subsidiary when it is exposed to or has rights to variable returns from the company and has the ability to affect those returns through its power over the company.
The financial statements of the Subsidiary Entities and Subsidiary Companies have been prepared based on the same period of Petróleos Mexicanos’ consolidated financial statements applying the same accounting policies.
For more information about Subsidiary Companies, see Note 4.
Permanent investments in associates and joint arrangements
Associates are those entities in which PEMEX has significant influence but not the power to control financial and operational decisions. It is presumed that there is significant influence when PEMEX owns directly or indirectly between 20% and 50% of voting rights in another entity.
Joint arrangements are those arrangements whereby two or more parties have joint control of an arrangement. A joint arrangement is either a joint venture, where both of the parties have rights to the net assets of the arrangements, or a joint operation, where the parties have both rights to the assets, and obligations for the liabilities relating to the arrangements.
Investments in associates and joint ventures are recognized based on the equity method and recorded initially at cost, including any goodwill identified on acquisition. With respect to joint operations, the assets, liabilities, income and expenses are recognized in relation to the share of each party and in accordance with the applicable IFRS for each of those items. The investment cost includes transaction costs.
These consolidated financial statements include the proportion of gains, losses and other comprehensive income corresponding to PEMEX’s share in each investee, once these items are adjusted to align with the accounting policies of PEMEX, from the date that significant influence and joint control begins to the date that such influence or joint control ceases.
When the value of the share of losses exceeds the value of PEMEX’s investment in an associate or joint venture, the carrying value of the investment, including any long-term investment, is reduced to zero and PEMEX ceases to recognize additional losses, except in cases where PEMEX is jointly liable for obligations incurred by those associates and joint ventures.
For more information about associates and joint arrangements, see Note 11.
Non-controlling interests
The interests of third parties who do not have a controlling interest in the equity or comprehensive result of subsidiaries of PEMEX are presented in the consolidated statements of financial position, the consolidated
PETRÓLEOS MEXICANOS, PRODUCTIVE STATE-OWNED SUBSIDIARIES
AND SUBSIDIARY COMPANIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2016, 2015 AND 2014
(FIGURES STATED IN THOUSANDS, EXCEPT AS NOTED)
statements of changes in equity (deficit) as“non-controlling interests” and as “net income and comprehensive income for the period, attributable tonon-controlling interests,” in the consolidated statements of comprehensive income.
Dividends in cash and assets other than cash
A liability for distributions of dividends in cash andnon-cash assets to third parties is recognized when the distribution is authorized by the Board of Directors. The corresponding amount is recognized directly in equity.
Distributions of dividends innon-cash assets are measured at the fair value of the assets managed or the contractual cash flows collected); and
the frequency, volume and timing of sales in prior periods, the reasons for such sales and expectations about future sales activity.
Transfers of financial assets to be distributed. Changes relating to these measurementsthird parties in transactions that do not qualify for derecognition are not considered sales for this purpose, consistent with PEMEX’s continuing recognition of the assets.
Financial assets that are held for trading or managed and the performance of which is evaluated on a fair value between the date on which the distribution is declaredbasis are measured at FVTPL.
Financial Asset - Assessment whether contractual cash flows are solely payments of principal and the date when the assets are transferred, are recognized directly in equity.
When distributingnon-cash assets, any difference between the carrying amount of the liability for distribution of dividends and the carrying amount of the assets distributed is recognized in the consolidated statements of comprehensive income.
Business combinations are accounted for using the acquisition method. The cost of an acquisition is measured as the aggregate of the consideration transferred, measured as the acquisition date fair value, and the amount of anynon-controlling interest in the acquiree.
When PEMEX acquires a business, it assesses the acquired assets and liabilities in order to appropriately classify and designate each, taking into account the contractual terms, economic circumstances and other pertinent conditions as of the date of the acquisition. This includes the separation of embedded derivatives in host contractors by the acquiree. Acquired petroleum reserves and resources that can be reliably measured are recognized separately in the assessment of fair values on acquisition. Other potential reserves and rights, for which fair values cannot be reliably measured, are not recognized separately, but instead are subsumed in goodwill.interest: Applicable policy beginning January 1, 2018
For business combinations achieved in stages, any previously held equity interestthe purposes of this assessment, principal is measured at its acquisition date fair value, and any resulting gain or loss is recognized in income or loss or other comprehensive income.
Any contingent consideration to be transferred by the acquirer will be recognized at fair value on the acquisition date. Contingent consideration classifieddefined as an asset or liability that is a financial instrument and within the scope of IAS 39 “Financial instruments: Recognition and Measurement” is measured at fair value, with changes in fair value recognized in income or loss or other comprehensive income. If contingent consideration is not with the scope of IAS 39, it is measured in accordance with the appropriate IFRS requirement. Contingent consideration that is classified as equity is not remeasured, and subsequent settlement is accounted for within equity.
Goodwill, which is initially measured at cost, is the excess of the aggregate of the consideration transferred and the amount recognized fornon-controlling interest over the fair value of the identifiable netfinancial assets on initial recognition.
Interest is defined as consideration for the time value of money and for the credit risk associated with the principal amount outstanding during the relevant period of time and for the basic lending risks and costs (e.g., liquidity risk and administrative costs), as well as profit margin.
In assessing whether the contractual cash flows are solely payments of principal and interest, PEMEX considers the contractual terms of the instrument, which includes assessing whether the financial asset contains a contractual term that could change the timing or amount of contractual cash flows such that it would not meet this condition. In making this assessment, PEMEX considers:
contingent events that would change the amount or timing of cash flows;
terms that may adjust the contractual coupon rate, including variable rate features;
prepayment and extension features; and
terms that limit PEMEX’s claim to cash flows from specified assets (for example,non-recourse features).
A prepayment feature is consistent solely with the payments of principal and interest criterion if the prepayment amount substantially represents unpaid amounts of principal and interest on the principal amount outstanding, which may include reasonable additional compensation for early termination of the contract. Additionally, for a financial asset acquired and liabilities assumed. Ifat a significant discount or premium to its contractual par amount, a feature that permits or requires prepayment at an amount that substantially represents the contractual par amount plus accrued (but unpaid) contractual interest (which may also include reasonable additional compensation for early termination) is treated as consistent with this criterion if the fair value of the net asset acquiredprepayment feature is greater than the aggregate consideration
PETRÓLEOS MEXICANOS, PRODUCTIVE STATE-OWNED SUBSIDIARIES
AND SUBSIDIARY COMPANIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2016, 2015 AND 2014
(FIGURES STATED IN THOUSANDS, EXCEPT AS NOTED)
transferred (bargain purchase), before recognizing aFinancial assets – Subsequent measurement and gain PEMEX reassesses whether it has correctly identified all of the assets acquired and all of the liabilities assumed and reviews the procedures used to measure the amounts to be recognized at the acquisition date. If the assessment still results in an excess of the fair value of net assets acquired over the aggregate consideration transferred, then the gain is recognized in the statement of comprehensive income.
After initial recognition, goodwill is measured at cost less any accumulated impairment losses. For the purpose of impairment testing, goodwill acquired in a business combination is, from the acquisition date, allocated to each cash generating unit that is expected to benefit from the combination, irrespective of whether other assets or liabilities of the acquiree are assigned to those units.
When goodwill is allocated to a cash generating unit and certain of the operations in that unit are disposed of, the goodwill associated with the disposed operation is included in the carrying amount of the operation when determining the gain or loss on disposal. Goodwill disposed in these circumstances is measured based on the relative values of the disposed operation and the portion of the cash generating unit retained.losses: Applicable policy beginning January 1, 2018
In accordance with IAS 21 “The Effects of Changes in Foreign Exchange Rates” (“IAS 21”), transactions in foreign currencies are translated and recorded at exchange rates at the dates of the transactions and/or of the presentation of financial information.
Exchange differences arising from the settlement of monetary items or from the translation of monetary items into rates different from those at which they were translated on their initial recognition, are recognized in the results of operations in the reporting period in which they arise. When a gain or loss from anon-monetary item is recognized in other comprehensive results, any exchange difference included in that gain or loss is recognized in other comprehensive results. Conversely, when a gain or loss from anon-monetary item is recognized in the results of operations, any exchange difference included in that gain or loss is recognized in the results of operations for the period.
PEMEX measures certain financial instruments such as DFIs at fair value as of the closing date of the relevant reporting period.
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. A measurement at fair value assumes that the sale of the asset or transfer of a liability occurs:
Financial assets at amortized cost | ||
Debt investments at FVOCI | These assets are subsequently measured at fair value. Interest income calculated using the effective interest method, foreign exchange gains and losses and impairment are recognized in profit or loss. Other net gains and losses are recognized in OCI. On derecognition, gains and losses accumulated in OCI are reclassified to profit or loss. | |
Equity investments at FVOCI | These assets are subsequently measured at fair value. Dividends are recognized as income in profit or loss unless the |
The principal market or the most advantageous market must be accessible for PEMEX.
The fair value of an asset or liability is measured by using the same assumptions that market participants would make when pricing the asset or liability under the premise that market participants take into account highest and best use of the asset or liability.
Financial assets - Applicable policy before January 1, 2018
PETRÓLEOS MEXICANOS, PRODUCTIVE STATE-OWNED SUBSIDIARIES
AND SUBSIDIARY COMPANIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2016, 2015 AND 2014
(FIGURES STATED IN THOUSANDS, EXCEPT AS NOTED)
Financial instruments are classified as: (i) financial instruments measured at fair value through profit or loss; (ii) financial instruments held to maturity;(iii) available-for-sale financial assets; (iv) investments in equity instruments; (v) loans and receivables; and (vi) DFIs. PEMEX determines the classification of its financial instruments at the time of initial recognition.
PEMEX’s financial instruments include cash and short-term deposits,available-for-sale financial assets, accounts receivable, other receivables, loans, accounts payable to suppliers, other accounts payable, borrowings and debts, as well as DFIs.
BelowThe following are descriptionsthe policies applicable before January 1, 2018 of the financial instruments policies employedoperated by PEMEX:PEMEX on that date:
Financial instruments measured at fair value through profit or loss
A financial instrument is measured at fair value through profit or loss if it is classified as held for trading or designated as such upon initial recognition. Financial assets are designated at fair value through profit or loss if PEMEX manages such investments and makes purchase and sale decisions based on their fair value in accordance with PEMEX’s documented risk management or investment strategy. In addition, directly attributable transaction costs are recognized in the consolidated statements of comprehensive income for the year. These financial instruments are recognized at fair value and corresponding changes relating to dividend income are recognized in the consolidated statements of comprehensive income.
Available-for-sale financial assets
Until January 1, 2018,Available-for-saleavailable-for-sale financial assets arewerenon-DFIs that arewere designated asavailable-for-sale or arewere not classified in any of the previous categories. PEMEX’s investments in certain equity securities and debt securities arewere classified asavailable-for-sale financial assets.Available-for-sale financial assets arewere recognized initially at fair value plus any directly attributable transaction costs.
Subsequent to initial recognition,available-for-sale financial assets are measured at fair value. In addition, any gains or losses associated with such instruments, as well as foreign exchange differences are recognized in other comprehensive resultresults and presented in the fair value reserve in equity. When an investment is derecognized, any gains or losses accumulated in the equity are reclassified to profit or loss.
Sales and purchases of financial assets that require the delivery of such assets within a period of time established by market practice are recognized as of the negotiation date (the date on which PEMEX commits to purchase or sell the asset).
Loans and receivables
Loans and receivables are initially recognized at fair value. After initial recognition, loans and debt securities that bear interest are measured at amortized cost using the effective interest rate (“EIR”) method, less impairment losses.
The amortized cost is calculated based on any discount or premium on acquisition and fees and costs that are an integral part of the EIR method. Amortization of costs is included under the heading of financing cost in the statementconsolidated statements of comprehensive income.
PETRÓLEOS MEXICANOS, PRODUCTIVE STATE-OWNED SUBSIDIARIES
AND SUBSIDIARY COMPANIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2016, 2015 AND 2014
(FIGURES STATED IN THOUSANDS, EXCEPT AS NOTED)
Derivative financial instruments
The DFIs presented in the consolidated statement of financial position are carriedvalued at fair value. In the case of DFIs heldderivatives for trading purposes, changes in fair value are recorded intaken directly to profit or loss; inloss for the period. In the case of DFIsderivatives formally designated and classified as and that qualifyDFIs for hedging changes inpurposes, they are accounted for following the fair value are recorded in the statement of comprehensive income usingor cash flow or fair value hedge accounting with gains or losses classified in accordance with the earnings treatment of the hedge transaction.model.
Embedded derivatives
PEMEX evaluates the potential existence of embedded derivatives, which may be found in the terms of its contracts, or combined with other host contracts, which could be structured financial instruments (debt or equity instruments with embedded derivatives). Embedded derivatives have terms that implicitly or explicitly meet the characteristics of a DFI. In some instances, these embedded derivatives must be segregated from the underlying contracts and measured, recognized, presented and disclosed as DFIs, such as when the economic risks and terms of the embedded derivative are not clearly and closely related to the underlying contract.
Financial liabilities: Classification, subsequent measurement and gains and losses
Financial liabilities are classified as measured at amortized cost or FVTPL. A financial liability is classified as FVTPL if it is classified asheld-for-trading, it is a derivative or it is designated as such on initial recognition. Financial liabilities at FVTPL are measured at fair value and net gains and losses, including any interest expense, are recognized in profit or loss. Other financial liabilities are subsequently measured at amortized cost using the effective interest method. Interest expense and foreign exchange gains and losses are recognized in profit or loss. Any gain or loss on derecognition is also recognized in profit or loss.
iii. | Derecognition |
Financial assets
PEMEX derecognizes a financial asset when the contractual rights to the cash flows from the financial asset expire, or it transfers the rights to receive the contractual cash flows in a transaction in which substantially all of the risks and rewards of ownership of the financial asset are transferred or in which PEMEX neither transfers nor retains substantially all of the risks and rewards of ownership and it does not retain control of the financial asset.
PEMEX enters into transactions whereby it transfers assets recognized in its statement of financial position but retains either all or substantially all of the risks and rewards of the transferred assets. In these cases, the transferred assets are not derecognized.
Financial liabilities
PEMEX derecognizes a financial liability when its contractual obligations are discharged, cancelled or expired. PEMEX also derecognizes a financial liability when its terms are modified and the cash flows of the modified liability are substantially different, in which case a new financial liability based on the modified terms is recognized at fair value.
On derecognition of a financial liability, the difference between the carrying amount extinguished and the consideration paid (including anynon-cash assets transferred or liabilities assumed) is recognized in profit or loss.
iv. | Offsetting |
Financial assets and financial liabilities are offset, and the net amount is presented in the statement of financial position when, and only when, PEMEX has a legally enforceable right to set off the amounts and it intends either to settle them on a net basis or to realize the asset and settle the liability simultaneously.
v. | Derivative financial instruments and hedge accounting |
PEMEX uses DFIs to hedge the risk exposure in foreign currency, interest rate and the price of commodities related to its products. Embedded derivatives are separated from the host contract and accounted for separately if the host contract is not a financial asset and certain criteria are met.
DFIs are initially measured at fair value. Subsequent to initial recognition, DFIs are measured at fair value, and changes therein are generally recognized in profit or loss.
However, these contracts are not accounted as designated hedging instruments. DFIs are initially recognized at fair value on the date on which a derivative contract is entered into and after initial recognition are measured again at fair value. DFIs are accounted for as financial assets when the fair value is positive and as a financial liability when the fair value is negative. Any gain or loss arising from changes in the fair value of the DFIs is recognized directly in the income statement.
vi. | Impairment - Applicable policy beginning January 1, 2018 |
Financial instruments and contract assets
PEMEX recognizes loss allowances for Estimated Credit Losses (“ECLs”) on:
financial assets measured at amortized cost;
debt investments measured at FVOCI; and
contract assets.
PEMEX measures loss allowances at an amount equal to lifetime ECL, except for the following, which are measured as12-month ECLs:
debt securities that are determined to have low credit risk at the reporting date; and
other debt securities and bank balances for which credit risk (i.e. the risk of default occurring over the expected life of the financial instrument) has not increased significantly since initial recognition.
Loss allowances for trade receivables and contract assets are always measured at an amount equal to lifetime ECL.
When determining whether the credit risk of a financial asset has increased significantly since initial recognition and when estimating ECL, PEMEX considers reasonable and supportable information that is relevant and available without undue cost or effort. This includes both quantitative and qualitative information and analysis, based on PEMEX’s historical experience and informed credit assessment which includes forward-looking information.
PEMEX assumes that the credit risk on a financial asset has increased significantly if it does not comply with the terms established in the contract.
PEMEX considers a financial asset to be in default when the borrower is unlikely to pay its credit obligations to PEMEX in full, without recourse by PEMEX to actions such as realizing security (if any is held).
PEMEX considers that a debt instrument has a low credit risk, when its credit rating is classified as “investment grade”. The investment grade classification is based on minimum credit ratings of Baa3 (Moody’s) andBBB- (S & P and Fitch), as well as its equivalent in other rating agencies
Lifetime ECLs are the credit losses that result from all possible default events over the expected life of a financial instrument.
12-month ECLs are the portion of ECLs that result from default events that are possible within the 12 months after the reporting date (or a shorter period if the expected life of the instrument is less than 12 months).
The maximum period considered when estimating ECLs is the maximum contractual period over which PEMEX is exposed to credit risk.
Measurement of ECLs
ECLs are a probability-weighted estimate of credit losses. Credit losses are measured as the present value of all cash shortfalls (for example, the difference between the cash flows due to the entity in accordance with the contract and the cash flows that PEMEX expects to receive).
ECLs are discounted at the effective interest rate of the financial asset.
Credit-impaired financial assets
At each reporting date, PEMEX assesses whether financial assets carried at amortized cost and debt securities at FVOCI are credit-impaired. A financial asset is ‘credit-impaired’ when one or more events that have a detrimental impact on the estimated future cash flows of the financial asset have occurred.
Evidence that a financial asset is credit-impaired includes the following observable data:
significant financial difficulty of the borrower or issuer;
a breach of contract such as a default or being more than 90 days past due;
the restructuring of a loan or advance by PEMEX on terms that it would not consider otherwise;
it is probable that the borrower will enter bankruptcy or other financial reorganization; or
the disappearance of an active market for a security because of financial difficulties.
Presentation of allowance for ECL in the statement of financial position
Loss allowances for financial assets measured at amortized cost are deducted from the gross carrying amount of the assets.
For debt securities at FVOCI, the loss allowance is charged to profit or loss and is reclassified from OCI.
Write-off
The gross carrying amount of a financial asset is written off (either partially or in full) to the extent that there is no realistic prospect of recovery. This is generally the case when PEMEX determines that the debtor does not have assets or sources of income that could generate sufficient cash flows to repay the amounts subject to thewrite-off. However, financial assets that are written off could still be subject to enforcement activities in order to comply with PEMEX’s procedures for recovery of amounts due.
Impairment of financial assets - Policy applicable before January 1, 2018
At each reporting date, PEMEX evaluates whether there is objective evidence that a financial asset or group of financial assets is impaired, in which case the value of the recoverable amount of the asset is calculated. A financial asset is impaired if objective evidence indicates that a loss event has occurred after the initial recognition of the asset, and that the loss event had a negative effect on the estimated future cash flows of the financial asset.
Objective evidence that a financial asset or group of assets is impaired includes significant financial difficulty of the issuer or obligor, a breach of contract, such as a default or delinquency in interest or principal payments; the lender, for economic or legal reasons relating to the borrower’s financial difficulty, granting to the borrower a concession that the lender would not otherwise consider; it becoming probable that the borrower will enter bankruptcy or other financial reorganization; the disappearance of an active market for that financial asset because of financial difficulties; or observable data indicating that there is a measurable decrease in the estimated future cash flows. Impairments by asset are:
Impairment of financial assets carried at amortized cost
The impairment of financial assets carried at amortized cost is measured as the difference between the assetsassets’ carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the financial asset´sasset’s original effective interest rate. The amount of the loss shall be recognized in profit or loss.
If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognized, the impairment loss previously recognized shall be reversed in profit or loss.
Impairment in available-for-saleavailable–for–sale financial assets
Additionally to the above mentioned,In addition, a significant or prolonged decline in the fair value of an available- for- investment in an available–for–sale financial assetequity instrument is also objective evidence of impairment.
PETRÓLEOS MEXICANOS, PRODUCTIVE STATE-OWNED SUBSIDIARIES
AND SUBSIDIARY COMPANIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2016, 2015 AND 2014
(FIGURES STATED IN THOUSANDS, EXCEPT AS NOTED)
When there is objective evidence of the impairment of an asset, the accumulated loss recognized in other comprehensive incomeOCI shall be reclassified from equity to profit or loss even though the financial asset has not been derecognized.
If, in a subsequent period, the impairment loss decreases, and the reduction could be objectively related to an event occurring after the impairment recognition, this impairment loss previously recognizedreversal shall be reversedreflected as a reversal in profit or loss.OCI.
Cash and cash equivalents are comprised of cash balances on hand, net of overdrafts, deposits in bank accounts, foreign currency reserves and instruments with maturities of three months or less from the acquisition date that are subject to an insignificant risk of changes in their fair value, which are used in the management of PEMEX’s short-term commitments.
Cash subject to restrictions or that cannot be exchanged or used to settle a liability within 12 months is presented asnon-current assets.
Inventories and cost of sales |
Inventories are valued at the lower of cost or net realizable value. Cost is determined based on the cost of production or acquisition of inventory and other costs incurred in transporting such inventory to its present location and in its present condition, using the average cost formula. Net realizable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated selling costs. The estimate takes into consideration, among other things, the decrease in the value of inventories due to obsolescence.
Cost of sales represents the cost of production or acquisition of inventories at the time of sale, increased, where appropriate, by declines in net realizable value of inventories during the year.
Advance payment to suppliers for inventory purchases are recognized as part of inventory when the risks and benefits of the ownership of the inventory have been transferred to PEMEX.
E. | Wells, pipelines, properties, plant and equipment |
Wells,
i. | Recognition and measurement |
Items of wells, pipelines, properties, plant and equipment are recorded at acquisition or construction cost, which includes capitalized borrowing cost, less accumulated depreciation and accumulated impairment losses.
PEMEX uses the successful efforts method for the exploration and production of crude oil and gas activities, considering the criteria mentioned in IFRS 6, “Exploration for and Evaluation of Mineral Resources” in relation to the recognition of exploration and drilling assets. Costs of development wells and related plant, property and equipment involved in the exploitation of oil and gas are recorded as part of the cost of assets. The costs of exploratory wells in areas that have not yet been designated as containing proved reserves are recorded as intangible assets until it is determined whether they are commercially viable to capitalize as fixed assets, otherwise they are recognized as exploration expenses. Other expenditures on exploration are recognized as exploration expenses as they are incurred.
PETRÓLEOS MEXICANOS, PRODUCTIVE STATE-OWNED SUBSIDIARIES
AND SUBSIDIARY COMPANIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2016, 2015 AND 2014
(FIGURES STATED IN THOUSANDS, EXCEPT AS NOTED)
In accordance with IAS 16, “Property, Plant and Equipment” (“IAS 16”), initialInitial costs of wells, pipelines, properties, plant and equipment are initially recorded at cost, which includes their original purchase price or construction cost, any costs attributable to bringing the assets to a working condition for their intended use and the costs of dismantling and removing the items and restoring the site on which they are located, including the estimated cost of plugging and abandoning wells.
The cost of financing projects that require large investments and financing incurred for projects, net of interest revenues from the temporary investment of these funds, is recognized as part of wells, pipelines, properties, plant and equipment when the cost is directly attributable to the construction or acquisition of a qualifying asset. The capitalization of these costs is suspended during periods in which the development of construction is interrupted, and its capitalization ends when the activities necessary for the use of the qualifying asset are substantially completed. All other financing costs are recognized in the consolidated statements of comprehensive income in the period in which they are incurred.
The cost of self-constructed assets includes the cost of materials and direct labor, interest on financing and any other costs directly attributable to start up. In some cases, the cost also includes the costpresent value of the costs of plugging of wells and removal.
Expenditures related to the construction of wells, pipelines, properties, plant and equipment during the stage prior to commissioning are stated at cost as intangible assets or construction in progress, in accordance with the characteristics of the asset. Once the assets are ready for use, they are transferred to the respective component of wells, pipelines, properties, plant and equipment and depreciation or amortization begins.
If significant parts of an item of wells, pipelines, properties, plant and equipment have different useful lives, then they are accounted for as separate items (major components) of property, plant and equipment.
The capitalized value of finance leases is also included in the line item of wells, pipelines, properties, plant and equipment.
Any gain or loss on disposal of an item of wells, pipelines, properties, plant and equipment is recognized in profit or loss.
Advance payments for the acquisition of pipelines, properties, plant and equipment are also recognized in the line item of wells, pipelines, properties, plant and equipment when the risks and benefits of the ownership have been transferred to PEMEX.
ii. | Subsequent expenditure |
The costs of major maintenance or replacement of a significant component of an item of wells, pipelines, properties, plant and equipment are recognized in the carrying amount of the item if it is probable that the future economic benefits embodied within the component will flow to PEMEX and its cost can be measured reliably. The costs of recurring maintenance, repairs and renovations of wells, pipelines, properties, plant and equipment carried out to maintain the facilities in normal operation conditions are recognized in profit or loss as incurred.
iii. | Depreciation |
Depreciation and amortization of capitalized costs in wells are determined based on the estimated economic life of the field to which the wells belong, considering the relationship between the production of barrels of oil equivalent for the period and proved developed reserves of the field, as of the beginning of the year,period, with quarterly updates for new development investments.
Depreciation of other elements of pipelines, properties, plant and equipment is recognized in profit or loss on a straight-line basis over the estimated useful life of the asset, beginning as of the date that the asset is available for use, or in the case of construction, from the date that the asset is completed and ready for use.
When parts of an item of wells, pipelines, properties and equipment are significant relative to the total cost of the item, the part is depreciated separately.
Estimated useful lives of items of properties, plant and equipment are reviewed if expectations differ from previous estimates.
Pipelines, properties, and equipment received from customers are initially recognized at fair value as revenue from ordinary operating activities if PEMEX has no future obligations to the customer who transferred the item. In contrast, if PEMEX does have future obligations to such a customer, the initial recognition is recorded as a deferred liability based on the period in which the assets will provide services to the customers.
PETRÓLEOS MEXICANOS, PRODUCTIVE STATE-OWNED SUBSIDIARIES
AND SUBSIDIARY COMPANIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2016, 2015 AND 2014
(FIGURES STATED IN THOUSANDS, EXCEPT AS NOTED)
The capitalized value of finance leases is also included in the line item of wells, pipelines, properties, plant and equipment. Properties, plant and equipment acquired through financial leases are depreciated over the shorter of the lease term or the useful life of the asset.
Advance payments for the acquisition of pipelines, properties, plant and equipment are also recognized in the line itemThe estimated useful lives of wells, pipelines, properties, plant and equipment when the risksfor current and benefitscomparative periods are described in Note 15.
Estimated useful lives of the ownership have been transferred to PEMEX.items of properties, plant and equipment are reviewed and updated prospectively if expectations differ from previous estimates.
F. | Intangible assets and oil and natural gas exploration and license, appraisal and development expenditure |
Intangible assets mainly include expenditure on the exploration for and evaluation of oil and natural gas resources,right-of-way and easements and licenses software.
i. | Intangible assets |
Intangible assets acquired separately are measured at the time the initial cost of acquisition is recognized. After the initial recognition, intangible assets are measured at their acquisition cost, less (i) accumulated amortization, measured using the straight-line method during the estimated useful life of the intangible asset and (ii) accumulated impairment.
Rights-of-way and easements and licenses software are amortized over the contract period or over the remaining life of the fixed asset or property to which they pertain.
The estimated useful lives of intangible assets for current and comparative periods are described in Note 15.
The estimated useful lives and residual values of intangible assets are reviewed at each reporting date and adjusted if appropriate.
ii. | Oil and natural gas exploration and license, appraisal and development expenditure |
Oil and natural gas exploration, appraisal and development expenditure is accounted for using the principles of the successful efforts method of accounting as described below.
Exploration and appraisal expenditure
Geological and geophysical exploration costs are recognized as an expense as incurred.
Costs directly associated with an exploration well are initially capitalized as an intangible asset until the drilling of the well is complete and the results have been evaluated. These costs include employee remuneration, materials and fuel used, rig costs and payments made to contractors.
If potentially commercial quantities of hydrocarbons are not found, the exploration well costs are written off against profit or loss. If hydrocarbons are found and, subject to further appraisal activity, are likely to be capable of commercial development, the costs continue to be carried as an asset. If it is determined that development will not occur, then the costs are expensed against profit or loss.
Costs directly associated with appraisal activity undertaken to determine the size, characteristics and commercial potential of a reservoir following the initial discovery of hydrocarbons, including the costs of appraisal wells where hydrocarbons were not found, are initially capitalized as an intangible asset. When proved reserves of oil and natural gas are determined and development is approved by management, the relevant expenditure is transferred to wells, pipelines, properties, plant and equipment.
Exploration wells more than 12 months old are expensed unless: (i) they are in an area requiring mayor capital expenditure before production can begin, (ii) commercially productive quantities of reserves have been found, and (iii) they are subject to further exploration or appraisal activity, in that either drilling or additional exploration wells is underway or firmly planned for the near future.
PEMEX periodically assesses the amounts included within fixed assets to determine whether capitalization is initially appropriate and can continue. Exploration wells capitalized beyond 12 months are subject to additional scrutiny as to whether the facts and circumstances have changed and therefore whether the conditions described in the preceding paragraph no longer apply.
Development expenditure
Expenditure on the construction, installation and completion of infrastructure facilities such as platforms, pipelines and the drilling of development wells, including service and unsuccessful development or delineation wells, is capitalized within wells, pipelines, properties, plant and equipment and is depreciated from the commencement of production as described in the accounting policy for wells, pipelines, properties, plant and equipment.
G. | Crude oil and natural gas reserves |
Under Mexican law, all crude oil and other hydrocarbon reserves located in the subsoil of Mexico are owned by the Mexican nation and not by PEMEX. In accordance with the aforementioned and based on the applicable regulation as of the date of these consolidated financial statements, the reserves assigned to PEMEX by the Mexican Government are not registered for accounting purposes because they are not PEMEX’s property. PEMEX estimates total proved oil and natural gas reserve volumes in accordance with the definitions, methods and procedures established in Rule4-10(a) of RegulationS-X (“Rule4-10(a)”) of the U.S. Securities and Exchange Commission (“SEC”) as amended, and where necessary, in accordance with the Standards Pertaining to the Estimating and Auditing of Oil and Gas Reserves Information promulgated by the Society of Petroleum Engineers (the “SPE”) as of February 19, 2007. These procedures are consistent with international reserves reporting practice. The estimation of these reserves depends on assumptions made and the interpretation of the data available and may vary among analysts. The results of drilling activities, test wells and production after the date of estimation are utilized in future revisions of reserves estimates.
Although PEMEX does not own the oil and other hydrocarbon reserves within Mexico, these procedures allow PEMEX to record the effects that such oil and other hydrocarbon reserves have on its consolidated financial statements, including, for example, in the depreciation and amortization line item.
H. | Impairment ofnon-financial assets |
The carrying amounts of PEMEX’snon-financial assets, other than inventories and deferred taxes, are assessed for indicators of impairment at the end of each reporting period. If the net carrying value of the asset or its cash-generating unit exceeds the recoverable amount, PEMEX records an impairment charge in its consolidated statement of comprehensive income.
A cash-generating unit is the smallest identifiable group of assets which can generate cash flows independently from other assets or groups of assets.
The recoverable amount of an asset or a cash-generating unit is defined as the higher of its fair value minus the costs of disposal and its value in use. The value in use is the discounted present value of the net future cash flows expected to arise from the continuing use of an asset and from its disposal at the end of its useful life. In measuring value in use, the discount rate applied is thepre-tax rate that reflects current market assessments of the time value of money and the risks specific to the asset. Fair value is calculated using discounted cash flows determined by the assumptions that market participants would apply in order to estimate the price of an asset or cash generating unit, assuming that such participants were acting in their best economic interest.
PETRÓLEOS MEXICANOS, PRODUCTIVE STATE-OWNED SUBSIDIARIES
AND SUBSIDIARY COMPANIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2016, 2015 AND 2014
(FIGURES STATED IN THOUSANDS, EXCEPT AS NOTED)
In the case of cash-generating assets or items dedicated to the exploration and evaluation of hydrocarbons reserves, the recoverable amount is determined using the value in use based on the proved reserves and probable reserves, in some cases, for the risk factor associated with such reserves.
Both impairment losses and reversals are recognized in the statement of comprehensive income in the costs and expenses line items in which the depreciation and amortization are recognized. Impairment losses may not be presented as part of the costs that have been capitalized in the value of any asset. Impairment losses related to inventories are recognized as part of cost of sales. Impairment losses on investments in associates, joint ventures and other permanent investments are recognized as profit (loss) sharing in associates.
An impairment loss shall be reversed if there has been a change in the estimates used since the date when the impairment loss was recognized. These reversals will not exceed the carrying value of the asset as though no impairment had been recognized. Impairment losses and reversals are presented in a separate line item in the consolidated statement of comprehensive income.
I. | Leases |
The determination of whether an agreement is or contains a lease is based on the economic substance of the agreement at the date of execution. An agreement contains a lease if performance under the agreement depends upon the use of a specific asset or assets, or if the agreement grants the right to use the asset.
Finance leases, which transfer to PEMEX substantially all the inherent benefits and risks of the leased property, are capitalized at the date the lease commences, and the value is recorded as the lower of the fair value of the leased property and the present value of the minimum lease payments. Payments on the lease are divided between the financial costs and the amortization of the remaining debt principal in order to achieve a constant effective interest rate for the outstanding liability. The financing costs are recognized in the consolidated statement of comprehensive income.
Operating lease payments are recognized as expenses in the consolidated statement of comprehensive income on a straight linestraight-line basis over the term of the lease and variable rent payments are recognized in the operating results on an accrued basis.
Assetsheld-for-sale |
Non-current assets, or disposal groups comprising assets and liabilities, are classified asheld-for-sale if it is highly probable that they will be recovered primarily through sale rather than through continuing use.
Such assets, or disposal groups, are generally measured at the lower of their carrying amount and fair value less costs to sell. Any impairment loss on a disposal group is allocated first to goodwill, and then to the remaining assets and liabilities on a pro rata basis, except that no loss is allocated to inventories, financial assets, deferred tax assets, employee benefit assets, investment property or biological assets, which continue to be measured in accordance with PEMEX’s other accounting policies. Impairment losses on initial classification asheld-for-sale orheld-for-distribution and subsequent gains and losses on remeasurement are recognized in profit or loss.
Once classified asheld-for-sale, intangible assets and property, plant and equipment are no longer amortized or depreciated, and any equity-accounted investee is no longer equity accounted.
K. | Provisions |
Provisions are determined by discounting the expected future cash flows at apre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. The unwinding of the discount is recognized as finance cost.
PEMEX recognizes provisions when, as a result of a past event, PEMEX has incurred a legal or assumed present obligation for which a future disbursement is probable and the value of such disbursement is reasonably estimable. In certain cases, such amounts are recorded at their present value.
Environmental liabilities
In accordance with applicable legal requirements and accounting practices, an environmental liability is recognized when the cash outflows are probable and the amount is reasonably estimable. Disbursements related to the conservation of the environment that are linked to revenue from current or future operations are accounted as expenses or assets, depending on the circumstances of each disbursement. Disbursements related to past operations, which no longer contribute to current or future revenues, are accounted for as current period expenses.
PETRÓLEOS MEXICANOS, PRODUCTIVE STATE-OWNED SUBSIDIARIES
AND SUBSIDIARY COMPANIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2016, 2015 AND 2014
(FIGURES STATED IN THOUSANDS, EXCEPT AS NOTED)
The accrual of a liability for a future disbursement occurs when an obligation related to environmental remediation, for which PEMEX has the information necessary to determine a reasonable estimated cost, is identified.
Retirement of assets
The obligations associated with the future retirement of assets, including those related to the retirement of wells, pipelines, properties, plant and equipment and their components are recognized at the date that the retirement obligation is incurred, based on the discounted cash flow method. The determination of the fair value is based on existing technology and regulations. If a reliable estimation of fair value cannot be made at the time the obligation is incurred, the accrual will be recognized when there is sufficient information to estimate the fair value.
The obligations related to the costs of future retirement of assets associated with the principal refining processes for gas and petrochemicals are not recognized. These assets are considered to have an indefinite useful life due to the potential for maintenance and repairs.
The abandonment costs related to wells currently in production and wells temporarily closed are recorded in the statement of comprehensive income based on the units of production method. Total cost of abandonment and plugging fornon-producing wells is recognized in the statement of comprehensive income at the end of each period. All estimations are based on the useful lives of the wells, considering their discounted present value. Salvage values are not considered, as these values commonly have not traditionally existed.
L. | Employee benefits |
Short-term employee benefits |
Beginning January 1, 2016, Petróleos MexicanosShort-term employee benefits are expensed as the related service is provided. A liability is recognized for the amount expected to be paid if PEMEX has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee and the Subsidiary Entities operates both aobligation can be estimated reliably.
ii. | Defined contribution plans |
Obligations for contributions to defined contribution plan and a defined benefit pension plan. Until December 31, 2015, PEMEX only operated a defined benefit pension plan.
Defined contribution pension plan
In this plan, both Petróleos Mexicanos andplans are expensed as the Subsidiary Entities and its employees contribute to the worker’s individual account. PEMEX’srelated service is provided. Prepaid contributions are recognized onas an accrual basis as cost, expense or asset and are credited to liability.
Contributions to the defined contribution planextent that are not expected to be fully settled within 12 months after the enda cash refund or a reduction in future payments is available.
iii. | Defined benefit plan |
PEMEX’s net obligation in respect of the annual reporting period in which the employee rendered related services; they will be discounted using the defined benefit plan discount rate.
Defined benefit plan
Under the defined benefit plan, Petróleos Mexicanos and the Subsidiary Entities are the only parties that contribute to a trust which is managed separately. Petróleos Mexicanos and the Subsidiary Entities recognize the cost for defined benefit plans based on independent actuarial computations applyingis calculated separately for each plan by estimating the amount of future benefit that employees have earned in the current and prior periods, discounting that amount and deducting the fair value of any plan assets.
The calculation of defined benefit obligations is performed annually by a qualified actuary using the projected unit credit method. Actuarial gains and losses areWhen the calculation results in a potential asset for PEMEX, the recognized within other comprehensive results for the period in which they are determined.
PETRÓLEOS MEXICANOS, PRODUCTIVE STATE-OWNED SUBSIDIARIES
AND SUBSIDIARY COMPANIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2016, 2015 AND 2014
(FIGURES STATED IN THOUSANDS, EXCEPT AS NOTED)
The costs of prior services are recognized within profit or loss for the period in which they are determined.
The asset or liability in the defined benefit plan comprises the present value of the defined benefit obligation less the fair value of plan assets for which obligations have to be settled. The value of any asset is limited to the present value of economic benefits available in the form of any economic benefit represented byfuture refunds from the plan reimbursements or reductions of thein future contributions to the plan. To calculate the present value of economic benefits, consideration is given to any applicable minimum funding requirements.
In addition,Remeasurements of the net defined benefit liability, which comprise actuarial gains and losses, the return on plan assets (excluding interest) and the effect of the asset ceiling (if any, excluding interest), are recognized immediately in OCI. PEMEX determines the net interest expense (income) on the net defined benefit liability (asset) for the period by applying the discount rate used to measure the defined benefit obligation at the beginning of the annual period to the net defined benefit liability (asset) at such time, taking into account any changes in the net defined benefit liability (asset) during the period as a result of contributions and benefit payments. Net interest expense and other long termexpenses related to defined benefit plans are recognized in profit or loss.
When the benefits of a plan are changed or when a plan is curtailed, the resulting change in benefit that relates to past service or the gain or loss on curtailment is recognized immediately in profit or loss. PEMEX recognizes gains and losses from the settlement of a defined benefit plan when the settlement occurs.
iv. | Other long-term employee benefits |
PEMEX’s net obligation in respect of long-term employee benefits includeis the seniority premiums payableamount of future benefit that employees have earned in return for disability, deaththeir service in the current and survivors benefits, medical services, gas and basic food basket for beneficiaries.
Termination benefitsprior periods. That benefit is discounted to determine its present value. Remeasurements are recognized in profit or loss forin the yearperiod in which they are incurred.arise.
v. | Termination benefits |
Termination benefits are expensed at the earlier of when PEMEX can no longer withdraw its offer of those benefits and when PEMEX recognizes costs for a restructuring. If benefits are not expected to be settled in full within 12 months of the reporting date, then they are discounted.
M. | Income taxes, duties and |
CurrentIncome tax expense comprises current and deferred tax. It is recognized in profit or loss except to the extent that it relates to a business combination, or items recognized directly in equity or in OCI.
The interest and penalties related to income taxes, including uncertain tax treatments, do not meet the definition of income taxes, and are therefore accounted for under IAS 37 “Provisions, Contingent Liabilities and Contingent Assets.”
i. | Current tax |
Current tax comprises the expected tax payable or receivable on the taxable income tax assets or liabilitiesloss for the year and any adjustment to the tax payable or receivable in respect of previous years. The amount of current and prior years are measured astax payable or receivable is the best estimate of the tax amount expected to be paid or received that reflects uncertainty related to be recovered from the tax authorities,income taxes, if any. It is measured using either the tax rates in forceenacted or substantively enacted at the reporting date. Current tax rates which are in the process of being approved and are substantially completed by the end of the year.also includes any tax arising from dividends.
Current income taxes related with items that are recognized as equity shall be presented in the other comprehensive income of the year. Periodically, PEMEX evaluates the positions taken in its tax returns for those regulations that are subject to interpretation and books corresponding provisions, if it is deemed necessary.
Deferred income taxes
Deferred taxes are recorded based on the assets and liabilities method, which consists on the recognitionare offset only if certain criteria are met.
ii. | Deferred tax |
Deferred tax is recognized in respect of deferred taxes by applying tax rates applicable to the income tax to the temporary differences between the carrying value and tax valuesamounts of assets and liabilities atfor financial reporting purposes and the date of these consolidated financial statements.
amounts used for taxation purposes. Deferred tax liabilities areis not recognized for all taxable temporary differences, except to the extent that the deferred tax liability arises from:for:
temporary differences on the initial recognition of an assetassets or liabilityliabilities in a transaction which is not a business combination and at the time of the transaction, affects neither accounting profit nor taxable profit or tax loss; and
Deferred tax assets are recognized for all deductible temporary differences, carry forward of both unused tax credits and unused tax losses to the extent that it is probable that taxable profit will be available against deductible temporary differences, and that the carry forward of both unused tax credits and unused tax losses can be utilized, unless:
PETRÓLEOS MEXICANOS, PRODUCTIVE STATE-OWNED SUBSIDIARIES
AND SUBSIDIARY COMPANIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2016, 2015 AND 2014
(FIGURES STATED IN THOUSANDS, EXCEPT AS NOTED)
temporary differences associated withrelated to investments in subsidiaries, associates and interestsjoint arrangements to the extent that PEMEX is able to control the timing of the reversal of the temporary differences and it is probable that they will not reverse in joint ventures, deferredthe foreseeable future; and
taxable temporary differences arising from the initial recognition of goodwill.
Deferred tax assets are recognized onlyfor unused tax losses, unused tax credits and deductible temporary differences to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable profitprofits will be available against which they can be used. Future taxable profits are determined based on the reversal of relevant taxable temporary differences. If the amount of taxable temporary differences can be utilized.
The carrying amount ofis insufficient to recognize a deferred tax asset isin full, then future taxable profits, adjusted for reversals of existing temporary differences, are considered, based on the business plans of PEMEX. Deferred tax assets are reviewed at the end of each reporting period. PEMEX reduces the carrying amount of a deferred tax assetdate and are reduced to the extent that it is no longer probable that a sufficient taxable profitthe related tax benefit will be available to allowrealized. Such reductions are reversed when the benefitprobability of that deferred tax asset to be utilized in whole or in part. future taxable profits improves.
Unrecognized deferred tax assets are revaluedreassessed at each reporting date and will be recognized to the extent that it ishas become probable that future taxable incomeprofits will be sufficient to allow for the recovery of the deferred tax asset.available against which they can be used.
Deferred tax assets and liabilities areis measured at the tax rates that are expected to applybe applied to the periodtemporary differences when the asset is realized or the liability is settled, based onthey reverse, using tax rates (and tax laws) that have been enacted or substantively enacted by the end ofat the reporting period.date.
The measurement of deferred tax reflects the tax consequences that would follow from the manner in which PEMEX expects, at the reporting date, to recover or settle the carrying amount of its assets and liabilities.
Deferred tax assets and deferred tax liabilities related with items that are recognized in equity shall be presented directly in other comprehensive income.
Deferred tax assets and deferred tax liabilities are offset only if PEMEX has a legal right to set off current tax assets against current tax liabilities andcertain criteria are levied by the same taxation authority or the same taxable entity.met.
Income taxes and duties
iii. | Duties, royalties and considerations |
Duties
PEMEX is subject to taxes and special duties, which are based on the value of hydrocarbons extracted, with certain deductions.
These taxes and duties are recognized in accordance with IAS 12, “Income Taxes” (IAS 12), when they have the characteristics of income tax, which occurs when such taxes are set by a government authority and are determined based on a formula that considers the balance of income (or extraction valued at a selling price) less expenses. Taxes and duties that meet this criteria should be recognized for current and deferred income tax based on the above paragraphs. Taxes and duties that do not meet this criteria are recognized as liabilities, affecting the costs and expenses relating to the transactions that gave rise to them.
(Special Tax on ProductionRoyalties and Services, or “IEPS Tax”)considerations
The IEPS Tax chargedRoyalties and considerations are payable pursuant to customers is a witholding on domestic saleslicense agreements. These royalties are recognized as liabilities and affect the items of gasoline, dieselcosts and fossil fuels. The applicable quotas depend on, among other factors,expenses related to the product, producer’s price, freight costs, commissions and the region in which the respective product is sold.operations that gave rise to them. See note 15.
N. | Contingencies |
Contingency losses are recorded when it is probable that a liability has been incurred and the amount thereof can be reasonably estimated. When a reasonable estimation cannot be made, qualitative disclosure is provided in the notes to the consolidated financial statements. Contingent revenues, earnings or assets are not recognized until realization is assured.
O. | Fair value |
‘Fair value’ is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date in the principal or, in its absence, the most advantageous market to which PEMEX has access at that date. The fair value of a liability reflects itsnon-performance risk.
PETRÓLEOS MEXICANOS, PRODUCTIVE STATE-OWNED SUBSIDIARIESA number of PEMEX accounting policies and disclosures require the measurement of fair values, for both financial andnon-financial assets and liabilities (see Note 8).
AND SUBSIDIARY COMPANIESWhen one is available, PEMEX measures the fair value of an instrument using the quoted price in an active market for that instrument. A market is regarded as ‘active’ if transactions for the asset or liability take place with sufficient frequency and volume to provide pricing information on an ongoing basis.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSIf there is no quoted price in an active market, then PEMEX uses valuation techniques that maximize the use of relevant observable inputs and minimize the use of unobservable inputs. The chosen valuation technique incorporates all of the factors that market participants would take into account in pricing a transaction.
FOR THE YEARS ENDED DECEMBER 31, 2016, 2015 AND 2014If an asset or a liability measured at fair value has a bid price and an ask price, then PEMEX measures assets and long positions at the bid price and liabilities and short positions at the ask price.
(FIGURES STATED IN THOUSANDS, EXCEPT AS NOTED)The best evidence of the fair value of a financial instrument on initial recognition is normally the transaction price (i.e., the fair value of the consideration given or received). If PEMEX determines that the fair value on initial recognition differs from the transaction price and the fair value is evidenced neither by a quoted price in an active market for an identical asset or liability nor based on a valuation technique for which any unobservable inputs are judged to be insignificant in relation to the measurement, then the financial instrument is initially measured at fair value, adjusted to defer the difference between the fair value on initial recognition and the transaction price. Subsequently, that difference is recognized in profit or loss on an appropriate basis over the life of the instrument but no later than when the valuation is fully supported by observable market data or the transaction is closed out.
P. | Revenue |
Sales revenuePEMEX initially applied IFRS 15 as of January 1, 2018. Information about accounting policies relating to contracts with customers and the effect of initially applying IFRS 15 is recognized at the moment when the risks and benefits of ownership of crude oil, refined or gas products, and derivative and petrochemical products are transferred to the customers who acquire them, which occurs as follows:
Services rendered are recognized as services income when the customers accept the receipt of the services.Note4-A).
The costs and expenses shown in PEMEX’s consolidated statements of comprehensive income are presented based on their function, which allows for a better understanding of the components of PEMEX’s operating income. This classification allows for a comparison to the industry to which PEMEX belongs.
Revenues
Represents revenues from sale or products or services.
Cost of sales
Cost of sales represents the acquisition and production costs of inventories at the time of sale. Cost of sales mainly includes depreciation, amortization, salaries, wages and benefits, a portion of the cost of the reserve for employee benefits and operating expenses related to the production process.
Other revenues (expenses), net
Other revenues (expenses), net consist primarily of income an expenses concepts that are not related directly to the operation of PEMEX.
Transportation, distribution and sale expenses
Transportation, distribution and sale expenses are costs in connection to the storage, sale and delivery of products, such as depreciation and operating expenses associated with these activities.
Administrative expenses
Administrative expenses are costs related to PEMEX’s areas that provide administrative support.
Financing income
Financing income is comprised of interest income, financial income and other income from financial operations between PEMEX and third parties.
PETRÓLEOS MEXICANOS, PRODUCTIVE STATE-OWNED SUBSIDIARIES
AND SUBSIDIARY COMPANIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2016, 2015 AND 2014
(FIGURES STATED IN THOUSANDS, EXCEPT AS NOTED)
Financing cost
Financing cost is comprised of interest expenses, commissions and other expenses related to financing operations minus any portion of the financing cost that is capitalized.
Derivative financial instruments (cost) income, net
Derivative financial instruments (cost) income represents the net effect of the profit or loss for the year associated with DFIs.
Foreign exchange loss, net
Exchange rate variations relating to assets or liabilities governed by contracts denominated in foreign currencies are recorded in income (loss) for the year.
Operating segments |
Operating segments are identifiable components of PEMEX that pursue business activities from which PEMEX earns revenues and incurs expenses including those revenues and expenses from transactions with other segments of PEMEX, and for which information is available to management on a segmented basis and is assessed by the Board of Directors in order to allocate resources and assess the profitability of the segments.
Presentation of consolidated statements of comprehensive income |
Costs and expenses shown in PEMEX’s consolidated statements of income are presented based on their function, which allows for a better understanding of the components of PEMEX’s operating income. This classification allows for a comparison to the industry to which PEMEX belongs.
i. | Operating profit |
Operating profit is the result generated from the continuing principal revenue-producing activities of PEMEX as well as other income and expenses related to operating activities. Operating profit excludes net finance costs, share of profit of equity-accounted investees and income taxes.
Revenues
Represents revenues from sale or products or services.
Cost of sales
Cost of sales represents the acquisition and production costs of inventories, depreciation, amortization, salaries, wages and benefits, a portion of the cost of the reserve for employee benefits and operating expenses related to the production process, production taxes and duties, exploration costs,Non-currentnon-operating asset held forcosts, among others.
Other revenues (expenses), net
Other revenues (expenses), net consist primarily of income and expenses that are not related directly to the operation of PEMEX.
Transportation, distribution and sale expenses
Transportation, distribution and sale expenses are costs in connection with the storage, sale and delivery of products, such as the depreciation and operating expenses associated with these activities.
Administrative expenses
Administrative expenses are costs related to PEMEX’s areas that provide administrative support.
ii. | Financing income and financing cost and derivative financial instruments income (cost), net |
Financing income
Financing income is comprised of interest income, financial income and other income from financial operations between PEMEX classifies anon-current asset, or disposal groupand third parties.
Financing cost
Financing cost is comprised of assets, as held for sale if (a) itsinterest expenses, commissions and other expenses related to PEMEX’s financing operations less any portion of the financing cost that is capitalized.
When calculating interest income and expenses, the effective interest rate is applied to the gross carrying amount will be recovered principally through a sale transaction rather than through continuing use; (b)of the asset (when the asset has no credit impairment) or groupto the amortized cost of the liability. However, for financial assets with credit impairment after initial recognition, interest income is availablecalculated by applying the effective interest rate at the amortized cost of the financial asset. If the asset ceases to be impaired, the interest income calculation returns to the gross base.
Derivative financial instruments income (cost), net
Includes the result of changes in its present conditionthe fair falue of derivative financial instruments.
NOTE 4. ACCOUNTING CHANGES AND RECLASSIFICATIONS
A. | Accounting changes |
As of January 1, 2018, PEMEX adopted IFRS 15 and IFRS 9.
i. | IFRS 15 |
IFRS 15 establishes a comprehensive framework for immediate saledetermining whether, how much and (c)when revenue is recognized. It replaces existing revenue recognition guidance, including IAS 18 Revenue, IAS 11 Construction Contracts, IFRIC 13 Customer Loyalty Programs and IFRIC 15 Agreements for the Construction of Real Estate.
PEMEX adopted IFRS 15 using the modified retrospective transition method at January 1, 2018. Under this transition method, comparative information has not been restated and continues to be presented under IAS 18, IAS 11 and related interpretations. As of January 1, 2018, no significant uncompleted contracts were identified, so there was no impact on the consolidated financial statements due to the initial adoption of the standard.
Under IFRS 15, revenue is measured based on the consideration specified in a contract with a customer and excludes amounts collected on behalf of third parties. PEMEX recognizes revenue when it transfers control over a product or service to a costumer.
In the case of comparative periods, revenue was measured at the fair value of the consideration received or receivable. Revenue from the sale of goods was recognized when the significant risks and rewards of ownership had been transferred to the customer, recovery of the consideration was probable, the associated costs and possible return of goods could be estimated reliably. Revenue from rendering of services was recognized in proportion to the stage of completion of the work performed at the reporting date.
The details of the main impacts generated by the adoption of IFRS 15 are the following:
a. | Nature of revenues of products and services |
For a description of the nature and sources of PEMEX’s primary revenues, see Note 6.
Crude oil sales
Nature, performance obligations and timing of revenue recognition
Export sales of crude oil are based on delivery terms established in contracts or orders. All sales are performed by the Free on Board International commercial term (“FOB” Incoterm). Therefore, revenue is expectedrecognized at a point in time when control of the crude oil has transferred to the customer, which occurs when the product is delivered at the point of shipping. Invoices are generated at that time and are mostly payable within the deadlines established in contracts or orders.
Determination and allocation of the transaction price
The price of the product is determined based on a market components formula and, with respect to crude oil, in accordance with the provisions of the Hydrocarbon Trading Strategies Management.
For international market crude oil sales, revenue is recognized with a provisional price, which undergoes subsequent adjustments until the product has arrived at the port of destination. There may be completeda period of up to 2 months in determining the final sale price, such as in the case of sales to the European market, the Middle East and Asia.
Crude oil sale contracts consider possible customers’ claims due to product quality, volume or delays in boarding, which are estimated in the price of the transaction.
Therefore, due to the implementation of IFRS 15, the main impacts on revenue recognition with respect to the previous year are as follows:
IFRS 15 | IAS 18 | |
For orders that have variations in price, revenue is adjusted on the closing date of each period. The subsequent variations in the fair value at the different reporting dates are recognized according to IFRS 9 | For orders that have variations in price, revenue was adjusted upon the product’s arrival at its final destination and the final price is defined. | |
Revenue is measured initially estimating the variable compensations such as quality and volume claims, delays in boarding etc. | A decrease in revenue was recognized when quality and volume claims, or other variable compensations were known. |
Sale of petroleum products
Nature, performance obligations and timing of revenue recognition
Refined products and their derivatives are sold within onethe national market. TheComisión Federal de Electricidad (Federal Electricity Commission, or “CFE”) purchases a significant portion of the fuel oil production, whileAeropuertos y Servicios Auxiliares (the Airports and Auxiliary Services Agency) purchases most of the jet fuel. The most important refined products are gasoline and diesel.
Revenue is recognized at a point in time when control is transferred to the customer, which occurs either at the point of shipping or when it is delivered at the customer’s facilities. Therefore, transportation fees can be included in the price of sale of the product and are considered part of a single performance obligation since transportation is rendered before control is transferred.
Determination and allocation of the transaction price
The price is determined based on the price at the point of delivery, adding the price of the services rendered (freight, handling of jet fuel, etc.) with the provisions and terms established by theComisión Reguladora de Energía (Energy Regulatory Commission or “ERC”). There are penalties for delivery failures and/or payment obligations, as well as quality and volume claims, which are known days after the transaction.
Therefore, due to the implementation of IFRS 15, the main impacts on revenue recognition with respect to the previous year fromare as follows:
IFRS 15 | IAS 18 | |
For all petroleum products, there is only one performance obligation that includes transport and handling services to the point of delivery. | Transportation and handling services were recognized as a separate service income, on the basis of prices established in the service orders. However, service income was also recognized at the point of delivery. | |
Revenue is measured initially estimating the variable compensations such as quality and volume claims, etc. | A decrease in revenue was recognized at the time quality and volume claims, or other variable compensations were known. |
Sales of natural gas
The sale of natural gas, liquefied petroleum gas, naphtha, butane, ethane and some other petrochemicals such as methane derivatives, ethane derivatives, aromatics and derivatives are mainly carried out in the domestic market.
Revenue is recognized at a point in time when control is transferred to the customer, which occurs when it is delivered at the customer’s facilities. Therefore, transportation fees can be included in the price of sale of the product and are considered part of a single performance obligation since transportation is rendered before control is transferred.
Determination and allocation of the transaction price
The transaction price is established at the time of sale, including the estimation of variable considerations such as capacity, penalties, extraordinary sales not included in contracts, adjustments for quality or volume claims, and incentives for the purchase of products; which are known days after the transaction.
Therefore, due to the implementation of IFRS 15, the main impacts on revenue recognition with respect to the previous year are as follows:
IFRS 15 | IAS 18 | |
There is only one performance obligation that includes transport and handling services to the point of delivery. | Natural gas supply, transportation and fuel capacity were considered as performance obligations. Sales of natural gas were recorded as sale of products while the amount charged to customers for transportation and fuel capacity was recognized as other revenue at the point of delivery. | |
Revenue is measured initially estimating the variable compensations as quality and volume claims, etc. | A decrease in revenue was recognized at the time quality and volume claims, or other variable compensations were known |
Drilling services
PEMEX provides drilling, termination and repair of wells services, as well as the execution of well services. The services are provided in accordance with the purchase orders which include the price of the transaction at the date of classification,the service. There are adjustment clauses for quality or more,volume claims or incentives for the purchase of products, which are known after the transaction.
Therefore, due to the implementation of IFRS 15, the main impacts on the recognition of income with certain exceptions.respect to the previous year are as follow:
Non-current assets classified
IFRS 15 | IAS 18 | |
If the customer can benefit from the different services within the same service order but separately, each service will be considered as a performance obligation. If the customer cannot benefit separately and the service is considered as a whole, the service order will be considered as a single performance obligation. | Income was recognized when all services within the same service order have been completed, so the entire service order was considered a performance obligation. | |
The price of the transaction is estimated, considering the prices established in the service orders at the date of sale and variable compensations are estimated, such as penalties fornon-delivery, quality claims, etc. | Income was recognized for sale of services. Subsequently, a decrease in income for quality and volume claims was recognized separately as it was known. | |
Price is not distributed when there is a performance obligation, except, when there is more than one performance obligation, in which case, the price of the transaction will be assigned according to the service price established in the service order. | The price is determined according to the service order as performance obligation. | |
Income is recognized at a point in time, when the service is rendered. | Income was recognized on a monthly straight line basis, regardless of whether the service had been rendered. |
Logistics services
PEMEX provides transport for hydrocarbons, oil and petrochemicals, through transport strategies by employing pipelines and offshore and onshore resources, as heldwell as the sale of capacity for its storage and management. The prices are established in the contracts, which also include penalties.
Therefore, due to the implementation of IFRS 15, the main impacts on the recognition of income with respect to the previous year are as follow:
IFRS 15 | IAS 18 | |
In the case of the contract with CENAGAS, operation and maintenance services for a period of one year are considered a performance obligation; any additional maintenance will be considered a separate performance obligation. For all the other contracts with third parties, in cases where within the same service order there are transportation and storage services, there could exist more than one performance obligation, depending on the term of the service. | All services were recognized as a single performance obligation. | |
The final price is estimated as follows: For CENAGAS, the price of the transaction is considered based on the prices established in the contract and in the service orders for each additional maintenance. For all other contracts, the price of the transaction is considered based on the prices established in the service orders. In all cases, variable compensations are estimated such as penalties fornon-compliance with delivery, quality and volume claims, etc. | The sale of the service was recorded at the price of the sale date without the terms of the contract and a decrease in income was recognized at the time the claims for quality and volume were known. | |
Price is not distributed when there is a performance obligation, except, when there is more than one performance obligation, in which case, the price of the transaction will be assigned according to the service price established in the service order. | The price is determined according to the service order as performance obligation. | |
Income is recognized at a point in time, when the service is rendered. | Income was recognized on a monthly straight line basis, regardless of whether the service had been rendered. |
Other products
Ethylene receives revenues from sales of methane, ethane and propylene products, as well as fertilizers and their derivatives. Most sales are made in the domestic market. The sale and delivery of the product are measuredmade at the lowersame time and because they are FOB, transportation fees are included in the price of sale of the product.
The transaction price is established at the time of sale, including the estimation of variable considerations such as capacity, penalties, extraordinary sales not included in contracts, adjustments for quality or volume claims, and incentives for the purchase of products; which are known days after the transaction. In the case of fertilizers and their derivatives, there are three types of prices, the list price, the retail customer price (which represents a discount compared to the list price) and the wholesale customer price (which represents a discount compared to the retail customer price).
Therefore, due to the implementation of IFRS 15, the main impacts on the recognition of income with respect to the previous year are as follow:
IFRS 15 | IAS 18 | |
There is only one performance obligation that includes transportation for delivery to destination. | An income was recognized for the sale of the products and another for the transportation. | |
The price of the product is estimated on the date of sale and considered as variable compensations such as quality and volume claims, etc. | The sale is recorded with the price at the time of the sale and delivery of the product and subsequently a decrease in income is recognized at the time quality and volume claims were known. | |
There is only one performance obligation so the price is not distributed. | The sale of product, freight and other services had their own prices. |
ii. | IFRS 9 |
In July 2014, the IASB finalized the accounting reform of financial instruments and issued IFRS 9 which contains: (a) the requirements for the classification and measurement of financial assets and liabilities, (b) the requirements for the impairment methodology, and (c) general information about hedge accounting. IFRS 9 replaces IAS 39 “Financial Instruments: Recognition and Measurement” (“IAS 39”) as of its carrying amount,effective date.
PEMEX has adopted IFRS 9 issued in July 2014 with a date of initial application of January 1, 2018. The requirements of IFRS 9 represent a significant change from IAS 39.
The nature and fair value minus costeffects of sales andthe key changes to PEMEX’s accounting policies resulting from its adoption of IFRS 9 are summarized below.
As a result of the adoption of IFRS 9, PEMEX adopted consequential amendments to IAS 1 Presentation of Financial Statements, which requires impairment of financial assets to be presented in a separate line item in the consolidated statementsstatement of profit or loss and OCI. Previously, PEMEX’s approach was to include the impairment of trade receivables in other expenses.
Classification of financial position.Non-currentassets classifiedand financial liabilities
IFRS 9 contains three principal classification categories for financial assets: measured at amortized cost, FVOCI and FVTPL. The classification of financial assets under IFRS 9 is generally based on the business model in which a financial asset is managed and its contractual cash flow characteristics. IFRS 9 eliminates the previous IAS 39 categories of trading, held to maturity, loans and receivables and available for sale. Under IFRS 9, derivatives embedded in contracts where the host is a financial asset in the scope of the standard are never separated. Instead, the hybrid financial instrument as helda whole is assessed for saleclassification.
With respect to financial liabilities, the current classification and measurement criteria under IAS 39 have been transferred to IFRS 9, including the criteria for using the fair value option. The only change contemplated by IFRS 9 in relation to financial liabilities is related to liabilities designated at FVTPL. Changes in the fair value of such financial liabilities attributable to changes in the entity’s own credit risk will be presented in OCI instead of in the period’s results. The adoption of IFRS 9 has not had a significant effect on PEMEX’s accounting policies for financial liabilities.
Impairment of financial assets
IFRS 9 replaces the “incurred loss” model in IAS 39 with an ECL model. The new impairment model applies to financial assets measured at amortized cost, contract assets and debt investments at FVOCI, but not to investments in equity instruments. Under IFRS 9, credit losses are recognized earlier than under IAS 39.
Hedge accounting
PEMEX, as part of the initial adoption of, and as permitted under, IFRS 9, elected to continue applying the hedge accounting requirements of IAS 39, instead of those included in IFRS 9. PEMEX uses DFIs to hedge the risk exposure in foreign currency, interest rate and the price of commodities related to its products. However, these contracts are not subject to depreciationaccounted as designated hedging instruments. DFIs are initially recognized at fair value on the date on which a derivative contract is entered into and after initial recognition are measured again at fair value. DFIs are accounted for as financial assets when the fair value is positive and as a financial liability when the fair value is negative. Any gain or amortization after the classification as held for sale.
The liabilities of a disposal group classified as held for sale are presented separatelyloss arising from other liabilitieschanges in the statementfair value of financial position. Those assetsthe DFIs is recognized directly in the income statement. This policy applies to the comparative information presented in 2018 and liabilities are2017.
Transition
PEMEX has defined January 1, 2018 as the initial date of adoption of IFRS 9 and according to the transitional standard in IFRS 9, PEMEX will not offsetrestate previous periods for comparison purposes and presentedany difference that may arise as a single amount.
Non-current asset held for distribution to owners
When PEMEX agrees to distribute anon-current asset, or disposal groupresult of assets, to owners, this asset or disposal groupthe adoption of assets, is classified as held for distribution to owners if: a)non-current asset or disposal group of assets, is available for immediate distribution in their present conditions and b)IFRS 9 between the distribution must be highly expected to be completed within one year from the date of classification, with certain exceptions.
PETRÓLEOS MEXICANOS, PRODUCTIVE STATE-OWNED SUBSIDIARIES
AND SUBSIDIARY COMPANIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2016, 2015 AND 2014
(FIGURES STATED IN THOUSANDS, EXCEPT AS NOTED)
Non-current assets classified as held for distribution are measured at the lower of itsprevious carrying amount and fair value less costthe carrying amount at the beginning of distributionthe reporting period shall be recognized in accumulated results over the opening initial period.
Classification and it is presented in a separate line item in the consolidated financial statements.Non-current assets classified as held for distribution are not subject to depreciation or amortization after the classification as held for distribution.measurement
The liabilitiesfollowing table sets forth the original measurement categories under IAS 39 and the new measurement categories under IFRS 9 for each class of a disposal group classified as held for distribution to owners are presented separately from other liabilities in the statement ofPEMEX’s financial position. Those assets and liabilities shall not be offset and shall be presented as a single amount.
Discontinued operations
A discontinued operation is a component of an entity that either has been disposed of or is classified as held for sale, and either:at January 1, 2018.
The revenues or expenses from discontinued operations, including profits or losses from previous years, are presented in a specific line item in the consolidated financial statement of comprehensive income.
Financial Assets | Classification IAS 39 | Classification IFRS 9 | Carrying amount IAS 39 | Carrying amount IFRS 9 | ||||||||
Cash and equivalents | Loans and receivables | FVTPL | Ps. | 97,851,754 | Ps. | 97,851,754 | ||||||
Account receivables short term – net | Loans and receivables | Amortized Cost | 170,645,234 | *170,670,191 | ||||||||
Equity instruments | Financial assets available for sale | FVTOCI | 1,056,918 | 1,056,918 | ||||||||
Derivative financial instrument | FVTPL | FVTPL | 30,113,454 | 30,113,454 | ||||||||
Account receivables long term – net | Loans and receivables | Amortized Cost | 148,492,909 | *148,492,909 | ||||||||
Total financial assets | Ps. | 448,160,269 | Ps. | 448,185,226 |
Short-term accounts receivable, which were classified as loans and items receivable under IAS 39, are now classified at amortized cost. An increase of Ps. 24,957 was recognized in the allowance for impairment for these receivables in accumulated results as of January 1, 2018 when the transition to IFRS 9 was made. |
Impairment
PEMEX has concluded that the financial assets most affected by the impairment estimate under the ECL model will be its accounts receivables, in relation to PEMEX’s holding of the long-term notes issued by the Mexican Government. The IASB issuedevaluation of the possible impairment of the notes was made using the general approach for calculating impairment contemplated under IFRS 9. The evaluation does not have material effects.
PEMEX considers it probable that impairment losses increase and present more volatility for instruments under the new ECL model. Furthermore, PEMEX considers that most of its accounts receivable are short-term without a significant financial component. Accordingly, PEMEX has elected to apply the simplified approach.
PEMEX considers that the application of the impairment requirements of IFRS mentioned below, which are applicable to PEMEX and are effective for annual periods beginning9 as of December 31, 2017 did not significantly impact the reserves as of January 1, 2016:
a) Amendments to IAS 16 and IAS 38 “Intangible Assets” (“IAS 38”), to clarify acceptable methods2018. The adjustment as of depreciation and amortization.
The amendments had no impact on these consolidated financial statements.
b) Amendments to IFRS 11, “Joint Arrangements” (“IFRS 11”), to address accounting for interest acquisition in joint operations.
The amendments to IFRS 11 address how a joint operator should account for the acquisition of an interest in a joint operation that constitutes a business. IFRS 11 now requires that such transactions be
PETRÓLEOS MEXICANOS, PRODUCTIVE STATE-OWNED SUBSIDIARIES
AND SUBSIDIARY COMPANIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2016, 2015 AND 2014
(FIGURES STATED IN THOUSANDS, EXCEPT AS NOTED)comparison with impairment losses incurred under IAS 39 was approximately Ps. 24,957.
• |
|
The amendments had no impact on these consolidated financial statements.
c) Amendments to IFRS 5,“Non-Current AssetsHeld-for-Sale and Discontinued Operations” (“IFRS 5”). Change in distribution methods.
The amendments to IFRS 5 introduce specific guidance for the reclassification of an asset fromheld-for-sale toheld-for-distribution-to-owners (or vice versa) or the discontinuation ofheld-for-distribution accounting.
The amendments state that:
The amendments had no impact on these consolidated financial statements.
d) Amendments to IFRS 7, “Financial Instruments: Disclosures” (“IFRS 7”)
The amendments to IFRS 7 provide additional guidance to clarify whether a servicing contract constitutes continuing involvement in a transferred asset for purposes of the required disclosure relating to transferred assets.
The amendments apply retrospectively; however, to avoid the risk of hindsight affecting the determination of the required fair value disclosure, an entity is not required to apply the amendments to any period beginning prior to the annual period during which the amendments are first applied. The amendments also include an amendment to IFRS 1, “First Time Adoption of International Financial Reporting Standards (IFRS 1).”
The amendments apply retrospectively in accordance with IAS 8, “Accounting Policies, Changes in Accounting Estimates and Errors” (“IAS 8”).
The amendments had no impact on these consolidated financial statements.
PETRÓLEOS MEXICANOS, PRODUCTIVE STATE-OWNED SUBSIDIARIES
AND SUBSIDIARY COMPANIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2016, 2015 AND 2014
(FIGURES STATED IN THOUSANDS, EXCEPT AS NOTED)
e) Amendments to IAS 19, “Employee Benefits” (“IAS 19”) Discount rate: issuing in a regional market.
The amendments to IAS 19 clarify that investment-grade corporate bonds used to estimate the discount rate for post-employment benefits should be issued in the same currency as the benefits to be paid. These amendments also provide for the assessment of the depth of the market for investment-grade corporate bonds at the relevant currency level.
The amendments apply retrospectively in accordance with IAS 8.
The amendments had no impact on these consolidated financial statements.
The IASB issued amendments and new IFRS that are not effective as of the issuance date of these consolidated financial statements but could have effect in subsequent PEMEX’s financial information.
Amendments that will be applicable in 2017:
a) IAS 12 “Income Taxes: Recognition of Deferred Tax Assets for Unrealized Losses” (“IAS 12”)
The IASB issues amendments to IAS 12 to clarify the diversity of practices in the recognition of deferred tax assets for unrealized losses related to debt instruments measured at fair value. The amendments to IAS 12 include some explanatory paragraphs and an illustrative example.
The amendments clarify the following aspects of IAS 12:
The amendments are to be applied retrospectively and are effective for annual periods beginning on or after January 1, 2017. Earlier application is permitted.
PEMEX is in the process of evaluating the impact that these standards will have on its consolidated financial statements.
b) Amendments to IAS 7 “Statement of Cash Flows” (“IAS 7”)
The IASB issued amendments to IAS 7. The amendments are intended to clarify disclosure provided to the user of financial statements about an entity’s financing activities.
PETRÓLEOS MEXICANOS, PRODUCTIVE STATE-OWNED SUBSIDIARIES
AND SUBSIDIARY COMPANIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2016, 2015 AND 2014
(FIGURES STATED IN THOUSANDS, EXCEPT AS NOTED)
Changes
The amendments in IAS 7 come with the objective that entities shall provide disclosures that enable users of financial statements to evaluate changes in liabilities arising from financing activities.
To achieve this objective, the IASB requires that the following changes in liabilities arising from financing activities are disclosed: (i) changes from financing cash flows; (ii) changes arising from obtaining or losing control of subsidiaries or other businesses; (iii) the effects of changes in foreign exchange rate; (iv) changes in fair values; and (v) other changes.
The IASB defines liabilities arising from financing activities as liabilities “for which cash flows were, or future cash flows will be, classified in the statements of cash flows as cash flows from financing activities.” It also stresses that the new disclosure requirements also relate to changes in financial assets if they meet the same definition.
The amendments state that one way to fulfill the new disclosure requirements is to provide reconciliation between the opening and closing balances in the statement of financial position for liabilities arising from financing activities.
Finally, the amendments state that changes in liabilities arising from financing activities must be disclosed separately from changes in other assets and liabilities.
The amendments are effective for annual periods beginning on or after January 1, 2017. Earlier application is permitted. Entities need not provide comparative information when they first apply the amendments.
PEMEX is in the process of evaluating the impact that these standards will have on its financial statements.
c) IFRS 12 “Disclosure of Interest in Other Entities” (“IFRS 12”) – Annual Improvements to IFRS 2014 – 2016 Cycle.
As of December 2016, the IASB published Annual Improvements to IFRS 2014 – 2016 Cycle, which clarified the scope of IFRS 12, by specifying that the disclosure requirements apply to all subsidiaries, joint arrangements, associates and unconsolidated structured entities classified as held for sale, held for distribution or as discontinued operations in accordance with IFRS 5, with certain exceptions.
The amendments are going to be applied restrospectively and are effective for annual periods beginning on or after January 1, 2017.
PEMEX is in the process of evaluating the impact that these standards will have on its financial statements.
Amendments effective for periods beginning in 2018:
a) IFRS 15, “Revenue from Contracts with Customers” (“IFRS 15”)
The IASB issued the amendment to IFRS 15 to provide a single comprehensive model for the accounting of revenue from contracts with customers and replaces the current guidelines on revenue recognition.
The core principle of the new IFRS 15 is that an entity should recognize revenue as the promised transfer of goods or services to the customer, valued at the amount that the entity expects to be entitled in exchanged for those goods or services.
PETRÓLEOS MEXICANOS, PRODUCTIVE STATE-OWNED SUBSIDIARIES
AND SUBSIDIARY COMPANIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2016, 2015 AND 2014
(FIGURES STATED IN THOUSANDS, EXCEPT AS NOTED)
Pursuant to IFRS 15, an entity should:
The new IFRS 15 enhances disclosures of revenue. This standard must be applied for periods beginning on or after January 1, 2018, and early application is permitted. During the year of application, entities may apply the rule retrospectively or use a modified approach.
PEMEX is in the process of evaluating the impact that these standards will have on its financial statements.
b) IFRS 9, “Financial Instruments” (“IFRS 9”(2014))
The IASB issued IFRS 9 (2009) and IFRS 9 (2010), which introduced new classification and measurement requirements. In 2013, the IASB released a new model for hedge accounting. The final version of IFRS 9, which was issued in July 2014 (“IFRS 9 (2014)”), replaces the previous versions of IFRS 9 and completes the IASB’s project to replace IAS 39, “Financial Instruments.”
The package of improvements introduced by IFRS 9 (2014) includes a logical model for classification and measurement, a single, forward-looking “expected loss” impairment model and a substantially reformed approach to hedge accounting.
Classification and Measurement
Classification under IFRS 9 (2014) determines how financial assets and liabilities are recognized in financial statements and, in particular, how they are measured on an ongoing basis. IFRS 9 (2014) introduces a logical approach to the classification of financial assets, which is based on the cash flow characteristics of the financial asset and the entity’s business model for managing the financial assets. This principle-based approach replaces the existing classification and measurement requirements.
Impairment
As part of IFRS 9 (2014), the IASB introduced a new, single impairment model that is applicable to all financial instruments and eliminates the complexity associated with multiple impairment models. The new
PETRÓLEOS MEXICANOS, PRODUCTIVE STATE-OWNED SUBSIDIARIES
AND SUBSIDIARY COMPANIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2016, 2015 AND 2014
(FIGURES STATED IN THOUSANDS, EXCEPT AS NOTED)
impairment model requires an entity to recognize expected credit losses on a timelier basis and to update the amount of expected losses throughout the useful life of a financial instrument. Additional disclosure is required to describe the basis for recognizing expected credit losses and any changes in the estimated amount of expected credit losses.
Hedge Accounting
IFRS 9 (2014) includes significant changes to hedge accounting, such as new disclosure requirements that require a description of an entity’s risk management activities. The new model represents a comprehensive review of hedge accounting and aligns the accounting with risk management in order to better reflect risk management activities in the financial statements. These changes are intended to provide better disclosure about the risks that an entity faces and the impact of risk management activities on its financial information.
Credit Risk
IFRS 9 (2014) also aims to eliminate the volatility in financial results caused by changes in the credit risk of liabilities that are measured at fair value. Under IFRS 9 (2014), earnings from the impairment credit risk of liabilities are recognized in other comprehensive income rather than directly in profit or net loss.
IFRS 9 (2014) is effective for annual periods beginning on or after January 1, 2018. Earlier application is permitted. Additionally, the new standards relating to credit risk may be applied early and in isolation, without adopting other modifications to the recognition of financial instruments.
PEMEX is in the process of evaluating the impact that these standards will have on its financial statements.
c) IAS 28 “Investments in Associates and Joint Ventures” (“IAS 28”) – Annual Improvements to IFRS 2014 – 2016 Cycle.
As of December 2016, the IASB published Annual Improvements to IFRS Cycle 2014 – 2016, which clarified that a venture capital organization or a mutual fund, unit trust and similar entities may elect, at initial recognition, to measure investment in an associate or joint venture at fair value through recognizing the changes in profits.
The amendments are effective for periods beginning on or after January 1, 2018.
PEMEX is in the process of evaluating the impact that these standards will have on its financial statements.
d) Amendments to IAS 40 “Investment Property” (“IAS 40”) – Transfers of Investment Property
These amendments were made to state that an entity transfer a property to, or from, investment property occurs when, and only when, there is evidence of a change of use. A change of use occurs if property meets, or ceases to meet, the definition of investment property. A change in management’s intentions for the use of a property by itself does not constitute evidence of a change in use.
Additionally, examples of evidence of a change in use were included.
The amendments are effective for periods beginning on or after January 1, 2018.
PETRÓLEOS MEXICANOS, PRODUCTIVE STATE-OWNED SUBSIDIARIES
AND SUBSIDIARY COMPANIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2016, 2015 AND 2014
(FIGURES STATED IN THOUSANDS, EXCEPT AS NOTED)
PEMEX is in the process of evaluating the impact that these standards will have on its financial statements.
e) Interpretation of IFRIC 22 “Foreign Currency Transactions and Advance Considerations” (IFRIC 22)
As of December 2016, IASB published an interpretation of IFRIC 22 developed by the International Financial Reporting Standards Interpretations Committee (the Interpretations Committee). The interpretation clarified when to recognize payments and collections of foreign currency transactions paid in advance due the fact that it observed some diversity in practice regarding these transactions.
The interpretations recognized foreign currency transactions when:
i. | there is consideration that is denominated or priced in a foreign currency; |
ii. | the entity recognizes a prepayment asset or a deferred income liability in respect of that consideration, in advance of the recognition of the related asset, expense or income; and |
iii. | the prepayment asset or deferred income liability isnon-monetary. |
The Interpretations Committee concluded that:
The date of the transaction, for the purpose of determining the exchange rate, is the date of initial recognition of thenon- monetary prepayment asset or deferred income liability.
If there are multiple payments or receipts in advance, a date of transaction is established for each payment or receipt.
IFRIC 22 is effective for annual reporting periods beginning on or after January 1, 2018. Entities may apply the rule retrospectively, or prospectively, in accordance with IAS 8, with certain exemptions.
PEMEX is in the processThe adoption of evaluating thethis interpretation did not have any impact that these standards will have on its financial statements.
Standards effective for periods beginning in 2019
IFRS 16, “Leases” (“IFRS 16”)
In January 2016, the IASB published a new accounting standard IFRS 16, which replaces IAS 17, “Leases and Guide interpretations.”
The main changes from the previous standard are:
PETRÓLEOS MEXICANOS, PRODUCTIVE STATE-OWNED SUBSIDIARIES
AND SUBSIDIARY COMPANIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2016, 2015 AND 2014
(FIGURES STATED IN THOUSANDS, EXCEPT AS NOTED)
PEMEX is in the process of assessing the impact this new standard will have on itsconsolidated financial statements.
B. | Reclassifications |
For comparison purposes, theThe following amounts in the consolidated financial statements as of December 31, 20152017 were reclassified to add long-term notes receivable as a separate line item from other assets inconform their presentation to the consolidatedstatement of financial statements as of December 31, 2016.position for 2018:
Line item | December 31, 2015 (as previously reported) | Reclassification | December 31, 2015 (following reclasification) | |||||||||
Other assets | Ps. | 57,407,660 | Ps. | (50,000,000 | ) | Ps. | 7,407,660 | |||||
Long-term notes receivable | Ps. | — | Ps. | 50,000,000 | Ps. | 50,000,000 |
2017 | ||||||||||||
Line item | As previously reported | Reclassification | Following Reclassification | |||||||||
Accounts receivable, net(i) | Ps. | 170,645,234 | Ps. | (2,522,206 | ) | Ps. | 168,123,028 | |||||
Short-term notes receivable(i) | — | 2,522,206 | 2,522,206 | |||||||||
Intangible assets(ii) | Ps. | 9,088,563 | Ps. | 5,590,077 | Ps. | 14,678,640 | ||||||
Other assets(ii) | 11,485,177 | (5,590,077 | ) | 5,895,100 |
These reclassifications had no impact on PEMEX’s total assets or liabilities.
(i) | Due to the fact that Short-term notes receivable are now presented in a separate line ítem, figures for 2017 were recclassified from Accounts receivable, net. |
(ii) | Due to the fact that intangible assets are now presented in a separate line ítem, figures for 2017 were recclassified from Other assets. |
NOTE 4.5. SUBSIDIARY ENTITIES AND SUBSIDIARY COMPANIES
As of December 31, 2016,2018 and 2017, the Subsidiary Entities consolidated in these financial statements include Pemex Exploration and Production, Pemex Industrial Transformation, Pemex Cogeneration and Services (until July 27, 2018, see Note 1), Pemex Drilling and Services, Pemex Logistics, Pemex Fertilizers and Pemex Ethylene.
TheAs of December 31, 2018 and 2017, the consolidated Subsidiary Companies are as follows:
• | PEP Marine, |
• | P.M.I. Services, B.V. (PMI SHO)(i) |
• | P.M.I. Holdings, B.V. (PMI HBV)(i)(vi) |
• | P.M.I. Trading |
• | PEMEX Internacional España, S. A. (PMI SES)(i)(iv) |
• | P.M.I. Holdings Petróleos España, |
• | P.M.I. Services North |
• | P.M.I. Holdings North |
• | 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. Field Management Resources, |
P.M.I. Campos Maduros SANMA, S. de R. L. de C. V. (SANMA)
Pro-Agroindustria, S. A. de C. V. (AGRO)
• | P.M.I. Azufre Industrial, S. A. de C. V. (PMI AZIND)(ix) |
• |
PETRÓLEOS MEXICANOS, PRODUCTIVE STATE-OWNED SUBSIDIARIES
AND SUBSIDIARY COMPANIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2016, 2015 AND 2014
(FIGURES STATED IN THOUSANDS, EXCEPT AS NOTED)
P.M.I. Infraestructura de Desarrollo, S. A. de C. V. (PMI ID)(i) |
• | P.M.I. Cinturón Transoceánico Gas Natural, |
• | P.M.I. Transoceánico Gas LP, |
• | P.M.I. Servicios Portuarios Transoceánicos, |
• | P.M.I. Midstream del Centro, |
PEMEX Procurement International, Inc. (PPI)
• | Hijos de J. Barreras, S. A. (HJ BARRERAS)(ii) |
• | 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 Cogeneración Internacional, S.L. (MG COG)(viii) |
• | PMX Cogeneración S.A.P.I. de C.V. (PMX COG) (viii) |
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. |
• | Holdings Holanda Services, B.V. (HHS) |
i. | Member Company of the “PMI Subsidiaries”. |
ii. | Non-controlling |
iii. As of January |
iv. As of February 2017, this company merged with HPE. |
v. As of June |
vi. As of October 2017, PMI HBV was divided, and HHS was created and included in the consolidated financial statements of PEMEX. |
vii. This company was liquidated in 2017. |
viii. As of |
ix. As of August 2018, this company was consolidated by MGAS. |
x. On December 17, 2018 PEMEX aquired the total shares in this company and as of December 31, 2018 this company is no longer part of thenon-controlling interest. |
xi. Formerly P.M.I. Marine DAC until August, 2018 |
xii. Formerly P.M.I. Trading Ltd until August, 2018. |
NOTE 5.6. 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. After the Corporate Reorganization, PEMEX’s operations are nowhave been conducted through nine business segments: explorationExploration and production, industrial transformation, cogenerationProduction, Industrial Transformation, Cogeneration and services, drillingServices (until July 27, 2018, see Note 1), Drilling and services, logistics, ethylene,
PETRÓLEOS MEXICANOS, PRODUCTIVE STATE-OWNED SUBSIDIARIES
AND SUBSIDIARY COMPANIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2016, 2015 AND 2014
(FIGURES STATED IN THOUSANDS, EXCEPT AS NOTED)
fertilizers,Services, Logistics, Ethylene, Fertilizers, the Trading Companies and Corporate and Other Operating Subsidiary Companies. The results for refining, gas and basic petrochemicals and petrochemicals reported in a separate segment during 2015, are now reported under the industrial transformation segment. In addition, information for 2015 relating to the segments of the Subsidiary Entities includes the results of the operation as of its creation date (see Note 1). For comparison purposes, results for the year ended December 31, 2015 are also presented using Industrial Transformation, and do not separate out the results for refining, gas and basic petrochemicals and petrochemicals. Due to PEMEX’s structure, there are significant quantitiesamounts of inter-segment sales among the reporting segments, which are made at internal transfer prices established by PEMEX reflectingthat are intended to reflect international market prices.
The primary sources of revenue for PEMEX’s business segments following the Corporate Reorganization are as described below:
The exploration and production segment earns revenues from domestic sales of domestic crude oil and natural gas, and from exporting crude oil through certain of the Trading Companies. Export sales are made through PMI CIM to approximately 3430 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 producedit produces to the Comisión Federal de Electricidad (Federal Electricity Commission, or “CFE”)CFE and a significant portion of jet fuel produced to Aeropuertos y Servicios Auxiliares (thethe Airports and Auxiliary Services Agency).Agency. The refining segment’s most important products are different types of gasoline and diesel.
The cogeneration segment receivesreceived income from the cogeneration, supply and sale of electricity and thermal energy; itenergy and also provides technical and management activities associated with these services. During 2018 this company did not generate income. This entity was liquidated on July 27, 2018 (see Note 1).
The drilling segment receives income from drilling services, and wells repairservicing and services.repairing wells.
The logistics segment earns income from transportation storage and related servicesstorage of crude oil, petroleum products and petrochemicals, through strategies such as well as related services, which it provides by employing pipelines and maritimeoffshore and terrestrialonshore resources, and from the provision ofproviding services related to the maintenance, and handling, of the products and guardguarding and management services.of these products.
The ethylene segment earns revenues from the distribution and trade of methane, ethane and propylene in the domestic market.
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”), earn revenues from trading crude oil, natural gas and petroleum and petrochemical products withinin 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 andre-insurance services to PEMEX’s entities and companies.
PETRÓLEOS MEXICANOS, PRODUCTIVE STATE-OWNED SUBSIDIARIES
AND SUBSIDIARY COMPANIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2016, 2015 AND 2014
(FIGURES STATED IN THOUSANDS, EXCEPT AS NOTED)
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. These reporting segments are those which PEMEX’s management evaluates in its analysis of PEMEX and makes decisions.on which it bases its decision-making.
As of/for the year | Exploration and Production | Industrial Transformation | Cogeneration and Services (1) | Drilling and Services | Logistics | Fertilizers | Ethylene | Trading Companies | Corporate and Other Operating Subsidiary Companies | Intersegment eliminations | Total | |||||||||||||||||||||||||||||||||
Sales: | ||||||||||||||||||||||||||||||||||||||||||||
Trade | Ps. | 482,262,631 | Ps. | 960,558,229 | Ps. | — | Ps. | — | Ps. | — | Ps. | 2,933,424 | Ps. | 12,809,114 | Ps. | 204,103,954 | Ps. | 9,778,796 | Ps. | — | Ps. | 1,672,446,148 | ||||||||||||||||||||||
Intersegment | 397,199,590 | 141,997,392 | — | 3,414,033 | 63,672,574 | 65,802 | 1,635,050 | 640,382,216 | 119,762,378 | (1,368,129,035 | ) | — | ||||||||||||||||||||||||||||||||
Services income | 23,110 | 546,136 | — | 198,775 | 4,708,217 | 4,742 | 13,379 | 64,038 | 3,114,605 | — | 8,673,002 | |||||||||||||||||||||||||||||||||
(Reversal) Impairment of wells pipelines, properties, plant and equipment, net | (65,013,616 | ) | (659,610 | ) | — | — | 40,288,338 | 2,246,264 | — | 1,719,627 | — | — | (21,418,997 | ) | ||||||||||||||||||||||||||||||
Cost of sales | 402,979,694 | 1,091,796,331 | — | (1,350,678 | ) | 42,694,683 | 4,509,881 | 15,952,951 | 837,820,025 | 54,148,722 | (1,249,040,048 | ) | 1,199,511,561 | |||||||||||||||||||||||||||||||
Gross income (loss) | 541,519,253 | 11,965,036 | — | 4,963,486 | (14,602,230 | ) | (3,752,177 | ) | (1,495,408 | ) | 5,010,556 | 78,507,057 | (119,088,987 | ) | 503,026,586 | |||||||||||||||||||||||||||||
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Other revenue (expenses), net | 12,475,283 | 5,370,430 | 1,788 | (3,797,729 | ) | (40,069,840 | ) | 71,419 | 149,028 | 1,791,001 | 6,771,950 | 40,289,181 | 23,052,511 | |||||||||||||||||||||||||||||||
Distribution, transportation and sales expenses | 106,510 | 26,616,527 | — | 63 | 82,755 | 387,397 | 251,459 | 280,407 | 94,457 | (3,462,366 | ) | 24,357,209 | ||||||||||||||||||||||||||||||||
Administrative expenses | 67,988,247 | 51,613,434 | — | 965,397 | 11,592,604 | 785,883 | 1,860,759 | 1,541,092 | 74,525,804 | (76,551,739 | ) | 134,321,481 | ||||||||||||||||||||||||||||||||
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Operating income (loss) | 485,899,779 | (60,894,495 | ) | 1,788 | 200,297 | (66,347,429 | ) | (4,854,038 | ) | (3,458,598 | ) | 4,980,058 | 10,658,746 | 1,214,299 | 367,400,407 | |||||||||||||||||||||||||||||
Financing income | 94,009,399 | 7,475,509 | 1 | 350,326 | 1,351,514 | 4,916 | 26,565 | 702,471 | 142,481,311 | (214,844,890 | ) | 31,557,122 | ||||||||||||||||||||||||||||||||
Financing cost | (127,343,514 | ) | (1,910,666 | ) | — | (771,639 | ) | (220,721 | ) | (478,044 | ) | (79,335 | ) | (1,379,583 | ) | (202,865,030 | ) | 214,321,510 | (120,727,022 | ) | ||||||||||||||||||||||||
Derivative financial instruments (cost) income, net | (19,132,060 | ) | (11,304 | ) | — | — | — | — | — | 382,568 | (3,497,812 | ) | (5 | ) | (22,258,613 | ) | ||||||||||||||||||||||||||||
Foreign exchange (loss) income, net | 28,035,087 | (1,707,558 | ) | — | 31,051 | 167,982 | (2,577 | ) | (28,542 | ) | 920,488 | (3,756,451 | ) | — | 23,659,480 | |||||||||||||||||||||||||||||
Profit (loss) sharing in joint ventures and associates | 54,149 | — | — | — | (1,092 | ) | — | — | 1,012,490 | (124,094,148 | ) | 124,555,613 | 1,527,012 | |||||||||||||||||||||||||||||||
Taxes, duties and other | 469,669,529 | — | — | (407,217 | ) | (2,474,189 | ) | — | 1,446,202 | 1,840,409 | (8,496,511 | ) | — | 461,578,223 | ||||||||||||||||||||||||||||||
Net (loss) income | (8,146,689 | ) | (57,048,514 | ) | 1,789 | 217,252 | (62,575,557 | ) | (5,329,743 | ) | (4,986,112 | ) | 4,778,083 | (172,576,873 | ) | 125,246,527 | (180,419,837 | ) | ||||||||||||||||||||||||||
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Total current assets | 1,109,407,361 | 238,486,786 | — | 11,478,067 | 15,343,841 | 2,772,995 | 8,337,752 | 137,727,664 | 723,490,973 | (1,853,935,478 | ) | 393,109,961 | ||||||||||||||||||||||||||||||||
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Total non current assets | 1,023,144,103 | 283,521,897 | — | 15,267,696 | 100,097,224 | 4,187,744 | 17,771,292 | 28,939,309 | 1,624,995,944 | (1,415,837,902 | ) | 1,682,087,307 | ||||||||||||||||||||||||||||||||
Total current liabilities | 334,709,929 | 155,402,987 | — | 2,962,370 | 31,418,555 | 9,682,768 | 6,710,315 | 98,007,805 | 1,662,808,360 | (1,853,926,795 | ) | 447,776,294 | ||||||||||||||||||||||||||||||||
Total non current liabilities | 2,254,024,319 | 529,484,079 | — | 10,739,495 | 10,332,359 | 108,467 | 149,750 | 4,272,341 | 2,116,660,861 | (1,838,945,265 | ) | 3,086,826,406 | ||||||||||||||||||||||||||||||||
Equity (deficit), net | (456,182,784 | ) | (162,878,383 | ) | — | 13,043,898 | 73,690,151 | (2,830,496 | ) | 19,248,979 | 64,386,827 | (1,430,982,304 | ) | 423,098,680 | (1,459,405,432 | ) | ||||||||||||||||||||||||||||
Depreciation and amortization | 124,671,118 | 19,183,640 | — | 1,483,248 | 4,409,226 | (246,697 | ) | 1,385,445 | 403,122 | 2,092,938 | — | 153,382,040 | ||||||||||||||||||||||||||||||||
Net periodic cost of employee benefits | 33,688,888 | 51,239,055 | — | 27,105 | 191,132 | 9,162 | 8,839 | (321,683 | ) | 26,861,666 | 2,917,450 | 114,621,614 |
As of/for the year ended December 31, 2016 | Exploration and Production | Industrial Transformation | Cogeneration and Services | Drilling and Services | Logistics | Fertilizers | Ethylene | Trading Companies | Corporate and Other Operating Subsidiary Companies | Intersegment eliminations | Total | |||||||||||||||||||||||||||||||||
Sales: | ||||||||||||||||||||||||||||||||||||||||||||
Trade | Ps. | — | Ps. | 648,088,013 | Ps. | — | Ps. | — | Ps. | — | Ps. | 3,873,403 | Ps. | 15,392,552 | Ps. | 395,118,117 | Ps. | 2,646,505 | Ps. | — | Ps. | 1,065,118,590 | ||||||||||||||||||||||
Intersegment | 616,380,615 | 117,096,378 | 51,913 | 1,981,754 | 68,316,958 | 900,464 | 1,764,438 | 405,293,283 | 50,683,175 | (1,262,468,978 | ) | — | ||||||||||||||||||||||||||||||||
Services income | — | 5,565,604 | 132,521 | 70,112 | 2,813,887 | 1,908 | 60,141 | 236,230 | 5,925,854 | (379,176 | ) | 14,427,081 | ||||||||||||||||||||||||||||||||
(Reversal) Impairment of wells pipe-lines, properties, plant and equipment | (271,709,433 | ) | (52,498,881 | ) | — | — | (5,829,520 | ) | — | (1,276,509 | ) | — | — | (331,314,343 | ) | |||||||||||||||||||||||||||||
Cost of sales | 359,064,884 | 823,763,927 | 166,721 | 143,956 | 61,248,584 | 5,506,198 | 13,936,213 | 783,691,245 | 9,018,456 | (1,188,959,550 | ) | 867,580,634 | ||||||||||||||||||||||||||||||||
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Gross income (loss) | 529,025,164 | (515,051 | ) | 17,713 | 1,907,910 | 15,711,781 | (730,423 | ) | 4,557,427 | 16,956,385 | 50,237,078 | (73,888,604 | ) | 543,279,380 | ||||||||||||||||||||||||||||||
Other revenues (expenses), net | 27,346,794 | 19,964,654 | — | 591,704 | (27,189,969 | ) | 32,710 | 63,989 | 3,412,711 | (4,600,209 | ) | (666,804 | ) | 18,955,580 | ||||||||||||||||||||||||||||||
Distribution, transportation and sales expenses | — | 50,792,317 | 8,232 | 6 | 148,215 | 185,168 | 481,727 | 229,432 | 49,162 | (26,663,019 | ) | 25,231,240 | ||||||||||||||||||||||||||||||||
Administrative expenses | 54,509,047 | 34,183,846 | 32,126 | 983,560 | 7,175,451 | 731,479 | 2,101,834 | 1,157,182 | 60,497,232 | (48,718,224 | ) | 112,653,533 | ||||||||||||||||||||||||||||||||
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Operating income (loss) | 501,862,911 | (65,526,560 | ) | (22,645 | ) | 1,516,048 | (18,801,854 | ) | (1,614,360 | ) | 2,037,855 | 18,982,482 | (14,909,525 | ) | 825,835 | 424,350,187 | ||||||||||||||||||||||||||||
Financing income | 56,040,129 | 11,056,345 | — | 72,995 | 373,301 | 4,358 | 64,582 | 1,098,079 | 125,964,466 | (180,925,000 | ) | 13,749,255 | ||||||||||||||||||||||||||||||||
Financing cost | (109,946,363 | ) | (3,188,892 | ) | (12,055 | ) | (642,711 | ) | (481,741 | ) | (20,217 | ) | (2,980 | ) | (1,342,351 | ) | (163,400,779 | ) | 180,193,625 | (98,844,464 | ) | |||||||||||||||||||||||
Derivative financial instruments (cost) income, net | — | 3,172 | — | — | — | — | — | (1,951,959 | ) | (12,052,200 | ) | — | (14,000,987 | ) | ||||||||||||||||||||||||||||||
Foreign exchange (loss) income, net | (217,166,718 | ) | (12,858,875 | ) | — | (1,570,317 | ) | (1,118,537 | ) | (29,263 | ) | (2,843 | ) | 174,866 | (21,441,056 | ) | — | (254,012,743 | ) | |||||||||||||||||||||||||
(Loss) profit sharing in associates | (21,164 | ) | 649,520 | — | — | — | — | — | 1,586,503 | (117,426,818 | ) | 117,347,804 | 2,135,845 | |||||||||||||||||||||||||||||||
Taxes, duties and other | 276,647,448 | — | — | (481,581 | ) | (10,010,686 | ) | — | — | 7,380,870 | (9,014,616 | ) | — | 264,521,435 | ||||||||||||||||||||||||||||||
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Net (loss) income | (45,878,653 | ) | (69,865,290 | ) | (34,700 | ) | (142,404 | ) | (10,018,145 | ) | (1,659,482 | ) | 2,096,614 | 11,166,750 | (194,251,296 | ) | 117,442,264 | (191,144,342 | ) | |||||||||||||||||||||||||
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Total current assets | 983,260,710 | 795,237,287 | 388,422 | 6,032,213 | 22,087,801 | 1,724,967 | 5,817,262 | 125,081,531 | 611,464,455 | (2,195,695,848 | ) | 355,398,800 | ||||||||||||||||||||||||||||||||
Permanent investments in associates and other | 139,523 | 257,159 | — | — | — | — | — | 17,568,893 | (244,932,588 | ) | 250,121,645 | 23,154,632 | ||||||||||||||||||||||||||||||||
Wells, pipelines, properties, plant and equipment, net | 1,176,504,263 | 311,432,174 | — | 21,023,629 | 86,695,514 | 7,771,634 | 20,086,650 | 6,691,813 | 37,536,571 | — | 1,667,742,248 | |||||||||||||||||||||||||||||||||
Total assets | 2,206,418,541 | 1,107,094,580 | 388,423 | 27,673,598 | 130,824,921 | 9,556,469 | 26,007,319 | 155,376,864 | 2,359,024,145 | (3,692,478,836 | ) | 2,329,886,024 | ||||||||||||||||||||||||||||||||
Total current liabilities | 340,011,451 | 666,467,674 | 472,236 | 3,894,121 | 19,824,792 | 2,995,088 | 3,879,828 | 78,894,485 | 1,497,612,971 | (2,187,862,760 | ) | 426,189,886 | ||||||||||||||||||||||||||||||||
Long-term debt | 1,737,109,328 | 31,495,027 | — | 12,489,423 | 4,382,109 | — | — | 3,597,938 | 1,757,315,685 | (1,739,384,968 | ) | 1,807,004,542 | ||||||||||||||||||||||||||||||||
Employee benefits | 362,312,386 | 575,277,374 | 191,876 | 441,127 | 571,702 | 20,362 | 21,893 | (749,034 | ) | 282,321,750 | — | 1,220,409,436 | ||||||||||||||||||||||||||||||||
Total liabilities | 2,533,221,665 | 1,278,138,290 | 664,829 | 16,853,202 | 29,336,417 | 3,015,450 | 3,901,722 | 86,885,889 | 3,553,477,189 | (3,942,600,482 | ) | 3,562,894,171 | ||||||||||||||||||||||||||||||||
Equity (deficit), net | (326,803,124 | ) | (171,043,710 | ) | (276,406 | ) | 10,820,396 | 101,488,504 | 6,541,019 | 22,105,597 | 68,490,975 | (1,194,453,044 | ) | 250,121,646 | (1,233,008,147 | ) | ||||||||||||||||||||||||||||
Depreciation and amortization | 124,329,921 | 17,425,472 | — | 2,559,357 | 2,230,557 | 481,241 | 1,395,232 | 86,707 | 1,931,004 | — | 150,439,491 | |||||||||||||||||||||||||||||||||
Net periodic cost of employee benefits | 32,617,215 | 52,886,397 | 5,860 | 31,491 | 30,340 | (1,178 | ) | 1,424 | (552,735 | ) | 24,719,602 | — | 109,738,416 | |||||||||||||||||||||||||||||||
Acquisition of wells, pipelines, properties, plant and equipment | 70,418,370 | 32,254,531 | — | 2,053,139 | 26,344,495 | 889,420 | 1,724,690 | 1,019,484 | 21,031,214 | — | 155,735,343 |
(1) | This company was liquidated on July 27, 2018. Except for certain expenses incurred in the liquidation, all operations were transferred to Pemex Industrial Transformation. (See Note 1) |
PETRÓLEOS MEXICANOS, PRODUCTIVE STATE-OWNED SUBSIDIARIES
As of/for the year ended | Exploration and Production | Industrial Transformation | Cogeneration and Services (1) | Drilling and Services | Logistics | Fertilizers | Ethylene | Trading Companies | Corporate and Other Operating Subsidiary Companies | Intersegment eliminations | Total | |||||||||||||||||||||||||||||||||
Sales: | ||||||||||||||||||||||||||||||||||||||||||||
Trade | Ps. | — | Ps. | 857,456,146 | Ps. | — | Ps. | — | Ps. | — | Ps. | 4,123,006 | Ps. | 12,621,648 | Ps. | 508,539,112 | Ps. | 3,159,238 | Ps. | — | Ps. | 1,385,899,150 | ||||||||||||||||||||||
Intersegment | 762,637,362 | 150,360,283 | 114,233 | 3,400,456 | 70,671,871 | 642,965 | 1,565,757 | 539,193,190 | 79,031,944 | (1,607,618,061 | ) | — | ||||||||||||||||||||||||||||||||
Services income | — | 6,116,937 | 334,755 | 41,741 | 3,714,941 | 2,339 | 26,733 | 66,621 | 826,502 | — | 11,130,569 | |||||||||||||||||||||||||||||||||
(Reversal) Impairment of wells pipelines, properties, plant and equipment, net | 129,350,315 | 15,952,092 | — | — | — | 1,935,500 | — | — | 4,206,653 | — | 151,444,560 | |||||||||||||||||||||||||||||||||
Cost of sales | 391,089,410 | 1,004,683,554 | 472,732 | 468,171 | 50,926,263 | 6,001,259 | 14,272,340 | 1,031,997,901 | 33,033,923 | (1,528,740,673 | ) | 1,004,204,880 | ||||||||||||||||||||||||||||||||
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Gross income (loss) | 242,197,637 | (6,702,280 | ) | (23,744 | ) | 2,974,026 | 23,460,549 | (3,168,449 | ) | (58,202 | ) | 15,801,022 | 45,777,108 | (78,877,388 | ) | 241,380,279 | ||||||||||||||||||||||||||||
Other revenue (expenses), net | 10,204,045 | 1,515,538 | 2,646 | (31,454 | ) | (24,134,436 | ) | 9,013 | 23,030 | 307,212 | (5,344,872 | ) | 22,623,354 | 5,174,076 | ||||||||||||||||||||||||||||||
Distribution, transportation and sales expenses | — | 26,049,566 | 13,581 | 73,526 | 528,370 | 334,663 | 375,482 | 59,043 | (5,544,561 | ) | 21,889,670 | |||||||||||||||||||||||||||||||||
Administrative expenses | 58,539,119 | 38,994,887 | 37,679 | 888,776 | 7,459,928 | 352,537 | 1,105,554 | 1,564,859 | 62,001,641 | (51,005,526 | ) | 119,939,454 | ||||||||||||||||||||||||||||||||
Operating income (loss) | 193,862,563 | (70,231,195 | ) | (72,358 | ) | 2,053,796 | (8,207,341 | ) | (4,040,343 | ) | (1,475,389 | ) | 14,167,893 | (21,628,448 | ) | 296,053 | 104,725,231 | |||||||||||||||||||||||||||
Financing income | 121,293,404 | 11,427,907 | 147 | 57,313 | 1,622,827 | 2,248 | 46,113 | 905,405 | 145,907,795 | (265,097,306 | ) | 16,165,853 | ||||||||||||||||||||||||||||||||
Financing cost | (136,378,338 | ) | (2,398,643 | ) | (19,882 | ) | (795,947 | ) | (2,307,427 | ) | (211,004 | ) | (1,964 | ) | (1,328,827 | ) | (239,003,771 | ) | 264,801,255 | (117,644,548 | ) | |||||||||||||||||||||||
Derivative financial instruments (cost) income, net | (1,613,874 | ) | 5,835 | — | — | — | — | — | (772,143 | ) | 27,718,506 | — | 25,338,324 | |||||||||||||||||||||||||||||||
Foreign exchange (loss) income, net | 10,043,316 | 4,924,209 | — | 227,365 | 613,099 | (20,925 | ) | (10,486 | ) | (4,318 | ) | 7,411,862 | — | 23,184,122 | ||||||||||||||||||||||||||||||
Profit (loss) sharing in joint ventures and associates | (75,195 | ) | 485,224 | — | — | (74 | ) | — | — | 1,049,809 | (212,666,494 | ) | 211,567,170 | 360,440 | ||||||||||||||||||||||||||||||
Taxes, duties and other | 338,169,260 | — | — | 276,967 | (7,444,967 | ) | — | — | 1,972,718 | 6,063 | — | 332,980,041 | ||||||||||||||||||||||||||||||||
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Net (loss) income | (151,037,384 | ) | (55,786,663 | ) | (92,093 | ) | 1,265,560 | (833,949 | ) | (4,270,024 | ) | (1,441,726 | ) | 12,045,101 | (292,266,613 | ) | 211,567,172 | (280,850,619 | ) | |||||||||||||||||||||||||
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Total current assets | 1,036,063,541 | 570,380,888 | 179,807 | 6,871,148 | 49,391,784 | 3,155,476 | 3,994,381 | 158,414,445 | 506,187,594 | (1,971,112,774 | ) | 363,526,290 | ||||||||||||||||||||||||||||||||
Total non current assets | 1,021,972,864 | 286,815,419 | — | 19,349,601 | 142,504,209 | 5,767,980 | 19,147,664 | 28,394,454 | 1,605,553,140 | (1,361,029,507 | ) | 1,768,475,824 | ||||||||||||||||||||||||||||||||
Total current liabilities | 284,656,058 | 459,130,165 | 531,580 | 2,201,936 | 44,521,371 | 6,455,246 | 2,183,654 | 112,046,527 | 1,439,097,882 | (1,961,697,234 | ) | 389,127,185 | ||||||||||||||||||||||||||||||||
Total non current liabilities | 2,285,756,339 | 617,978,584 | — | 11,684,489 | 12,184,880 | 100,804 | 125,236 | 4,796,353 | 2,148,891,089 | (1,836,290,460 | ) | 3,245,227,314 | ||||||||||||||||||||||||||||||||
Equity (deficit), net | (512,375,992 | ) | (219,912,442 | ) | (351,773 | ) | 12,334,324 | 135,189,742 | 2,367,406 | 20,833,155 | 69,966,018 | (1,476,248,237 | ) | 465,845,413 | (1,502,352,385 | ) | ||||||||||||||||||||||||||||
Depreciation and amortization | 127,742,568 | 17,935,112 | — | 2,368,123 | 4,562,140 | 422,930 | 1,688,493 | (19,798 | ) | 2,004,945 | — | 156,704,513 | ||||||||||||||||||||||||||||||||
Net periodic cost of employee benefits | 32,794,386 | 52,538,989 | — | 39,697 | (4,954 | ) | (1,999 | ) | (12,561 | ) | 16,166 | 22,703,351 | — | 108,073,075 |
AND SUBSIDIARY COMPANIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2016, 2015 AND 2014
(FIGURES STATED IN THOUSANDS, EXCEPT AS NOTED)
As of/for the year ended December 31, 2015 | Exploration and Production | Industrial Transformation | Cogeneration and Services | Drilling and Services | Logistics | Fertilizers | Ethylene | Trading Companies | Corporate and Other Operating Subsidiary Companies | Intersegment eliminations | Total | |||||||||||||||||||||||||||||||||
Sales: | ||||||||||||||||||||||||||||||||||||||||||||
Trade | Ps. | — | Ps. | 740,190,020 | Ps. | — | Ps. | — | Ps. | — | Ps. | 1,494,478 | Ps. | 4,551,413 | Ps. | 407,214,446 | Ps. | — | Ps. | — | Ps. | 1,153,450,357 | ||||||||||||||||||||||
Intersegment | 690,642,133 | 126,294,195 | — | 1,511,970 | 598,853 | 209,970 | 473,990 | 353,137,149 | 18,296,515 | (1,191,164,775 | ) | — | ||||||||||||||||||||||||||||||||
Services income | — | 7,549,061 | — | — | 10,355,988 | 236 | 17,893 | 661,683 | 5,107,109 | (10,779,858 | ) | 12,912,112 | ||||||||||||||||||||||||||||||||
Impairment of wells, pipelines, properties, plant and equipment | 394,396,580 | 76,442,079 | — | — | 5,829,519 | — | 1,276,512 | — | — | — | 477,944,690 | |||||||||||||||||||||||||||||||||
Benefit from change in pension plan | (46,368,308 | ) | (45,808,781 | ) | — | — | — | — | — | — | — | — | (92,177,089 | ) | ||||||||||||||||||||||||||||||
Cost of sales | 427,158,621 | 876,531,944 | 2,793 | 706,896 | 10,727,462 | 1,707,548 | 4,965,414 | 749,655,199 | 5,895,648 | (1,182,282,621 | ) | 895,068,904 | ||||||||||||||||||||||||||||||||
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Gross (loss) income | (84,544,760 | ) | (33,131,966 | ) | (2,793 | ) | 805,074 | (5,602,140 | ) | (2,864 | ) | (1,198,630 | ) | 11,358,079 | 17,507,976 | (19,662,012 | ) | (114,474,036 | ) | |||||||||||||||||||||||||
Other (expenses) revenues, net | (7,957,202 | ) | 1,243,040 | — | 38 | 26,941 | 14,680 | 19,909 | 1,666,783 | 721,759 | 1,890,786 | (2,373,266 | ) | |||||||||||||||||||||||||||||||
Distribution, transportation and sales expenses | — | 35,292,527 | 1,448 | — | 3,009 | 4,416 | 62,071 | 428,613 | 254 | (6,863,699 | ) | 28,928,639 | ||||||||||||||||||||||||||||||||
Administrative expenses | 18,454,281 | 40,529,587 | 47,670 | 8,553 | 104,794 | 152,404 | 519,351 | 1,967,581 | 61,609,813 | (10,921,939 | ) | 112,472,095 | ||||||||||||||||||||||||||||||||
Benefit from change in pension plan | (17,853,725 | ) | (39,975,450 | ) | — | — | — | — | — | — | (46,031,780 | ) | — | (103,860,955 | ) | |||||||||||||||||||||||||||||
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Operating (loss) income | (93,102,518 | ) | (67,735,590 | ) | (51,911 | ) | 796,559 | (5,683,002 | ) | (145,004 | ) | (1,760,143 | ) | 10,628,668 | 2,651,448 | 14,412 | (154,387,081 | ) | ||||||||||||||||||||||||||
Financing income | 25,852,078 | 2,789,535 | — | 43,690 | 37 | 3,503 | 7,728 | 1,147,870 | 110,816,691 | (125,670,273 | ) | 14,990,859 | ||||||||||||||||||||||||||||||||
Financing cost | (90,822,360 | ) | (13,738,104 | ) | 2,110 | (95,280 | ) | (61,153 | ) | — | — | (1,299,580 | ) | (87,289,616 | ) | 125,530,390 | (67,773,593 | ) | ||||||||||||||||||||||||||
Derivative financial instruments (cost) income, net | — | 6,463 | — | — | — | — | — | 1,347,323 | (22,803,663 | ) | — | (21,449,877 | ) | |||||||||||||||||||||||||||||||
Foreign exchange loss, net | (132,165,427 | ) | (7,364,486 | ) | (7,509 | ) | (92,046 | ) | (11,090 | ) | (3,600 | ) | (2,802 | ) | (49,190 | ) | (15,069,424 | ) | — | (154,765,574 | ) | |||||||||||||||||||||||
(Loss) profit sharing in associates and other | (473,082 | ) | 671,868 | — | — | — | — | — | 2,056,259 | (749,900,890 | ) | 749,963,960 | 2,318,115 | |||||||||||||||||||||||||||||||
Taxes, duties and other | 376,682,705 | 1,839,021 | — | 197,491 | (2,069,848 | ) | — | — | 5,134,176 | (50,283,298 | ) | — | 331,500,247 | |||||||||||||||||||||||||||||||
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Net (loss) income | (667,394,014 | ) | (87,209,335 | ) | (57,310 | ) | 455,432 | (3,685,360 | ) | (145,101 | ) | (1,755,217 | ) | 8,697,174 | (711,312,156 | ) | 749,838,489 | (712,567,398 | ) | |||||||||||||||||||||||||
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Total current assets | 709,252,019 | 313,801,630 | 655,239 | 2,171,717 | 49,162,929 | 1,594,643 | 4,988,511 | 73,116,155 | 275,582,816 | (1,163,125,162 | ) | 267,200,497 | ||||||||||||||||||||||||||||||||
Permanent investments in associates and other | 919,654 | 6,687,977 | — | — | — | 8,500 | — | 11,845,489 | (242,233,405 | ) | 246,937,384 | 24,165,599 | ||||||||||||||||||||||||||||||||
Wells, pipelines, properties, plant and equipment, net | 966,144,619 | 246,463,069 | — | 22,647,454 | 58,078,603 | 7,405,969 | 18,480,684 | 3,045,704 | 22,217,529 | — | 1,344,483,631 | |||||||||||||||||||||||||||||||||
Total assets | 1,698,909,240 | 567,486,579 | 655,240 | 24,917,981 | 111,307,038 | 9,034,376 | 23,705,118 | 93,266,620 | 1,443,189,885 | (2,196,817,877 | ) | 1,775,654,200 | ||||||||||||||||||||||||||||||||
Total current liabilities | 278,507,394 | 104,569,842 | 469,524 | 1,981,652 | 14,698,159 | 1,486,468 | 4,534,980 | 34,749,438 | 1,157,183,570 | (1,154,773,306 | ) | 443,407,721 | ||||||||||||||||||||||||||||||||
Long-term debt | 1,252,239,594 | 16,707,005 | — | 12,031,849 | 4,850,905 | — | — | 3,607,840 | 1,285,676,066 | (1,274,240,092 | ) | 1,300,873,167 | ||||||||||||||||||||||||||||||||
Employee benefits | 379,150,943 | 609,492,623 | 61,171 | 417,817 | 368,036 | 12,533 | 3,611 | (59,581 | ) | 289,938,288 | — | 1,279,385,441 | ||||||||||||||||||||||||||||||||
Total liabilities | 1,985,557,185 | 735,280,560 | 530,696 | 14,431,318 | 19,917,100 | 1,499,001 | 4,538,591 | 41,420,792 | 2,747,910,113 | (2,443,755,258 | ) | 3,107,330,098 | ||||||||||||||||||||||||||||||||
Equity (deficit), net | (286,647,945 | ) | (167,793,981 | ) | 124,544 | 10,486,663 | 91,389,938 | 7,535,375 | 19,166,527 | 51,845,828 | (1,304,720,228 | ) | 246,937,381 | (1,331,675,898 | ) | |||||||||||||||||||||||||||||
Depreciation and amortization | 144,567,149 | 20,916,796 | — | 612,741 | 337,364 | 158,505 | 442,504 | 84,493 | 831,698 | — | 167,951,250 | |||||||||||||||||||||||||||||||||
Net periodic cost of employee benefits | 23,608,485 | 21,392,600 | (298 | ) | — | (310 | ) | — | — | (119,819 | ) | 17,668,484 | — | 62,549,142 | ||||||||||||||||||||||||||||||
Acquisition of wells, pipelines, properties, plant and equipment | 184,786,051 | 68,935,841 | — | — | 1,544,224 | 320,762 | 1,882,108 | 677,314 | 6,711,511 | — | 264,857,811 |
PETRÓLEOS MEXICANOS, PRODUCTIVE STATE-OWNED SUBSIDIARIES
AND SUBSIDIARY COMPANIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2016, 2015 AND 2014
(FIGURES STATED IN THOUSANDS, EXCEPT AS NOTED)
As of / for the year ended December 31, 2014 | Exploration and Production | Refining | Gas and Basic Petrochemicals | Petrochemicals | Trading Companies | Corporate and Other Operating Subsidiary Companies | Intersegment eliminations | Total | ||||||||||||||||||||||||
Sales: | ||||||||||||||||||||||||||||||||
Trade | Ps. | — | Ps. | 758,988,560 | Ps. | 157,715,607 | Ps. | 28,293,812 | Ps. | 630,291,313 | Ps. | — | Ps. | — | Ps. | 1,575,289,292 | ||||||||||||||||
Intersegment | 1,134,519,972 | 78,453,236 | 84,198,317 | 15,181,899 | 433,732,307 | 65,377,209 | (1,811,462,940 | ) | — | |||||||||||||||||||||||
Services income | — | 4,016,699 | 2,038,629 | 779,978 | 777,160 | 4,743,987 | (917,871 | ) | 11,438,582 | |||||||||||||||||||||||
Impairment of wells, pipelines, properties, plant and equipment | 21,199,705 | — | — | 1,445,991 | — | — | — | 22,645,696 | ||||||||||||||||||||||||
Cost of sales | 336,376,922 | 916,867,969 | 238,920,142 | 46,215,742 | 1,059,616,060 | 3,730,490 | (1,759,092,541 | ) | 842,634,784 | |||||||||||||||||||||||
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Gross income (loss) | 776,943,345 | (75,409,474 | ) | 5,032,411 | (3,406,044 | ) | 5,184,720 | 66,390,706 | (53,288,270 | ) | 721,447,394 | |||||||||||||||||||||
Other (expenses) revenues, net | (3,190,604 | ) | 39,332,749 | 376,111 | (361,504 | ) | 643,043 | 1,011,199 | (258,597 | ) | 37,552,397 | |||||||||||||||||||||
Distribution, transportation and sales expenses | — | 31,071,231 | 3,024,325 | 1,061,157 | 493,651 | 468 | (3,468,166 | ) | 32,182,666 | |||||||||||||||||||||||
Administrative expenses | 43,131,979 | 31,941,961 | 11,038,955 | 14,107,044 | 1,806,000 | 59,442,914 | (50,131,739 | ) | 111,337,114 | |||||||||||||||||||||||
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Operating income (loss) | 730,620,762 | (99,089,917 | ) | (8,654,758 | ) | (18,935,749 | ) | 3,528,112 | 7,958,523 | 53,038 | 615,480,011 | |||||||||||||||||||||
Financing income | 14,784,998 | 258,069 | 2,653,747 | 142,115 | 1,157,820 | 87,371,829 | (103,354,391 | ) | 3,014,187 | |||||||||||||||||||||||
Financing cost | (74,492,786 | ) | (9,917,204 | ) | (346,660 | ) | (72,354 | ) | (1,068,869 | ) | (69,026,534 | ) | 103,365,347 | (51,559,060 | ) | |||||||||||||||||
Derivative financial instruments income (cost), net | — | — | 8,116 | — | 4,652,123 | (14,098,809 | ) | — | (9,438,570 | ) | ||||||||||||||||||||||
Foreign exchange loss, net | (63,865,750 | ) | (5,077,441 | ) | (132,849 | ) | (29,136 | ) | (96,785 | ) | (7,797,200 | ) | — | (76,999,161 | ) | |||||||||||||||||
Profit (loss) sharing in associates | 203,285 | — | 284,080 | — | (247,303 | ) | (263,425,082 | ) | 263,219,388 | 34,368 | ||||||||||||||||||||||
Taxes, duties and other | 760,627,534 | — | (21,772,116 | ) | — | 3,839,908 | 3,379,438 | — | 746,074,764 | |||||||||||||||||||||||
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Net (loss) income | (153,377,025 | ) | (113,826,493 | ) | 15,583,792 | (18,895,124 | ) | 4,085,190 | (262,396,711 | ) | 263,283,382 | (265,542,989 | ) | |||||||||||||||||||
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Depreciation and amortization | 121,034,025 | 11,435,739 | 7,039,030 | 2,685,896 | 80,990 | 799,107 | — | 143,074,787 | ||||||||||||||||||||||||
Net periodic cost of employee benefits | 37,582,742 | 38,198,504 | 9,338,059 | 11,512,589 | 177,003 | 24,914,431 | — | 121,723,328 | ||||||||||||||||||||||||
Acquisition of wells, pipelines, properties, plant and equipment | 174,019,012 | 39,087,896 | 5,632,770 | 4,709,838 | 2,545,075 | 8,007,600 | — | 234,002,191 |
PETRÓLEOS MEXICANOS, PRODUCTIVE STATE-OWNED SUBSIDIARIES
AND SUBSIDIARY COMPANIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2016, 2015 AND 2014
(FIGURES STATED IN THOUSANDS, EXCEPT AS NOTED)
For the year ended | Exploration and Production | Industrial Transformation | Cogeneration and Services | Drilling and Services | Logistics | Fertilizers | Ethylene | Trading Companies | Corporate and Other Operating Subsidiary Companies | Intersegment eliminations | Total | |||||||||||||||||||||||||||||||||
Sales: | ||||||||||||||||||||||||||||||||||||||||||||
Trade | Ps. | — | Ps. | 648,088,013 | Ps. | — | Ps. | — | Ps. | — | Ps. | 3,873,403 | Ps. | 15,392,552 | Ps. | 395,118,117 | Ps. | 2,646,505 | Ps. | — | Ps. | 1,065,118,590 | ||||||||||||||||||||||
Intersegment | 616,380,615 | 117,096,378 | 51,913 | 1,981,754 | 68,316,958 | 900,464 | 1,764,438 | 405,293,283 | 50,683,175 | (1,262,468,978 | ) | — | ||||||||||||||||||||||||||||||||
Services income | — | 5,565,604 | 132,521 | 70,112 | 2,813,887 | 1,908 | 60,141 | 236,230 | 473,415 | (379,176 | ) | 8,974,642 | ||||||||||||||||||||||||||||||||
(Reversal) Impairment of wells pipelines, properties, plant and equipment, net | (271,709,433 | ) | (52,498,881 | ) | — | — | (5,829,520 | ) | — | (1,276,509 | ) | — | — | — | (331,314,343 | ) | ||||||||||||||||||||||||||||
Cost of sales | 359,064,884 | 823,763,927 | 166,721 | 143,956 | 61,248,584 | 5,506,198 | 13,936,213 | 783,691,245 | 7,260,043 | (1,188,959,550 | ) | 865,822,221 | ||||||||||||||||||||||||||||||||
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Gross income (loss) | 529,025,164 | (515,051 | ) | 17,713 | 1,907,910 | 15,711,781 | (730,423 | ) | 4,557,427 | 16,956,385 | 46,543,052 | (73,888,604 | ) | 539,585,354 | ||||||||||||||||||||||||||||||
Other revenue (expenses), net | 27,346,794 | 19,964,654 | — | 591,704 | (27,189,969 | ) | 32,710 | 63,989 | 3,412,711 | (906,183 | ) | (666,804 | ) | 22,649,606 | ||||||||||||||||||||||||||||||
Distribution, transportation and sales expenses | — | 50,792,317 | 8,232 | 6 | 148,215 | 185,168 | 481,727 | 229,432 | 49,162 | (26,663,019 | ) | 25,231,240 | ||||||||||||||||||||||||||||||||
Administrative expenses | 54,509,047 | 34,183,846 | 32,126 | 983,560 | 7,175,451 | 731,479 | 2,101,834 | 1,157,182 | 60,497,232 | (48,718,224 | ) | 112,653,533 | ||||||||||||||||||||||||||||||||
Operating income (loss) | 501,862,911 | (65,526,560 | ) | (22,645 | ) | 1,516,048 | (18,801,854 | ) | (1,614,360 | ) | 2,037,855 | 18,982,482 | (14,909,525 | ) | 825,835 | 424,350,187 | ||||||||||||||||||||||||||||
Financing income | 56,040,129 | 11,056,345 | 72,995 | 373,301 | 4,358 | 64,582 | 1,098,079 | 125,964,466 | (180,925,000 | ) | 13,749,255 | |||||||||||||||||||||||||||||||||
Financing cost | (109,946,363 | ) | (3,188,892 | ) | (12,055 | ) | (642,711 | ) | (481,741 | ) | (20,217 | ) | (2,980 | ) | (1,342,351 | ) | (163,400,779 | ) | 180,193,625 | (98,844,464 | ) | |||||||||||||||||||||||
Derivative financial instruments (cost) income, net | — | 3,172 | — | — | — | — | — | (1,951,959 | ) | (12,052,200 | ) | — | (14,000,987 | ) | ||||||||||||||||||||||||||||||
Foreign exchange (loss) income, net | (217,166,718 | ) | (12,858,875 | ) | — | (1,570,317 | ) | (1,118,537 | ) | (29,263 | ) | (2,843 | ) | 174,866 | (21,441,056 | ) | — | (254,012,743 | ) | |||||||||||||||||||||||||
Profit (loss) sharing in joint ventures and associates | (21,164 | ) | 649,520 | — | — | — | — | — | 1,586,503 | (117,426,818 | ) | 117,347,804 | 2,135,845 | |||||||||||||||||||||||||||||||
Taxes, duties and other | 276,647,448 | — | — | (481,581 | ) | (10,010,686 | ) | — | — | 7,380,870 | (9,014,616 | ) | — | 264,521,435 | ||||||||||||||||||||||||||||||
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Net (loss) income | (45,878,653 | ) | (69,865,290 | ) | (34,700 | ) | (142,404 | ) | (10,018,145 | ) | (1,659,482 | ) | 2,096,614 | 11,166,750 | (194,251,296 | ) | 117,442,264 | (191,144,342 | ) | |||||||||||||||||||||||||
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Depreciation and amortization | 124,329,921 | 17,425,472 | 2,559,357 | 2,230,557 | 481,241 | 1,395,232 | 86,707 | 1,931,004 | — | 150,439,491 | ||||||||||||||||||||||||||||||||||
Net periodic cost of employee benefits | 32,617,215 | 52,886,397 | 5,860 | 31,491 | 30,340 | (1,178 | ) | 1,424 | (552,735 | ) | 24,719,602 | — | 109,738,416 |
PEMEX’s management measures the performance of the segments based on operating income and net segment income before elimination of unrealized intersegment gain (loss), as well as by analyzing the impact of the results of each segment inon the consolidated financial statements. For certain of the items in these consolidated financial statements to agreeconform with the individual financial statements of the operating segments, they must be reconciled. The tables below present the financial information of PEMEX’s operating segments, before intersegment eliminations:
The following tables present accounting conciliationsreconciliations between individual and consolidated information.
As of/for the year ended December 31, 2016 | Exploration and Production | Industrial Transformation | Cogeneration and Services | Drilling and Services | Logistics | Fertilizers | Ethylene | Trading Companies | Corporate and Other Operating Subsidiary Companies | |||||||||||||||||||||||||||
Sales: | ||||||||||||||||||||||||||||||||||||
By segment | Ps. | 616,380,615 | 771,597,427 | 184,434 | 6,263,093 | 71,130,845 | 4,775,775 | 17,217,131 | 800,979,076 | 59,255,534 | ||||||||||||||||||||||||||
Less unrealized intersegment sales | — | (847,432 | ) | — | (4,211,227 | ) | — | — | — | (331,446 | ) | — | ||||||||||||||||||||||||
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Total consolidated sales | Ps. | 616,380,615 | 770,749,995 | 184,434 | 2,051,866 | 71,130,845 | 4,775,775 | 17,217,131 | 800,647,630 | 59,255,534 | ||||||||||||||||||||||||||
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| |||||||||||||||||||
Operating income (loss): | ||||||||||||||||||||||||||||||||||||
By segment | Ps. | 503,679,153 | (60,347,367 | ) | (22,645 | ) | 1,271,202 | (25,701,065 | ) | (2,877,725 | ) | (3,504,812 | ) | 19,526,997 | ( 14,909,526 | ) | ||||||||||||||||||||
Less unrealized intersegment sales | — | (847,432 | ) | — | (4,211,227 | ) | — | — | — | (331,446 | ) | — | ||||||||||||||||||||||||
Less unrealized gain due to production cost valuation of inventory | (273,237 | ) | 3,572,498 | — | 3,815,371 | — | 905,910 | (2,163 | ) | (213,069 | ) | — | ||||||||||||||||||||||||
Less capitalized refined products | (1,661,986 | ) | (7,904,259 | ) | — | — | — | — | — | — | — | |||||||||||||||||||||||||
Less amortization of capitalized interest | 118,981 | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||
Less depreciation of revaluated assets | — | — | — | 640,702 | 6,899,211 | 357,455 | 5,544,830 | — | — | |||||||||||||||||||||||||||
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| |||||||||||||||||||
Total consolidated operating income (loss) | Ps. | 501,862,911 | (65,526,560 | ) | (22,645 | ) | 1,516,048 | (18,801,854 | ) | (1,614,360 | ) | 2,037,855 | 18,982,482 | ( 14,909,526 | ) | |||||||||||||||||||||
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| |||||||||||||||||||
Net income (loss): | ||||||||||||||||||||||||||||||||||||
By segment | Ps. | (44,069,001 | ) | (61,639,067 | ) | (381,214 | ) | (387,250 | ) | (16,917,356 | ) | (7,820,835 | ) | (3,780,706 | ) | 11,711,265 | (194,251,297 | ) | ||||||||||||||||||
Less unrealized intersegment sales | — | (847,432 | ) | — | (4,211,227 | ) | — | — | — | (331,446 | ) | — | ||||||||||||||||||||||||
Less unrealized gain due to production cost valuation of inventory | (273,237 | ) | 3,572,498 | — | 3,815,371 | — | 905,910 | (2,163 | ) | (213,069 | ) | — | ||||||||||||||||||||||||
Less capitalized refined products | (1,661,986 | ) | (7,904,259 | ) | — | — | — | — | — | — | — | |||||||||||||||||||||||||
Less equity method elimination | 6,590 | (3,047,030 | ) | 346,514 | — | — | 4,897,988 | 334,653 | — | — | ||||||||||||||||||||||||||
Less amortization of capitalized interest | 118,981 | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||
Less depreciation of revaluated assets | — | — | — | 640,702 | 6,899,211 | 357,455 | 5,544,830 | — | — | |||||||||||||||||||||||||||
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| |||||||||||||||||||
Total consolidated net (loss) income | Ps. | (45,878,653 | ) | (69,865,290 | ) | (34,700 | ) | (142,404 | ) | (10,018,145 | ) | (1,659,482 | ) | 2,096,614 | 11,166,750 | (194,251,297 | ) | |||||||||||||||||||
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| �� |
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PETRÓLEOS MEXICANOS, PRODUCTIVE STATE-OWNED SUBSIDIARIES
AND SUBSIDIARY COMPANIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2016, 2015 AND 2014
(FIGURES STATED IN THOUSANDS, EXCEPT AS NOTED)
As of/for the year ended December 31, 2018 | Exploration and Production | Industrial Transformation | Cogeneration and Services(1) | Drilling and Services | Logistics | Fertilizers | Ethylene | Trading Companies | Corporate and Other Operating Subsidiary Companies | |||||||||||||||||||||||||||
Sales: | ||||||||||||||||||||||||||||||||||||
By segment | Ps. | 910,443,812 | 1,105,255,786 | — | 8,716,657 | 68,380,791 | 3,051,428 | 14,457,543 | 844,550,208 | 132,655,779 | ||||||||||||||||||||||||||
Less unrealized intersegment sales | (30,958,481 | ) | (2,154,029 | ) | — | (5,103,849 | ) | — | (47,460 | ) | — | — | — | |||||||||||||||||||||||
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| |||||||||||||||||||
Total consolidated sales | Ps. | 879,485,331 | 1,103,101,757 | — | 3,612,808 | 68,380,791 | 3,003,968 | 14,457,543 | 844,550,208 | 132,655,779 | ||||||||||||||||||||||||||
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| |||||||||||||||||||
Operating income (loss): | ||||||||||||||||||||||||||||||||||||
By segment | Ps. | 488,151,914 | (70,799,130 | ) | 1,788 | 406,574 | (97,029,061 | ) | (5,162,552 | ) | (9,520,020 | ) | 4,913,736 | 10,658,746 | ||||||||||||||||||||||
Less unrealized intersegment sales | (30,958,481 | ) | (2,154,029 | ) | — | (5,103,849 | ) | — | (47,460 | ) | — | — | — | |||||||||||||||||||||||
Less unrealized gain due to production | (596,889 | ) | 12,058,664 | — | 4,537,200 | — | — | — | 66,322 | — | ||||||||||||||||||||||||||
Less capitalized refined products | (1,774,227 | ) | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||
Less amortization of capitalized interest | 118,981 | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||
Less depreciation and impairment of revaluated transferred assets | 30,958,481 | — | — | 360,372 | 30,681,632 | 355,974 | 6,061,422 | — | — | |||||||||||||||||||||||||||
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| |||||||||||||||||||
Total consolidated operating income (loss) | Ps. | 485,899,779 | (60,894,495 | ) | 1,788 | 200,297 | (66,347,429 | ) | (4,854,038 | ) | (3,458,598 | ) | 4,980,058 | 10,658,746 | ||||||||||||||||||||||
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| |||||||||||||||||||
Net income (loss): | ||||||||||||||||||||||||||||||||||||
By segment | Ps. | (5,867,212 | ) | (65,286,932 | ) | 1,789 | 971,701 | (85,357,751 | ) | (6,248,709 | ) | (6,144,326 | ) | 4,711,761 | (172,576,873 | ) | ||||||||||||||||||||
Less unrealized intersegment sales | (30,958,481 | ) | (2,154,029 | ) | — | (5,103,849 | ) | — | (47,460 | ) | — | — | — | |||||||||||||||||||||||
Less unrealized gain due to production | (596,889 | ) | 12,058,664 | — | 3,799,980 | — | — | — | 66,322 | — | ||||||||||||||||||||||||||
Less capitalized refined products | (1,774,227 | ) | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||
Less equity method elimination | (27,342 | ) | (1,666,217 | ) | — | — | 666 | 610,452 | (3,457,006 | ) | — | — | ||||||||||||||||||||||||
Less amortization of capitalized interest | 118,981 | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||
Less depreciation and impairment of revaluated transferred assets, net of deferred taxes | 30,958,481 | — | — | 549,420 | 22,781,528 | 355,974 | 4,615,220 | — | — | |||||||||||||||||||||||||||
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| |||||||||||||||||||
Total consolidated net (loss) income | Ps. | 8,146,689 | (57,048,514 | ) | 1,789 | 217,252 | (62,575,557 | ) | (5,329,743 | ) | (4,986,112 | ) | 4,778,083 | (172,576,873 | ) | |||||||||||||||||||||
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| |||||||||||||||||||
Assets: | ||||||||||||||||||||||||||||||||||||
By segment | Ps. | 2,161,126,244 | 567,768,812 | — | 28,400,765 | 176,047,827 | 10,018,775 | 31,365,663 | 177,684,447 | 2,348,486,917 | ||||||||||||||||||||||||||
Less unrealized intersegment sales | 1,557,729 | (7,544,007 | ) | — | — | 7,184 | (26,886 | ) | (5,304 | ) | (408,060 | ) | — | |||||||||||||||||||||||
Less unrealized gain due to production cost valuation of inventory | (4,254,421 | ) | (30,320,566 | ) | — | — | — | (47,460 | ) | — | (9,339,859 | ) | — | |||||||||||||||||||||||
Less capitalized refined products | (1,774,227 | ) | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||
Less depreciation and impairment of revaluated transferred assets, net of deferred taxes | (23,660,467 | ) | — | — | (1,655,002 | ) | (60,523,859 | ) | (1,801,679 | ) | (5,186,318 | ) | (424,850 | ) | — | |||||||||||||||||||||
Less equity method for unrealized profits | (562,375 | ) | (7,903,679 | ) | — | — | (90,087 | ) | (1,182,011 | ) | (64,997 | ) | (844,705 | ) | — | |||||||||||||||||||||
Less amortization of capitalized interest | 118,981 | 8,123 | — | — | — | — | — | — | — | |||||||||||||||||||||||||||
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| |||||||||||||||||||
Total consolidated assets | Ps. | 2,132,551,464 | 522,008,683 | — | 26,745,763 | 115,441,065 | 6,960,739 | 26,109,044 | 166,666,973 | 2,348,866,917 | ||||||||||||||||||||||||||
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Liabilities: | ||||||||||||||||||||||||||||||||||||
By segment | Ps. | 2,588,734,248 | 689,306,996 | — | 12,328,030 | 41,750,914 | 9,791,235 | 6,860,065 | 104,239,692 | 3,779,469,221 | ||||||||||||||||||||||||||
Less unrealized intersegment sales | — | (4,419,930 | ) | — | 1,373,835 | — | — | — | (1,959,546 | ) | — | |||||||||||||||||||||||||
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| |||||||||||||||||||
Total consolidated liabilities | Ps. | 2,588,734,248 | 684,887,066 | — | 13,701,865 | 41,750,914 | 9,791,235 | 6,860,065 | 102,280,146 | 3,779,469,221 | ||||||||||||||||||||||||||
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As of/for the year ended December 31, 2016 | Exploration and Production | Industrial Transformation | Cogeneration and Services | Drilling and Services | Logistics | Fertilizers | Ethylene | Trading Companies | Corporate and Other Operating Subsidiary Companies | |||||||||||||||||||||||||||
Assets: | ||||||||||||||||||||||||||||||||||||
By segment | Ps. | 2,232,052,453 | 1,151,907,566 | 425,141 | 30,990,147 | 254,615,026 | 10,421,225 | 43,067,636 | 170,782,928 | 2,359,024,145 | ||||||||||||||||||||||||||
Less unrealized intersegment sales | 483,230 | (4,158,101 | ) | — | — | — | — | (5,304 | ) | (332,529 | ) | — | ||||||||||||||||||||||||
Less unrealized gain due to production cost valuation of inventory | (3,246,782 | ) | (33,361,438 | ) | — | — | — | — | — | (5,688,341 | ) | — | ||||||||||||||||||||||||
Less capitalized refined products | (1,661,986 | ) | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||
Less depreciation of revalued assets | (20,585,300 | ) | — | — | (3,316,549 | ) | (123,790,105 | ) | (5,300,044 | ) | (12,746,136 | ) | (652 | ) | — | |||||||||||||||||||||
Less equity method for unrealized profits | (742,055 | ) | ( 7,293,447 | ) | (36,718 | ) | — | — | 4,435,288 | (4,308,877 | ) | (8,960,344 | ) | — | ||||||||||||||||||||||
Less amortization of capitalized interest | 118,981 | — | — | — | — | — | — | (424,198 | ) | — | ||||||||||||||||||||||||||
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| |||||||||||||||||||
Total consolidated assets | Ps. | 2,206,418,541 | 1,107,094,580 | 388,423 | 27,673,598 | 130,824,921 | 9,556,469 | 26,007,319 | 155,376,864 | 2,359,024,145 | ||||||||||||||||||||||||||
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| |||||||||||||||||||
Liabilities: | ||||||||||||||||||||||||||||||||||||
By segment | Ps. | 2,533,221,665 | 1,282,558,220 | 664,829 | 16,457,347 | 29,336,417 | 3,015,450 | 3,901,722 | 85,392,123 | 3,553,477,189 | ||||||||||||||||||||||||||
Less unrealized intersegment sales | — | (4,419,930 | ) | — | 395,855 | — | — | — | 1,493,766 | — | ||||||||||||||||||||||||||
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| |||||||||||||||||||
Total consolidated liabilities | Ps. | 2,533,221,665 | 1,278,138,290 | 664,829 | 16,853,202 | 29,336,417 | 3,015,450 | 3,901,722 | 86,885,889 | 3,553,477,189 | ||||||||||||||||||||||||||
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(1) | This company was liquidated on July 27, 2018. Except for certain expenses incurred in the liquidation, all operations were transferred to Pemex Industrial Transformation. (See Note 1) |
PETRÓLEOS MEXICANOS, PRODUCTIVE STATE-OWNED SUBSIDIARIES
As of/for the year ended December 31, 2017 | Exploration and Production | Industrial Transformation | Cogeneration and Services | Drilling and Services | Logistics | Fertilizers | Ethylene | Trading Companies | Corporate and Other Operating Subsidiary Companies | |||||||||||||||||||||||||||
Sales: | ||||||||||||||||||||||||||||||||||||
By segment | Ps. | 762,637,362 | 1,015,157,118 | 448,988 | 6,679,132 | 74,386,812 | 4,795,196 | 14,214,138 | 1,047,874,453 | 83,017,684 | ||||||||||||||||||||||||||
Less unrealized intersegment sales | — | (1,223,752 | ) | — | (3,236,935 | ) | — | (26,886 | ) | — | (75,530 | ) | — | |||||||||||||||||||||||
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| |||||||||||||||||||
Total consolidated sales | Ps. | 762,637,362 | 1,013,933,366 | 448,988 | 3,442,197 | 74,386,812 | 4,768,310 | 14,214,138 | 1,047,798,923 | 83,017,684 | ||||||||||||||||||||||||||
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| |||||||||||||||||||
Operating income (loss): | ||||||||||||||||||||||||||||||||||||
By segment | Ps. | 194,814,292 | (59,989,652 | ) | (72,358 | ) | 882,692 | (61,696,313 | ) | (7,148,431 | ) | (4,698,838 | ) | 14,490,017 | (21,628,448 | ) | ||||||||||||||||||||
Less unrealized intersegment sales | — | (1,223,752 | ) | — | (3,236,935 | ) | — | (26,886 | ) | — | (75,530 | ) | — | |||||||||||||||||||||||
Less unrealized gain due to production | (496,329 | ) | (9,017,791 | ) | — | 2,932,663 | — | — | — | (246,594 | ) | — | ||||||||||||||||||||||||
Less capitalized refined products | (574,381 | ) | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||
Less amortization of capitalized interest | 118,981 | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||
Less depreciation and impairment of revaluated transferred assets | — | — | — | 1,475,376 | 53,488,972 | 3,134,974 | 3,223,449 | — | — | |||||||||||||||||||||||||||
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| |||||||||||||||||||
Total consolidated operating income (loss) | Ps. | 193,862,563 | (70,231,195 | ) | (72,358 | ) | 2,053,796 | (8,207,341 | ) | (4,040,343 | ) | (1,475,389 | ) | 14,167,893 | (21,628,448 | ) | ||||||||||||||||||||
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Net income (loss): | ||||||||||||||||||||||||||||||||||||
By segment | Ps. | (150,388,699 | ) | (44,599,751 | ) | (358,862 | ) | 345,913 | (40,300,942 | ) | (8,616,130 | ) | (5,866,542 | ) | 5,200,268 | (292,266,613 | ) | |||||||||||||||||||
Less unrealized intersegment sales | — | (1,223,752 | ) | — | (3,236,935 | ) | — | (26,886 | ) | — | (75,530 | ) | — | |||||||||||||||||||||||
Less unrealized gain due to production | (496,329 | ) | (9,017,791 | ) | — | 2,932,663 | — | — | — | (246,594 | ) | — | ||||||||||||||||||||||||
Less capitalized refined products | (574,381 | ) | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||
Less equity method elimination | 303,044 | (945,369 | ) | 266,769 | — | 333 | 1,238,018 | 1,201,367 | 7,166,957 | — | ||||||||||||||||||||||||||
Less amortization of capitalized interest | 118,981 | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||
Less depreciation and impairment of revaluated transferred assets, net of deferred taxes | — | — | — | 1,223,919 | 39,466,660 | 3,134,974 | 3,223,449 | — | — | |||||||||||||||||||||||||||
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| |||||||||||||||||||
Total consolidated net (loss) income | Ps. | (151,037,384 | ) | (55,786,663 | ) | (92,093 | ) | 1,265,560 | (833,949 | ) | (4,270,024 | ) | (1,441,726 | ) | 12,045,101 | (292,266,613 | ) | |||||||||||||||||||
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Assets: | ||||||||||||||||||||||||||||||||||||
By segment | Ps. | 2,084,553,745 | 912,770,881 | 179,807 | 28,256,876 | 276,537,764 | 17,689,305 | 35,498,783 | 195,538,239 | 2,111,740,734 | ||||||||||||||||||||||||||
Less unrealized intersegment sales | 858,094 | (5,389,977 | ) | — | — | 7,183 | — | (5,303 | ) | (408,059 | ) | — | ||||||||||||||||||||||||
Less unrealized gain due to production cost valuation of inventory | (3,657,242 | ) | (42,379,229 | ) | — | — | — | (26,886 | ) | — | (7,163,664 | ) | — | |||||||||||||||||||||||
Less capitalized refined products | (574,381 | ) | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||
Less depreciation and impairment of revaluated transferred assets, net of deferred taxes | (22,503,168 | ) | — | — | (2,036,127 | ) | (84,557,831 | ) | (2,165,068 | ) | (9,522,686 | ) | (424,849 | ) | — | |||||||||||||||||||||
Less equity method for unrealized profits | (759,624 | ) | (7,813,492 | ) | — | — | (91,123 | ) | (6,573,895 | ) | (2,828,749 | ) | (732,768 | ) | — | |||||||||||||||||||||
Less amortization of capitalized interest | 118,981 | 8,124 | — | — | — | — | — | — | — | |||||||||||||||||||||||||||
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| |||||||||||||||||||
Total consolidated assets | Ps. | 2,058,036,405 | 857,196,307 | 179,807 | 26,220,749 | 191,895,993 | 8,923,456 | 23,142,045 | 186,808,899 | 2,111,740,734 | ||||||||||||||||||||||||||
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Liabilities: | ||||||||||||||||||||||||||||||||||||
By segment | Ps. | 2,570,412,397 | 1,081,528,677 | 531,580 | 13,186,297 | 56,706,251 | 6,556,050 | 2,308,890 | 116,648,398 | 3,587,988,971 | ||||||||||||||||||||||||||
Less unrealized intersegment sales | — | (4,419,928 | ) | — | 700,128 | — | — | — | 194,482 | — | ||||||||||||||||||||||||||
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| |||||||||||||||||||
Total consolidated liabilities | Ps. | 2,570,412,397 | 1,077,108,749 | 531,580 | 13,886,425 | 56,706,251 | 6,556,050 | 2,308,890 | 116,842,880 | 3,587,988,971 | ||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AND SUBSIDIARY COMPANIES
For the year ended December 31, 2016 | Exploration and Production | Industrial Transformation | Cogeneration and Services | Drilling and Services | Logistics | Fertilizers | Ethylene | Trading Companies | Corporate and Other Operating Subsidiary Companies | |||||||||||||||||||||||||||
Sales: | ||||||||||||||||||||||||||||||||||||
By segment | Ps. | 616,380,615 | 771,597,427 | 184,434 | 6,263,093 | 71,130,845 | 4,775,775 | 17,217,131 | 800,979,076 | 53,803,095 | ||||||||||||||||||||||||||
Less unrealized intersegment sales | — | (847,432 | ) | — | (4,211,227 | ) | — | — | — | (331,446 | ) | — | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
Total consolidated sales | Ps. | 616,380,615 | 770,749,995 | 184,434 | 2,051,866 | 71,130,845 | 4,775,775 | 17,217,131 | 800,647,630 | 53,803,095 | ||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
Operating income (loss): | ||||||||||||||||||||||||||||||||||||
By segment | Ps. | 503,679,153 | (60,347,367 | ) | (22,645 | ) | 1,271,202 | (25,701,065 | ) | (2,877,725 | ) | (3,504,812 | ) | 19,526,997 | (14,909,525 | ) | ||||||||||||||||||||
Less unrealized intersegment sales | — | (847,432 | ) | — | (4,211,227 | ) | — | — | — | (331,446 | ) | — | ||||||||||||||||||||||||
Less unrealized gain due to production | (273,237 | ) | 3,572,498 | — | 3,815,371 | — | 905,910 | (2,163 | ) | (213,069 | ) | — | ||||||||||||||||||||||||
Less capitalized refined products | (1,661,986 | ) | (7,904,259 | ) | — | — | — | — | — | — | — | |||||||||||||||||||||||||
Less amortization of capitalized interest | 118,981 | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||
Less depreciation and impairment of revaluated assets | — | — | — | 640,702 | 6,899,211 | 357,455 | 5,544,830 | — | — | |||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
Total consolidated operating income (loss) | Ps. | 501,862,911 | (65,526,560 | ) | (22,645 | ) | 1,516,048 | (18,801,854 | ) | (1,614,360 | ) | 2,037,855 | 18,982,482 | (14,909,525 | ) | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
Net income (loss): | ||||||||||||||||||||||||||||||||||||
By segment | Ps. | (44,069,001 | ) | (61,639,067 | ) | (381,214 | ) | (387,250 | ) | (16,917,356 | ) | (7,820,835 | ) | (3,780,706 | ) | 11,711,265 | (194,251,296 | ) | ||||||||||||||||||
Less unrealized intersegment sales | — | (847,432 | ) | — | (4,211,227 | ) | — | — | — | (331,446 | ) | — | ||||||||||||||||||||||||
Less unrealized gain due to production | (273,237 | ) | 3,572,498 | — | 3,815,371 | — | 905,910 | (2,163 | ) | (213,069 | ) | — | ||||||||||||||||||||||||
Less capitalized refined products | (1,661,986 | ) | (7,904,259 | ) | — | — | — | — | — | — | — | |||||||||||||||||||||||||
Less equity method elimination | 6,590 | (3,047,030 | ) | 346,514 | — | — | 4,897,988 | 334,653 | — | — | ||||||||||||||||||||||||||
Less amortization of capitalized interest | 118,981 | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||
Less depreciation of revaluated assets | — | — | — | 640,702 | 6,899,211 | 357,455 | 5,544,830 | — | — | |||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
Total consolidated net (loss) income | Ps. | (45,878,653 | ) | (69,865,290 | ) | (34,700 | ) | (142,404 | ) | (10,018,145 | ) | (1,659,482 | ) | 2,096,614 | 11,166,750 | (194,251,296 | ) | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2016, 2015 AND 2014
(FIGURES STATED IN THOUSANDS, EXCEPT AS NOTED)
As of/for the year ended | Exploration and Production | Industrial Transformation | Cogeneration and Services | Drilling and Services | Logistics | Fertilizers | Ethylene | Trading Companies | Corporate and Other Operating Subsidiary Companies | |||||||||||||||||||||||||||
Sales: | ||||||||||||||||||||||||||||||||||||
By segment | Ps. | 690,642,133 | Ps. | 874,630,488 | Ps. | — | Ps. | 1,511,970 | Ps. | 10,954,841 | Ps. | 1,704,684 | Ps. | 5,048,600 | Ps. | 761,213,475 | Ps. | 23,403,624 | ||||||||||||||||||
Less unrealized intersegment sales | — | (597,212 | ) | — | — | — | — | (5,304 | ) | (200,197 | ) | — | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
Total consolidated sales | Ps. | 690,642,133 | Ps. | 874,033,276 | Ps. | — | Ps. | 1,511,970 | Ps. | 10,954,841 | Ps. | 1,704,684 | Ps. | 5,043,296 | Ps. | 761,013,278 | Ps. | 23,403,624 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
Operating income (loss): | ||||||||||||||||||||||||||||||||||||
By segment | Ps. | (89,473,302 | ) | Ps. | (88,819,558 | ) | Ps. | (51,911) | Ps. | 700,748 | Ps. | (6,875,252 | ) | Ps. | (262,145 | ) | Ps. | (2,288,747 | ) | Ps. | 10,334,138 | Ps. | 2,651,448 | |||||||||||||
Less unrealized intersegment sales | — | (597,212 | ) | — | — | — | — | (5,304 | ) | (200,197 | ) | — | ||||||||||||||||||||||||
Less unrealized gain due to production cost valuation of inventory | (251,995 | ) | 21,681,180 | — | — | — | — | 2,163 | 494,727 | — | ||||||||||||||||||||||||||
Less capitalized refined products | (3,496,201 | ) | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||
Less amortization of capitalized interest | 118,980 | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||
Less depreciation of revaluated assets | — | — | — | 95,811 | 1,192,250 | 117,141 | 531,745 | — | — | |||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
Total consolidated operating (loss) income | Ps. | (93,102,518 | ) | Ps. | (67,735,590 | ) | Ps. | (51,911 | ) | Ps. | 796,559 | Ps. | (5,683,002 | ) | Ps. | (145,004 | ) | Ps. | (1,760,143 | ) | Ps. | 10,628,668 | Ps. | 2,651,448 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
Net income (loss): | ||||||||||||||||||||||||||||||||||||
By segment | Ps. | (663,719,119 | ) | Ps. | (107,164,261 | ) | Ps. | (57,310 | ) | Ps. | 359,621 | Ps. | (4,877,610 | ) | Ps. | (262,242 | ) | Ps. | (2,314,774 | ) | Ps. | 8,402,644 | Ps. | (711,312,156 | ) | |||||||||||
Less unrealized intersegment sales | — | (597,212 | ) | — | — | — | — | (5,304 | ) | (200,197 | ) | — | ||||||||||||||||||||||||
Less unrealized gain due to production cost valuation of inventory | (251,995 | ) | 21,681,180 | — | — | — | — | 2,163 | 494,727 | — | ||||||||||||||||||||||||||
Less capitalized refined products | (3,496,201 | ) | — | — | — | — | — | — | — | |||||||||||||||||||||||||||
Less equity method elimination | (45,679 | ) | (1,129,042 | ) | — | — | — | — | 30,953 | — | — | |||||||||||||||||||||||||
Less amortization of capitalized interest | 118,980 | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||
Less depreciation of revaluated assets | — | — | — | 95,811 | 1,192,250 | 117,141 | 531,745 | — | — | |||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
Total consolidated net (loss) income | Ps. | (667,394,014 | ) | Ps. | (87,209,335 | ) | Ps. | (57,310 | ) | Ps. | 455,432 | Ps. | (3,685,360 | ) | Ps. | (145,101 | ) | Ps. | (1,755,217 | ) | Ps. | 8,697,174 | Ps. | (711,312,156 | ) | |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PETRÓLEOS MEXICANOS, PRODUCTIVE STATE-OWNED SUBSIDIARIES
AND SUBSIDIARY COMPANIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2016, 2015 AND 2014
(FIGURES STATED IN THOUSANDS, EXCEPT AS NOTED)
As of/for the year ended | Exploration and Production | Industrial Transformation | Cogeneration and Services | Drilling and Services | Logistics | Fertilizers | Ethylene | Trading Companies | Corporate and Other Operating Subsidiary Companies | |||||||||||||||||||||||||||
Assets: | ||||||||||||||||||||||||||||||||||||
By segment | Ps.1,722,396,075 | Ps. 599,848,048 | Ps.655,240 | Ps.28,875,231 | Ps.247,480,983 | Ps.15,166,563 | Ps.45,951,979 | Ps. 98,305,071 | Ps.1,443,189,885 | |||||||||||||||||||||||||||
Less unrealized intersegment sales | 1,132 | (3,502,902 | ) | — | — | — | — | (5,304 | ) | (293,536 | ) | — | ||||||||||||||||||||||||
Less unrealized gain due to production cost valuation of inventory | (19,699,526 | ) | (25,264,947 | ) | — | — | — | — | 2,163 | (4,744,915 | ) | — | ||||||||||||||||||||||||
Less capitalized refined products | (3,496,201 | ) | — | — | — | — | — | — | — | |||||||||||||||||||||||||||
Less equity method for unrealized profits | (411,221 | ) | (3,593,620 | ) | — | — | — | — | (3,952,754 | ) | — | — | ||||||||||||||||||||||||
Less amortization of capitalized interest | 118,981 | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||
Less market value of fixed assets elimination | — | — | — | (3,957,250 | ) | (136,173,945 | ) | (6,132,187 | ) | (18,290,966 | ) | — | — | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
Total consolidated assets | Ps.1,698,909,240 | Ps.567,486,579 | Ps.655,240 | Ps.24,917,981 | Ps.111,307,038 | Ps.9,034,376 | Ps.23,705,118 | Ps. 93,266,620 | Ps.1,443,189,885 | |||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
Liabilities: | ||||||||||||||||||||||||||||||||||||
By segment | Ps.1,985,557,185 | Ps.735,280,560 | Ps.530,696 | Ps.14,431,318 | Ps.19,917,100 | Ps. 1,499,001 | Ps. 4,538,591 | Ps.39,895,655 | Ps.2,747,910,113 | |||||||||||||||||||||||||||
Less unrealized intersegment sales | — | — | — | — | — | — | — | 1,525,137 | — | |||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
Total consolidated liabilities | Ps.1,985,557,185 | Ps. 735,280,560 | Ps.530,696 | Ps.14,431,318 | Ps. 19,917,100 | Ps. 1,499,001 | Ps. 4,538,591 | Ps. 41,420,792 | Ps.2,747,910,113 | |||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PETRÓLEOS MEXICANOS, PRODUCTIVE STATE-OWNED SUBSIDIARIES
AND SUBSIDIARY COMPANIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2016, 2015 AND 2014
(FIGURES STATED IN THOUSANDS, EXCEPT AS NOTED)
For the year ended December 31, 2014 | Exploration and Production | Refining | Gas and Basic Petrochemicals | Petrochemicals | Trading Companies | Corporate and Other Subsidiary Companies | ||||||||||||||||||
Sales: | ||||||||||||||||||||||||
By segment | Ps. | 1,134,519,972 | Ps. | 844,558,586 | Ps. | 243,972,757 | Ps. | 44,258,725 | Ps. | 1,064,903,042 | Ps. | 70,121,196 | ||||||||||||
Less unrealized intersegment sales | — | (3,100,091 | ) | (20,204 | ) | (3,036 | ) | (102,262 | ) | — | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total consolidated sales | Ps. | 1,134,519,972 | Ps. | 841,458,495 | Ps. | 243,952,553 | Ps. | 44,255,689 | Ps. | 1,064,800,780 | Ps. | 70,121,196 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Operating income (loss): | ||||||||||||||||||||||||
By segment | Ps. | 730,817,884 | Ps. | (101,970,712 | ) | Ps. | (9,527,142 | ) | Ps. | (19,066,287 | ) | Ps. | 5,844,320 | Ps. | 7,958,523 | |||||||||
Less unrealized intersegment sales | — | (3,100,091 | ) | (20,204 | ) | (3,036 | ) | (102,262 | ) | — | ||||||||||||||
Less unrealized gain due to productioncost valuation of inventory | 3,473,742 | 5,980,886 | 892,588 | 133,574 | (2,213,946 | ) | — | |||||||||||||||||
Less capitalized refined products | (3,789,845 | ) | — | — | — | — | — | |||||||||||||||||
Less amortization of capitalized interest | 118,981 | — | — | — | — | — | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total consolidated operating income (loss) | Ps. | 730,620,762 | Ps. | (99,089,917 | ) | Ps. | (8,654,758 | ) | Ps. | (18,935,749 | ) | Ps. | 3,528,112 | Ps. | 7,958,523 | |||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Net income (loss): | ||||||||||||||||||||||||
By segment | Ps. | (153,150,787 | ) | Ps. | (116,707,288 | ) | Ps. | 16,255,028 | Ps. | (19,129,147 | ) | Ps. | 6,401,398 | Ps. | (262,297,846 | ) | ||||||||
Less unrealized intersegment sales | — | (3,100,091 | ) | (20,204 | ) | (3,036 | ) | (102,262 | ) | — | ||||||||||||||
Less unrealized gain due to productioncost valuation of inventory | 3,473,742 | 5,980,886 | 892,588 | 133,574 | (2,213,946 | ) | — | |||||||||||||||||
Less capitalized refined products | (3,789,845 | ) | — | — | — | — | — | |||||||||||||||||
Less equity method for unrealized profits | (29,116 | ) | — | (1,543,620 | ) | 103,485 | — | (98,865 | ) | |||||||||||||||
Less amortization of capitalized interest | 118,981 | — | — | — | — | — | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total consolidated net (loss) income | Ps. | (153,377,025 | ) | Ps. | (113,826,493 | ) | Ps. | 15,583,792 | Ps. | (18,895,124 | ) | Ps. | 4,085,190 | Ps. | (262,396,711 | ) | ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
PETRÓLEOS MEXICANOS, PRODUCTIVE STATE-OWNED SUBSIDIARIES
AND SUBSIDIARY COMPANIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2016, 2015 AND 2014
(FIGURES STATED IN THOUSANDS, EXCEPT AS NOTED)
Supplemental geographic information:
For the years ended December 31, | For the years ended December 31, | |||||||||||||||||||||||
2016 | 2015 | 2014 | 2018 | 2017 | 2016 | |||||||||||||||||||
Domestic sales | Ps. | 670,000,473 | Ps. | 746,235,912 | Ps. | 944,997,979 | Ps. 980,559,538 | Ps. 877,360,038 | Ps. 670,000,473 | |||||||||||||||
|
|
|
|
|
| |||||||||||||||||||
Export sales: | ||||||||||||||||||||||||
United States | 221,954,461 | 266,826,499 | 481,364,906 | 434,838,159 | 302,912,999 | 221,954,461 | ||||||||||||||||||
Canada, Central and South America | 14,058,897 | 11,027,813 | 17,575,078 | 11,274,714 | 13,943,080 | 14,058,897 | ||||||||||||||||||
Europe | 64,348,997 | 58,707,787 | 54,214,041 | 158,900,339 | 71,470,613 | 64,348,997 | ||||||||||||||||||
Other | 94,755,762 | 70,652,346 | 77,137,288 | 86,873,398 | 120,212,420 | 94,755,762 | ||||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||
Total export sales | 395,118,117 | 407,214,445 | 630,291,313 | 691,886,610 | 508,539,112 | 395,118,117 | ||||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||
Services income | 14,427,081 | 12,912,112 | 11,438,582 | 8,673,002 | 11,130,569 | 8,974,642 | ||||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||
Total sales | Ps. | 1,079,545,671 | Ps. | 1,166,362,469 | Ps. | 1,586,727,874 | Ps. 1,681,119,150 | Ps. 1,397,029,719 | Ps. 1,074,093,232 | |||||||||||||||
|
|
|
|
|
|
PEMEX does not have significant long-lived assets outside of Mexico.
The following table shows income by product:
For the years ended December 31, | For the years ended December 31, | |||||||||||||||||||||||
2016 | 2015 | 2014 | 2018 | 2017 | 2016 | |||||||||||||||||||
Domestic sales | ||||||||||||||||||||||||
Refined petroleum products and derivatives (primarily gasolines) | Ps. 578,718,674 | Ps. 660,573,780 | Ps. 830,545,046 | Ps. 850,342,124 | Ps. 738,943,017 | Ps. 578,718,674 | ||||||||||||||||||
Gas | 59,648,576 | 54,497,824 | 77,813,359 | 110,219,691 | 116,021,269 | 59,648,576 | ||||||||||||||||||
Petrochemical products | 31,633,223 | 31,164,308 | 36,639,574 | 19,997,723 | 22,395,752 | 31,633,223 | ||||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||
Total domestic sales | Ps. 670,000,473 | Ps. 746,235,912 | Ps. 944,997,979 | Ps. 980,559,538 | Ps. 877,360,038 | Ps. 670,000,473 | ||||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||
Export sales | ||||||||||||||||||||||||
Crude oil | Ps. 288,625,794 | Ps. 288,170,451 | Ps. 475,056,981 | Ps. 482,259,045 | Ps. 356,623,114 | Ps. 288,625,794 | ||||||||||||||||||
Refined petroleum products and derivatives (primarily gasolines) | 92,705,248 | 118,129,615 | 153,436,847 | 167,796 ,526 | 124,644,353 | 92,705,248 | ||||||||||||||||||
Gas | 20,995 | 27,283 | 64,397 | 34,446,277 | 22,253,493 | 20,995 | ||||||||||||||||||
Petrochemical products | 13,766,080 | 887,096 | 1,733,088 | 7,384,762 | 5,018,152 | 13,766,080 | ||||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||
Total export sales | Ps. 395,118,117 | Ps. 407,214,445 | Ps. 630,291,313 | Ps. 691,886,610 | Ps. 508,539,112 | Ps. 395,118,117 | ||||||||||||||||||
|
|
|
|
|
|
PETRÓLEOS MEXICANOS, PRODUCTIVE STATE-OWNED SUBSIDIARIESNOTE 7. REVENUE
AND SUBSIDIARY COMPANIESAs of December 31, 2018 and 2017, the revenues were as follows:
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2016, 2015 AND 2014
(FIGURES STATED IN THOUSANDS, EXCEPT AS NOTED)A. Revenue disaggregation
For the period ended December 31, | Exploration and Production | Industrial Transformation | Cogeneration and Services(1) | Drilling and Services | Logistics | Fertilizers | Ethylene | Trading Companies | Corporate and Other Operating Subsidiary Companies | Total | ||||||||||||||||||||||||||||||
Geographical market | ||||||||||||||||||||||||||||||||||||||||
2018 | ||||||||||||||||||||||||||||||||||||||||
United States | 276,785,650 | — | — | — | — | — | — | 158,713,210 | — | 435,498,860 | ||||||||||||||||||||||||||||||
Other | 51,708,232 | — | — | — | — | — | — | 40,743,480 | 5,660,310 | 98,112,022 | ||||||||||||||||||||||||||||||
Europe | 153,765,163 | — | — | — | — | — | — | 4,647,265 | 2,905,858 | 161,318,286 | ||||||||||||||||||||||||||||||
Local | 26,696 | 961,104,365 | — | 198,775 | 4,708,217 | 2,938,167 | 12,822,493 | 64,037 | 4,327,232 | 986,189,982 | ||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||
Total | 482,285,741 | 961,104,365 | — | 198,775 | 4,708,217 | 2,938,167 | 12,822,493 | 204,167,992 | 12,893,400 | 1,681,119,150 | ||||||||||||||||||||||||||||||
|
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|
|
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|
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|
|
|
| |||||||||||||||||||||
2017* | ||||||||||||||||||||||||||||||||||||||||
United States | — | — | — | — | — | — | — | 320,069,332 | — | 320,069,332 | ||||||||||||||||||||||||||||||
Other | — | — | — | — | — | — | — | 71,209,448 | — | 71,209,448 | ||||||||||||||||||||||||||||||
Europe | — | — | — | — | — | — | — | 117,260,334 | 1,062,795 | 118,323,129 | ||||||||||||||||||||||||||||||
Local | — | 863,573,083 | 334,755 | 41,741 | 3,714,941 | 4,125,345 | 12,648,381 | 66,619 | 2,922,945 | 887,427,810 | ||||||||||||||||||||||||||||||
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||
Total | — | 863,573,083 | 334,755 | 41,741 | 3,714,941 | 4,125,345 | 12,648,381 | 508,605,733 | 3,985,740 | 1,397,029,719 | ||||||||||||||||||||||||||||||
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| |||||||||||||||||||||
2016* | ||||||||||||||||||||||||||||||||||||||||
United States | — | — | — | — | — | — | — | 236,095,685 | — | 236,095,685 | ||||||||||||||||||||||||||||||
Other | — | — | — | — | — | — | — | 67,377,456 | 72,660 | 67,450,116 | ||||||||||||||||||||||||||||||
Europe | — | — | — | — | — | — | — | 90,817,488 | — | 90,817,488 | ||||||||||||||||||||||||||||||
Local | — | 653,653,617 | 132,521 | 70,112 | 2,813,887 | 3,875,311 | 15,452,693 | 862,641 | 2,869,161 | 679,729,943 | ||||||||||||||||||||||||||||||
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||
Total | — | 653,653,617 | 132,521 | 70,112 | 2,813,887 | 3,875,311 | 15,452,693 | 395,153,270 | 2,941,821 | 1,074,093,232 | ||||||||||||||||||||||||||||||
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| |||||||||||||||||||||
Major products and services | ||||||||||||||||||||||||||||||||||||||||
2018 | ||||||||||||||||||||||||||||||||||||||||
Crude oil | 482,259,045 | — | — | — | — | — | — | — | — | 482,259,045 | ||||||||||||||||||||||||||||||
Gas | 3,586 | 110,216,105 | — | — | — | — | — | 34,446,277 | — | 144,665,968 | ||||||||||||||||||||||||||||||
Refined petroleum products | — | 850,342,124 | — | — | — | — | — | 167,796,526 | — | 1,018,138,650 | ||||||||||||||||||||||||||||||
Oher | — | — | — | — | — | 2,933,425 | 12,809,114 | 1,861,152 | 9,778,794 | 27,382,485 | ||||||||||||||||||||||||||||||
Services | 23,110 | 546,136 | — | 198,775 | 4,708,217 | 4,742 | 13,379 | 64,037 | 3,114,606 | 8,673,002 | ||||||||||||||||||||||||||||||
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|
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|
|
|
|
|
|
|
|
|
|
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|
|
| |||||||||||||||||||||
Total | 482,285,741 | 961,104,365 | — | 198,775 | 4,708,217 | 2,938,167 | 12,822,493 | 204,167,992 | 12,893,400 | 1,681,119,150 | ||||||||||||||||||||||||||||||
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| |||||||||||||||||||||
2017* | ||||||||||||||||||||||||||||||||||||||||
Crude oil | — | — | — | — | — | — | — | 356,623,113 | — | 356,623,113 | ||||||||||||||||||||||||||||||
Gas | — | 116,021,269 | — | — | — | — | — | 22,253,493 | — | 138,274,762 | ||||||||||||||||||||||||||||||
Refined petroleum products | — | 738,943,017 | — | — | — | — | — | 124,644,353 | — | 863,587,370 | ||||||||||||||||||||||||||||||
Oher | — | 2,491,860 | — | — | — | 4,123,006 | 12,621,648 | 5,018,152 | 3,159,239 | 27,413,905 | ||||||||||||||||||||||||||||||
Services | — | 6,116,937 | 334,755 | 41,741 | 3,714,941 | 2,339 | 26,733 | 66,622 | 826,501 | 11,130,569 | ||||||||||||||||||||||||||||||
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|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||
Total | — | 863,573,083 | 334,755 | 41,741 | 3,714,941 | 4,125,345 | 12,648,381 | 508,605,733 | 3,985,740 | 1,397,029,719 | ||||||||||||||||||||||||||||||
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| |||||||||||||||||||||
2016* | ||||||||||||||||||||||||||||||||||||||||
Crude oil | — | — | — | — | — | — | — | 268,999,873 | — | 268,999,873 | ||||||||||||||||||||||||||||||
Gas | — | 115,997,297 | — | — | — | — | — | 13,813,301 | — | 129,810,598 | ||||||||||||||||||||||||||||||
Refined petroleum products | — | 529,322,404 | — | — | — | — | — | 106,770,273 | — | 636,092,677 | ||||||||||||||||||||||||||||||
Oher | — | 2,768,313 | — | — | — | 3,873,402 | 15,392,552 | 5,534,217 | 2,646,958 | 30,215,442 | ||||||||||||||||||||||||||||||
Services | — | 5,565,603 | 132,521 | 70,112 | 2,813,887 | 1,909 | 60,141 | 35,606 | 294,863 | 8,974,642 | ||||||||||||||||||||||||||||||
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|
|
|
|
|
|
|
|
| �� |
|
|
|
|
|
|
|
| ||||||||||||||||||||
Total | — | 653,653,617 | 132,521 | 70,112 | 2,813,887 | 3,875,311 | 15,452,693 | 395,153,270 | 2,941,821 | 1,074,093,232 | ||||||||||||||||||||||||||||||
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|
|
|
|
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|
|
|
|
|
|
| |||||||||||||||||||||
Timing of revenue recognition | ||||||||||||||||||||||||||||||||||||||||
2018 | ||||||||||||||||||||||||||||||||||||||||
Products transferred at a point in time | 482,262,631 | 960,558,229 | — | — | — | 2,933,425 | 12,809,114 | 204,103,954 | 9,778,794 | 1,672,446,147 | ||||||||||||||||||||||||||||||
Products and services transferred over the time | 23,110 | 546,136 | — | 198,775 | 4,708,217 | 4,742 | 13,379 | 64,038 | 3,114,606 | 8,673,003 | ||||||||||||||||||||||||||||||
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||
Total | 482,285,741 | 961,104,365 | — | 198,775 | 4,708,217 | 2,938,167 | 12,822,493 | 204,167,992 | 12,893,400 | 1,681,119,150 | ||||||||||||||||||||||||||||||
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|
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| |||||||||||||||||||||
2017* | ||||||||||||||||||||||||||||||||||||||||
Products transferred at a point in time | — | 857,456,146 | — | — | — | 4,123,006 | 12,621,648 | 508,539,111 | 3,159,239 | 1,385,899,150 | ||||||||||||||||||||||||||||||
Products and services transferred over the time | — | 6,116,937 | 334,755 | 41,741 | 3,714,941 | 2,339 | 26,733 | 66,622 | 826,501 | 11,130,569 | ||||||||||||||||||||||||||||||
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||
Total | — | 863,573,083 | 334,755 | 41,741 | 3,714,941 | 4,125,345 | 12,648,381 | 508,605,733 | 3,985,740 | 1,397,029,719 | ||||||||||||||||||||||||||||||
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|
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| |||||||||||||||||||||
2016* | ||||||||||||||||||||||||||||||||||||||||
Products transferred at a point in time | — | 648,088,014 | — | — | — | 3,873,402 | 15,392,552 | 395,117,664 | 2,646,958 | 1,065,118,590 | ||||||||||||||||||||||||||||||
Products and services transferred over the time | — | 5,565,603 | 132,521 | 70,112 | 2,813,887 | 1,909 | 60,141 | 35,606 | 294,863 | 8,974,642 | ||||||||||||||||||||||||||||||
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||
Total | — | 653,653,617 | 132,521 | 70,112 | 2,813,887 | 3,875,311 | 15,452,693 | 395,153,270 | 2,941,821 | 1,074,093,232 | ||||||||||||||||||||||||||||||
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|
|
* | PEMEX applied the modified retrospective transition method to the implementation of IFRS 15. Under this method the comparative financial information is notre-established. |
(1) | This company was liquidated on July 27, 2018. Except for certain expenses incurred in the liquidation, all the operations were transferred to Pemex Industrial Transformation. (See Note 1) |
B. Accounts receivable in the Statement of Financial Position
As of December 31, 2018 and 2017, PEMEX had accounts receivable derived from customer contracts in the amounts of Ps. 87,740,515 and Ps. 114,486,024, respectively (see Note 10).
C. Practical expedients
1) | Expiration of contracts. |
PEMEX has no outstanding performance obligations to meet as of December 31, 2018 due to the nature of its operations (see Note4-A).
2) | 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.
3) | PEMEX applied the practical file, 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 6.8. 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 December 31, 2018 and 2017. 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 December 31, 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. | 22,382,277 | — | — | — | — | Ps. | 22,382,277 | — | 22,382,277 | — | 22,382,277 | ||||||||||||||||||||||||||||
Equity instruments | — | — | 245,440 | — | — | 245,440 | — | 245,440 | — | 245,440 | ||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||
Total | Ps. | 22,382,277 | — | 245,440 | — | — | Ps. | 22,627,717 | ||||||||||||||||||||||||||||||||
Financial assets not measured at fair value | ||||||||||||||||||||||||||||||||||||||||
Cash and cash equivalents | Ps. | — | — | — | 81,912,409 | — | Ps. | 81,912,409 | — | — | — | — | ||||||||||||||||||||||||||||
Accounts receivable, net | — | — | — | 167,139,778 | — | 167,139,778 | — | — | — | — | ||||||||||||||||||||||||||||||
Investments in joint ventures, associates and other | — | — | — | 16,841,545 | — | 16,841,545 | — | — | — | — | ||||||||||||||||||||||||||||||
Long-term notes receivable | — | — | — | 157,982,449 | — | 157,982,449 | — | — | — | — | ||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||
Total | Ps. | — | — | — | 423,876,181 | — | Ps. | 423,876,181 | ||||||||||||||||||||||||||||||||
Financial liabilities measured at fair value | ||||||||||||||||||||||||||||||||||||||||
Derivative financial instruments | Ps. | (15,895,245 | ) | — | — | — | — | Ps. | (15,895,245 | ) | — | (15,895,245 | ) | — | (15,895,245 | ) | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||
Total | Ps. | (15,895,245 | ) | — | — | — | — | Ps. | (15,895,245 | ) | ||||||||||||||||||||||||||||||
Financial liabilities not measured at fair value | ||||||||||||||||||||||||||||||||||||||||
Suppliers | Ps. | — | — | — | — | (149,842,712 | ) | Ps. | (149,842,712 | ) | — | — | — | — | ||||||||||||||||||||||||||
Accounts and accrued expenses payable | — | — | — | — | (24,917,669 | ) | (24,917,669 | ) | — | — | — | — | ||||||||||||||||||||||||||||
Debt | — | — | — | — | (2,082,286,116 | ) | (2,082,286,116 | ) | — | (1,913,377,218 | ) | — | (1,913,377,218 | ) | ||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||
Total | Ps. | — | — | — | — | (2,257,046,497 | ) | Ps. | (2,257,046,497 | ) | ||||||||||||||||||||||||||||||
Carrying amount | Fair value hierarchy | |||||||||||||||||||||||||||||||||||||||
As of December 31, In thousands of pesos | FVTPL | Held-to-maturity | Loans and receivables | Available-for-sale | Other financial liabilities | Total carrying amount | Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||||||||||||||||
Financial assets measured at fair value | ||||||||||||||||||||||||||||||||||||||||
Derivative financial instruments | Ps. | 30,113,454 | — | — | — | — | Ps. | 30,113,454 | — | 30,113,454 | — | 30,113,454 | ||||||||||||||||||||||||||||
Equity instruments | — | — | — | 1,056,918 | — | 1,056,918 | — | 1,056,918 | — | 1,056,918 | ||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||
Total | Ps. | 30,113,454 | — | — | 1,056,918 | — | Ps. | 31,170,372 | ||||||||||||||||||||||||||||||||
Financial assets not measured at fair value | ||||||||||||||||||||||||||||||||||||||||
Cash and cash equivalents | Ps. | — | — | 97,851,754 | — | — | Ps. | 97,851,754 | — | — | — | — | ||||||||||||||||||||||||||||
Accounts receivable, net | — | — | 168,123,028 | — | — | 168,123,028 | — | — | — | — | ||||||||||||||||||||||||||||||
Investments in joint ventures, associates and other | — | 16,707,364 | — | — | — | 16,707,364 | — | — | — | — | ||||||||||||||||||||||||||||||
Long-term notes receivable | — | 151,015,115 | — | — | — | 151,015,115 | — | — | — | — | ||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||
Total | Ps. | — | 167,722,479 | 265,974,782 | — | — | Ps. | 433,697,261 | ||||||||||||||||||||||||||||||||
Financial liabilities measured at fair value | ||||||||||||||||||||||||||||||||||||||||
Derivative financial instruments | Ps. | (17,745,979 | ) | — | — | — | — | Ps. | (17,745,979 | ) | — | (17,745,979 | ) | — | (17,745,979 | ) | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||
Total | Ps. | (17,745,979 | ) | — | — | — | — | Ps. | (17,745,979 | ) | ||||||||||||||||||||||||||||||
Financial liabilities not measured at fair value | ||||||||||||||||||||||||||||||||||||||||
Suppliers | Ps. | — | — | — | — | (139,955,378 | ) | Ps. | (139,955,378 | ) | — | — | — | — | ||||||||||||||||||||||||||
Accounts and accrued expenses payable | — | — | — | — | (23,211,401 | ) | (23,211,401 | ) | — | — | — | — | ||||||||||||||||||||||||||||
Debt | — | — | — | — | (2,037,875,071 | ) | (2,037,875,071 | ) | — | (2,153,383,220 | ) | — | (2,153,383,220 | ) | ||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||
Total | Ps. | — | — | — | — | (2,201,041,850 | ) | Ps. | (2,201,041,850 | ) |
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.
As of December 31, 2018 and 2017, PEMEX had monetary assets and liabilities denominated in foreign currency as indicated below:
As of December 31, 2018 | ||||||||||||||||||||
Foreing currency | ||||||||||||||||||||
Asset | Liability | Net Asset (Liability) | Exchange rate | Equivalent in Mexican Pesos | ||||||||||||||||
U.S. dollar | 8,458,532 | 80,583,838 | (72,125,306 | ) | 19. | 6829 | (1,419,635,185 | ) | ||||||||||||
Euro | 14,459 | 15,714,542 | (15,700,083 | ) | 22. | 5054 | (353,336,648 | ) | ||||||||||||
Pounds sterling | — | 816,469 | (816,469 | ) | 25. | 0878 | (20,483,411 | ) | ||||||||||||
Japanese yen | — | 467,077,295 | (467,077,295 | ) | 0. | 1793 | (83,746,959 | ) | ||||||||||||
Swiss francs | — | 2,843,298 | (2,843,298 | ) | 19. | 9762 | (56,798,290 | ) | ||||||||||||
|
| |||||||||||||||||||
Total | Ps. | (1,934,000,493 | ) | |||||||||||||||||
|
| |||||||||||||||||||
As of December 31, 2017 | ||||||||||||||||||||
Foreing currency | ||||||||||||||||||||
Asset | Liability | Net Asset (Liability) | Exchange rate | Equivalent in Mexican Pesos | ||||||||||||||||
U.S. dollar | 12,942,402 | 79,871,378 | (66,928,976 | ) | 19. | 7867 | (1,324,303,569 | ) | ||||||||||||
Euro | 701,619 | 13,988,051 | (13,286,432 | ) | 23. | 7549 | (315,617,864 | ) | ||||||||||||
Pounds sterling | — | 870,661 | (870,661 | ) | 26. | 7724 | (23,309,685 | ) | ||||||||||||
Japanese yen | — | 341,603,010 | (341,603,010 | ) | 0. | 1757 | (60,019,649 | ) | ||||||||||||
Swiss francs | — | 2,642,304 | (2,642,304 | ) | 20. | 2992 | (53,636,657 | ) | ||||||||||||
|
| |||||||||||||||||||
Total | Ps. | (1,776,887,424 | ) | |||||||||||||||||
|
|
The information related to “Cash and cash equivalents”, “Accounts receivable, net”, “Equity instruments”, “Investment in joint ventures and associates”, “Long-term notes receivable and other assets”, “Debt” and “Derivative Financial Instruments” is described in the following notes, respectively:
Note 9, Cash and cash equivalents.
Note 10, Accounts receivable, net.
Note 12, Equity instruments.
Note 14, Investment in joint ventures and associates.
Note 17, Long-term notes receivable and other assets.
Note 18, Debt.
Note 19, Derivative financial instruments.
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.
NOTE 9. CASH AND CASH EQUIVALENTS AND RESTRICTED CASH
a. As of December 31, 20162018 and 2015,2017, cash and cash equivalents were as follows:
2016 | 2015 | 2018 | 2017 | |||||||||||||
Cash on hand and in banks(i) | Ps. | 71,430,427 | Ps. | 52,509,683 | Ps. 41,974,735 | Ps. 55,871,127 | ||||||||||
Marketable securities | 92,102,086 | 56,859,197 | ||||||||||||||
Highly liquid investments(ii) | 39,937,674 | 41,980,627 | ||||||||||||||
|
|
|
| |||||||||||||
Ps. | 163,532,513 | Ps. | 109,368,880 | Ps. 81,912,409 | Ps. 97,851,754 | |||||||||||
|
|
|
|
(i) | Cash on hand and in banks is primarily composed of cash in banks. |
(ii) | Mainly composed of short-term Mexican Government investments. |
b. At December 31, 2016, and 2015, restricted cash was as follows:
2016 | 2015 | |||||||
Restricted cash | Ps. 10,478,626 | Ps. 9,246,772 | ||||||
|
|
|
|
Restricted cash as of December 31, 2016 and 2015 is primarily composed of the deposit made by Pemex-Exploration and Production in the amount of U.S. $465,060 as a result of an arbitration claim before the International Court of Arbitration of the International Chamber of Commerce (the “ICA”). At December 31, 2016 and 2015, this deposit, including income interest, amounted to Ps. 9,624,804 and Ps. 8,010,298, respectively (see Note 25). On December 31, 2016 and 2015, PMI HBV made deposits of U.S. $ 41,319 and U.S. $ 71,861, respectively, in an account in Banco Santander, S.A. as additional collateral for a credit agreement in accordance with the terms of the agreement. The credit agreement requires that PMI HBV maintain aloan-to-value ratio based on the ratio between the principal amount of debt and the market value in U.S. dollars of the Repsol S. A. (“Repsol”) shares owned by PMI HBV. Accordingly, PMI HBV deposited this amount in order to maintain theloan-to-value ratio required under the credit agreement. As of December 31, 2016 and 2015, this deposit, including income interest, amounted to Ps. 853,822 and Ps.1,236,474, respectively (see Note 10).
NOTE 7.10. ACCOUNTS RECEIVABLE, NET
As of December 31, 20162018 and 2015,2017, accounts receivable and other receivables were as follows:
2016 | 2015 | |||||||
Domestic customers, net | Ps. | 41,884,579 | Ps. | 29,328,750 | ||||
Export customers, net | 34,859,341 | 17,131,455 | ||||||
Sundry debtors | 18,736,922 | 10,837,297 | ||||||
Prepaid taxes | 29,361,303 | 10,710,521 | ||||||
Employees and officers | 6,054,251 | 5,523,740 | ||||||
Advances to suppliers | 2,246,437 | 5,634,114 | ||||||
Insurance claims | 38,497 | 43,490 | ||||||
Other accounts receivable | 39,197 | 36,454 | ||||||
|
|
|
| |||||
Ps. | 133,220,527 | Ps. | 79,245,821 | |||||
|
|
|
|
PETRÓLEOS MEXICANOS, PRODUCTIVE STATE-OWNED SUBSIDIARIES
AND SUBSIDIARY COMPANIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2016, 2015 AND 2014
(FIGURES STATED IN THOUSANDS, EXCEPT AS NOTED)a. Customers
2018 | 2017 | |||||||
Domestic customers, net | Ps. | 48,520,478 | Ps. | 60,057,141 | ||||
Export customers, net | 39,220,037 | 54,428,883 | ||||||
|
|
|
| |||||
Total customers | Ps. | 87,740,515 | Ps. | 114,486,024 | ||||
|
|
|
| |||||
Sundry debtors(i) | 53,388,512 | 23,583,497 | ||||||
Taxes to be recovered and prepaid taxes | 18,405,990 | 23,039,023 | ||||||
Employees and officers | 6,333,216 | 5,681,478 | ||||||
Advances to suppliers | 597,700 | 1,250,846 | ||||||
Other accounts receivable | 673,845 | 82,160 | ||||||
|
|
|
| |||||
Total account receivable | Ps. | 79,399,263 | Ps. | 53,637,004 | ||||
|
|
|
| |||||
Total account receivable, net | Ps. | 167,139,778 | Ps. | 168,123,028 | ||||
|
|
|
|
(i) | Mainly Special Tax on Production and Services. |
The following table shows a breakdown of accounts receivable based on their credit history at December 31, 20162018 and 2015:2017, as well as the relation between the breakdown and the impaired amount:
Domestic customers | Domestic customers | |||||||||||||||
2016 | 2015 | 2018 | 2017 | |||||||||||||
1 to 30 days | Ps. | 1,767,718 | Ps. | 620,034 | Ps. | 1,172,961 | Ps. | 10,188,070 | ||||||||
31 to 60 days | 658,456 | 28,278 | 133,538 | 4,081,862 | ||||||||||||
61 to 90 days | 263,447 | (32,411 | ) | 375,790 | 777,409 | |||||||||||
More than 90 days | 1,016,553 | 692,040 | 584,886 | 11,345,933 | ||||||||||||
|
|
|
| |||||||||||||
Past due | 3,706,174 | 1,307,941 | 2,267,175 | 26,393,274 | ||||||||||||
Impaired (reserved) | (458,428 | ) | (667,883 | ) | (1,409,014 | ) | (951,932 | ) | ||||||||
|
|
|
| |||||||||||||
Unimpaired | 3,247,746 | 640,058 | 858,161 | 25,441,342 | ||||||||||||
Current | 38,636,833 | 28,688,692 | 47,662,317 | 34,615,799 | ||||||||||||
|
|
|
| |||||||||||||
Total | Ps. | 41,884,579 | Ps. | 29,328,750 | Ps. | 48,520,478 | Ps. | 60,057,141 | ||||||||
|
|
|
|
Export customers | ||||||||
2016 | 2015 | |||||||
1 to 30 days | Ps. | 341,184 | Ps. | 323 | ||||
31 to 60 days | 6,824 | 425 | ||||||
61 to 90 days | 35,372 | 37,239 | ||||||
More than 90 days | 624,157 | 413,603 | ||||||
|
|
|
| |||||
Past due | 1,007,537 | 451,590 | ||||||
Impaired (reserved) | (374,699 | ) | (312,004 | ) | ||||
|
|
|
| |||||
Unimpaired | 632,838 | 139,586 | ||||||
Current | 34,226,503 | 16,991,869 | ||||||
|
|
|
| |||||
Total | Ps. | 34,859,341 | Ps. | 17,131,455 | ||||
|
|
|
|
(1) | The increase in the impairment of domestic customers of Ps.457,082 in 2018, comes mainly from accounts receivables of Pemex Industrial Transformation. |
Export customers | ||||||||
2018 | 2017 | |||||||
1 to 30 days | Ps. | 34,839 | Ps. | 334,155 | ||||
31 to 60 days | 3,313 | — | ||||||
61 to 90 days | 26,444 | — | ||||||
More than 90 days | 307,089 | 315,888 | ||||||
|
|
|
| |||||
Past due | 371,865 | 650,043 | ||||||
Impaired (reserved) | (321,438 | ) | (272,813 | ) | ||||
|
|
|
| |||||
Unimpaired | 50,247 | 377,230 | ||||||
Current | 39,169,790 | 54,051,653 | ||||||
|
|
|
| |||||
Total | Ps. | 39,220,037 | Ps. | 54,428,883 | ||||
|
|
|
|
As of December 31, 2018 and 2017, PEMEX has exposure to credit risk related to accounts receivable with an average payment term of 36 and 43 days, respectively.
Additionally, the reconciliation for impaired accounts receivable is as follows:
Domestic customers | ||||||||||||||||
2018 | 2017 | |||||||||||||||
Balance at the beginning of the year | Ps. | (951,932 | ) | Ps. | (458,428 | ) | ||||||||||
Adjustment on initial application of IFRS9 | 44,590 | — | ||||||||||||||
|
| |||||||||||||||
Balance at January 1 under IFRS 9 | (907,342 | ) | (458,428 | ) | ||||||||||||
Additions against income | — | (493,514 | ) | |||||||||||||
Amount used | — | 10 | ||||||||||||||
Impairment accounts receivable | (501,672 | ) | — | |||||||||||||
|
| |||||||||||||||
Balance at the end of the year | Ps. | (1,409,014 | ) | Ps. | (951,932 | ) | ||||||||||
|
| |||||||||||||||
Domestic customers | ||||||||||||||||
Export customers | ||||||||||||||||
2016 | 2015 | 2018 | 2017 | |||||||||||||
Balance at the beginning of the year | Ps. (667,883 | ) | Ps. (598,624 | ) | Ps. | (272,813 | ) | Ps. | (374,699 | ) | ||||||
Adjustment on initial application of IFRS9 | (69,639 | ) | — | |||||||||||||
|
| |||||||||||||||
Balance at January 1 under IFRS 9 | (342,452 | ) | (374,699 | ) | ||||||||||||
Additions against income | (218,836 | ) | (196,856 | ) | — | (204,713 | ) | |||||||||
Application against estimation | 428,291 | 127,597 | ||||||||||||||
Amount used | — | 297,047 | ||||||||||||||
Translation effects | — | 9,552 | ||||||||||||||
Impairment accounts receivable | 21,014 | — | ||||||||||||||
|
|
|
| |||||||||||||
Balance at the end of the year | Ps. (458,428 | ) | Ps. (667,883 | ) | Ps. | (321,438 | ) | Ps. | (272,813 | ) | ||||||
|
|
|
|
PETRÓLEOS MEXICANOS, PRODUCTIVE STATE-OWNED SUBSIDIARIESMethodology to determine the estimation of the impairment of the accounts receivable
AND SUBSIDIARY COMPANIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2016, 2015 AND 2014
(FIGURES STATED IN THOUSANDS, EXCEPT AS NOTED)
Export customers | ||||||||
2016 | 2015 | |||||||
Balance at the beginning of the year | Ps. | (312,004 | ) | Ps. | (309,252 | ) | ||
Additions against income | (25,931 | ) | (119,819 | ) | ||||
Aplication against estimation | — | 145,811 | ||||||
Translation effects | (36,764 | ) | (28,744 | ) | ||||
|
|
|
| |||||
Balance at the end of the year | Ps. (374,699) | Ps. (312,004) | ||||||
|
|
|
|
NOTE 8. INVENTORIES, NETPEMEX allocates each exposure to a credit risk grade based on data that is determined to be predictive of the risk of loss (including but not limited to, audited financial statements, management accounts and cash flow projections and available information about customers) and applying experienced credit judgment. Credit risk grades are defined using qualitative and quantitative factors that are indicative of the risk of default. Exposures within each credit risk grade are segmented by each Subsidiary Entity and its commercial business lines, so the expected credit loss rate is calculated for each segment based on actual credit loss experienced over the past two years. These rates are multiplied by scale factors to reflect differences between the economic conditions during the period over which historical data has been collected, current conditions and PEMEX’s view of economic conditions over the expected lives of the receivables.
As of December 31, 20162018, the expected percentage of credit loss for accounts receivable for each Subsidiary Entity and 2015,Subsidiary Company was: 0.72% for Pemex Fertilizers, 2.70% for Pemex Industrial Transformation, 3.15% for Pemex Corporate, 0.69% for Pemex Ethylene, 10.80% for Pemex Logistics, 21.71% for Pemex Drilling and Services, 0.06% for PMI CIM and 4.65% for PMI TRD.
The amount of impairment of accounts receivables recognized in the income statement was Ps. 582,855, which includes the impairment of customers and other accounts receivables.
NOTE 11. INVENTORIES
As of December 31, 2018 and 2017, inventories were as follows:
2016 | 2015 | 2018 | 2017 | |||||||||||||
Refined and petrochemicals products | Ps. 21,534,846 | Ps. 23,673,427 | Ps. | 43,134,519 | Ps. | 27,862,384 | ||||||||||
Products in transit | 16,260,213 | 19,112,606 | ||||||||||||||
Crude oil | 11,391,310 | 11,461,185 | 16,708,606 | 11,445,780 | ||||||||||||
Products in transit | 7,735,163 | 3,262,252 | ||||||||||||||
Materials and products in stock | 4,721,834 | 5,145,874 | 5,292,796 | 5,172,779 | ||||||||||||
Materials in transit | 419,547 | 120,750 | 490,403 | 180,711 | ||||||||||||
Gas and condesate products | 89,360 | 107,440 | ||||||||||||||
Gas and condensate products | 136,031 | 84,670 | ||||||||||||||
|
|
|
| |||||||||||||
Ps. 45,892,060 | Ps. 43,770,928 | Ps. | 82,022,568 | Ps. | 63,858,930 | |||||||||||
|
|
|
|
NOTE 9. HELD—FOR—SALENON-FINANCIAL ASSETS
The remaining amount to be paid by CENAGAS, Ps. 8,027,628 (including VAT), will be received in the form of a consideration payment which will take into account depreciation inflation accumulated in each payment period and a rate of cost of capital determined by the Energy Regulatory Commission. These factors are subject to a determination of variables over the time (see Note14-a).
PETRÓLEOS MEXICANOS, PRODUCTIVE STATE-OWNED SUBSIDIARIES
AND SUBSIDIARY COMPANIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2016, 2015 AND 2014
(FIGURES STATED IN THOUSANDS, EXCEPT AS NOTED)
As a result of the Energy Reform Decree, the secondary legislation and the corresponding initial adjudication of rights for the exploration and extraction of oil and solid hydrocarbons mentioned in transitory article 6 of the Energy Reform Decree, certain assignments that Pemex Exploration and Production received from the Mexican Government were affected. These investments will be compensated at their fair value pursuant to the terms determined by Ministry of Energy.
In 2016, pursuant to Round 1.3, the Ministry of Energy awarded certain contractual areas for the exploration and extraction of oil and solid hydrocarbons to third parties and their respective fixed assets will be transferred from PEMEX to such third parties. During 2016, PEMEX submitted the application for compensation from the Ministry of Energy for the fixed assets located in those areas, and, on December 31, 2016, these fixed assets were reclassified asheld-for-salenon-financial assets at book value of Ps. 7,460,674, as follows:
Fields | As of December 31, 2016 | |||||
22 | Not-requested but temporarily assigned fields | Ps. 2,736,358 | ||||
3 | Not-requested and unassigned fields | 71,974 | ||||
|
| |||||
2,808,332 | ||||||
317 | Fields permanently unassigned | 4,652,342 | ||||
|
| |||||
Total | Ps. 7,460,674 | |||||
|
|
NOTE 10. AVAILABLE—FOR—SALENON-CURRENT FINANCIAL ASSETS
On January 1, 2015, PEMEX had a total of 19,557,003 shares of Repsol valued at Ps. 3,944,696, which represented approximately 1.48% of Repsol’s share capital.
On January 16, 2015, PMI HBV received 575,205 new Repsol shares, valued at Ps. 163,834, as anin-kind dividend resulting from a flexible dividend declared by Repsol in December 2014.
On June 15, 2015, Repsol declared flexible dividends to its shareholders, of which PMI HBV received 592,123 new Repsol shares in July 2015, valued at Ps. 171,451.
On August 4, 2015, PMI HBV obtained a loan for U.S. $250,000, which bears interest at a rate of 1.79% and is due in 2018. The loan is collateralized by 20,724,331 Repsol shares which are presented asnon-current assets.
On December 16, 2015, Repsol declared flexible dividends to its shareholders, from which PMI HBV received 942,015 new Repsol shares as anin-kind dividend in January 2015. This amount was recognized as an account receivable of Ps.188,490 as of December 31, 2015.
On June 13, 2016, Repsol declared flexible dividends to its shareholders, of which PMI HBV received 555,547 new Repsol shares as anin-kind dividend on July 18, 2016, valued at Ps. 128,051.
Since the 1,497,562 new Repsol shares were received as anin-kind dividend during 2016 are not included in the loan agreement obtained by PMI HBV in August 2015, these shares are presented as short termavailable-for-sale current financial assets amounting to Ps. 435,556. These shares were sold in January 2017.
PETRÓLEOS MEXICANOS, PRODUCTIVE STATE-OWNED SUBSIDIARIES
AND SUBSIDIARY COMPANIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2016, 2015 AND 2014
(FIGURES STATED IN THOUSANDS, EXCEPT AS NOTED)
On December 14, 2016, Repsol declared flexible dividends to its shareholders, of which PMI HBV received 584,786 new Repsol shares as anin-kind dividend in January 23, 2017. This amount was recognized as an account receivable of Ps.165,346 as of December 31, 2016.12. EQUITY INSTRUMENTS
As of December 31, 2016 and December 31, 2015,2017, PEMEX was in the investments in 20,724,331process of selling its shares of Repsol held by PMI HBVTAG Norte Holding, S. de R.L. de C.V. and TAG Pipeline Sur, S. de R.L. de C.V. These shares were valued at Ps. 6,027,540 and Ps. 3,944,696, respectively. These shares are presented undernon-current assets. The effecttheir net realizable value, which, as of December 31, 2017, resulted in a negative value that was recognized in the profit or loss at the end of the valuation onyear. As of December 31, 2017,available-for-sale currentnon-financial assets amounted to Ps. 1,056,918.
On September 4 and 5, 2018, PEMEX received the investment at fair valuepayment for the sale of its 5% interest in TAG Norte Holding, S. de R.L. de C.V., which was recorded in other comprehensive resultas equity instruments in the statementamount of changes in equity (deficit) asU.S.$ 43,036 (Ps. 826,046), obtaining a net profit of Ps. 207,817 at December 31, 2016, and a loss of Ps. 3,206,316 at December 31, 2015.Ps.10,257.
As of December 31, 20162018, due to the adoption of IFRS 9, PEMEX classified its TAG Pipeline Sur, S. de R.L. de C.V. shares of Ps. 245,440 as equity instruments.
Before the initial application of IFRS 9 on January 1, 2018, PEMEX classified these investments asavailable-for-sale financial assets. Beginning January 1, 2018 these investments are now classified as equity instruments.
NOTE 13.HELD-FOR-SALENON-FINANCIAL ASSETS
As of December 31, 2018, Pemex Logistics has Ps. 1,253,638 asheld-for-sale currentnon-financial assets, the potential sale of which is being given careful consideration to maximize its value and 2015, PEMEX’s direct holdingsmaintain a presence in the market.
These held-for-sale current non-financial assets consisted of Repsol shares amountedthe following:
December 31, 2018 | ||||
Plants | Ps. | 712,246 | ||
Pipelines | 143,434 | |||
Buildings | 116,868 | |||
Lands | 92,400 | |||
Telecommunications equipment | 6,311 | |||
Oher assets | 1,278 | |||
Ps. | 1,072,537 | |||
The details relating to approximately 1.52%the potential sale of these assets are classified as “reserved”, pursuant to Article 110, sections VIII and 1.48% respectively,XIII of Repsol’s total shares.the Ley Federal de Transparencia y Acceso a la información Pública (Federal Law on Transparency and Access to Public Information), in relation to Article 82 and Article 111 of the Petróleos Mexicanos Law, since the details are still being considered and evaluated and contain sensitive facts about the commercial and economic scope, which only pertain to PEMEX and its commercial partners.
In addition to the Ps. 1,072,537, there are Ps. 181,101 inheld-for-sale assets to CENAGAS, composed of 74 buildings and 10 undeveloped properties.
NOTE 11. PERMANENT14. INVESTMENTS IN ASSOCIATESJOINT VENTURES AND OTHERASSOCIATES
The permanent investments in associatesjoint ventures and otherassociates as of December 31, 20162018 and 2015,2017, were as follows:
Percentage of investment | 2016 | 2015 | ||||||||||||
Deer Park Refining Limited | 49.99% | Ps. | 14,039,384 | Ps. | 10,600,545 | |||||||||
Petroquímica Mexicana de Vinilo, S. A. de C. V. | (i) | 44.09% | 4,309,050 | 3,954,251 | ||||||||||
TAG Norte Holding, S. de R. L. de C. V. | (ii)(iii) | 5.00% | 1,909,527 | 283,524 | ||||||||||
Sierrita Gas Pipeline LLC | 35.00% | 1,112,338 | 983,059 | |||||||||||
TAG Pipelines Sur, S. de R. L. de C. V. | (ii)(iii) | 5.00% | 507,596 | 61,747 | ||||||||||
Frontera Brownsville, LLC. | 50.00% | 478,414 | 404,129 | |||||||||||
Texas Frontera, LLC. | 50.00% | 260,828 | 224,834 | |||||||||||
CH4 Energía, S. A. | 50.00% | 194,868 | 183,474 | |||||||||||
Administración Portuaria Integral de Dos Bocas, S.A. de C.V. | 40.00% | 139,523 | 160,687 | |||||||||||
PMV Minera, S.A. de C.V. | 44.09% | 61,779 | 51,270 | |||||||||||
Gasoductos de Chihuahua, S. de R. L. de C. V. | (iv) | 50.00% | — | 6,454,806 | ||||||||||
Compañía Mexicana de Exploraciones, S. A. de C. V. | (v) | 60.00% | — | 758,967 | ||||||||||
Other-net | Various | 141,325 | 44,306 | |||||||||||
|
|
|
| |||||||||||
Ps. | 23,154,632 | Ps. | 24,165,599 | |||||||||||
|
|
|
|
Percentage | December 31, | |||||||||||
of investment | 2018 | 2017 | ||||||||||
Deer Park Refining Limited | 49.99 | % | Ps. 14,731,030 | Ps. 14,405,542 | ||||||||
Sierrita Gas Pipeline LLC | 35.00 | % | 1,068,995 | 1,084,169 | ||||||||
Frontera Brownsville, LLC. | 50.00 | % | 472,898 | 471,085 | ||||||||
Texas Frontera, LLC. | 50.00 | % | 228,564 | 239,782 | ||||||||
CH 4 Energía, S. A. | 50.00 | % | 155,878 | 315,713 | ||||||||
Administración Portuaria Integral de Dos Bocas, S. A. de C.V. | 40.00 | % | 118,478 | 64,328 | ||||||||
PMV Minera, S. A. de C. V. (iii) | 44.09 | % | — | 45,133 | ||||||||
Ductos el Peninsular, S. A. P. I. de C. V. | 30.00 | % | 17,244 | 18,336 | ||||||||
Other-net | Various | 48,458 | 63,276 | |||||||||
|
|
|
| |||||||||
Ps. 16,841,545 | Ps. 16,707,364 | |||||||||||
|
|
|
|
Profit (loss) sharing in joint ventures and associates:
2018 | 2017 | 2016 | ||||||||||
Deer Park Refining Limited | Ps. | 872,885 | Ps. | 920,409 | Ps. | 1,437,850 | ||||||
Sierrita Gas Pipeline LLC | 124,209 | 129,401 | 105,825 | |||||||||
Frontera Brownsville, LLC. | 59,973 | 66,798 | 57,769 | |||||||||
Texas Frontera, LLC. | 55,316 | 51,412 | 50,710 | |||||||||
CH4 Energía S.A. de C.V. | 15,395 | 125,132 | — | |||||||||
Administración Portuaria Integral de Dos Bocas, S.A. de C.V. | 54,149 | (75,195 | ) | — | ||||||||
PMV Minera, S.A. de C.V. (iii) | 6,863 | 6,253 | — | |||||||||
Ductos el Peninsular, S. A. P. I. de C. V. | (1,092 | ) | 74 | — | ||||||||
Petroquímica Mexicana de Vinilo, S. A. de C. V.(iii) | 352,816 | (1,223,640 | ) | (190,468 | ) | |||||||
Ductos y Energéticos del Norte, S.A. de C.V.(i) | — | 360,092 | — | |||||||||
Gasoductos de Chihuahua, S. de R. L. de C. V. (ii) | — | — | 638,126 | |||||||||
Other, net | (13,502 | ) | (296 | ) | 45,800 | |||||||
|
|
|
|
|
| |||||||
Profit sharing in joint ventures and associates, net | Ps. | 1,527,012 | Ps. | 360,440 | Ps. | 2,135,845 | ||||||
|
|
|
|
|
|
i. | On |
PETRÓLEOS MEXICANOS, PRODUCTIVE STATE-OWNED SUBSIDIARIES
AND SUBSIDIARY COMPANIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2016, 2015 AND 2014
(FIGURES STATED IN THOUSANDS, EXCEPT AS NOTED)
On September 28, 2016, PEMEX completed the divestiture of its 50% ownership interest in the Gasoductos de Chihuahua S. de R.L. de C.V. joint venture with Infraestructura Energética Nova, S.A.B. de C.V. The stock was sold for Ps. 22,684,736, yielding a |
On November 30, 2018, PEMEX received the payment for the sale of its total 44.09% interest in Petroquímica Mexicana de Vinilo, S.A. de C.V. and 44.09% interest in PMV Minera, S.A. de C.V. which were recorded as investments in joint ventures and associates. The sale price was |
Profit (loss) sharing in associates and others:
2016 | 2015 | 2014 | ||||||||||
Deer Park Refining Limited | Ps. | 1,437,850 | Ps. | 1,913,835 | Ps. | (232,960 | ) | |||||
Gasoductos de Chihuahua, S. de R. L. de C. V. | 638,126 | 666,779 | 244,958 | |||||||||
Sierrita Gas Pipeline LLC | 105,825 | 152,445 | 6,478 | |||||||||
TAG Norte Holding, S. de R. L. de C. V. | — | 34,602 | (108,126 | ) | ||||||||
TAG Pipelines Sur, S. de R. L. de C. V. | — | (6,543 | ) | (57,330 | ) | |||||||
Petroquímica Mexicana de Vinilo, S. A. de C. V. | (190,468 | ) | (61,952 | ) | (89,280 | ) | ||||||
Compañía Mexicana de Exploraciones, S. A. de C. V. | — | (496,774 | ) | 114,677 | ||||||||
Other, net | 144,512 | 115,723 | 155,951 | |||||||||
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Profit sharing in associates and other, net | Ps. | 2,135,845 | Ps. | 2,318,115 | Ps. | 34,368 | ||||||
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The following tables show condensed financial information of major investments recognized under the equity method during 20162018 and 2015:
Condensed statements of financial position2017:
Deer Park Refining Limited | Gasoductos de Chihuahua, S. de R. L. de C. V. | |||||||||||||||
2016 | 2015 | 2016 | 2015 | |||||||||||||
Total assets | Ps. | 42,428,275 | Ps. | 33,249,652 | Ps. | — | Ps. | 26,573,119 | ||||||||
Total liabilities | Ps. | 14,346,643 | Ps. | 12,046,441 | Ps. | — | Ps. | 13,663,507 | ||||||||
Total equity | 28,081,632 | 21,203,211 | 12,909,612 | |||||||||||||
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Total liabilities and equity | Ps. | 42,428,275 | Ps. | 33,249,652 | Ps. | — | Ps. | 26,573,119 | ||||||||
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Condensed statements of comprehensive income
Condensed statements of financial position | ||||||||||||||||
Deer Park Refining Limited | Sierrita Gas Pipeline, LLC | |||||||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||||||
Total assets | Ps. | 41,119,684 | Ps. | 41,075,547 | Ps. | 3,140,289 | Ps. | 3,518,036 | ||||||||
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Total liabilities | Ps. | 11,654,678 | Ps. | 12,261,581 | Ps. | 86,014 | Ps. | 420,410 | ||||||||
Total equity | 29,465,006 | 28,813,966 | 3,054,275 | 3,097,626 | ||||||||||||
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Total liabilities and equity | Ps. | 41,119,684 | Ps. | 41,075,547 | Ps. | 3,140,289 | Ps. | 3,518,036 | ||||||||
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Deer Park Refining Limited | Gasoductos de Chihuahua, S. de R. L. de C. V. | |||||||||||||||||||||||
December 31, | August 31 | December 31, | ||||||||||||||||||||||
2016 | 2015 | 2014 | 2016 | 2015 | 2014 | |||||||||||||||||||
Sales and other income | Ps. | 16,750,155 | Ps. | 16,658,705 | Ps. | 11,996,951 | Ps. | 3,798,666 | Ps. | 4,617,982 | Ps. | 2,406,375 | ||||||||||||
Costs and expenses | 13,874,172 | 12,830,653 | 12,462,917 | 2,522,415 | 3,284,424 | 1,916,459 | ||||||||||||||||||
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Net result | Ps. | 2,875,983 | Ps. | 3,828,052 | Ps. | (465,966 | ) | Ps. | 1,276,251 | Ps. | 1,333,558 | Ps. | 489,916 | |||||||||||
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PETRÓLEOS MEXICANOS, PRODUCTIVE STATE-OWNED SUBSIDIARIES
AND SUBSIDIARY COMPANIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2016, 2015 AND 2014
(FIGURES STATED IN THOUSANDS, EXCEPT AS NOTED)
Condensed statements of comprehensive income | ||||||||||||||||||||||||
Deer Park Refining Limited | Sierrita Gas Pipeline, LLC | |||||||||||||||||||||||
December 31, | December 31, | |||||||||||||||||||||||
2018 | 2017 | 2016 | 2018 | 2017 | 2016 | |||||||||||||||||||
Sales and other income | Ps. | 17,519,219 | Ps. | 16,427,064 | Ps. | 16,750,155 | Ps. | 615,150 | Ps. | 840,414 | Ps. | 717,351 | ||||||||||||
Costs and expenses | 15,773,274 | 14,586,061 | 13,874,172 | 260,272 | 470,697 | 414,994 | ||||||||||||||||||
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Net result | Ps. | 1,745,945 | Ps. | 1,841,003 | Ps. | 2,875,983 | Ps. | 354,878 | Ps. | 369,717 | Ps. | 302,357 | ||||||||||||
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Additional information about the significant permanent investments in associatesjoint ventures and otherassociates is presented below:
• | Deer Park Refining Limited. On March 31, 1993, PMI NASA acquired |
• | Petroquímica Mexicana de Vinilo, S.A. de C.V.On September 13, 2013, Pemex-Petrochemicals (now Pemex Industrial Transformation), through its subsidiary PPQ Cadena Productiva, S.L. and Mexichem founded Petroquímica Mexicana de Vinilo, S.A. de C.V. |
• |
Sierrita Gas Pipeline LLC.This company was created on June 24, 2013. Its main activity is the developing of projects related to the |
• |
Frontera Brownsville, LLC. Effective April 1, 2011, PMI SUS entered into a joint venture with TransMontaigne Operating Company L.P (TransMontaigne) to create Frontera Brownsville, LLC. Frontera Brownsville, LLC was incorporated in Delaware, |
• | 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 |
• | CH4 Energía, S.A.This company was constituted on December 21, 2000. CH4 Energía engages in the purchase and sale of natural gas and in |
PETRÓLEOS MEXICANOS, PRODUCTIVE STATE-OWNED SUBSIDIARIES
AND SUBSIDIARY COMPANIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2016, 2015 AND 2014
(FIGURES STATED IN THOUSANDS, EXCEPT AS NOTED)
• | Administración Portuaria Integral de Dos Bocas, S.A. de C.V.This company was constituted on August 12, 1999. Its |
• | PMV Minera, S.A. de C.V. This company was constituted on October 1, 2014 and the principal activity is the extraction and sale of salmuera (mixture of salt and water). This investment is recorded under the equity method. In November 2018, PEMEX sold its total ownership interest in PMV Minera, S.A. de C.V. |
• |
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PETRÓLEOS MEXICANOS, PRODUCTIVE STATE-OWNED SUBSIDIARIES
AND SUBSIDIARY COMPANIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2016, 2015 AND 2014
(FIGURES STATED IN THOUSANDS, EXCEPT AS NOTED)
NOTE 12.15. WELLS, PIPELINES, PROPERTIES, PLANT AND EQUIPMENT, NET
Plants | Drilling equipment | Pipelines | Wells | Buildings | Offshore platforms | Furniture and equipment | Transportation equipment | Construction in progress | Land | Unproductive fixed assets | Other fixed assets | Total fixed assets | 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 January 1, 2015 | Ps. | 758,965,433 | 46,129,352 | 571,099,029 | 1,191,385,012 | 64,403,269 | 337,246,010 | 54,819,706 | 24,002,014 | 195,817,249 | 42,813,007 | 10,825,706 | 583,753 | 3,298,089,540 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balances as of January 1, 2017 | Ps. | 758,446,110 | 23,269,116 | 460,145,428 | 1,318,822,917 | 62,743,033 | 322,704,205 | 50,746,687 | 19,442,845 | 207,414,148 | 44,571,618 | — | 491,506 | 3,268,797,613 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Acquisitions | 10,018,030 | 418,283 | 7,054,793 | 14,937,882 | 802,300 | 7,811,374 | 1,183,679 | 284,445 | 51,410,469 | 58,563 | — | — | 93,979,818 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Reclassifications | 3,146,955 | — | (53,349 | ) | — | 98,245 | (10,199,213 | ) | (96,899 | ) | (75,674 | ) | (812,943 | ) | (560 | ) | — | 4,072,464 | (3,920,974 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Capitalization | 43,033,864 | — | 21,357,074 | 36,564,811 | 1,265,246 | 8,677,765 | 30,879 | 3,746,395 | (114,700,828 | ) | 29,248 | — | (4,454 | ) | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Impairment | (48,020,616 | ) | — | 2,226,771 | (83,236,991 | ) | — | (15,564,190 | ) | — | — | (6,849,534 | ) | — | — | — | (151,444,560 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Disposals | (10,598,983 | ) | (244,283 | ) | (8,862,541 | ) | (19,340,709 | ) | (208,353 | ) | — | (806,694 | ) | (226,375 | ) | (6,724,930 | ) | (112,170 | ) | — | (4,440,865 | ) | (51,565,902 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Balances as of December 31, 2017 | 756,025,360 | 23,443,116 | 481,868,176 | 1,267,747,910 | 64,700,471 | 313,429,941 | 51,057,652 | 23,171,636 | 129,736,382 | 44,546,699 | — | 118,651 | 3,155,845,995 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Acquisitions | Ps. | 21,066,695 | 6,117,156 | 5,331,416 | 49,027,740 | 2,624,138 | 6,874,162 | 1,531,683 | 236,284 | 155,841,872 | 12,077,308 | 114,062 | 4,015,295 | 264,857,811 | 13,362,218 | 1,059,027 | 852,308 | 38,829,246 | 329,969 | 4,958,299 | 473,812 | 117,632 | 54,407,962 | 434,698 | (106 | ) | — | 114,825,065 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Reclassifications | Ps. | 1,871,739 | (313,503 | ) | 2,816,080 | — | 937,482 | 774 | (607,369 | ) | 387,331 | 1,809,152 | 23,804 | (6,448,543 | ) | (3,275,979 | ) | (2,799,032 | ) | 1,400,531 | 45,268 | (1,603,022 | ) | — | 37,343 | (4,039,499 | ) | 3,015,144 | 101,424 | 32,280 | (6,620 | ) | 2,780,266 | (869 | ) | 1,762,246 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Capitalization | Ps. | 33,362,415 | — | 17,144,630 | 76,065,532 | 1,301,395 | 13,670,992 | 35,933 | 590,435 | (141,792,676 | ) | 209,655 | — | (588,311 | ) | — | 25,752,538 | — | 2,456,977 | 21,269,614 | 991,061 | — | 163,000 | 227,334 | (50,828,761 | ) | — | — | (31,763 | ) | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Impairment | Ps. | (97,981,310 | ) | — | (34,543,415 | ) | (249,962,633 | ) | — | (95,457,330 | ) | — | — | — | — | — | — | (477,944,688 | ) | 20,226,139 | — | (59,632,531 | ) | 59,774,797 | (831,561 | ) | 12,133,524 | — | (6,981,561 | ) | (3,269,810 | ) | — | — | — | 21,418,997 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Disposals | Ps. | (68,872,958 | ) | (30,252,662 | ) | (141,868,232 | ) | — | (2,981,818 | ) | (2,006,512 | ) | (2,813,759 | ) | (9,886,969 | ) | — | (11,775,972 | ) | (4,491,225 | ) | (103,880 | ) | (275,053,987 | ) | (5,496,395 | ) | (4,466,446 | ) | (2,705,958 | ) | (8,297,844 | ) | (382,120 | ) | — | (2,689,566 | ) | (1,476,513 | ) | (725,540 | ) | (623,152 | ) | (2,780,160 | ) | (53,361 | ) | (29,697,055 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Balances as of December 31, 2015 | Ps. | 648,412,014 | 21,680,343 | 419,979,508 | 1,066,515,651 | 66,284,466 | 260,328,096 | 52,966,194 | 15,329,095 | 211,675,597 | 43,347,802 | — | 630,878 | 2,807,149,644 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Acquisitions | Ps. | 20,406,464 | 1,629,710 | 1,265,011 | 8,239,480 | 2,541,802 | 9,866,984 | 545,271 | 2,063,519 | 107,682,868 | 1,487,434 | 6,800 | — | 155,735,343 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Reclassifications | Ps. | 150,817 | — | (1,268,887 | ) | 8,649,686 | (6,610,184 | ) | — | (561,569 | ) | (325,778 | ) | (282,044 | ) | 50,709 | 2,039 | (137,246 | ) | (332,457 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Capitalization | Ps. | 15,943,630 | — | 11,851,378 | 40,825,973 | 1,085,323 | 17,318,279 | 2,769 | 2,918,621 | (89,945,973 | ) | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Impairment | Ps. | 81,135,967 | — | 31,967,407 | 198,974,994 | — | 35,640,491 | 438,979 | 8,743 | (16,852,238 | ) | — | — | — | 331,314,343 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Disposals | Ps. | (7,602,782 | ) | (40,937 | ) | ( 3,648,989 | ) | (4,382,867 | ) | (558,374 | ) | (449,645 | ) | (2,644,957 | ) | (551,355 | ) | (4,864,062 | ) | (314,327 | ) | (8,839 | ) | (2,126 | ) | (25,069,260 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Balances as of December 31, 2016 | Ps. | 758,446,110 | 23,269,116 | 460,145,428 | 1,318,822,917 | 62,743,033 | 322,704,205 | 50,746,687 | 19,442,845 | 207,414,148 | 44,571,618 | — | 491,506 | 3,268,797,613 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Accumulated depreciation and amortization | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balances as of January 1, 2015 | Ps. | (339,292,292 | ) | (27,771,648 | ) | (232,658,051) | (695,718,382 | ) | (37,144,310 | ) | (124,922,867 | ) | (37,051,446 | ) | (12,811,151 | ) | — | — | (7,345,255 | ) | — | (1,514,715,402 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balances as of January 1, 2017 | Ps. | (360,016,979 | ) | (2,942,575 | ) | (152,365,227 | ) | (850,536,754 | ) | (39,124,631 | ) | (153,161,770 | ) | (36,990,666 | ) | (5,916,763 | ) | — | — | — | — | (1,601,055,365 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Depreciation and amortization | Ps. | (41,107,609 | ) | (3,041,899 | ) | (16,777,673 | ) | (84,823,893 | ) | (1,608,620 | ) | (15,986,093 | ) | (3,533,648 | ) | (1,071,815 | ) | — | — | — | — | (167,951,250 | ) | (45,709,123 | ) | (2,198,867 | ) | (15,095,115 | ) | (74,673,473 | ) | (1,906,164 | ) | (13,192,369 | ) | (2,890,563 | ) | (1,038,839 | ) | — | — | — | — | (156,704,513 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Reclassifications | Ps. | (1,148,744 | ) | 283,636 | (310,859 | ) | — | (113,573 | ) | — | 1,259,561 | (402,648 | ) | — | — | 3,231,659 | — | 2,799,032 | 2,799,244 | — | (72,841 | ) | — | (69,236 | ) | 1,146,904 | 102,375 | 14,532 | — | — | — | — | 3,920,978 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Disposals | Ps. | 60,264,739 | 29,951,896 | 110,415,176 | 98,636 | 1,154,416 | — | 2,812,054 | 8,391,094 | — | — | 4,113,596 | — | 217,201,607 | 8,902,711 | 127,458 | 7,573,769 | 16,810,591 | 59,022 | — | 805,916 | 222,764 | — | — | — | — | 34,502,231 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Balances as of December 31, 2015 | Ps. | (321,283,906 | ) | (578,015 | ) | (139,331,407 | ) | (780,443,639 | ) | (37,712,087 | ) | (140,908,960 | ) | (36,513,479) | (5,894,520 | ) | — | — | — | — | (1,462,666,013) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balances as of December 31, 2017 | (394,024,147 | ) | (5,013,984 | ) | (159,959,414 | ) | (908,399,636 | ) | (41,041,009 | ) | (165,207,235 | ) | (38,972,938 | ) | (6,718,306 | ) | — | — | — | — | (1,719,336,669 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Depreciation and amortization | Ps. | (44,549,443 | ) | (2,364,560 | ) | (15,153,879 | ) | (70,090,038 | ) | (1,796,383 | ) | (12,252,810 | ) | (3,205,089 | ) | (1,027,289 | ) | — | — | — | — | (150,439,491 | ) | (44,925,549 | ) | (1,347,046 | ) | (14,799,664 | ) | (70,255,577 | ) | (2,026,403 | ) | (15,968,324 | ) | (2,827,887 | ) | (1,231,590 | ) | — | — | — | — | (153,382,040 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Reclassifications | Ps. | (10,521 | ) | — | (166,632 | ) | (3,077 | ) | (108,718 | ) | — | 166,914 | 454,492 | — | — | — | — | 332,458 | (212,207 | ) | (45,953 | ) | 232,680 | — | 17,387 | 1,344,469 | (3,003,850 | ) | (94,772 | ) | — | — | — | — | (1,762,246 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Disposals | Ps. | 5,826,891 | — | 2,286,691 | — | 492,557 | — | 2,560,988 | 550,554 | — | — | — | — | 11,717,681 | 2,558,780 | 408,502 | 1,262,358 | 5,187,467 | 125,769 | — | 2,643,297 | 625,618 | — | — | — | — | 12,811,791 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Balances as of December 31, 2016 | Ps. | (360,016,979 | ) | (2,942,575 | ) | (152,365,227 | ) | (850,536,754 | ) | (39,124,631 | ) | (153,161,770 | ) | (36,990,666 | ) | (5,916,763 | ) | — | — | — | — | (1,601,055,365 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balances as of December 31, 2018 | 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 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Wells, pipelines, properties, plant and equipment—net as of December 31,2015 | Ps. | 327,128,108 | 21,102,328 | 280,648,101 | 286,072,012 | 28,572,379 | 119,419,136 | 16,452,715 | 9,434,575 | 211,675,597 | 43,347,802 | — | 630,878 | 1,344,483,631 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Wells, pipelines, properties, plant and equipment—net as of December 31,2017 | Ps. | 362,001,214 | 18,429,132 | 321,908,762 | 359,348,274 | 23,659,462 | 148,222,706 | 12,084,714 | 16,453,330 | 129,736,382 | 44,546,699 | — | 118,651 | 1,436,509,326 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Wells, pipelines, properties, plant and equipment—net as of December 31,2016 | Ps. | 398,429,131 | 20,326,541 | 307,780,201 | 468,286,163 | 23,618,402 | 169,542,435 | 13,756,021 | 13,526,082 | 207,414,148 | 44,571,618 | — | 491,506 | 1,667,742,248 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Wells, pipelines, properties, plant and equipment—net as of December 31,2018 | Ps. | 374,667,268 | 14,082,484 | 247,971,910 | 405,855,977 | 21,920,907 | 146,651,175 | 9,858,664 | 7,740,902 | 129,352,513 | 44,351,625 | — | 32,659 | 1,402,486,084 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Depreciation rates | 3 a 5 | % | 5 | % | 2 a 7 | % | — | 3 a 7 | % | 4 | % | 3 a 10 | % | 4 a 20 | % | — | — | — | — | — | 3 to 5 | % | 5 | % | 2 to 7 | % | — | 3 to 7 | % | 4 | % | 3 to 10 | % | 4 to 20 | % | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Estimated useful lives | 20 a 35 | 20 | 15 a 45 | — | 33 a 35 | 25 | 3 a 10 | 5 a 25 | — | — | — | — | — | 20 to 35 | 20 | 15 to 45 | — | 33 to 35 | 25 | 3 to 10 | 5 to 25 | — | — | — | — | — |
(1) | Mainly wells, pipelines and plants |
a. | As of December 31, |
b. | The combined depreciation of fixed assets and amortization of wells for the fiscal years ended December 31, |
c. | As of December 31, |
PETRÓLEOS MEXICANOS, PRODUCTIVE STATE-OWNED SUBSIDIARIES
AND SUBSIDIARY COMPANIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2016, 2015 AND 2014
(FIGURES STATED IN THOUSANDS, EXCEPT AS NOTED)
d. | As of December 31, |
e. | As of December 31, 2018 and 2017, PEMEX recognized a net reversal of impairment of Ps. |
i. | As of December 31, 2018, the net reversal of impairment was as follows: |
(Impairment) | Reversal of impairment | Reversal of impairment / (Impairment) | ||||||||||
Pemex Logistics | Ps. | (40,288,338 | ) | Ps. | — | Ps. | (40,288,388 | ) | ||||
Pemex Fertilizers | (2,246,264 | ) | — | (2,246,264 | ) | |||||||
PMI NASA | (1,719,627 | ) | — | (1,719,627 | ) | |||||||
Pemex Exploration and Production | (63,252,635 | ) | 128,266,251 | 65,013,616 | ||||||||
Pemex Industrial Transformation | (13,788,470 | ) | 14,448,080 | 659,610 | ||||||||
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Total | Ps. | (121,295,334 | ) | Ps. | 142,714,331 | Ps. | 21,418,997 | |||||
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Cash Generating Units of Pemex Logistics
Cash Generating Units of pipelines
As of December 31, 2018, Pemex Logistics recognized an impairment in the CGU of pipelines for Ps. 40,288,338, mainly due to a decrease in income flows projection of 46%, from an annual average income of Ps. 47,219,903 at the end of 2017 to Ps. 25,271,404 at the end of 2018, in addition to an increase in the cost ofnon-operating losses of 40%, from an annual average of Ps. 18,067,730 at the end of 2017 to Ps. 25,226,769 at the end of 2018. This increase was partially offset by a decrease in direct operating costs of 58%, from annual average costs at the end of 2017 of Ps. 16,485,969 to Ps. 6,880,967 at the end of December 2018, as well as a decrease in the discount rate, from 15.41% at the end of 2017 to 13.55% at the end of 2018.
The recoverable amounts of the assets as of December 31, 2018, corresponding to the discounted cash flows at the rate of 13.55% are the following:
TAD, TDGL, TOMS (Stotage terminals) | Ps. | 92,772,003 | ||
Land Transport (white pipes) | 445,377 | |||
Primary logistics | 111,941,265 | |||
Total | Ps. | 205,158,645 | ||
Cash Generating Units of Pemex Fertilizers
Cash generating units are plants used in the ammonia process.
The recoverable amount of assets is based on each asset’s value in use. To determine cash flows, volumes to be produced and sales to be carried out were taken into consideration. The discount rate used was 8.92%.
As of December 31, 2018, Pemex Fertilizers recognized an impairment of Ps. (2,246,264). The impairment is presented as a separate line item in the consolidated statement of comprehensive income.
Cash Generating Units of PMI NASA
As of December 31, 2018, PMI NASA recognized an impairment of Ps. (1,719,627), due to the disuse of the Cerro de la Pez Flotel, as a consequence of the reduction in the development of projects in recent months. This impairment was calculated by comparing the disbursement that would have to be made to acquire a flotel with similar characteristics compared to the valuation made by a specialized company of the flotel.
Cash Generating Unit of Pemex Exploration and Production
As of December 31, 2018, Pemex Exploration and Production recognized a net reversal of impairment in the amount of Ps. (271,709,432) as of December 31, 2016, arising from (1) a reversal of Ps. (288,581,670)65,013,616 mainly due to (i) an advance of production in Cantarell for rethinking physical goals for the reallocationperiod from 2024 to 2029 with a recovery of resources towards oil fieldsPs. 98,673,388. This computation was projected using a discount rate of 7.03% and a tax rate of 30% (observable market) on the operating profit with highest profitabilityan economic horizon of 25 years, compared to a discount rate of 14.40% that includes the cost of financing and the pyramiding of taxes and observable rights in similar companies, including the Profit-sharing; (ii) application in the fourth quarter of the relevant discount rate and tax rate (observable market), a net cash flows arising from relatively greater efficiencybenefit was generated in oil extraction and lower production costs, which fields are located primarilymost of the projects with respect to the previous year, mainly in the Aceite Terciario del Golfo project in the amount of Ps. 29,592,863. The foregoing was partially offset by an impairment of Ps. (63,252,635), mainly in (i) the Aguas Someras 2 projects in the amount of Ps. (58,318,030), (ii) the Crudo Ligero Marino Burgos, Cantarellprojects, mainly due to higher water and Antonio J. Bermudez crude oil projects, (ii)salt content in the appreciation of the U.S. dollar against the Mexican peso by 20.1%, from a peso–U.S. dollar exchange rate of Ps. 17.2065 to U.S. $1.00 as of December 31, 2015 to a peso–U.S. dollar exchange rate of Ps. 20.6640 to U.S. $1.00 as of December 31, 2016, given that cash inflows are denominated in U.S. dollars and then translated to the reporting currency using the exchange rate at the end of the period,hydrocarbons reserves, (iii) the changeYaxche Project, due to operating impacts in the period usedfields directly related to estimate long-term prices of proved reservesproduction, and (iv) the recoverable amount of fixed assets from 20 years to 25 years in accordance with the amendment to theLineamientos que regulan el procedimiento de cuantificación y certificación de reservas de la nación y el informe de los recursos contingentes relacionados (Guidelines regulating the quantificationTsimin Xux and certification procedures of the nation’s reserves and the related contingent resources report), (iv) by the authorization that the assignments to safeguard for two years be considered in an undetermined time until they are bidded and assigned to a contract and (v) the decrease in the discount rate; (2) an impairment of fixed assets of Ps. 16,872,238,Chuc projects, mainly due to the fact that cash flows were not sufficient to cover the recovery valuenatural decline of the Lakach project as a result of the increase in investments in this strategic gas project.proved hydrocarbon reserves.
The cash generating units of Pemex Exploration and Production are investment projects in productive fields with hydrocarbon reserves associated with proved reserves (1P). 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 the 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.
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:
PETRÓLEOS MEXICANOS, PRODUCTIVE STATE-OWNED SUBSIDIARIES
AND SUBSIDIARY COMPANIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2016, 2015 AND 2014
(FIGURES STATED IN THOUSANDS, EXCEPT AS NOTED)
The total forecast production, calculated with a horizon of 25 years is 7,092 million bpce.
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 (1P). The recoverable amount on each asset is the value in use.
Cash Generating Units which conform Industrial Transformation
As of December 31, 2016, Industrial Transformation recognized a net reversal of impairment of Ps. (52,498,881) mainly due to (1) a reversal of Ps. (54,998,987) corresponding to Madero and Minatitlán refineries due to higher prices than were forecasted in 2015 during the market decline, the reduction of the discount rate in the National Refinery System from 13.72% to 12.06%, and the appreciation of the U.S. dollar against the Mexican peso by 20.1%, from a peso–U.S. dollar exchange rate of Ps. 17.2065 to U.S. $1.00 as of December 31, 2015 to a peso–U.S. dollar exchange rate of Ps. 20.6640 to U.S. $1.00 as of December 31, 2016; (2) the cash generating units of the Arenque gas processor complex also recognized a reversal of impairment of Ps. (268,161) due to the improvement in prices of generated products and the appreciation of the U.S. dollar against the Mexican peso, improved efficiency in operating expenses and (3) three cash generating units presented impairment, including Ps. 65,105 in the gas Matapionche Processor Center, Ps. 2,590,870 in the Cangrejera Petrochemical Center and Ps. 112,292 for the Independencia Petrochemical Center, due to a decrease in the methanol price produced in these petrochemical centers.
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 or intermediate products that can be processed in another of its cash generating units or by a third party.
Each processing center of Industrial Transformation 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.
Cash flows determination is 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 different statistic models that consider historical information of processes and the capacity of different processing centers.
Cash generating unit of refining
To determine the value in use of long-lived assets associated with refineries of the National Refinery System, the net present value of reserves were determined based on the following assumptions:
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PETRÓLEOS MEXICANOS, PRODUCTIVE STATE-OWNED SUBSIDIARIES
AND SUBSIDIARY COMPANIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2016, 2015 AND 2014
(FIGURES STATED IN THOUSANDS, EXCEPT AS NOTED)
The recoverable amount of the assets is value in use. To determine of cash flows the volume of volumes product produced and sold are taken into consideration. As of December 31, 2016, the value in use for the Minatitlán and Madero Refineries was Ps. 79,113,512. As of December 31, 2016, the projection of cash flows was based on a period of 14 years for each refinery.
Cash generating unit of gas
To determine the value in use of long-lived assets associated with gas processing centers, the net present value of reserves is determined based on the following assumptions:
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The recoverable amount of assets based on each asset’s value in use. The value in use for each asset is calculated based on cash flows, taking into consideration volumes produced and sold. As of December 31, 2016, the value in use amounted to Ps.572,909 in the Matapionche gas processing center. Until December 31, 2016, the projection of cash flows was calculated based on a period of 10 years according to the useful life of each gas processing center.
Cash generating unit of petrochemicals
To determine the value in use of long-lived assets associated with petrochemicals centers, the net present value of reserves is determined based on the following assumptions:
| ||
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 volumes produced and sold. As of December 31, 2016, the value in use of impairment fixed assets amounted to Ps. 4,148,373 in the petrochemicals centers Cangrejera and Independencia. Until December 31, 2016, the projection of cash flows was calculated based on a period of 4 years according to the useful life of each petrochemical center.
Cash generating unit of logistics
The cash generating units of PEMEX’s logistics segments are pipelines, tankers, storage terminals and transportation equipment used for service, transport and storage of oil, oil products and petrochemicals.
Pemex Logistics calculates the recoverable amount of assets based on the value in use. The value in use for each asset is calculated based on cash flows, taking into consideration services income. As of December 31,
PETRÓLEOS MEXICANOS, PRODUCTIVE STATE-OWNED SUBSIDIARIES
AND SUBSIDIARY COMPANIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2016, 2015 AND 2014
(FIGURES STATED IN THOUSANDS, EXCEPT AS NOTED)
2016, the value in use amounted to Ps. 139,436,715. Until December 31, 2016, the projection of cash flows was calculated based on a period of 5 years. During 2016 the discount rate used was 12.63%.
As of December 31, 2016, reversal of impairment amounted Ps. (5,829,520), mainly due to improvements in operating costs.
Cash generating unit of ethylene
Pemex Ethylene calculates the recoverable amount of assets based on the value in use. The value in use for each asset is calculated based on cash flows, taking into consideration services income. As of December 31, 2016 the value in use of impairment fixed assets amounted to Ps. (1,276,510). During 2016 the discount rate used was 10.29%.
Cash generating unit of exploration and production
The cash generating units of Pemex Exploration and Production are investment projects grouped from productive fields with hydrocarbon reserves associated with proved reserves (1P).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.
To determine the value in use of long-lived assets associated withto hydrocarbon extraction, the net present value of reserves is determined based on the following assumptions:
Average crude oil | ||
Average gas price | ||
Average condensates price | ||
Discount rate | ||
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.
During 2018, Pemex Exploration and Production performed an analysis of the discount rate for its oil and gas activities cash flows in the domestic and international markets, taking into account the international price conditions, to value its production reserves.
In 2017, Pemex Exploration and Production used cash flows associated with proved reserves before tax and used an equallypre-tax discount rate, which was based on a weighted average cost of capital (“WACC”)grossed-up after taxes with a weight of the corporate tax rate of 30%, and the median of taxes and duties on hydrocarbon extraction from countries with similar conditions to the fields in Mexico, which discount rate was 57%.
As a result of the analysis performed in 2018, Pemex Exploration and Production noted that the industry is currently using after tax discount rates. Accordingly, Pemex Exploration and Production determined it would comply with the practices observed in the industry and started using the after-tax discount rate. Theafter-tax discount rate considers the present value of future cash flows, increasing interest rates of debt incurred by Petróleos Mexicanos, the risk of the country and specific industry-related risks (calculated as the median of the beta of industry companies), which is then used to calculate the WACC. The discount rate is independent of the capital structure of the subsidiary entity. The WACC considers the median proportion of debt and capital observed for companies in the sector.
Taking into consideration the assumptions described above, thepre-tax discount rate used by Pemex Exploration and Production in 2018 for the value in use was 7.03%, resulting in a net reversal or impairment of Ps. 65,013,616 for 2018.
For 2017, the pre-tax discount rate was 14.40%. If the same methodology had been applied in 2018, the discount rate after tax would have been 16.12% (the result of thegross-up of the 7.03% discount rate) and the net impairment would have been Ps. (958,060).
The total forecast production, calculated with a horizon of 25 years is 6,192 million barrels per day of crude oil equivalent.
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 (1P).reserves. The recoverable amount on each asset is the value in use. As of December 31, 2015 the value in use of impairment fixed assets amounted to Ps. 266,214,532. Until December 31, 2014, Pemex Exploration and Production based its estimates of long-term prices for proved reserves on a 25 year period for the projection of cash flows; however, due to changes in the applicable regulatory provisions as a result of the Energy Reform, as of January 1, 2015, the period used to
PETRÓLEOS MEXICANOS, PRODUCTIVE STATE-OWNED SUBSIDIARIES
AND SUBSIDIARY COMPANIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2016, 2015 AND 2014
(FIGURES STATED IN THOUSANDS, EXCEPT AS NOTED)
estimate long-term prices was reduced to 20 years as a contractual limit. The discount rate used in 2015 was 15.48%, which included an assessment of factors of market risk, country risk, capital cost and cost of debt. Cash flows projections were determined based on the assumptions described above, presenting a declining rate of growth of Ps. 394,396,580. The main projects that were affected by this declining rate of growth were Cantarell, Aceite Terciario del Golfo, Crudo Ligero Marino, Antonio J. Bermudez and Burgos.
Cash Generating Units of industrial transformationPemex Industrial Transformation
As of December 31, 2015, industrial transformation2018, Pemex Industrial Transformation recognized a net reversal of impairment of Ps. 659,610.
The net reversal of impairment was in the following cash generating units:
Minatitlán Refinery | Ps. | 14,448,080 | ||
Reversal of impairment | 14,440,080 | |||
Salina Cruz Refinery | (7,955,528 | ) | ||
Tula Refinery | (5,099,635 | ) | ||
Madero Refinery | (733,307 | ) | ||
Impairment | (13,788,470 | ) | ||
Net reversal of impairment | Ps. | 659,610 | ||
The net reversal of impairment was mainly due to (i) an increase in processing of refined products due to higher imports of crude oil and humid gas resulting in an increase in income related to transportation fees; (ii) the appreciation of the U.S. dollar against the peso, from apeso-U.S. dollar exchange rate of Ps.19.7867 to U.S. $1.00 as of December 31, 2017 to apeso-U.S. dollar exchange rate of Ps. 19.6829 to U.S. $1.00 as of December 31, 2018; (iii) a decrease in the discount rate of cash generating units recognized Ps. 76,442,079 of impairmentrefined products and gas and petrochemicals by 0.1% and 8.1%, respectively; and (iv) an increase in maintenance of long-lived assets, mainly due to: an impairmentthe refineries and a decrease in gas production.
Cash-generating units in Pemex Industrial Transformation are processing centers grouped according to their types of Ps. 75,724,859processes 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 theanother of its cash generating units or by a third party. Each processing center of Pemex Industrial Transformation represents the smallest unit that can concentrate the core 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 refining, an impairmentfuture prices of Ps. 325,200 inproducts related to the cash generating unitprocesses of gas and an impairment of Ps.392,020 in the cash generating unit of petrochemicals.
Cash generating unit of refining
As a result of the Corporate Reorganization, the cash generating units, budget programs and various statistical models that consider historical information of PEMEX’s refining activities were redefined to those refineries located inprocesses and the following strategic pointscapacity of Mexico: Cadereyta, Minatitlán, Salamanca, Salina Cruz, Madero and Tula. The National Refinery System was previously a cash generating unit.various processing centers.
To determine the value in use of long-lived assets associated with refineriesthe cash-generating units of the National Refinery System,Pemex Industrial Transformation, the net present value of reservescash flows was determined based on the following assumptions:
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Petrochemicals | ||||||
Average | 53.98 U.S dollars | N.A. | N.A. | |||
Processed volume | 680 mbd | 2,717 mmpcd of humid gas | Variable because the load inputs are diverse | |||
Rate of U.S. dollar | Ps. 19.6829 mxp/usd | Ps. 19.6829 mxp/usd | ||||
Useful lives of the cash generating units | Average | Average 8 years | Average 7 years | |||
Discount rate | 10.22% annually | 8.92% annually | ||||
Period | 2019-2034 | 2019-2027 | 2019-2026 |
The recoverable amount of the refineries’ 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 sold.sales to be carried out. As of December 31, 20152018, the value in use for the impairment or reversal of impairment of fixed assets amounted towas as follows:
Minatitlán Refinery | Ps. | 54,846,565 | ||
Madero Refinery | 21,083,328 | |||
Salina Cruz Refinery | 9,428,152 | |||
Tula Refinery | 39,429,897 | |||
Total value in use | Ps. | 124,787,942 | ||
ii. | As of December 31, 2017, the net impairment was as follows: |
Impairment | Reversal of impairment | Net Impairment | ||||||||||
Pemex Exploration and Production | Ps. | (129,350,315 | ) | Ps. | — | Ps. | (129,350,315 | ) | ||||
Pemex Industrial Transformation | (19,751,882 | ) | 3,799,790 | (15,952,092 | ) | |||||||
AGRO | (4,206,653 | ) | — | (4,206,653 | ) | |||||||
Pemex Fertilizers | (1,935,500 | ) | — | (1,935,500 | ) | |||||||
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Total | Ps. | (155,244,350 | ) | Ps. | 3,799,790 | Ps. | (151,444,560 | ) | ||||
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Cash Generating Unit of Pemex Exploration and Production
Pemex Exploration and Production recognized an impairment in the amount of Ps. 1,801,000. Until December 31, 2015, the projection of cash flows was based on a period of 14 years. During 2015 the discount rate used was 13.72%.
As(129,350,315) as of December 31, 2015,2017, arising from: (i) the total impairment charge on long-lived assets was Ps. 75,724,859, including impairment chargesdeferral of the development investments in the first 5 years of the economic horizon in the proved reserves, which caused a decrease in production and consequently in income, as well as there-categorization of part of the proved reserves as probable reserve, as a consequence of budget adjustments in the strategic investments in the Cantarell, Aceite terciario del Golfo, Crudo Ligero Marino, Antonio J. Bermúdez and Tzimin Xux projects, (ii) insufficient cash flows to make up for costs recovery at the Burgos and Lakach projects as a result of the appreciation of the Mexican peso against the U.S. dollar by 4.3%, from a peso–U.S. dollar exchange rate of Ps. 53,890,967 recorded by20.6640 to U.S. $1.00 as of December 31, 2016 to a peso–U.S. dollar exchange rate of Ps. 19.7867 to U.S. $1.00 as of December 31, 2017, given that cash inflows are denominated in U.S. dollars and then translated to the Minatitlán cash generating unitreporting currency using the exchange rate at the date of report; (iii) a 0.3% increase in the discount rate; (iv) a 7.2% decrease in crude oil forward prices from 60.24 usd/bl in 2016 to 55.89 usd/bl in 2017 and Ps. 21,833,892 recorded by(v) the Madero cash generating unit.natural decline in production in the Macuspana project.
Cash generating unit of gas
The cash generating units of PEMEX’s gasPemex Exploration and petrochemicals activitiesProduction are gas processing centers locatedinvestment 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 following strategic points of Mexico: Ciudad Pemex, Cactus, Nuevo Pemex, La Venta, Coatzacoalcos, Matapionche, Poza Rica, Burgossmallest unit which can concentrate the core revenues, with clear costs and Arenque.
PETRÓLEOS MEXICANOS, PRODUCTIVE STATE-OWNED SUBSIDIARIES
AND SUBSIDIARY COMPANIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2016, 2015 AND 2014
(FIGURES STATED IN THOUSANDS, EXCEPT AS NOTED)
expenses that enable future cash flows (value in use) to be determined. To determine the value in use of long-lived assets associated with gas processing centers,hydrocarbon extraction, the net present value of reserves is determined based on the following assumptions:
Average crude oil |
| |
Average gas price | 4.92 U.S. dollars /mpc | |
| 38.33 U.S. dollars /bl | |
| 14.40% annually |
The total forecast production, calculated with a horizon of 25 years is 7,091 million barrels per day of crude oil equivalent.
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.
Cash Generating Units of Pemex Industrial Transformation
As of December 31, 2017, Pemex Industrial Transformation recognized a net impairment of Ps.(15,952,092).
The impairment was in the following cash generating units:
Minatitlán Refinery | Ps. | (5,691,005 | ) | |
Madero Refinery | (8,480,880 | ) | ||
Salina Cruz Refinery | (5,579,997 | ) | ||
|
| |||
Total impairment of assets | (19,751,882 | ) | ||
Cangrejera Petrochemical Center | 3,565,355 | |||
Independencia Petrochemical Center | 112,292 | |||
Arenque gas processor complex | 57,039 | |||
Matapionche gas processor complex | 65,104 | |||
Reversal of impairment | 3,799,790 | |||
Net impairment | Ps. | (15,952,092 | ) | |
The impairment was mainly due to (i) an increase in capitalizable maintenance expenses in refining; (ii) the appreciation of the Mexican peso against the U.S. dollar, from a peso–U.S. dollar exchange rate of Ps. 20.6640 to U.S. $1.00 as of December 31, 2016 to a peso–U.S. dollar exchange rate of Ps. 19.7867 to U.S. $1.00 as of December 31, 2017; partially offset by (i) an increase in the transportation fees; (ii) an increase in the processing of wet gas due to higher imports of this product and redistribution by Pemex Exploration and Production; (iii) an increase in prices arising from the price liberalization in 2017; and (iv) a decrease in the discount rate of cash generating units of refined products, gas and petrochemicals of 4.4%, 4.5%, and 5.6%, respectively.
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 which can concentrate the core 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 the various processing centers.
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:
Refining | Gas | Petrochemicals | ||||
Average | 51.30 U.S. dollars | N.A. | N.A. | |||
Processed volume | 767 mbd | 3,085 mmpcd or sour gas | Variable because the load inputs are diverse | |||
Rate of U.S. dollar | Ps.19.7867 mxp/usd | Ps.19.7867 mxp/usd | ||||
Useful lives of the cash generating units | Average of | Average of 9 years | Average of 6 years | |||
Discount rate | 10.24% annually | 9.71% annually | ||||
Period | 2018-2034 | 2018-2029 | 2016-2024 |
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 sold.sales to be carried out. As of December 31, 20152017, the value in use for the impairment or reversal of impairment of fixed assets amounted to Ps. 235,000. Until December 31, 2015, the projection of cash flows was calculated based on a period of 13 years. During 2015 the discount rate used was 9.52%.as follows:
As of December 31, 2015, impairment of wells, pipelines, properties, plant and equipment includes
Minatitlán Refinery | Ps. | 32,531,925 | ||
Madero Refinery | 11,420,952 | |||
Salina Cruz Refinery | 12,051,597 | |||
Cangrejera Petrochemical Center | 17,544,825 | |||
Independencia Petrochemical Center | 3,146,413 | |||
Arenque gas processor complex | 1,283,201 | |||
Matapionche gas processor complex | 1,074,729 | |||
Total value in use | Ps. | 79,053,642 | ||
Pro-Agroindustria, S.A. de C.V.
Pro-Agroindustria, S.A. de C.V. recognized an impairment charge on long-lived assetsfor Ps. (4,206,653) related to its nitric acid, amonium nitrate and UAN 32 acquired plants, the rehabilitation of Ps. 325,200 recorded bywhich has not yet commenced. The company will not be able to develop an alternate plan for the Arenque cash generating unit.
Cash generating unitrehabilitation of petrochemicals
The cash generating units of PEMEX’s petrochemicals segment are petrochemicals centers locatedthese plants in the following strategic pointsfive years due to its financing commitments.
Cash Generating Units of Mexico: IndependenciaPemex Fertilizers
Cash generating units are plants used in the ammonia process.
Pemex Fertilizers recognized an impairment of Ps. (1,935,500) for the year ended December 31, 2017 resulting from (i) a decrease in the production capacity in fertilizers plants due to a shortage of raw material; (ii) an increase in raw material prices; and Cangrejera.(iii) a decrease in ammonia sale prices.
The recoverable amount of assets is based on each asset’s value in use. To determine cash flows, volumes to be produced and sales to be carried out were taken into consideration. The value in use for each asset is calculated based on cash flows, taking into consideration volumes produced and sold. Asthe impairment of December 31, 2015 therefixed assets was no value in use for these cash generating units. Until December 31, 2015, the projection of cash flows was calculated based on a period of 14 years. During 2015 thePs. 2,744,600. The discount rate used was 8.84%9.71%.
As of December 31, 2015, impairment of wells, pipelines, properties, plant and equipment includes an impairment charge on long-lived assets of Ps. 392,020 recorded by the Cangrejera cash generating unit.
Cash generating unit of logistics
The cash generating units of PEMEX’s logistics segments are pipelines, tankers, storage terminals and transportation equipment used for service, transport and storage of oil, oil products and petrochemicals. Cash generating units were redefined as a result of the Corporate Reorganization in 2015, prior to which they were part of cash generating units from The National Refinery System and imported products.
Pemex Logistics calculates the recoverable amount of assets based on the value in use. The value in use for each asset is calculated based on cash flows, taking into consideration services income. As of December 31, 2015 the value in use of impairment fixed assets amounted to Ps. 93,873,919. Until December 31, 2015, the projection of cash flows was calculated based on a period from 5 to 21 years. During 2015 the discount rate used was 8.42%.
As of December 31, 2015, impairment of wells, pipelines, properties, plant and equipment includes an impairment charge on long-lived assets of Ps. 5,829,519 recorded by the cash generating units mentioned above.
PETRÓLEOS MEXICANOS, PRODUCTIVE STATE-OWNED SUBSIDIARIES
AND SUBSIDIARY COMPANIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2016, 2015 AND 2014
(FIGURES STATED IN THOUSANDS, EXCEPT AS NOTED)
Cash generating unit of ethylene
Pemex Ethylene calculates the recoverable amount of assets based on each asset’s value in use. The value in use for each asset is calculated based on cash flows, taking into consideration sales and services income. As of December 31, 2015 the value in use of impairment fixed assets amounted to Ps. 129,843. During 2015 the discount rate used was 7.28%.
As of December 31, 2015, impairment of wells, pipelines, properties, plant and equipment includes an impairment charge on long-lived assets of Ps. 1,276,510 recorded by the cash generating units mentioned above.
PEMEX’snet-future cash flow projections are based on the best available estimations of revenues and expenses of the cash-generating units, using forecasts, past performances and market developement. PEMEX’s annual budget and business plan set macroeconomic variables for each of the cash-generating units using real basis and including some variables, such as production volume, market prices, exchange rates, among other variables, which are used to quantify estimated income and expenses. Forecasts are prepared based on internal values and are updated based on changes to certain relevant information from external sources (mainly price predictions made by consultants and specialized entities).
The key value assumptions, which are the more sensitive variables used to calcultate net cash flows, and the general principles used to generate these assumptions are as follows:
These future net cash flows estimates are discounted to their present value using discount rates for specific cash-generating units based on the currency in which they are denominated, their cash flows and risks associated with these cash flows. Discount rates are intended to reflect current market assessments of the time value of money and the specific risks of each asset. Accordingly, various discount rates used take into account the country risk. To ensure calculations are consistent and avoid double counting, the cash flow projections do not take into account the risks that have already been incorporated in the discount rates used. The discount rates reflect current market conditions and the specific risks associated with these assets.
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PETRÓLEOS MEXICANOS, PRODUCTIVE STATE-OWNED SUBSIDIARIES
AND SUBSIDIARY COMPANIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2016, 2015 AND 2014
(FIGURES STATED IN THOUSANDS, EXCEPT AS NOTED)
Fields | Amount | |||||||
Temporarily assigned fields | 6 | Ps. | 2,107,126 | |||||
Unassigned requested fields | 44 | 12,077,947 | ||||||
Exploratory areas not assigned | 14 | 843,960 | ||||||
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Total | Ps. | 15,029,033 | ||||||
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As of December 31, 2013, PEMEX had entered into nine capital lease arrangements for drilling equipment. These leases expire on various dates over the next 10 years.
As of December 31, 2015, PEMEX had entered into certain capital lease arrangements for two offshore platforms. These leases expire on various dates over the next 10 years.
As of December 31, 20162018 and 2015,2017, assets acquired through these capital leases were as follows:
2016 | 2015 | 2018 | 2017 | |||||||||||||
Investment in tankers and drilling equipment | Ps. | 11,142,197 | Ps. | 11,142,197 | Ps. | 7,963,262 | Ps. | 11,142,197 | ||||||||
Less accumulated depreciation | (1,274,314 | ) | (1,176,208 | ) | (886,946 | ) | (1,696,089 | ) | ||||||||
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Ps. | 9,867,883 | Ps. | 9,965,989 | Ps. | 7,076,316 | Ps. | 9,446,108 | |||||||||
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The liabilities relating to the assets listed above are payable in the years following December 31, 20162018 as presented below:
Year | Pesos | U.S. dollars | ||||||
2017 | Ps. 2,037,107 | U.S.$ | 98,583 | |||||
2018 | 1,941,756 | 93,968 | ||||||
2019 | 1,245,341 | 60,266 | ||||||
2020 | 1,245,341 | 60,266 | ||||||
2021 | 1,245,341 | 60,266 | ||||||
2022 and thereafter | 3,499,546 | 169,355 | ||||||
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11,214,432 | 542,704 | |||||||
Less: short-term unaccrued interest | 436,619 | 21,129 | ||||||
Less: long-term unaccrued interest | 1,218,753 | 58,980 | ||||||
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Total capital leases | 9,559,060 | 462,595 | ||||||
Less: current portion of leases (excluding interest) | 1,600,488 | 77,753 | ||||||
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Total long-term capital leases | Ps. 7,958,572 | U.S. $ | 384,842 | |||||
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PETRÓLEOS MEXICANOS, PRODUCTIVE STATE-OWNED SUBSIDIARIES
AND SUBSIDIARY COMPANIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2016, 2015 AND 2014
(FIGURES STATED IN THOUSANDS, EXCEPT AS NOTED)
Year | Pesos | U.S. dollars | ||||||
2019 | Ps. | 1,255,105 | U.S. $ | 63,766 | ||||
2020 | 1,186,253 | 60,268 | ||||||
2021 | 1,186,253 | 60,268 | ||||||
2022 | 1,186,253 | 60,268 | ||||||
2023 | 1,186,253 | 60,268 | ||||||
2024 and thereafter | 892,218 | 45,330 | ||||||
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6,892,335 | 350,168 | |||||||
Less: short-term unaccrued interest | 251,768 | 12,791 | ||||||
Less: long-term unaccrued interest | 587,287 | 29,837 | ||||||
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| |||||
Total capital leases | 6,053,280 | 307,540 | ||||||
Less: current portion of leases (excluding interest) | 934,546 | 47,480 | ||||||
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Total long-term capital leases | Ps. | 5,118,734 | U.S. $ | 260,060 | ||||
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The capitalized interest expense from financialcapital leases for the years ended December 31, 2018, 2017 and 2016 2015 and 2014 was Ps.500,654, Ps. 450,760301,449, Ps. 418,883 and Ps. 242,436,500,654, respectively.
The discount rates applied to the calculation of capitalized leases were as follows:
PEMEX can conduct exploration and extraction activities through Exploration and Extraction Contracts (“EECs”). The EECs are awarded individually, through associations or joint ventures based on guidelines approved by the NHC and are classified into: |
Production-sharing contracts; |
Profit-sharing contracts; |
License agreements; and |
Service contracts. |
EECs as of December 31, 2018 are:
a. | Production-sharing contracts: |
The object of the Profit-sharing contracts is the execution of oil activities under shared production contracts among Mexico through the Mexican Government via the NHC, Pemex Exploration and Production (as contractor), for the contractual area and the sharing
of costs, risks, and terms and conditions involved in the contract and in accordance with the applicable regulations and best practices of the industry receiving, in exchange, benefits in favor of the contractor.
Exploration and Extraction Contract related to Block 2 Tampico Misantla, pursuant to a consortium formed by Pemex Exploration and Production and DEA and Compañía Española de Petróleos, S. A. U., (jointly liable). The object of the contract is the realization of oil activities, under shared production contracts, by the contractor for the contractual area and the sharing of costs, risks, terms and conditions involved in the contract and in accordance with the applicable regulations and best practices of the industry, receiving in exchange, benefits in favor of the contractor. Pemex Exploration and Production and DEA each have a 50% interest in this contractual area. Pemex Exploration and Production is the operator under this contract.
Exploration and Extraction Contract, related to Block 8 Cuencas del Sureste, pursuant to a consortium formed by Pemex Exploration and Production, EPC Hidrocarburos México, S. A. de C. V. (EPC). and Ecopetrol Global Energy, S. L. U. (jointly liable). Pemex Exploration and Production was designated by all the participating companies and with the approval of the NHC as the operator of this contract and all operational aspects of the petroleum activities will be carried out only by the operator on behalf of all participating companies. Pemex Exploration and Production and EPC each have a 50% interest in this contractual area.
Exploration and Extraction Contract, related to Block 16, Tampico Misantla, pursuant to a consortium by Pemex Exploration and Production, DEUTSCHE Erdoel México S. de R.L. de C.V. (as operator) and CEPSA E.P. México S. de R.L. de C.V., as jointly liable. Pemex Exploration and Production owns 40% of this contractual area, DEUTSCHE Erdoel México S. de R.L. de C.V. owns 40%, and CEPSA E.P. México S. de R.L. de C.V. owns 20%.
Exploration and Extraction Contract, related to Block 17, Tampico Misantla, pursuant to a consortium by Pemex Exploration and Production, DEUTSCHE Erdoel México S. de R.L. de C.V. (as operator) and CEPSA E.P. México S. de R.L. de C.V., as jointly liable. Pemex Exploration and Production owns 40% of this contractual area, DEUTSCHE Erdoel México S. de R.L. de C.V. owns 40%, and CEPSA E.P. México S. de R.L. de C.V. owns 20%.
Exploration and Extraction Contract, related to Block 18, Tampico Misantla, pursuant to a consortium by Pemex Exploration and Production (as operator) and CEPSA E.P. México S. de R.L. de C.V. (as partner). Pemex Exploration and Production owns 80% of this contractual area, and CEPSA E.P. México S. de R.L. de C.V. owns 20%.
Hydrocarbons Exploration and Extraction Contract for Block 29, Cuenca del Sureste, in which Pemex Exploration and Production owns 100% of the project.
Hydrocarbons Exploration and Extraction Contract for Block 32, Cuenca del Sureste, by Pemex Exploration and Production (as operator) and Total E&P México, S.A. de C.V. (as partner). Pemex Exploration and Total E&P México, S.A. de C.V each have a 50% interest in this contractual area.
Hydrocarbons Exploration and Extraction Contract for Block 33, Cuenca del Sureste, by Pemex Exploration and Production (as operator) and Total E&P México, S.A. de C.V. Pemex Exploration and Total E&P México, S.A. de C.V each have a 50% interest in this contractual area.
Hydrocarbons Exploration and Extraction Contract for Block 35, Cuenca del Sureste, by Shell Exploración y Extracción de México, S.A. de C.V (as operator) and Pemex Exploration and Production. Total E&P México, S.A. de C.V. and Pemex Exploration each have a 50% interest in this contractual area.
Hydrocarbon Extraction Contract for theEk-Balam (shallow water) Block. Pemex Exploration and Production owns 100% of this contractual area.
Exploration and Extraction Contract, related to the Santuario El Golpe Block, pursuant to a consortium formed by Pemex Exploration and Production (as partner) and Petrofac México, S.A. de C.V. (PETROFAC), as operator. Pemex Exploration and Production owns 64% of this contractual area and PETROFAC owns 36%.
Exploration and Extraction Contract, related to the Misión Block, pursuant to a consortium formed by Pemex Exploration and Production (as partner) and Servicios Múltiples de Burgos, S.A. de C.V. (as operator). Pemex Exploration and Production owns 51% of this contractual area and Servicios Múltiples de Burgos owns 49%.
Exploration and Extraction Contract, related to Ébano Blocl, pursuant to a consortium formed by Pemex Exploration and Production (as partner), DS Servicios Petroleros, S.A. de C.V. (as operator) and D&S Petroleum S.A. de C.V. (as partner). Pemex Exploration and Production owns 45% of this contractual area, Servicios Múltiples de Burgos owns 54.99%, while D&S Petroleum S.A. de C.V. owns 0.01%.
b. | License contracts |
The nature of the contract relationship is the execution of oil activities, under the license contracting modality, under which the contractor is granted the right to explore and extract at its exclusive cost and risk hydrocarbons owned by the Mexican nation, who must comply with the obligations arising from the contract in the name and representation of each of the signatory companies in the contractual area in accordance with the applicable regulations, industry best practices and the terms and conditions of the contract. The contractor shall be entitled to payment for hydrocarbons produced, in accordance with the terms of the contracts, and after payments to the Mexican Government are made.
Hydrocarbons Exploration and Extraction Contract for Block 3 “Plegado Perdido”, in deep waters, formed by INPEX Corporation (“INPEX”) (as partner), Chevron Energía de Mexico, S. de R.L. de C.V. (“Chevron”) (as operator) and Pemex Exploration and Production, (as partner). Chevron, Pemex Exploration and Production and Inpex have a 37.50%, 27.50% and 35.00% interest in this project, respectively, and will be jointly liable for all obligations of the contractors according to this contract regardless of their participation interest.
Hydrocarbons Exploration and Extraction Contract for Block 2, Plegado Perdido, formed by Pemex Exploration and Production (as partner) and Shell Exploración y Extracción de México, S.A. de C.V. (as operator). Pemex Exploration and Production and Shell Exploración y Extracción de México, S.A. de C.V. each have a 50% interest in this project.
Hydrocarbons Exploration and Extraction Contract for Block 5, Plegado Perdido, in which Pemex Exploration and Production owns 100% of the project.
Hydrocarbons Exploration and Extraction Contract for Block 18, Cordilleras Mexicanas, in which Pemex Exploration and Production owns 100% of the project.
Hydrocarbons Exploration and Extraction Contract for Block 22, Cuenca Salina, formed by Pemex Exploration and Production, Inpex E&P México, S.A. de C.V., (as partners), and Chevron (as operator). Chevron, Pemex Exploration and Production and Inpex E&P México, S.A. de C.V., have a 37.5%, 27.5% and 35% interest in this project, respectively.
A licensing contract with BHP Billiton Petróleo Operaciones de México, S. de R.L. (“BHP Billiton”) for the Trión Block. BHP Billiton owns 60% of the contractual area, while Pemex Exploration and Production owns 40%, and each of the signatory companies are jointly liable for all obligations of the contractors.
Hydrocarbons Exploration and Extraction Contract for the Cárdenas Mora Block, for onshore fields, formed by Pemex Exploration and Production (as partner), Petrolera Cárdenas Mora, S. A. P. I. de C. V. (as operator) and Cheiron Holding Limited (jontly liable). Pemex Exploration and Production and Petrolera Cárdenas Mora, S. A. P. I. de C. V. each have a 50% of interest in this project.
Hydrocarbons Exploration and Extraction Contract for the Ogarrio Block, for onshore fields, formed by Pemex Exploration and Production (as partner), Deutche Erdoel México, S. de R.L. de C.V. (as operator) and DEA Deutche Erdoel, A.G. (“DEA”) (jointly liable). Pemex Exploration and Production and DEA each have a 50% interest in this project.
Hydrocarbons Exploration and Extraction Contract for the Miquetla Block, for onshore fields, formed by Pemex Exploration and Production (as partner) and Operadora de Campos DWF, S.A. de C.V. (as operator). Pemex Exploration and Production has a 49% interest in this project while Operadora de Campos DWF, S.A. de C.V. has a 51% interest.
Certain of the EECs are operated though joint arrangements, for which PEMEX recognizes in its financial statements, both the rights to the assets and the obligations for the liabilities, as well as profits and losses relating to the arrangements.
See below for a condensed statement of comprehensive income and condensed statement of financial position, summarizing the projects listed above:
Production-sharing contracts | ||||||||||||||||||||||||||||||||||||||||||||||||||||
As of /For the year ended | EK / Balam | Block 2 | Block 8 | Block 16 | Block 17 | Block 18 | Block 29 | Block 32 | Block 33 | Block 35 | Santuario El Golpe | Misión | Ébano | |||||||||||||||||||||||||||||||||||||||
Sales: | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Net sales | 10,374,061 | — | — | — | — | — | — | — | — | — | 1,268,482 | 644,768 | 421,591 | |||||||||||||||||||||||||||||||||||||||
Cost of sales | 4,204,499 | 57,197 | 67,481 | 12,485 | 10,332 | 60,624 | 8,072 | 5,871 | 8,337 | 20,142 | 305,733 | 306,110 | 97,643 | |||||||||||||||||||||||||||||||||||||||
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Gross income (loss) | 6,169,562 | (57,197 | ) | (67,481 | ) | (12,485 | ) | (10,332 | ) | (60,624 | ) | (8,072 | ) | (5,871 | ) | (8,337 | ) | (20,142 | ) | 962,749 | 338,658 | 323,948 | ||||||||||||||||||||||||||||||
Other income (loss), net | 157,876 | — | — | — | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||
Administrative expenses | 129,451 | — | — | — | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||
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Operating income (loss) | 6,197,987 | (57,197 | ) | (67,481 | ) | (12,485 | ) | (10,332 | ) | (60,624 | ) | (8,072 | ) | (5,871 | ) | (8,337 | ) | (20,142 | ) | 962,749 | 338,658 | 323,948 | ||||||||||||||||||||||||||||||
Taxes, duties and other | 3,980 | — | — | — | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||
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Net income (loss) | 6,194,007 | (57,197 | ) | (67,481 | ) | (12,485 | ) | (10,332 | ) | (60,624 | ) | (8,072 | ) | (5,871 | ) | (8,337 | ) | (20,142 | ) | 962,749 | 338,658 | 323,948 | ||||||||||||||||||||||||||||||
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Cash and cash equivalents | — | 54,617 | 112,592 | — | — | — | — | 10,578 | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||
Accounts receivable | 11,698,071 | 27,376 | 27,189 | 874 | 927 | — | — | — | 35,454 | 3,701 | 1,308,008 | 669,805 | 335,434 | |||||||||||||||||||||||||||||||||||||||
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Total current assets | 11,698,071 | 81,993 | 139,780 | 874 | 927 | — | — | 10,578 | 35,454 | 3,701 | 1,308,008 | 669,805 | 335,434 | |||||||||||||||||||||||||||||||||||||||
Wells, pipelines, properties, plant and equipment, net | 20,344,054 | — | — | — | — | — | — | — | — | — | 1,022,923 | 2,210,968 | 406,075 | |||||||||||||||||||||||||||||||||||||||
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Total assets | 32,042,125 | 81,993 | 139,780 | 874 | 927 | — | — | 10,578 | 35,454 | 3,701 | 2,330,931 | 2,880,773 | 741,509 | |||||||||||||||||||||||||||||||||||||||
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Suppliers | 1,466,286 | — | — | — | — | — | — | — | — | — | — | 35,984 | — | |||||||||||||||||||||||||||||||||||||||
Taxes and duties payable | 3,980 | — | — | — | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||
Other current liabilities | 2,436,996 | 139,190 | 207,261 | 13,359 | 11,259 | 60,624 | 8,072 | 16,449 | 43,791 | 23,843 | 301,619 | 207,387 | — | |||||||||||||||||||||||||||||||||||||||
|
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|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||
Total current liabilities | 3,907,262 | 139,190 | 207,261 | 13,359 | 11,259 | 60,624 | 8,072 | 16,449 | 43,791 | 23,843 | 301,619 | 243,371 | — | |||||||||||||||||||||||||||||||||||||||
Other liabilities | 69,195 | |||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||
Total liabilities | 3,976,457 | 139,190 | 207,261 | 13,359 | 11,259 | 60,624 | 8,072 | 16,449 | 43,791 | 23,843 | 301,619 | 243,371 | — | |||||||||||||||||||||||||||||||||||||||
Equity (deficit), net | 21,871,661 | — | — | — | — | — | — | — | — | — | 1,066,563 | 2,298,744 | 417,561 | |||||||||||||||||||||||||||||||||||||||
|
|
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|
|
Licence contracts | ||||||||||||||||||||||||||||||||
As of /For the year ended December 31, 2018 | Block 3 | Block 2 | Block 5 | Block 18 | Block 22 | Cárdenas Mora | Ogarrio | Miquetla | ||||||||||||||||||||||||
Sales: | ||||||||||||||||||||||||||||||||
Net sales | — | — | — | — | — | 1,586,080 | 1,265,620 | |||||||||||||||||||||||||
Cost of sales | 58,261 | 41,156 | 52,555 | 9,390 | 186,693 | 714,233 | 604,373 | 2,713 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Gross income (loss) | (58,261 | ) | (41,156 | ) | (52,555 | ) | (9,390 | ) | (186,693 | ) | 871,847 | 661,247 | (2,713 | ) | ||||||||||||||||||
Other income (loss), net | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||
Administrative expenses | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Operating income (loss) | (58,261 | ) | (41,156 | ) | (52,555 | ) | (9,390 | ) | (186,693 | ) | 871,847 | 661,247 | (2,713 | ) | ||||||||||||||||||
Taxes, duties and other | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Net income (loss) | (58,261 | ) | (41,156 | ) | (52,555 | ) | (9,390 | ) | (186,693 | ) | 871,847 | 661,247 | (2,713 | ) | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Cash and cash equivalents | — | — | — | 3,362 | — | — | — | — | ||||||||||||||||||||||||
Accounts receivable | 14,888 | 6,151 | — | — | 23,555 | 1,820,428 | 1,300,773 | 406 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total current assets | 14,888 | 6,151 | — | 3,362 | 23,555 | 1,820,428 | 1,300,774 | 406 | ||||||||||||||||||||||||
Wells, pipelines, properties, plant and equipment, net | — | — | — | — | — | 2,528,860 | 2,122,341 | 26,206 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total assets | 14,888 | 6,151 | — | 3,362 | 23,555 | 4,349,288 | 3,423,115 | 26,612 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Suppliers | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||
Taxes and duties payable | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||
Other current liabilities | 73,149 | 47,307 | 52,555 | 12,752 | 210,248 | 860,137 | 564,565 | 2,943 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total current liabilities | 73,149 | 47,307 | 52,555 | 12,752 | 210,248 | 860,137 | 564,565 | 2,943 | ||||||||||||||||||||||||
Other liabilities | ||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total liabilities | 73,149 | 47,307 | 52,555 | 12,752 | 210,248 | 860,137 | 564,565 | 2,943 | ||||||||||||||||||||||||
Equity (deficit), net | — | — | — | — | — | 2,617,304 | 2,197,303 | 26,382 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit-sharing | License | |||||||||||||||||||||||
As of /For the year ended December 31, 2017 | EK / Balam | Block 2 | Block 8 | Trion | Block 3 | Total | ||||||||||||||||||
Sales: | ||||||||||||||||||||||||
Net sales | 7,009,464 | — | — | — | — | 7,009,464 | ||||||||||||||||||
Cost of sales | 5,447,955 | 5,953 | 4,845 | — | 511 | 5,459,264 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Gross income (loss) | 1,561,509 | (5,953 | ) | (4,845 | ) | (511 | ) | 1,550,200 | ||||||||||||||||
Other income (loss), net | 4,852 | — | — | — | — | 4,852 | ||||||||||||||||||
Administrative expenses | 34,338 | — | — | — | — | 34,338 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Operating income (loss) | 1,532,023 | (5,953 | ) | (4,845 | ) | — | (511 | ) | 1,520,714 | |||||||||||||||
Taxes, duties and other | 158,347 | — | — | — | — | 158,347 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Net income (loss) | 1,373,676 | (5,953 | ) | (4,845 | ) | — | (511 | ) | 1,362,367 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Cash and cash equivalents | — | 20 | 25 | — | — | 45 | ||||||||||||||||||
Accounts receivable | — | 1,013 | 1,804 | — | 327 | 3,144 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total current assets | — | 1,033 | 1,829 | — | 327 | 3,189 | ||||||||||||||||||
Wells, pipelines, properties, plant and equipment, net | 14,869,906 | — | — | 4,498,234 | 1,107,311 | 20,475,451 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total assets | 14,869,906 | 1,033 | 1,829 | 4,498,234 | 1,107,638 | 20,478,640 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Suppliers | 796,300 | — | — | — | — | 796,300 | ||||||||||||||||||
Taxes and duties payable | 973 | — | — | — | — | 973 | ||||||||||||||||||
Other current liabilities | 4,391 | 1,809 | 2,369 | — | — | 8,569 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total current liabilities | 801,664 | 1,809 | 2,369 | — | — | 805,842 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total liabilities | 801,664 | 1,809 | 2,369 | — | — | 805,842 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Equity (deficit), net | 14,068,242 | (776 | ) | (540 | ) | 4,498,234 | 1,107,638 | 19,672,798 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
NOTE 13.16. INTANGIBLE ASSETS, NET
At December 31, 20162018 and 2015,2017, intangible assets, net are wells unassigned to a reserve, which amounted to Ps. 8,639,24213,720,540 and Ps. 14,304,961,14,678,640, respectively as follows:
2016 | 2015 | 2018 | 2017 | |||||||||||||
Wells unassigned to a reserve: | ||||||||||||||||
Balance at the beginning of period | Ps. 14,304,961 | Ps. 14,970,904 | Ps. | 9,088,563 | Ps. | 8,639,242 | ||||||||||
Additions to construction in progress | 20,526,300 | 28,725,376 | 20,352,351 | 20,553,952 | ||||||||||||
Transfers against expenses | (9,798,246 | ) | (13,081,780 | ) | (12,934,906 | ) | (3,663,986 | ) | ||||||||
Transfers against fixed assets | (16,393,773 | ) | (16,309,539 | ) | (6,726,769 | ) | (16,440,645 | ) | ||||||||
|
|
|
| |||||||||||||
Balance at the end of period | Ps. 8,639,242 | Ps. 14,304,961 | Ps. | 9,779,239 | Ps. | 9,088,563 | ||||||||||
|
|
|
|
In addition, as of December 31, 20162018 and 2015,2017, PEMEX recognized expenses related to unsuccessful wells of Ps. 19,307,8382,508,180 and Ps. 10,131,739,2,500,638, respectively, directly in its statement of comprehensive income.
The other components of intangible assets are:
As of December 31, 2018 | Rights of way | Licenses | Exploration expenses, evaluation of assets and concessions | Total | ||||||||||||
Cost | ||||||||||||||||
Balance at the beginning of the year | Ps. | 2,311,743 | 3,586,553 | 1,940,583 | Ps. | 7,838,879 | ||||||||||
Additions | 40,323 | 638,479 | 325,471 | 1,004,273 | ||||||||||||
Effects of foreign exchange | — | (10,397 | ) | (10,503 | ) | (20,900 | ) | |||||||||
|
|
|
|
|
|
|
| |||||||||
2,352,066 | 4,214,635 | 2,255,551 | 8,822,252 | |||||||||||||
Amortization accumulated | ||||||||||||||||
Balance at the beginning of the year | (179,312 | ) | (1,401,443 | ) | (668,047 | ) | (2,248,802 | ) | ||||||||
Amortization | (86,332 | ) | (2,480,760 | ) | (76,234 | ) | (2,643,326 | ) | ||||||||
Effects of foreign exchange | — | 10,761 | 416 | 11,177 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
(265,644 | ) | (3,871,442 | ) | (743,865 | ) | (4,880,951 | ) | |||||||||
Balance at the end of the year | 2,086,422 | 343,193 | 1,511,686 | $ | 3,941,301 | |||||||||||
|
|
|
|
|
|
|
| |||||||||
Useful lives | 23 years | 1 to 3 years | Up to 36 years | |||||||||||||
As of December 31, 2017 | Rights of way | Licenses | Exploration expenses, evaluation of assets and concessions | Total | ||||||||||||
Cost | ||||||||||||||||
Balance at the beginning of the year | 2,311,743 | 2,990,011 | 1,940,316 | 7,242,070 | ||||||||||||
Additions | — | 589,918 | 267 | 590,185 | ||||||||||||
Effects of foreign exchange | — | 6,624 | — | 6,624 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
2,311,743 | 3,586,553 | 1,940,583 | 7,838,879 | |||||||||||||
Amortization accumulated | ||||||||||||||||
Balance at the beginning of the year | (179,312 | ) | (1,150,473 | ) | (636,573 | ) | (1,966,358 | ) | ||||||||
Amortization | — | (250,970 | ) | (30,026 | ) | (280,996 | ) | |||||||||
Effects of foreign exchange | — | — | (1,448 | ) | (1,448 | ) | ||||||||||
|
|
|
|
|
|
|
| |||||||||
(179,312 | ) | (1,401,443 | ) | (668,047 | ) | (2,248,802 | ) | |||||||||
Balance at the end of the year | 2,132,431 | 2,185,110 | 1,272,536 | 5,590,077 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Useful lives | 23 years | 1 to 3 years | Up to 36 years |
NOTE 14.17. MEXICAN GOVERNMENT LONG-TERM NOTES RECEIVABLE AND OTHER ASSETS
Long-term notes receivable |
As of December 31, 20162018 and 2015,2017, the balance of long-term notes receivable was as follows:
2016 | 2015 | |||||||
Promissory notes issued by the Mexican Government | Ps. 140,578,871 | Ps. 50,000,000 | ||||||
Other long-term notes receivable(i) | 8,028,731 | — | ||||||
|
|
|
| |||||
Total long-term notes receivable | Ps. 148,607,602 | Ps. 50,000,000 | ||||||
|
|
|
|
PETRÓLEOS MEXICANOS, PRODUCTIVE STATE-OWNED SUBSIDIARIES
AND SUBSIDIARY COMPANIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2016, 2015 AND 2014
(FIGURES STATED IN THOUSANDS, EXCEPT AS NOTED)
2018 | 2017 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Promissory notes issued by the Mexican Government | Ps. 118,827,894 | Ps. 147,274,076 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other long-term notes receivable(1) | 1,000,704 | 1,218,833 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Ps. 119,828,598 | Ps. 148,492,909 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
(1) | Mainly collection rights related to |
Promissory notes issued by the Mexican Government
2018 | 2017 | |||||||
Long-term promissory notes issued by the Mexican Government | Ps 156,981,745 | Ps. 149,796,282 | ||||||
Less: current portion of notes receivable issued by the Mexican Government(2) | 38,153,851 | 2,522,206 | ||||||
|
|
|
| |||||
Long-term promissory notes | Ps. 118,827,894 | Ps. 147,274,076 | ||||||
|
|
|
|
(2) | For 2018, the
|
On December 24, 2015, the SHCP published in the Official Gazette of the Federation theDisposiciones 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. 50,000,000non-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 innon-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 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 promisorry notes (see Note 24).
As of December 31, 2018 and 2017, these promissory notes amounted to Ps. 156,981,745 and Ps. 149,796,282, respectively. PEMEX intends is to hold them to maturity. These promissory notes will be converted into cash with annual maturity dates ranging from 5.14% to 7.04% in 2018, as follows:
As of December 31, 2018 | ||||||||
Number of Promissory Notes | Maturity | Yield Rate Range | Principal Amount | |||||
7(1) | 2019 | 5.14% to 7.04% | Ps. 38,153,851 | |||||
1 | 2020 | 5.39% | 4,663,037 | |||||
1 | 2021 | 5.57% | 5,534,162 | |||||
1 | 2022 | 5.74% | 6,142,562 | |||||
1 | 2022 | 5.88% | 6,712,753 | |||||
5 | 2024 to 2028 | 5.99% to 6.48% | 37,123,836 | |||||
5 | 2029 to 2033 | 6.62% to 6.85% | 37,522,297 | |||||
3 | 2034 to 2036 | 6.90% to 7.00% | 21,129,247 | |||||
|
| |||||||
Total promissory notes | Ps. 156,981,745 | |||||||
Less: current portion | 38,153,851 | |||||||
|
| |||||||
Long-term notes receivable | Ps. 118,827,894 | |||||||
|
|
(1) | Includes promissory note No.3 with an original maturity date of March 31, 2019 and interest rates of 5.14%, and promissory notes No. 21 to 26A with original maturity dates ranging from
|
From January 1 to December 31, 2018 PEMEX recognized Ps. 9,737,131 in accrued yields from these promissory notes, of which Ps. 28,818 corresponds to accrued interests. 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 December 31, 2018 are zero.
As of December 31, 2018 two promissory notes have expired: the first with maturity on March 31, 2017 in the amount of Ps. 1,562,288 (Ps 1,518,932 of principal and Ps. 43,356 of interest), and the second with maturity on March 31, 2018 in the amount of Ps. 2,551,024 (Ps. 2,364,053 of principal and Ps. 186,971 of interest), which were transferred to the Fondo Laboral PEMEX (Pemex Labor Fund or “FOLAPE”), for the payment obligations related to pensions and retirement plans. The payment of the second promissory note was carried out two days after the expiration date, which generated additional interest of $644. The monetized amount of the second promissory note was Ps. 2,551,668 (Ps. 2,364,053 of principal and Ps. 187,615 of interest).
B. | Other assets |
At December 31, 2018 and 2017, the balance of other assets was as follows:
At December 31, 2016 and 2015, the balance of other assets was as follows:
2016 | 2015 | |||||||
Payments in advance | Ps. | 2,558,767 | Ps. | 1,980,260 | ||||
Other | 6,953,878 | 5,427,400 | ||||||
|
|
|
| |||||
Total other assets | Ps. | 9,512,645 | Ps. | 7,407,660 | ||||
|
|
|
|
NOTE 15. DEBT
The Federal Income Law applicable to PEMEX as of January 1, 2016, published in the Official Journal of the Federation on November 18, 2015, authorized Petróleos Mexicanos and its Subsidiaries Entities to incur an internal net debt up to Ps. 110,500,000 and an external net debt up to U.S. $8,500,000. PEMEX can incur additional internal or external debt, as long as the total amount of net debt (Ps.240,550,000 equivalent to U.S. $15,722,000) does not exceed the ceiling established by the Federal Income Law.
PETRÓLEOS MEXICANOS, PRODUCTIVE STATE-OWNED SUBSIDIARIES
AND SUBSIDIARY COMPANIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2016, 2015 AND 2014
(FIGURES STATED IN THOUSANDS, EXCEPT AS NOTED)
On November 18, 2014, the Board of Directors of Petróleos Mexicanos approved policies and general requirements for obligations that constitute public debt of Petróleos Mexicanos and Subsidiary Entities, in accordance with the Article 107 of the Petroleos Mexicanos Law.
Subsequently, the Board of Directors of PEMEX, approved the debt program for fiscal year 2016 in accordance with Article 13 section XXVI of the Petróleos Mexicanos Law.
Insurance Payments in advance Other Total other assets During 2016, 2018 2017 Ps. 3,591,079 Ps. 3,089,801 1,114,513 1,593,315 1,720,218 1,211,984 Ps. 6,425,810 Ps. 5,895,100
NOTE 18. DEBT
The Federal Income Law applicable to PEMEX as of January 1, 2018, published in the Official Gazette of the Federation on November 15, 2017, authorized Petróleos Mexicanos and its Subsidiary Entities to incur an internal net debt up to Ps. 30,000,000 and an external net debt up to U.S. $6,182,800. PEMEX can incur additional internal or external debt, as long as the total amount of net debt (Ps. 143,000,000 equivalent to U.S. $7,813,000) 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.
Subsequently, the Board of Directors of PEMEX approved the debt program for fiscal year 2018 in accordance with Article 13 section XXVI of the Petróleos Mexicanos Law.
During the period from January 1 to December 31, 2018, PEMEX participated in the following financing activities:
On February, 12, 2018, Petróleos Mexicanos issued U.S. $4,000,000 of debt securities under its U.S. $92,000,000 Medium-Term Notes Program, Series C, in two tranches: (1) U.S. $2,500,000 5.35% Notes due 2028 and (2) U.S. $1,500,000 6.35% Bonds due 2048. On February 12, 2018, Petróleos Mexicanos consummated an exchange offer pursuant to which it exchanged (1) U.S. $952,454, aggregate principal amount of its outstanding 5.500% Bonds due 2044 for U.S. $881,899, aggregate principal amount of its new 6.350% Bonds due 2048 and (2) U.S. $ 1,021,065, aggregate principal amount of its outstanding 5.625% Bonds due 2046 for U.S. $946,764, aggregate principal amount of its new 6.350% Bonds due 2048. On March 5, 2018, Petróleos Mexicanos consummated a tender offer pursuant to which it purchased U.S. $138,598 aggregate principal amount of its outstanding 3.125% Notes due 2019, U.S. $558,644 aggregate principal amount of its outstanding 5.500% Notes due 2019, U.S. $91,843 aggregate principal amount of its outstanding 8.000% Notes due 2019, U.S. $183,017 aggregate principal amount of its outstanding 6.000% Notes due 2020 and U.S. $817,303 aggregate principal amount of its outstanding 3.500% Notes due 2020. On March 27, 2018, Petróleos Mexicanos entered into a credit line in the amount of U.S. $181,101, which bears interest at a rate linked to LIBOR plus 70 basis points, due February 2025 and was used on April 13, 2018. On April 16, 2018, Petróleos Mexicanos increased its Medium-Term Notes Program, Series C, from U.S. $92,000,000 to U.S. $102,000,000. On May 24, 2018, Petróleos Mexicanos issued €3,150,000 of debt securities under its U.S.$102,000,000 Medium Term Notes Program, Series C in four tranches: (i) €600,000 of its 2.500% Notes due on November 24, 2022; (ii) €650,000 of its Floating Rate Notes due on August 24, 2023; (iii) €650,000 of its 3.625% Notes due on November 24, 2025; and (iv) €1,250,000 of its 4.750% Notes due on February 26, 2029. All debt securities issued under this program are guaranteed by Pemex Exploration and Production, Pemex Industrial Transformation, Pemex Drilling and Services, Pemex Logistics and Pemex Cogeneration and Services and their respective successors and assignees. On June 4, 2018, Petróleos Mexicanos issued CHF365,000 of its 1.750% Notes due 2023 under its U.S.$102,000,000 Medium Term Notes Program, Series C. On June 26, 2018,Pro-Agroindustrias, refinanced a credit line for U.S. $250,000 by entering into a new credit line for the same amount, which bears interest at a floating rate linked to LIBOR plus 300 basis points on a quarterly basis and matures on December 26, 2025. This credit agreement is guaranteed by Petróleos Mexicanos. On August 23, 2018, Petróleos Mexicanos entered into a loan agreement in the amount of U.S. $200,000, which bears interest at a floating rate linked to LIBOR and matures in 2023. On October 23, 2018 Petróleos Mexicanos issued U.S. $ 2,000,000, of debt securities under U.S. $ 102,000,000 of its 6.500%, Medium-Term Notes Program, Series C, due 2029. On November 9, 2018, Petróleos Mexicanos entered into a revolving credit facility in the amount of Ps. 9,000,000, which matures in 2023. On November 30, 2018, Petróleos Mexicanos borrowed U.S. $250,000 from a bilateral credit line, which bears interest at a floating rate linked to LIBOR plus 80 basis points and matures in 2028. As of December 31, 2018, Petróleos Mexicanos had U.S. $6,700,000 and Ps. 32,500,000 in available credit lines in order to ensure liquidity, which U.S. $6,400,000 and Ps. 26,200,000 are available. All the financing activities were guaranteed by Pemex Exploration and Production, Pemex Industrial Transformation, Pemex Drilling and Services, Pemex Logistics and Pemex Cogeneration and Services (in the case of Pemex Cogeneration and Services, until July 27, 2018, the date it was liquidated (see Note 1)). From January 1 to December 31, 2018, PMI HBV (until July 31, 2018) and P.M.I. Holdings Holland Services, B.V., obtained U.S. $ 21,449,200 from its revolving credit line and repaid U.S. $ 21,099,000. As of December 31, 2017, the outstanding amount under this revolving credit line was U.S. $350,000. As of December 31, 2018, the outstanding amount under this revolving credit line was U.S. $ 700,000. The Federal Income Law applicable to PEMEX as of January 1, 2017, published in the Official Gazette of the Federation on November 17, 2016, authorized Petróleos Mexicanos and its Subsidiary Entities to incur an internal net debt up to Ps. 28,000,000 and an external net debt up to U.S. $7,100,000. PEMEX can incur additional internal or external debt, as long as the total amount of net debt (Ps. 150,000,000 equivalent to U.S. $8,055,900) does not exceed the ceiling established by the Federal Income Law. On July 8, 2016, the Board of Directors of Petróleos Mexicanos approved policies and general requirements for obligations that constitute public debt of Petróleos Mexicanos and Subsidiary Entities, in accordance with Article 106 section I of the Petroleos Mexicanos Law. Subsequently, the Board of Directors of PEMEX, approved the debt program for fiscal year 2017 in accordance with Article 13 section XXVI of the Petróleos Mexicanos Law. During the period from January 1 to December 31, 2017, PEMEX participated in the following financing activities:
All the financing activites were guaranteed by Pemex Exploration and Production, Pemex Industrial Transformation, Pemex Drilling and Services, Pemex Logistics and Pemex Cogeneration and Services. From January 1 to December 31, 2017, PMI HBV obtained U.S. $15,141,500 in financing from its revolving credit line and repaid U.S. $14,914,000. As of December 31, 2017, the outstanding amount under this revolving credit line was U.S. $227,500. As of December 31, 2017, Petróleos Mexicanos had U.S. $6,700,000 and Ps. 23,500,000 in available credit lines in order to ensure liquidity. The available amounts are U.S. $5,400,000 and Ps. 23,500,000, respectively. Various financial transactions (including credit facilities and bond issuances) require compliance with various covenants that, among other things, place restrictions on the following types of transactions by PEMEX, subject to certain exceptions: The sale of substantial assets essential for the continued operations of its business. The incurrence of liens against its assets. Transfers, sales or assignments of rights to payment not yet earned under contracts for the sale of crude oil or natural gas, accounts receivable or other negotiable instruments. As of December 31, 2018 and 2017 and as of the date of the issuance of these consolidated financial statements, PEMEX was in compliance with the covenants described above. As of December 31, 2018, long-term debt was as follows:
As of December 31, 2017, long-term debt was as follows:
The following table presents the roll-forward of total debt of PEMEX for each of the year ended December 31, 2018 and 2017, which includes short and long-term debt:
As of December 31, |
(2) | Includes financing from foreign banks of Ps. 1,746,196,819 and Ps. |
(3) | The total amounts of notes payable to contractors as of December 31, 2018 and 2017, current and long-term, are as follows: |
2018 | 2017 | |||||||
Total notes payable to contractors(a) (b) | Ps. | 3,018,063 | Ps. | 4,053,577 | ||||
Less: current portion of notes payable to contractors | 1,680,361 | 2,173,285 | ||||||
|
|
|
| |||||
Notes payable to contractors (long-term) | Ps. | 1,337,702 | Ps. | 1,880,292 | ||||
|
|
|
|
(a) | PEMEX has entered into FPWCs pursuant to which the hydrocarbons and construction in |
(b) | During 2007, Pemex-Exploration and Production contracted for the purchase of a Floating Production Storage and Offloading (“FPSO”) vessel. The
|
Year | Amount | |||
2019 | U.S.$ | 25,267 | ||
2020 | 25,267 | |||
2021 | 25,267 | |||
2022 | 18,950 | |||
|
| |||
Total | U.S $ | 94,751 | ||
|
|
(4) | PEMEX obtained financing through the sale and leaseback of
|
This transaction was recognized as a financing activity due to the fact that PEMEX retained all of the risks and benefits associated with ownership of the asset and substantially all of the operating rights to the assets.
The outstanding liability for this transaction is payable as follows:
Years | Pesos | U.S. dollars | ||||||
2019 | Ps. | 3,865,651 | U.S. $ | 196,396 | ||||
2020 | 3,865,651 | 196,396 | ||||||
2021 | 3,865,651 | 196,396 | ||||||
2022 | 3,865,651 | 196,396 | ||||||
2023 | 3,865,651 | 196,396 | ||||||
2024 and thereafter | 35,325,193 | 1,794,715 | ||||||
|
|
|
| |||||
54,653,448 | 2,776,695 | |||||||
Less: short-term unaccrued interest | 2,309,281 | 117,324 | ||||||
Less: long-term unaccrued interest | 21,440,519 | 1,089,297 | ||||||
|
|
|
| |||||
Total financing | 30,903,648 | 1,570,074 | ||||||
Less: short-term portion of financing (excluding interest) | 1,556,370 | 79,072 | ||||||
|
|
|
| |||||
Total long term financing | Ps. | 29,347,278 | U.S.$ | 1,491,002 | ||||
|
|
|
|
(5) |
PETRÓLEOS MEXICANOS, PRODUCTIVE STATE-OWNED SUBSIDIARIES
AND SUBSIDIARY COMPANIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2016, 2015 AND 2014
(FIGURES STATED IN THOUSANDS, EXCEPT AS NOTED)
PETRÓLEOS MEXICANOS, PRODUCTIVE STATE-OWNED SUBSIDIARIES
AND SUBSIDIARY COMPANIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2016, 2015 AND 2014
(FIGURES STATED IN THOUSANDS, EXCEPT AS NOTED)
PETRÓLEOS MEXICANOS, PRODUCTIVE STATE-OWNED SUBSIDIARIES
AND SUBSIDIARY COMPANIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2016, 2015 AND 2014
(FIGURES STATED IN THOUSANDS, EXCEPT AS NOTED)
As of December 31, 2015, Petróleos Mexicanos had U.S. $4,500,0002018 and Ps. 23,500,000 in lines of credit in order to ensure liquidity, of which U.S. $130,000 and Ps. 9,100,000, respectively, remain available.
Various financial transactions (including credit facilities and bond issuances) require compliance with various covenants that, among other things, place restrictions on2017, PEMEX used the following types of transactions by PEMEX, subject to certain exceptions:
As of December 31, 2016 and as of the date of the issuance of these consolidated financial statements, PEMEX was in compliance with the covenants described above.
PETRÓLEOS MEXICANOS, PRODUCTIVE STATE-OWNED SUBSIDIARIES
AND SUBSIDIARY COMPANIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2016, 2015 AND 2014
(FIGURES STATED IN THOUSANDS, EXCEPT AS NOTED)
As of December 31, 2016, long-term debt was as follows:
Pesos | Foreign currency | |||||||||||||
Rate of interest(1) | Maturity | (thousands) | (thousands) | |||||||||||
U.S. dollars | ||||||||||||||
Bonds | Fixed from 3.125% to 9.5% and LIBOR plus 0.35% to 2.02% | Various to 2046 | Ps. | 1,131,389,914 | U.S. $ | 54,751,738 | ||||||||
Purchasing loans | LIBOR plus 0.8% to 0.85% | Various to 2016 | 2,479,680 | 120,000 | ||||||||||
Project financing | Fixed from 2.35% to 5.45% and LIBOR plus 0.01% to 1.71% | Various to 2021 | 84,711,684 | 4,099,481 | ||||||||||
Direct loans | Fixed at 5.44% and LIBOR plus 1.0% | Various to 2018 | 33,100,587 | 1,601,848 | ||||||||||
Syndicated loans | LIBOR plus 0.85% | Various to 2020 | 41,056,571 | 1,986,865 | ||||||||||
Bank loans | Fixed from 3.5% to 5.28% | Various to 2023 | 4,339,826 | 210,019 | ||||||||||
Financial leases | Fixed from 0.38% to 1.99% | Various to 2025 | 9,559,060 | 462,595 | ||||||||||
Lease-back (See Financing activities for 2016(l)and m))(4) | Fixed from 0.45% to 0.7% | Various to 2036 | 35,513,114 | 1,718,598 | ||||||||||
|
| |||||||||||||
Total financing in U.S. dollars | 1,342,150,436 | U.S. $ | 64,951,144 | |||||||||||
|
| |||||||||||||
Euros | ||||||||||||||
Bonds | Fixed from 3.125% to 6.375% | Various to 2030 | 196,317,016 | € | 9,058,388 | |||||||||
Project financing | Fixed at 2% | Various to 2016 | 10,836,200 | 500,000 | ||||||||||
|
|
|
| |||||||||||
Total financing in Euros | 207,153,216 | € | 9,558,388 | |||||||||||
|
|
|
| |||||||||||
Japanese yen: | ||||||||||||||
Bonds | Fixed at 3.5% and LIBOR yen plus 0.75% | Various to 2023 | 30,800,746 | ¥ | 173,809,300 | |||||||||
Project financing | Fixed at 1.56% and Prime Rate yen plus 2.56% | Various to 2017 | 517,286 | 2,919,056 | ||||||||||
|
|
|
| |||||||||||
Total financing in yen | 31,318,032 | ¥ | 176,728,356 | |||||||||||
|
|
|
| |||||||||||
Pesos | ||||||||||||||
Certificados bursátiles | Mexican Government Treasury Certificates (“Cetes”) , TIIE(1)less 0.06% to 0.35%, and fixed at 7.19% to 9.15% | Various to 2026 | Ps. | 173,151,985 | ||||||||||
Direct loans | Fixed at 6.55% and TIIE plus 0.55% to 1.25% | Various to 2025 | 45,563,848 | |||||||||||
Syndicated loans | TIIE plus 0.95 | Various to 2025 | 38,538,961 | |||||||||||
Revolved loans | TIIE plus 0.55 | To 2016 | 20,000,000 | |||||||||||
|
| |||||||||||||
Total financing in pesos | Ps. | 277,254,794 | ||||||||||||
|
| |||||||||||||
Unidades de Inversión Certificados bursátiles | ||||||||||||||
Certificados bursátiles | Zero rate and Fixed at 3.02% to 5.23% | Various to 2035 | 53,703,421 | |||||||||||
|
|
PETRÓLEOS MEXICANOS, PRODUCTIVE STATE-OWNED SUBSIDIARIES
AND SUBSIDIARY COMPANIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2016, 2015 AND 2014
(FIGURES STATED IN THOUSANDS, EXCEPT AS NOTED)
Pesos | Foreign currency | |||||||||||||
Rate of interest(1) | Maturity | (thousands) | (thousands) | |||||||||||
Other currencies: | ||||||||||||||
Bonds | Fixed from 2.5% to 8.25% | Various to 2022 | 36,786,665 | |||||||||||
|
| |||||||||||||
Total principal in pesos(2) | 1,948,366,564 | |||||||||||||
Plus: accrued interest | 27,815,467 | |||||||||||||
Notes payable to contractors(3) | 6,988,699 | |||||||||||||
|
| |||||||||||||
Total principal and interest | 1,983,170,730 | |||||||||||||
Less: short-term maturities | 144,169,619 | |||||||||||||
Current portion of notes payable to contractors(3) | 4,181,102 | |||||||||||||
Accrued interest | 27,815,467 | |||||||||||||
|
| |||||||||||||
Total short-term debt and current portion of long-term debt | 176,166,188 | |||||||||||||
|
| |||||||||||||
Long-term debt (Note 16(c)) | Ps. 1,807,004,542 | |||||||||||||
|
| |||||||||||||
Rate of interest(1) | Maturity | Peso (thousands) | Foreign currency (thousands) | |||||||||||
U.S. dollars | ||||||||||||||
Bonds | Fixed from 3.125 % to 9.5% and LIBOR plus 0.35% to 2.02% | Various to 2046 | Ps. 727,841,896 | U.S. $ | 42,300,404 | |||||||||
Purchasing loans | LIBOR plus 0.8% to 0.85% | Various to 2016 | 75,192,405 | 4,370,000 | ||||||||||
Project financing | Fixed from 2.35% to 5.45% and LIBOR plus .01% to 1.71% | Various to 2021 | 81,621,345 | 4,743,634 | ||||||||||
Direct loans | Fixed at 5.44% and LIBOR plus 1.0% | Various to 2018 | 15,255,958 | 886,639 | ||||||||||
Syndicated loans | LIBOR plus 0.85% | Various to 2020 | 34,158,029 | 1,985,182 | ||||||||||
Bank loans | Fixed from 3.5% to 5.28% | Various to 2023 | 4,200,888 | 244,145 | ||||||||||
Financial leases | Fixed from 0.38% to 5.28% | Various to 2023 | 9,214,921 | 535,549 | ||||||||||
|
|
|
| |||||||||||
Total financing in U.S. dollars | 947,485,442 | U.S. $ | 55,065,553 | |||||||||||
|
|
|
| |||||||||||
Euros | ||||||||||||||
Bonds | Fixed from 3.125% to 6.375% | Various to 2030 | 143,993,293 | € | 7,653,433 | |||||||||
Project financing | Fixed at 2% | Various to 2016 | 24 | 1 | ||||||||||
|
|
|
| |||||||||||
Total financing in Euros | 143,993,317 | € | 7,653,434 | |||||||||||
|
|
|
| |||||||||||
Japanese yen: | ||||||||||||||
Bonds | Fixed at 3.5% and LIBOR yen plus 0.75% | Various to 2023 | 13,432,600 | ¥ | 94,000,000 | |||||||||
Project financing | Fixed at 1.56% and Prime Rate yen plus 2.56% | Various to 2017 | ||||||||||||
1,251,426 | 8,757,358 | |||||||||||||
|
|
|
| |||||||||||
Total financing in yen | 14,684,026 | ¥ | 102,757,358 | |||||||||||
|
|
|
|
PETRÓLEOS MEXICANOS, PRODUCTIVE STATE-OWNED SUBSIDIARIES
AND SUBSIDIARY COMPANIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2016, 2015 AND 2014
(FIGURES STATED IN THOUSANDS, EXCEPT AS NOTED)
|
| |||||||||||
| ||||||||||||
| ||||||||||||
| ||||||||||||
| ||||||||||||
| ||||||||||||
| ||||||||||||
| ||||||||||||
| ||||||||||||
| ||||||||||||
| ||||||||||||
| ||||||||||||
| ||||||||||||
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| ||||||||||||
| ||||||||||||
| ||||||||||||
| ||||||||||||
| ||||||||||||
2017 | 2018 | 2019 | 2020 | 2021 | 2022 and thereafter | Total | ||||||||||||||||||||||
Maturity of the total principal outstanding and accrued interest as of December 31, 2016, for each of the years ending December 31. | Ps.176,166,188 | Ps.127,349,970 | Ps.162,209,245 | Ps.199,534,891 | Ps.147,813,212 | Ps.1,170,097,224 | Ps.1,983,170,730 |
PETRÓLEOS MEXICANOS, PRODUCTIVE STATE-OWNED SUBSIDIARIES
AND SUBSIDIARY COMPANIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2016, 2015 AND 2014
(FIGURES STATED IN THOUSANDS, EXCEPT AS NOTED)
2016(i) | 2015(i) | |||||||
Changes in total debt: | ||||||||
At the beginning of the year | Ps.1,493,381,835 | Ps.1,143,250,503 | ||||||
Loans obtained—financing institutions | 829,579,084 | 378,971,078 | ||||||
Loans obtained—financing lease | 21,924,053 | 7,066,052 | ||||||
Debt payments | (613,377,146 | ) | (191,318,841 | ) | ||||
Accrued interest | 98,847,751 | 67,773,593 | ||||||
Interest paid | (88,757,428 | ) | (62,737,150 | ) | ||||
Foreign exchange | 243,182,764 | 152,676,257 | ||||||
Expenses related to debt issuance | (1,610,183 | ) | (2,299,657 | ) | ||||
|
|
|
| |||||
At the end of the year | Ps.1,983,170,730 | Ps.1,493,381,835 | ||||||
|
|
|
|
2016 | 2015 | |||||||
Total notes payable to contractors(a)(b) | Ps.6,988,699 | Ps.8,307,368 | ||||||
Less: current portion of notes payable to contractors | 4,181,102 | 4,677,431 | ||||||
|
|
|
| |||||
Notes payable to contractors (long-term) | Ps.2,807,597 | Ps.3,629,937 | ||||||
|
|
|
|
PETRÓLEOS MEXICANOS, PRODUCTIVE STATE-OWNED SUBSIDIARIES
AND SUBSIDIARY COMPANIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2016, 2015 AND 2014
(FIGURES STATED IN THOUSANDS, EXCEPT AS NOTED)
Year | Amount | |||
2017 | U.S. $ | 25,267 | ||
2018 | 25,267 | |||
2019 | 25,267 | |||
2020 | 25,267 | |||
2021 | 25,267 | |||
2022 and thereafter | 18,948 | |||
|
| |||
Total | U.S $ | 145,283 | ||
|
|
This transaction was recognized as a financing activity due to the fact that PEMEX retained all of the risks and benefits associated with ownership of the asset and substantially all of the operating rights to the assets.
The outstanding liability for this transaction is payable as follows:
Years | Pesos | U.S. dollars | ||||||
2017 | Ps. | 4,058,336 | U.S. $ | 196,396 | ||||
2018 | 4,058,336 | 196,396 | ||||||
2019 | 4,058,336 | 196,396 | ||||||
2020 | 4,058,336 | 196,396 | ||||||
2021 | 4,058,336 | 196,396 | ||||||
2022 and thereafter | 45,241,719 | 2,189,399 | ||||||
|
|
|
| |||||
65,533,399 | 3,171,379 | |||||||
Less: short-term unaccrued interest | 2,580,807 | 124,893 | ||||||
Less: long-term unaccrued interest | 27,439,478 | 1,327,888 | ||||||
|
|
|
| |||||
Total financing | 35,513,114 | 1,718,598 | ||||||
Less: short-term portion of financing | 1,477,529 | 71,503 | ||||||
|
|
|
| |||||
Total long term financing | Ps. 34,035,585 | U.S. $ 1,647,095 | ||||||
|
|
|
|
2016 | 2015 | |||||||
U.S. dollar | Ps. 20.6640 | Ps. 17.2065 | ||||||
Japanese yen | 0.1772 | 0.14290 | ||||||
Pounds sterling | 25.3051 | 25.4983 | ||||||
Euro | 21.6724 | 18.8084 | ||||||
Swiss francs | 20.1974 | 17.3487 | ||||||
Canadian dollar | 15.2896 | 12.4477 | ||||||
Australian dollar | 14.8842 | 12.5538 |
PETRÓLEOS MEXICANOS, PRODUCTIVE STATE-OWNED SUBSIDIARIES
AND SUBSIDIARY COMPANIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2016, 2015 AND 2014
(FIGURES STATED IN THOUSANDS, EXCEPT AS NOTED)
NOTE 16. DERIVATIVE FINANCIAL INSTRUMENTS
PEMEX faces market risk caused by the volatility of hydrocarbon prices, exchange rates and interest rates, credit risk associated with investments andto translate the outstanding balances in foreign currencies to pesos in the statement of financial derivatives, as well as liquidity risk. In order to monitor and manage these risks, PEMEX has approved general provisions relating to financial risk management, which are comprised of policies and guidelines that promote an integrated framework for risk management, regulate the use of derivative financial instruments (“DFIs”),position:
2018 | 2017 | |||||||
U.S. dollar | Ps. | 19.6829 | Ps. | 19.7867 | ||||
Japanese yen | 0.1793 | 0.1757 | ||||||
Pounds sterling | 25.0878 | 26.7724 | ||||||
Euro | 22.5054 | 23.7549 | ||||||
Swiss francs | 19.9762 | 20.2992 | ||||||
Canadian dollar | 14.4138 | 15.7858 | ||||||
Australian dollar | 13.8617 | 15.4752 |
NOTE 19. DERIVATIVE FINANCIAL INSTRUMENTS
PEMEX faces market risk caused by the volatility of hydrocarbon prices, exchange rates and interest rates, credit risk associated with investments and financial derivatives, as well as liquidity risk. In order to monitor and manage these risks, PEMEX has approved general provisions relating to financial risk management, which are comprised of policies and guidelines that promote an integrated framework for risk management, regulate the use of DFIs, and guide the development of risk mitigation strategies.
This regulatory framework establishes that DFIs should be used only for the purpose of mitigating financial risk. The use of DFIs for any other purpose must be approved in accordance with PEMEX’s current internal regulation. PEMEX has a Financial Risk Working Group (FRWG) which is a specialized working group with decision-making authority on financial risk exposure, financial risk mitigation schemes, and DFIs trading of Petróleos Mexicanos, the subsidiary entities, and where applicable, subsidiary companies.
Approved DFIs are mainly traded on the OTC (Over the Counter) market; however, exchange traded instruments may also be used. In the case of PMI Trading, DFIs are traded onCME-ClearPort.
The different types of DFIs that PEMEX trades are described below, in the subsections corresponding to the applicable trading markets.
One of PEMEX’s policies is to contribute minimizing the impact that unfavorable changes in financial risk factors have on its financial results by promoting an adequate balance between incoming cash flows from operations and outgoing cash flows related to its liabilities.
As part of the regulatory framework for financial risk management, PEMEX has established the eligible counterparties with which it may trade DFIs and other financial instruments.
In addition, certain PMI companies have implemented a regulatory framework for risk management with respect to its activities, which consists of policies, guidelines and procedures to manage the market risk associated with its commodity trading activities in accordance with industry best practices, such as: 1) the use of DFIs for financial risk mitigation purposes; 2) the segregation of duties; 3) valuation and monitoring mechanisms, such as the generation of a daily portfolio risk report, value at risk (“VaR”) computation; and 4) VaR limits, both at a global and business unit level and the implementation of stop loss mechanisms. In addition, PMI Trading also has its own risk management subcommittee which supervises the trading of DFIs.
Given that PEMEX’s outstanding DFIs have been entered into for risk mitigation purposes, particularly with economic hedging purposes, there is no need to establish and monitor market risk limits.
For those portfolios with an open market risk exposure, PEMEX’s financial risk management regulatory framework establishes the implementation and monitoring of market risk limits such as VaR and capital at risk (an aggregation of fair value ormark-to-market (“MtM”) and profit and loss (“P&L”), or “CaR”).
PEMEX has also established credit guidelines for DFIs that Pemex Industrial Transformation offers to its domestic customers, which include the use of guarantees and credit lines. For exchange traded DFIs, PEMEX trades under the margin requirements of the corresponding exchange market, and therefore does not have internal policies for these DFIs.
DFIs held with financial counterparties do not require collateral exchange clauses. Notwithstanding, PEMEX’s regulatory framework promotes credit risk mitigation strategies such as collateral exchange.
PEMEX does not have an independent third party to verify compliance with these internal standards; however, PEMEX has internal control procedures that certify compliance with existing policies and guidelines.
A. | Risk Management |
I. | Market Risk |
i. | Interest rate risk |
PEMEX is exposed to fluctuations in floating interest rate liabilities. PEMEX is exposed to U.S. dollar LIBOR and to Mexican peso TIIE. As of December 31, 2018, approximately 15.3% of PEMEX’s total net debt outstanding (including DFIs) consisted of floating rate debt.
Occasionally, for strategic reasons or in order to offset the expected inflows and outflows, PEMEX has entered into interest rate swaps. Under its interest rate swap agreements, PEMEX acquires the obligation to make payments based on a fixed interest rate and is entitled to receive floating interest rate payments based on LIBOR, TIIE or a rate referenced to or calculated from TIIE.
As of December 31, 2018, PEMEX was a party to four interest rate swap agreements denominated in U.S. dollars for an aggregate notional amount of U.S. $1,401,250 at a weighted average fixed interest rate of 2.35% and a weighted average term of 6.29 years.
Similarly, in order to eliminate the volatility associated with variable interest rates of long-term financing operations, PMI NASA has executed interest rate swap agreements denominated in U.S. dollars for an aggregate notional amount of U.S. $56,692, at a weighted average fixed interest rate of 4.17% and a weighted average term of 3.41 years.
Moreover, PEMEX invests in pesos and U.S. dollars in compliance with applicable internal regulations, through portfolios that have different purposes that seek an adequate return subject to risk parameters that reduce the probability of capital losses. The objective of the investments made through these portfolios is to meet PEMEX’s obligations payable in pesos and U.S. dollars.
The investments made through PEMEX’s portfolios are exposed to domestic and international interest rate risk and credit spread risk derived from government and corporate securities, and inflation risk arising from the relationship between UDIs and pesos. However, these risks are mitigated by established limits on exposure to market risk.
ii. | Exchange rate risk |
Most of PEMEX’s revenues are denominated in U.S. dollars, a significant amount of which is derived from exports of crude oil and petroleum products, which are priced and payable in U.S. dollars. Additionally, PEMEX’s revenues from domestic sales of gasoline and diesel net of IEPS Tax, tax duties, incentives, and other related taxes, as well as domestic sales of natural gas and its byproducts, LPG and petrochemicals, are referenced to international U.S. dollar-denominated prices.
PEMEX’s expenses related to hydrocarbon duties are calculated based on international U.S. dollar-denominated prices and the cost of hydrocarbon imports that PEMEX acquires for resale in Mexico or use in its facilities are indexed to international U.S. dollar-denominated prices. By contrast, PEMEX’s capital expenditure and operating expenses are established in pesos.
As a result of this cash flow structure, the depreciation of the peso against the U.S. dollar increases PEMEX’s financial balance. The appreciation of the peso relative to the U.S. dollar has the opposite effect. PEMEX manages this risk without the need for hedging instruments, because the impact on PEMEX’s revenues of fluctuations in the exchange rate between the U.S. dollar and the peso is offset in whole or in part by its impact on its obligations.
Therefore, PEMEX prioritizes debt issuances denominated in U.S. dollars; nonetheless, this is not always achievable, hencenon-U.S. dollar denominated debt issued in international currencies is hedged through DFIs to mitigate their exchange rate exposure, either by swapping them into U.S. dollars or through other derivative structures. The rest of the debt is denominated in pesos or in UDIs, for which most of the debt denominated in UDIs has been converted into pesos through DFIs in order to eliminate the inflationary risk exposure.
As a consequence of the above, PEMEX’s debt issued in international currencies other than U.S. dollars has exchange rate risk mitigation strategies. PEMEX has selected strategies that further seek to reduce its cost of funding by leaving, in some cases, part of this exchange rate exposure unhedged when assessed appropriate.
The underlying currencies of PEMEX’s DFIs are the euro, Swiss franc, Japanese yen and Pound sterling against the U.S. dollar and UDIs against the peso.
As of December 31, 2018, PEMEX entered into various cross-currency swaps to hedge inflation risk arising from debt obligations denominated in UDIs for an aggregate notional amount of Ps. 6,844,866 and during 2017, PEMEX entered into the same kind of instruments to hedge inflation risk arising from debt denominated in UDIs, for an aggregate notional amount of Ps. 6,291,969.
Additionally, in 2018, PEMEX entered into, without cost, structures which are composed of a cross-currency swap and the sale of a call option, in order to hedge the notional risk of four debt issues in euros for an aggregate notional amount of € 3,150,000, and an issue of debt in swiss francs for Fr. 365,000, guaranteeing complete protection up to a certain exchange rate and partial protection above that level.
Moreover, in 2017 PEMEX entered into, without cost, three options structures called “Seagull Option” to hedge the notional risk of three debt issues in euros for an aggregate notional amount of € 4,250,000. These structures protect the short exposure in euros against an appreciation of the euro versus the U.S. dollar in a specific range and result in a benefit if the euro depreciates up to a certain exchange rate, for each debt issue. Whereas, in order to mitigate the exchange rate risk caused by the coupons of these issues PEMEX entered into only coupon swaps.
Additionally, in 2017, PEMEX entered into, without cost, a structure which is composed of a cross-currency swap and the sale of a call option, in order to hedge the notional risk of a debt issue in Pounds sterling for £ 450,000, guaranteeing complete protection up to a certain exchange rate and partial protection above that level.
PEMEX recorded a total net foreign exchange gain (loss) of Ps. 23,659,480, Ps. 23,184,122 and Ps. (254,012,743), for the years ended December 31, 2018, 2017 and 2016, respectively; these amounts include the unrealized foreign exchange gain (loss) associated with debt of Ps. 19,762,208, Ps. 16,685,439 and Ps. (243,182,764) for the years ended December 31, 2018, 2017 and 2016, respectively. The appreciation of the peso during 2018 and 2017 caused a total net foreign exchange gain because a significant part of PEMEX’s debt, 89.77% (principal only) as of December 31, 2018 is denominated in foreign currency. Unrealized foreign exchange gains and losses do not impact PEMEX’s cash flows. Due to the cash flow structure described above, the depreciation of the peso relative to the U.S. dollar does not affect PEMEX’s ability to meet U.S. dollar-denominated financial obligations and improves PEMEX’s ability to meetpeso-denominated financial obligations. On the other hand, the appreciation of the peso relative to the U.S. dollar may increase PEMEX’s peso debt service costs on a U.S. dollar basis. PEMEX’s foreign exchange gain in 2018 was due to the appreciation of the peso, from Ps. 19.7867 = U.S. $1.00 on December 31, 2017 to Ps. 19.6829 = U.S. $1.00 on December 31, 2018. PEMEX’s foreign exchange gain in 2017 was due to the appreciation of the peso, from Ps. 20.6640 = U.S. $1.00 on December 31, 2016 to Ps. 19.7867 = U.S. $1.00
on December 31, 2017. PEMEX’s foreign exchange loss in 2016 was due to the depreciation of the peso, from Ps. 17.2065 = U.S. $1.00 on December 31, 2015 to Ps. 20.6640 = U.S. $1.00 on December 31, 2016.
Certain of the PMI companies face market risks generated by fluctuations in foreign exchange rates. In order to mitigate these risks, the boards of directors of several of these companies have authorized a policy which stipulates that no more than 5% of a company’s total financial assets may be denominated in a currency other than its functional currency, unless the company owes a duty or expected payment in a currency other than its functional one. Accordingly, some PMI companies will, from time to time, enter into DFIs in order to mitigate the risk associated with financing operations denominated in currencies other than their respective functional currency.
Finally, a significant amount of PMI Trading’s income and expenses, including the cost of sales and related sales costs, is derived from the trade of refined products, petrochemicals and gas liquids to PEMEX subsidiaries and third parties, whose prices are determined and are payable in U.S. dollars. PMI Trading’s exposure to foreign currency risk results primarily from the need to fund tax payments denominated in domestic currency, as well as certain related sales costs denominated in domestic currency.
PMI Trading believes it can adequately manage the risk created by the payment of taxes in domestic currency without the need to enter into hedging instruments because the exposure to this risk is marginal relative to the total flows of U.S. dollar. In addition, in the event that a potential foreign exchange risk arises in connection with a commercial transaction, PMI Trading may implement risk mitigation measures by entering into DFIs.
iii. | Hydrocarbon Price Risk |
PEMEX periodically assesses its revenues and expenditures structure in order to identify the main market risk factors that PEMEX’s cash flows are exposed to in connection with international hydrocarbon prices. Based on this assessment, PEMEX monitors its exposure to the most significant risk factors and quantifies their impact on PEMEX’s financial balance.
PEMEX’s exports and domestic sales are directly or indirectly related to international hydrocarbon prices. Therefore, PEMEX is exposed to fluctuations in these prices. In terms of crude oil and natural gas, part of this risk is transferred to the Mexican Government under PEMEX’s current fiscal regime.
PEMEX’s exposure to hydrocarbon prices is partly mitigated by natural hedges between its inflows and outflows.
Additionally, PEMEX continuously evaluates the implementation of risk mitigation strategies, including those involving the use of DFIs, considering the operative and budgetary feasibility of those strategies.
In 2017, the Board of Directors of Petróleos Mexicanos approved the establishment of an Annual Oil Hedging Program. Since then, PEMEX has implemented hedging strategies to partially protect its cash flows from drops in the Mexican crude oil basket price below the one established in the Federal Revenue Law.
In April 2017, PEMEX entered into a crude oil hedge for fiscal year 2017, in which PEMEX hedged 409 thousand barrels per day from May to December of fiscal year 2017, for U.S. $133,503. Afterwards, during the second half of 2017, PEMEX entered into a crude oil hedge for fiscal year 2018, in which PEMEX hedged 440 thousand barrels per day from January to December of fiscal year 2018, for U.S. $449,898.
During 2018, the crude oil hedge for fiscal year 2019 was implemented, pursuant to which PEMEX hedged 320 thousand barrels per day for the period between December 2018 and December 2019, for U.S. $149,588.
In addition to supplying natural gas, Pemex Industrial Transformation offers DFIs to its domestic customers in order to provide them with support to mitigate the risk associated with the volatility of natural gas prices. Until 2016, Pemex Industrial Transformation entered into DFIs with Mex Gas Supply, S.L. under the opposite position to those DFIs offered to its customers in order to mitigate the market risk it bears under such offered DFIs. Mex Gas Supply, S.L. then transfered the related price risk derived from the DFI position held with Pemex Industrial Transformation to international financial counterparties by entering into these opposite position DFIs with such parties. As of 2017, Pemex Industrial Transformation must enter into DFIs with Petróleos Mexicanos under the opposite position to those DFIs offered to its customers, thereby replacing Mex Gas Supply, S.L. However, as of December 31, 2018, no DFI had been carried out under this mechanism.
Due to the above, Pemex Industrial Transformation maintains a negligible or even null exposure to market risk. These portfolios have VaR and CaR limits in order to limit market risk exposure.
PMI Trading faces market risk generated by the terms of the purchase and sale of refined products and natural gas liquids, as well as the volatility of oil prices. Accordingly, it frequently enters into DFIs in order to mitigate this risk, thereby reducing the volatility of its financial results.
iv. | Market risk quantification |
The quantification of market risk exposure in PEMEX’s financial instruments is presented below, in accordance with the applicable international risk management practices.
Interest rate risk quantification
The quantification of interest rate risk of investment portfolios is carried out by using theone-day horizon historical VaR, with a confidence level of 95%, over a period of one year. The VaR incorporates interest rate and spread risks. In addition, for portfolios in domestic currency, the VaR includes the inflation risk embedded in securities denominated in UDI. For portfolio management purposes, interest rate risk is mitigated by VaR limits.
As of December 31, 2018, the VaRs of PEMEX’s investment portfolios were Ps. (17.19) for the Peso Treasury Portfolio, Ps. 0.00 for the Fondo Laboral Pemex Portfolio (“FOLAPE”), and U.S. $ 0.00 for the U.S. Dollar Treasury Portfolio. The Fideicomiso de Cobertura Laboral y de Vivienda Portfolio (“FICOLAVI”) and the Mexican Peso Treasury Portfolio managed by Operadora de Fondos Nafinsa S.A. de C.V. (“OFINSA”) were written off in 2018.
In addition to the exposure to interest rate fluctuations of the DFIs in which PEMEX is obligated to pay floating rates, PEMEX’s DFIs are exposed to MtM volatility as a result of changes in the interest rate curves used in their valuation.
Interest rate risk quantification was calculated for DFIs in conjunction with the interest rate risk quantification for the debt portfolio. The following table shows the sensitivity of PEMEX’s DFIs and debt portfolio to a parallel shift of 10 basis points (bp) over the zero coupon rate curves. The 10bp parallel shift may be used to estimate in a simple manner the impact for proportional values to this shift and was selected in accordance with market practices for financial risk management.
For the debt portfolio, interest rate risk sensitivity was calculated taking into account both the DFI interbank market yield curves and the PEMEX curves (which were also used to estimate the debt portfolios’ fair value). These metrics were calculated solely for informational purposes and are not used for portfolio management purposes because PEMEX does not intend to prepay its debt or terminate its DFIs early. Therefore, there is no interest rate risk arising from fixed rate obligations.
INTEREST RATE and CURRENCY DFIs Interest rate sensitivity to + 10 bp | ||||||||||||||||
Interbank Yield Curves | PEMEX Curves | |||||||||||||||
Sensitivity | Sensitivity | Sensitivity | Sensitivity | |||||||||||||
Currency | debt | DFIs | net | debt | ||||||||||||
in thousands U.S. dollars | ||||||||||||||||
CHF | 3,816 | (3,473 | ) | 343 | 3,340 | |||||||||||
Euro | 103,859 | (85,825 | ) | 18,034 | 73,784 | |||||||||||
Pound Sterling | 5,871 | (5,445 | ) | 426 | 4,598 | |||||||||||
Yen | 7,600 | (3,470 | ) | 4,130 | 5,518 | |||||||||||
Peso | 24,783 | 1,693 | 26,476 | 19,808 | ||||||||||||
UDI | 14,032 | (14,032 | ) | 0 | 9,803 | |||||||||||
U.S. dollar | 779,844 | 93,006 | 872,850 | 333,180 |
In addition, PEMEX performed a retrospective sensitivity analysis of the impact on its financial statements for the years ended December 31, 2018, 2017 and 2016, in which PEMEX assumed either an increase or decrease of 25 basis points in the floating interest rates of its debt and corresponding hedges.
At December 31, 2018, 2017 and 2016, had market interest rates been 25 basis points higher, with all other variables remaining constant, net loss for the year would have been Ps. 649,339, Ps. 704,011 and Ps. 841,024 higher for December 31, 2018, 2017 and 2016, respectively, primarily as a result of an increase in interest expense. Conversely, had market interest rates been 25 basis points lower, net loss for the year would have been Ps. 649,339, Ps. 704,011 and Ps. 841,024 lower at December 31, 2018, 2017 and 2016, respectively, primarily as a result of a decrease in interest expense.
Exchange rate risk quantification
The investments of PEMEX’s portfolios do not face foreign exchange rate risk because the funds of such portfolios are used to meet obligations in pesos and U.S. dollars.
Currency DFIs are entered into in order to hedge exchange rate risk arising from debt flows in currencies other than pesos and U.S. dollars or inflation risk arising from debt flows in UDIs. However, due to the accounting treatment, net income is exposed tomark-to-market volatility as a result of changes in the exchange rates used in their valuation.
Exchange rate risk quantification was calculated for DFIs in conjunction with the exchange rate risk quantification for the debt portfolio. The following table shows the sensitivity of PEMEX’s DFIs and debt portfolio to an increase of 1% to the exchange rates of currencies against the U.S. dollar. The 1% may be used to estimate in a simple manner the impact for proportional values to this increase and was selected in accordance with market practices for financial risk management.
For the debt portfolio, exchange rate risk sensitivity was calculated taking into account both, interbank market yield curves and the PEMEX curves. In addition, the table shows theone-day horizon historical VaR of the remaining open position, with a confidence level of 95%, over a period of one year. These metrics were calculated solely for informational purposes. Nevertheless, in order to carry out management activities related to its debt portfolio, PEMEX periodically conducts quantitative analyses in order to estimate the exchange rate risk exposure generated by its debt issuances. Based on these analyses, PEMEX has elected to enter into DFIs as an exchange rate risk mitigation strategy. These DFIs along with the debt that they hedge are shown in the following table:
INTEREST RATE and CURRENCY DFIs |
| |||||||||||||||||||
Interbank Yield Curves | PEMEX Curves | |||||||||||||||||||
1% | 1% | 1% | VaR 95% | 1% | ||||||||||||||||
Currency | Debt | DFIs | Net | Net | Debt | |||||||||||||||
in thousands U.S. dollars | ||||||||||||||||||||
CHF | (15,283 | ) | 14,597 | (686 | ) | (463 | ) | (14,183 | ) | |||||||||||
Euro | (214,136 | ) | 185,752 | (28,384 | ) | (25,365 | ) | (173,687 | ) | |||||||||||
Pound Sterling | (12,318 | ) | 11,701 | (617 | ) | (527 | ) | (10,292 | ) | |||||||||||
Yen | (17,118 | ) | 11,569 | (5,549 | ) | (4,482 | ) | (14,158 | ) | |||||||||||
Peso | (104,478 | ) | (32,064 | ) | (136,542 | ) | (164,722 | ) | (95,975 | ) | ||||||||||
UDI | (30,163 | ) | 30,163 | (0 | ) | (0 | ) | (25,951 | ) |
As shown in the table above, exchange rate risk derived from debt denominated in currencies other than pesos and U.S. dollars is almost fully hedged by DFIs. The exchange rate risk exposure to the Swiss franc, euro, Pound sterling and Japanese yen is a result of the delta of the structures described above (Seagull Options and Calls), and considering the current exchange rate levels, represents a lower funding cost than the hedging strategies carried through swaps.
In addition, PEMEX performed a retrospective sensitivity analysis of the impact on its financial statements of the years ended December 31, 2018, 2017 and 2016, in which PEMEX assumed either an increase or decrease of 10% in the exchange rate between the U.S. dollar and peso in order to determine the impact on net income and equity as a result of applying these new rates to the monthly balances of assets and liabilities denominated in U.S. dollars.
At December 31, 2018, 2017 and 2016, had the peso depreciated against the U.S. dollar by 10% with other variables remaining constant, net loss would have been Ps.192,025, Ps. 149,669 and Ps. 124,512 higher, respectively, primarily as a result of an increase in the exchange rate losses. However, had the peso appreciated against the U.S. dollar by 10%, net loss for the period would have decreased by Ps. 192,025, Ps. 149,669 and Ps. 124,512, respectively, primarily as a result of the decrease in exchange rate losses.
Hydrocarbon price risk quantification
Pemex Industrial Transformation occasionally faces market risk due to open positions arising from the mismatch between the DFI portfolio offered to domestic customers and hedges with international counterparties. As of December 31, 2018, Pemex Industrial Transformation’s natural gas DFI portfolio had no market risk exposure.
Market risk exposure is measured using the20-day Delta-Gamma VaR methodology, with a confidence level of 95%, based on 500 daily observations; VaR and CaR are monitored and mitigated bypre-established limits.
It should be noted that sensitivity analyses were not carried out for other financial instruments, such as accounts receivable and payable (as defined in the financial reporting standards). Such accounts are cleared in short-term, and therefore market risk is considered to be nonexistent. Most of these accounts are related to hydrocarbon prices.
In accordance with the risk management regulatory framework that PMI Trading has implemented, VaR and the change in profit and loss by portfolio are calculated daily and compared to the maximum applicable limits in order to implement risk mitigation mechanisms as necessary.
PMI Trading’s global VaR associated with commodities market risk was U.S. $(8,687) as of December 31, 2018. This VaR was calculated using the historical method with a 99% confidence level,two-year history and aone-day horizon. The minimum VaR recorded on the year was U.S. $(2,903) (registered on June 11, 2018) and the maximum VaR recorded on the year was U.S. $(26,533) (registered on September 21, 2018). As of December 31, 2017, the global VaR was U.S. $(8,789).
The quantification of crude oil price risk is carried out by using theone-day horizon historical VaR, with a confidence level of 95%, over a period of one year. As of December 31, 2018, this was U.S.$ (19,651).
II. | Credit Risk |
When the fair value of a DFI is favorable to PEMEX, PEMEX faces the risk that the counterparty will not be able to meet its obligations. PEMEX monitors its counterparties’ creditworthiness and calculates the credit risk exposure for its DFIs. As a risk mitigation strategy, PEMEX only enters into DFIs with major financial institutions with a minimum credit rating ofBBB-. These ratings are issued and revised periodically by risk rating agencies. Furthermore, PEMEX seeks to maintain a diversified portfolio of counterparties.
In order to estimate PEMEX’s credit risk exposure to each financial counterparty, the potential future exposure is calculated by projecting the risk factors used in the valuation of each DFI in order to estimate the MtM value for different periods, taking into account any credit risk mitigation provisions.
Moreover, PEMEX has entered into various long-term cross-currency swaps agreements with “recouponing” provisions (pursuant to which the payments on the swaps are adjusted when the MtM exceeds the relevant threshold specified in the swap), thereby limiting the exposure with its counterparties to a specific threshold amount. The specified thresholds were reached in seven cross-currency swaps from the first to the fourth quarter of 2018, which were used to hedge the exchange rate exposure to the euro and to the Pound sterling, and in three cross-currency swaps during 2017, which were used to hedge the exchange rate exposure to the euro. This resulted in the cash settlement of such swaps and the resetting of swap terms to return theirmark-to-market value to zero. During 2018, PEMEX did not enter into any cross-currency swap with these characteristics.
In addition, PEMEX has entered into long-term DFIs with mandatory early termination clauses (pursuant to which, at a given date and irrespective of the current MtM, the DFI will terminate and settle at the corresponding MtM, and PEMEX can either enter into a new DFI with the same counterparty or a new counterparty), which reduces the credit risk generated by the term of the DFI by bounding it to a specific date. As of December 31, 2018, PEMEX has entered into two Japanese yen Seagull Option structures, with termination clauses in 2021.
According to IFRS 13 “Fair Value Measurement,” the fair value or 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.
For each DFI, the CVA is calculated by determining the difference between the MtM and the estimated MtM adjusted for credit risk. In determining the credit risk, the CVA method takes into account the current market perception about the credit risk of both counterparties, using the following inputs: a) the MtM projection for each payment date based on forward yield curves; b) the implied default probability obtained from both, PEMEX and the counterparty’s credit default swaps, at each payment date; and c) the default recovery rates of each counterparty.
The current and potential exposures, aggregated by credit rating, are as follows:
Maximum Credit Exposure by term in Petróleos Mexicanos |
| |||||||||||||||||||||||||||
Rating | Current | Less than 1 year | 1-3 years | 3-5 years | 5-7 years | 7-10 years | More than 10 years | |||||||||||||||||||||
in thousands U.S. dollars | ||||||||||||||||||||||||||||
A+ | 33,574 | 327,062 | 478,533 | 290,207 | 189,464 | 129,778 | 0 | |||||||||||||||||||||
A | 172,468 | 1,069,540 | 1,051,021 | 933,130 | 260,363 | 189,119 | 0 | |||||||||||||||||||||
A- | 54,288 | 143,584 | 9,780 | 0 | 0 | 0 | 0 | |||||||||||||||||||||
BBB+ | 72,570 | 1,567,608 | 2,229,081 | 2,293,010 | 2,259,894 | 1,724,213 | 650,900 | |||||||||||||||||||||
BBB- | (71,491 | ) | 33,290 | 127,099 | 151,033 | 156,401 | 160,631 | 0 |
PEMEX also faces credit risk derived from its investments. As of December 31, 2018, the notional amounts of investments in domestic currency, organized by the credit ratings of the issuances, were as follows:
Credit rating of issuances* | Notional amount | |
mxAAA | Ps.100,344 |
* Minimum S&P, Moody’s and Fitch credit rating. | ||
National Credit Rating Scale. | ||
Does not include investments in Mexican Government bonds. |
The table above does not include domestic currency Mexican Government bonds since it is considered that, given the current credit rating, the default probability in this currency is zero.
Furthermore, by means of its credit guidelines for DFI operations, Pemex Industrial Transformation has significantly reduced its credit risk exposure related to the DFIs offered to its customers to assist them in mitigating the risk associated with the volatility of natural gas prices.
In order to qualify for these DFIs, Pemex Industrial Transformation’s customers must be party to a current natural gas supply contract and sign a domestic master derivative agreement.
Additionally, beginning on October 2, 2009, DFIs with these customers must be initially secured by cash deposits, letters of credit or other collateral provisions, as required. In accordance with these guidelines, in the event that a client does not meet its payment obligations, DFIs related to this client are terminated, rights to collateral are exercised and, if the collateral is insufficient to cover the fair value, natural gas supply is suspended until the payment is made.
On August 20, 2014, certain amendments to the credit guidelines were enacted, which allowedPemex-Gas and Petrochemicals, and now Pemex Industrial Transformation, to offer to its clients with an adequate credit rating, based on an internal financial and credit assessment, DFIs with an exemption from collateral requirements up to certain amount through a credit line approved by the credit committee. Moreover, if the credit line is insufficient to cover each client’s exposure, the client is obligated to deposit collateral. If a client suffers an event of default, DFIs related to this client are terminated early and natural gas supply is suspended until the payment is made.
As of December 31, 2018, Pemex Industrial Transformation’s DFIs had a fair value of Ps. 143 (deferred premiums included) for clients with exempted credit lines and Ps. 134 for clients with guaranteed credit lines. The total amount of exempt credit lines rose to Ps. 21,391, representing 1% usage of available exempt credit lines, while the total amount of guaranteed credit lines rose to Ps. 1,000 representing a 13% usage of available guaranteed credit lines.
As of December 31, 2018, the overdue accounts of natural gas customers in the industrial and distribution sectors accounted for less than 1% of the total sales of Pemex Industrial Transformation.
As of December 31, 2018, Pemex Industrial Transformation had open DFIs with two customers. Of the total volume (in millions of British thermal units or MMBtu) of DFIs, industrial customers represented 100%.
As of December 31, 2018 and 2017, Pemex Industrial Transformation had not provided any collateral for DFIs entered into to hedge its DFIs with customers. This was due to the following: (i) natural gas prices maintained levels below the strike price, which has kept the credit limits within the set limits; and (ii) when certain DFIs matured,Pemex-Gas and Basic Petrochemicals, and now Pemex Industrial Transformation, had used domestic customers’ payments to meet its international obligations.
It is not considered necessary to disclose the potential future exposure of the DFIs’ portfolio held by Pemex Industrial Transformation through Mex Gas Supply S.L., due to the fact that these instruments are collateralized, the current notional amount does not represent a significant amount and the maturity is less than one year.
PMI Trading’s credit risk associated with DFI transactions is mitigated through the use of futures and standardized instruments that are cleared throughCME-Clearport.
III. | Liquidity Risk |
PEMEX’s main internal source of liquidity comes from its operations. Additionally, through its debt planning and the purchase and sale of U.S. dollars, PEMEX currently preserves a cash balance at a level of liquidity in domestic currency and U.S. dollars that is considered adequate to cover its investment and operating expenses, as well as other payment obligations, such as those related to DFIs.
In addition, as of December 31, 2018, PEMEX has acquired committed revolving credit lines in order to mitigate liquidity risk, three of which provide access to Ps. 3,500,000, Ps. 20,000,000 and Ps. 9,000,000 with expiration dates in June 2019, November 2019 and November 2023, respectively; and three others that each provide access to U.S. $1,500,000, U.S. $3,250,000 and U.S. $1,950,000 with expiration dates in December 2019, February 2020 and January 2021, respectively.
Finally, the investment strategies of PEMEX’s portfolios are structured by selecting time horizons that consider each currency’s cash flow requirements in order to preserve liquidity.
Certain PMI companies mitigate their liquidity risk through several mechanisms, the most important of which is the centralized treasury or“in-house bank,” which provides access to a syndicated credit line for up to U.S. $ 700,000 and cash surplus capacity in the custody of the centralized structure. In addition, certain PMI companies have access to bilateral credit lines from financial institutions for up to U.S. $500,000.
These companies monitor their cash flow on a daily basis and protect their creditworthiness in the financial markets. Liquidity risk is mitigated by monitoring the maximum/minimum permissible financial ratios as set forth in the policies approved by each company’s board of directors.
The following tables show the cash flow maturities as well as the fair value of PEMEX’s debt and DFI portfolios as of December 31, 2018 and 2017. It should be noted that:
For debt obligations, these tables present principal cash flow and the weighted average interest rates for fixed rate debt.
For interest rate swaps, cross currency swaps, currency options and currency forwards, these tables present notional amounts and weighted average interest rates by expected (contractual) maturity dates.
Weighted average variable rates are based on implied forward rates obtained from the interbank market yield curve at the reporting date.
For natural gas DFIs, volumes are presented in millions of British thermal unit (MMBtu), and fixed average and strike prices are presented in U.S. dollars per MMBtu.
For crude oil, volumes are presented in millions of barrels, and fixed average and strike prices are presented in U.S. dollars per barrel.
A DFI’s fair value includes CVA and is calculated based on market quotes obtained from market sources such as Bloomberg. Forward curves and implied volatilities for natural gas and crude oil are supplied by Bloomberg.
For PMI Trading, the prices used in commercial transactions and DFIs are published by reputable sources that are widely used in international markets, such asCME-NYMEX, Platts and Argus, among others.
Fair value is calculated internally, either by discounting cash flows with the correspondingzero-coupon yield curve in the original currency, or through other standard methodologies commonly used in financial markets for specific instruments.
For all instruments, the tables are based on the contract terms in order to determine the future cash flows that are categorized by expected maturity dates.
This information is presented in thousands of pesos, except as noted.
Quantitative Disclosure of Debt Cash Flow’s Maturities as of December 31, 2018(1)
Year of expected maturity date | ||||||||||||||||||||||||||||||||
2019 | 2020 | 2021 | 2022 | 2023 | 2024 thereafter | Total carrying value | Fair value | |||||||||||||||||||||||||
Liabilities | ||||||||||||||||||||||||||||||||
Outstanding debt | ||||||||||||||||||||||||||||||||
Fixed rate (U.S. dollars) | Ps. 53,962,520 | Ps. 40,098,959 | Ps. 94,686,304 | Ps. 83,674,076 | Ps. 91,790,092 | Ps. 827,719,134 | Ps. 1,191,931,085 | Ps. 1,084,252,622 | ||||||||||||||||||||||||
Average interest rate (%) | 5.8927 | % | ||||||||||||||||||||||||||||||
Fixed rate (Japanese yen) | — | — | — | — | 5,379,000 | 14,317,126 | 19,696,126 | 16,603,524 | ||||||||||||||||||||||||
Average interest rate (%) | 1.3484 | % | ||||||||||||||||||||||||||||||
Fixed rate (Pound sterling) | — | — | — | 8,763,410 | — | 11,205,575 | 19,968,985 | 20,257,139 | ||||||||||||||||||||||||
Average interest rate (%) | 5.7248 | % | ||||||||||||||||||||||||||||||
Fixed rate (pesos) | — | 10,017,084 | 20,257,747 | 1,999,192 | — | 88,324,131 | 120,598,154 | 101,639,764 | ||||||||||||||||||||||||
Average interest rate (%) | 7.4872 | % | ||||||||||||||||||||||||||||||
Fixed rate (UDIs) | 19,386,459 | 4,999,710 | 4,066,182 | — | — | 31,275,418 | 59,727,769 | 51,079,974 | ||||||||||||||||||||||||
Average interest rate (%) | 2.7362 | % | ||||||||||||||||||||||||||||||
Fixed rate (euros) | 21,466,509 | 29,215,492 | 39,343,306 | 35,884,701 | 31,437,421 | 173,348,554 | 330,695,983 | 325,772,611 | ||||||||||||||||||||||||
Average interest rate (%) | 3.7123 | % | ||||||||||||||||||||||||||||||
Fixed rate (Swiss Francs) | 5,991,035 | 11,966,770 | 3,001,116 | — | 7,264,850 | — | 28,223,771 | 27,916,889 | ||||||||||||||||||||||||
Average interest rate (%) | 1.8697 | % | ||||||||||||||||||||||||||||||
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Total fixed rate debt | 100,806,523 | 96,298,015 | 161,354,655 | 130,321,379 | 135,871,363 | 1,146,189,938 | 1,770,841,873 | 1,627,522,522 | ||||||||||||||||||||||||
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Variable rate (U.S. dollars) | 23,231,281 | 63,823,350 | 14,517,807 | 32,878,778 | 11,136,784 | 17,616,801 | 163,204,801 | 169,873,202 | ||||||||||||||||||||||||
Variable rate (Japanese yen) | — | 11,475,200 | — | — | — | — | 11,475,200 | 11,264,120 | ||||||||||||||||||||||||
Variable rate (euros) | — | — | — | — | 14,601,014 | — | 14,601,014 | 16,093,157 | ||||||||||||||||||||||||
Variable rate (pesos) | 34,322,574 | 18,352,215 | 8,456,465 | 8,407,405 | 6,968,237 | 12,220,826 | 88,727,722 | 88,624,217 | ||||||||||||||||||||||||
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Total variable rate debt | 57,553,855 | 93,650,765 | 22,974,272 | 41,286,183 | 32,706,035 | 29,837,627 | 278,008,737 | 285,854,697 | ||||||||||||||||||||||||
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Total debt | Ps. 158,360,378 | Ps. 189,948,780 | Ps. 184,328,927 | Ps. 171,607,562 | Ps. 168,577,398 | Ps. 1,176,027,565 | Ps. 2,048,850,610 | Ps. 1,913,377,218 | ||||||||||||||||||||||||
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Note: Numbers may not total due to rounding.
(1) | The information in this table has been calculated using exchange rates at December 31, 2018 of: Ps. 19.6829 = U.S. $1.00; Ps. 0.17930 = 1.00 Japanese yen; Ps. 25.0878 = 1.00 Pound sterling; Ps. 6.226631 = 1.00 UDI; Ps. 22.5054 = 1.00 euro; and Ps. 19.9762 = 1.00 Swiss Franc. |
Source: PEMEX
Quantitative Disclosure of Debt Cash Flow’s Maturities as of December 31, 2017(1)
Year of expected maturity date | ||||||||||||||||||||||||||||||||
2018 | 2019 | 2020 | 2021 | 2022 | 2023 thereafter | Total carrying value | Fair value | |||||||||||||||||||||||||
Liabilities | ||||||||||||||||||||||||||||||||
Outstanding debt | ||||||||||||||||||||||||||||||||
Fixed rate (U.S. dollars) | Ps. 53,465,817 | Ps. 59,498,256 | Ps. 60,290,621 | Ps. 95,232,448 | Ps. 84,076,050 | Ps. 808,836,547 | Ps. 1,161,399,739 | Ps. 1,213,404,769 | ||||||||||||||||||||||||
Average interest rate (%) | 5.7747 | % | ||||||||||||||||||||||||||||||
Fixed rate (Japanese yen) | — | — | — | — | — | 19,296,607 | 19,296,607 | 18,040,398 | ||||||||||||||||||||||||
Average interest rate (%) | 1.3485 | % | ||||||||||||||||||||||||||||||
Fixed rate (Pound sterling) | — | — | — | — | 9,345,839 | 11,952,816 | 21,298,655 | 24,381,394 | ||||||||||||||||||||||||
Average interest rate (%) | 5.7246 | % | ||||||||||||||||||||||||||||||
Fixed rate (pesos) | — | — | 10,033,017 | 20,376,655 | 1,999,098 | 88,349,072 | 120,757,842 | 171,683,692 | ||||||||||||||||||||||||
Average interest rate (%) | 7.4876 | % | ||||||||||||||||||||||||||||||
Fixed rate (UDIs) | — | 18,477,076 | 4,764,175 | 3,874,313 | — | 30,081,647 | 57,197,211 | 56,536,905 | ||||||||||||||||||||||||
Average interest rate (%) | 2.7458 | % | ||||||||||||||||||||||||||||||
Fixed rate (euros) | 1,043 | 32,042,196 | 30,801,894 | 41,508,857 | 23,655,950 | 171,255,634 | 299,265,574 | 330,573,998 | ||||||||||||||||||||||||
Average interest rate (%) | 3.6736 | % | ||||||||||||||||||||||||||||||
Fixed rate (Swiss Francs) | 4,565,075 | 6,088,686 | 12,149,953 | 3,046,567 | — | — | 25,850,281 | 26,957,785 | ||||||||||||||||||||||||
Average interest rate (%) | 1.8387 | % | ||||||||||||||||||||||||||||||
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Total fixed rate debt | 58,031,935 | 116,106,214 | 118,039,660 | 164,038,840 | 119,076,937 | 1,129,772,323 | 1,705,065,909 | 1,841,578,940 | ||||||||||||||||||||||||
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Variable rate (U.S. dollars) | 58,364,536 | 15,302,101 | 62,289,546 | 12,809,666 | 31,289,725 | 18,379,557 | 198,435,131 | 206,254,219 | ||||||||||||||||||||||||
Variable rate (Japanese yen) | — | — | 11,244,800 | — | — | — | 11,244,800 | 11,361,079 | ||||||||||||||||||||||||
Variable rate (pesos) | 8,734,371 | 27,995,083 | 18,341,742 | 8,459,163 | 8,394,483 | 19,125,764 | 91,050,606 | 94,188,981 | ||||||||||||||||||||||||
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Total variable rate debt | 67,098,907 | 43,297,184 | 91,876,088 | 21,268,829 | 39,684,208 | 37,505,321 | 300,730,537 | 311,804,280 | ||||||||||||||||||||||||
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Total debt | Ps. 25,130,842 | Ps. 159,403,398 | Ps. 209,915,748 | Ps. 185,307,669 | Ps. 158,761,145 | Ps.1,167,277,644 | Ps. 2,005,796,446 | Ps.2,153,383,220 | ||||||||||||||||||||||||
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Note: Numbers may not total due to rounding.
(1) | The information in this table has been calculated using exchange rates at December 31, 2017 of: Ps. 19.7867 = U.S. $1.00; Ps. 0.1757 = 1.00 Japanese yen; Ps. 26.7724 = 1.00 Pound sterling; Ps. 5.934551 = 1.00 UDI; Ps. 23.7549 = 1.00 euro; and Ps. 20.2992 = 1.00 Swiss Franc. |
Source: PEMEX
Quantitative Disclosure of Cash Flow’s Maturities from Derivative Financial Instruments Held or Issued
for Purposes Other than Trading as of December 31, 2018(1) (2)
Year of expected maturity date | ||||||||||||||||||||||||||||||||
2019 | 2020 | 2021 | 2022 | 2023 | 2024 Thereafter | Total Notional Amount | Fair Value(3) | |||||||||||||||||||||||||
Hedging instruments(2)(4) | ||||||||||||||||||||||||||||||||
Interest rate DFIs | ||||||||||||||||||||||||||||||||
Interest rate swaps (U.S. dollars) | ||||||||||||||||||||||||||||||||
Variable to fixed | Ps. 4,692,574 | Ps. 4,706,039 | Ps. 4,661,811 | Ps. 4,546,095 | Ps. 4,406,561 | Ps. 5,683,437 | Ps. 28,696,517 | Ps. 644,746 | ||||||||||||||||||||||||
Average pay rate | 3.18 | % | 3.20 | % | 3.22 | % | 3.25 | % | 3.37 | % | 3.74 | % | N.A. | N.A. | ||||||||||||||||||
Average receive rate | 4.22 | % | 4.07 | % | 3.94 | % | 4.08 | % | 4.40 | % | 5.25 | % | N.A. | N.A. | ||||||||||||||||||
Currency DFIs | ||||||||||||||||||||||||||||||||
Cross-currency swaps | ||||||||||||||||||||||||||||||||
Receive euros/Pay U.S. dollars | 20,782,857 | 28,568,548 | 36,709,101 | 35,121,361 | 45,930,033 | 175,091,781 | 342,203,681 | 5,495,541 | ||||||||||||||||||||||||
Receive Japanese yen/ Pay U.S. dollars | — | 12,971,158 | — | — | 4,750,499 | — | 17,721,657 | (1,112,629 | ) | |||||||||||||||||||||||
Receive Pounds sterling/ Pay U.S. dollars | — | — | — | 9,819,995 | — | 11,645,585 | 21,465,580 | (297,318 | ) | |||||||||||||||||||||||
Receive UDI/ Pay pesos | 23,740,341 | 7,292,520 | 3,000,000 | — | — | 27,450,032 | 61,482,893 | (4,392,093 | ||||||||||||||||||||||||
Receive Swiss francs/ Pay U.S. dollars | 6,466,978 | 11,488,074 | 2,978,666 | — | 7,184,259 | — | 28,117,977 | 486,310 | ||||||||||||||||||||||||
Currency Options | ||||||||||||||||||||||||||||||||
Buy Put, Sell Put and Sell Call on Japanese yen | — | — | — | — | — | 14,355,685 | 14,355,685 | 222,491 | ||||||||||||||||||||||||
Buy call, Sell call and Sell Put on euros | — | — | 39,497,823 | 13,542,111 | 14,670,620 | 99,308,812 | 167,019,366 | 165,458 | ||||||||||||||||||||||||
Sell Call on Pound sterling | — | — | — | — | — | 11,296,695 | 11,296,695 | (232,636 | ) | |||||||||||||||||||||||
Sell Call on Swiss Francs | — | — | — | — | 7,315,424 | — | 7,315,424 | (183,093 | ) | |||||||||||||||||||||||
Currency Forward | ||||||||||||||||||||||||||||||||
Receive U.S. dollars / Pay pesos | — | — | — | — | — | — | — | — |
N.A. = not applicable.
Numbers may not total due to rounding.
(1) | The information in this table has been calculated using exchange rates at December 31, 2018 of: Ps. 19.6829 = U.S. $1.00 and Ps. 22.5054 = 1.00 euro. |
(2) | PEMEX’s management uses these DFIs to hedge market risk; however, these DFIs do not qualify for accounting purposes as hedges and are recorded in the financial statements as entered into for trading purposes. |
(3) | Positive numbers represent a favorable fair value to PEMEX. |
(4) | PMI’s risk management policies and procedures establish that DFIs should be used only for
|
Source: PEMEX
Quantitative Disclosure of Cash Flow’s Maturities from Derivative Financial Instruments Held or Issued
for Purposes Other than Trading as of December 31, 2017(1) (2)
N.A. = not applicable. Numbers may not total due to rounding.
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(2) | PEMEX’s
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(3) | Positive numbers represent a favorable fair value to PEMEX. |
(4) | PMI’s risk management policies and procedures establish that DFIs should be used only for hedging purposes; however DFIs are not recorded as hedges for accounting purposes. |
Source: PEMEX
B. | Fair value of derivative financial instruments |
PEMEX periodically evaluates its exposure to international hydrocarbon prices, interest rates and foreign currencies and uses derivative instruments 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 cashflows and discounting them with the corresponding discount factor; for currency 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 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 assumptions and inputs considered in the calculation of the fair value of its DFIs fall under Level 2 of the fair value hierarchy for market participant assumptions.
Embedded derivatives
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 December 31, 2018 and 2017, PEMEX did not recognize any embedded derivatives (foreign currency or index).
As of December 31, 2018, PEMEX recognized a loss of Ps. 3,142,662 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.
Accounting treatment
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 December 31, 2018 and 2017, 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. 6,487,032 and Ps. 12,367,475, respectively. As of December 31, 2018 and 2017, PEMEX did not have any DFIs designated as hedges.
The following table shows the fair values and notional amounts of PEMEX’s DFIs, including those with an open position and those that have matured but that have not been settled, which were designated asnon-hedges for accounting purposes and entered into for trading purposes as of December 31, 2018 and 2017. It should be noted that:
A DFI’s fair value includes CVA and is calculated based on market quotes obtained from market sources such as Bloomberg. Forward curves and implied volatilities for natural gas and crude oil are supplied by Bloomberg.
Fair value is calculated internally, either by discounting cash flows with the correspondingzero-coupon yield curve, in the original currency, or through other standard methodologies commonly used in the financial markets for certain specific instruments.
The information is presented in thousands of pesos (except as noted).
December 31, 2018 | December 31, 2017 | |||||||||||||||||
DFI | POSITION | Notional Amount | �� | Fair Value | Notional Amount | Fair Value | ||||||||||||
Interest rate swaps | PEMEX pays fixed in U.S. dollar and receives floating in3-month U.S. dollar LIBOR + spread. | 14,147,084 | 228,909 | 16,695,028 | 79,448 | |||||||||||||
Interest rate swaps | PEMEX pays fixed in U.S. dollar and receives floating in6-month U.S. dollar LIBOR + spread. | 13,433,579 | 420,029 | 15,433,626 | 332,273 | |||||||||||||
Cross-currency swaps | PEMEX pays the28-day TIIE + spread in pesos and receives fixed in UDI. | 37,742,553 | (237,428 | ) | 30,897,687 | (216,441 | ) | |||||||||||
Cross-currency swaps | PEMEX pays fixed in pesos and receives notional in UDI. | 23,740,341 | (4,154,665 | ) | 23,740,341 | (4,504,151 | ) | |||||||||||
Cross-currency swaps | PEMEX pays floating in6-month U.S. dollar LIBOR + spread and receives floating in6-month yen LIBOR + spread. | 12,971,158 | (1,532,612 | ) | 13,039,563 | (1,804,993 | ) | |||||||||||
Cross-currency swaps | PEMEX pays fixed in U.S. dollar and receives fixed in Japanese yen. | 4,750,499 | 419,983 | 4,775,551 | 134,461 | |||||||||||||
Cross-currency swaps | PEMEX pays floating in3-month U.S. dollar LIBOR + spread and receives floating in3-month euro LIBOR + spread. | 15,073,938 | (122,974 | ) | — | — | ||||||||||||
Cross-currency swaps | PEMEX pays fixed in U.S. dollar and receives fixed in euro. | 327,129,743 | 5,618,515 | 278,440,124 | 19,065,727 | |||||||||||||
Cross-currency swaps | PEMEX pays floating in6-month U.S. dollar LIBOR + spread and receives fixed in Pound sterling. | 9,819,995 | (2,573 | ) | 10,310,216 | 560,982 | ||||||||||||
Cross-currency swaps | PEMEX pays fixed in U.S. dollar and receives fixed in Pound sterling. | 11,645,585 | (294,745 | ) | 11,706,999 | 590,113 | ||||||||||||
Cross-currency swaps | PEMEX pays fixed in U.S. dollar and receives fixed in CHF. | 28,117,976 | 486,310 | 25,579,588 | 400,316 | |||||||||||||
Currency Options | PEMEX Buy Put, Sell Put and Sell Call on Japanese yen | 14,355,685 | 222,491 | 14,046,320 | 48,715 | |||||||||||||
Currency Options | PEMEX Buy Call, Sell Call and Sell Put on euro | 95,923,285 | 2,708,534 | 100,950,853 | 4,919,444 | |||||||||||||
Currency Options | PEMEX Sell Call on Pound sterling | 11,296,695 | (232,636 | ) | 12,031,728 | (239,626 | ) | |||||||||||
Currency Options | PEMEX Sell Call on CHF | 7,315,424 | (183,093 | ) | — | — | ||||||||||||
Currency Options | PEMEX Sell Call on euro | 71,096,081 | (2,543,075 | ) | — | — | ||||||||||||
Currency Forward | PEMEX pays Pesos and receives U.S. dollar. | — | — | 59,360,100 | (2,006,461 | ) | ||||||||||||
Natural gas swaps | PEMEX receives fixed. | (3,669 | ) | 136 | (51,724 | ) | 6,934 | |||||||||||
Natural gas swaps | PEMEX receives floating. | 3,622 | (94 | ) | 50,846 | (6,114 | ) | |||||||||||
Natural gas options | PEMEX Long Call. | 989 | 4 | 18,625 | 398 | |||||||||||||
Natural gas options | PEMEX Short Call. | (989 | ) | (4 | ) | (18,625 | ) | (397 | ) | |||||||||
Interest rate swaps | PEMEX pays fixed in U.S. dollar and receives floating in U.S. dollar LIBOR 1M. | 1,115,854 | (4,192 | ) | 1,423,368 | (22,870 | ) | |||||||||||
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Subtotal | 796,820 | 17,337,758 | ||||||||||||||||
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December 31, 2018 | December 31, 2017 | |||||||||||||||
DFI | Volume (MMb) | Fair Value | Volume (MMb) | Fair Value | ||||||||||||
Crude Oil Options | 111.68 | 5,690,212 | 153.56 | Ps. | (5,010,187 | ) |
December 31, 2018 | December 31, 2017 | |||||||||||||||||||
DFI | Market | Volume (MMb) | Fair value | Volume (MMb) | Fair value | |||||||||||||||
Futures | Exchange traded | 2.6 | Ps. | 441,954 | 2.1 | Ps. | (141,693) | |||||||||||||
Petroleum Products Swaps | Exchange traded | 4.9 | Ps. | 760,603 | 1.3 | Ps. | (99,680) |
Notes: Numbers may not total due to rounding.
(1) | The |
The exchange rate for U.S. dollars as of December 31, 2018 and 2017 was Ps. 19.6829 and Ps. 19.7867 per U.S. dollar, respectively. The exchange rate for euros as of December 31, 2018 and 2017 was Ps. 22.5054 and Ps. 22.3109 per euro, respectively.
For the years ended December 31, 2018, 2017 and 2016, PEMEX recognized a net (loss) gain of Ps. (22,258,613), Ps. 25,338,324 and Ps. (14,000,987), respectively, in the “Derivative financial instruments (cost) income, net” line item with respect to DFIs treated as instruments entered into for trading purposes.
The following table presents the fair value of PEMEX’s DFIs that are included in the consolidated statement of financial position in Derivative financial instruments (including both DFIs that have not reached maturity and those that have reached maturity but have not been settled), as of December 31, 2018 and 2017:
Derivatives assets | ||||||||
Fair value | ||||||||
December 31, 2018 | December 31, 2017 | |||||||
Derivatives not designated as hedging instruments | ||||||||
Crude oil options | Ps. | 5,690,212 | Ps. | 397,630 | ||||
Currency options | 2,931,025 | 4,968,159 | ||||||
Natural gas options | 4 | 398 | ||||||
Cross-currency swaps | 13,111,838 | 24,126,452 | ||||||
Natural gas swaps | 260 | 7,003 | ||||||
Propane swaps | — | — | ||||||
Interest rate swaps | 648,938 | 411,721 | ||||||
Others | — | 202,091 | ||||||
|
|
|
| |||||
Total derivatives not designated as hedging instruments | 22,382,277 | 30,113,454 | ||||||
|
|
|
| |||||
Total assets | Ps. | 22,382,277 | Ps. | 30,113,454 | ||||
|
|
|
|
Derivatives liabilities | ||||||||
Fair value | ||||||||
December 31, 2018 | December 31, 2017 | |||||||
Derivatives not designated as hedging instruments | ||||||||
Forwards | Ps. | — | Ps. | (2,006,461 | ) | |||
Crude oil options | — | (5,407,817 | ) | |||||
Currency options | — | — | ||||||
Natural gas options | (4 | ) | (397 | ) | ||||
Cross-currency swaps | (15,890,830 | ) | (10,301,983 | ) | ||||
Natural gas swaps | (218 | ) | (6,182 | ) | ||||
Interest rate swaps | (4,193 | ) | (22,870 | ) | ||||
Others | — | (269 | ) | |||||
|
|
|
| |||||
Total derivatives not designated as hedging instruments | (15,895,245 | ) | (17,745,979 | ) | ||||
|
|
|
| |||||
Total liabilities | Ps. | (15,895,245 | ) | Ps. | (17,745,979 | ) | ||
|
|
|
| |||||
Net total | Ps. | 6,487,032 | Ps. | 12,367,475 | ||||
|
|
|
|
The following tables presents the net gain (loss) recognized in income on PEMEX’s DFIs for the years ended December 31, 2018, 2017 and 2016, in the consolidated statement of comprehensive income which is presented in the “Derivative financial instruments (cost) income, net” line item:
Derivatives not designated as hedging instruments | Amount of gain (loss) recognized in the Statement of operations on derivatives | |||||||||||
December 31, 2018 | December 31, 2017 | December 31, 2016 | ||||||||||
Embedded derivatives | Ps. | (3,142,662 | ) | Ps. | — | Ps. | — | |||||
Forwards | 2,007,393 | (1,976,241 | ) | — | ||||||||
Futures | 374,112 | (779,950 | ) | (1,925,969 | ) | |||||||
Crude oil options | 2,329,051 | (3,771,604 | ) | — | ||||||||
Currency options | (2,210,301 | ) | 5,255,931 | (298,789 | ) | |||||||
Natural gas options | 185 | 673 | (671 | ) | ||||||||
Cross-currency swaps | (21,902,567 | ) | 27,747,290 | (11,633,605 | ) | |||||||
Natural gas swaps | 117 | 1,780 | 831 | |||||||||
Propane swaps | — | — | (3,805 | ) | ||||||||
Interest rate swaps | 286,059 | (34,306 | ) | (138,979 | ) | |||||||
Others | — | (1,105,249 | ) | — | ||||||||
|
|
|
|
|
| |||||||
Total | Ps. | (22,258,613 | ) | Ps. | 25,338,324 | Ps. | (14,000,987 | ) | ||||
|
|
|
|
|
|
NOTE 20. EMPLOYEE BENEFITS
Until December 31, 2015, Petróleos Mexicanos and Subsidiary Entities only had defined benefit pension plans for the retirement of its employees, to which only Petróleos Mexicanos and the Subsidiary Entities contribute. Benefits under these plans are based on an employee’s salary and years of service completed at retirement. As of January 1, 2016, Petróleos Mexicanos and Subsidiary Entities also has a defined contribution pension plan, in which both Petróleos Mexicanos and Subsidiary Entities and the employee contribute to an employee’s individual account.
Benefits under the defined benefit plan are mainly based on the years of service completed by the employee, and their remuneration at the date of retirement. The obligations and costs of these plans are recognized based on an actuarial valuation prepared by independent experts. Within the regulatory framework of plan assets, there are no minimum funding requirements. Petróleos Mexicanos and the Subsidiary Entities have established additional plans to cover post-employment benefits, which are based on actuarial studies prepared by independent experts and which include disability, post-mortem pension and the death of retired employees, as well as medical services for retired employees and beneficiaries.
As of December 31, 2018, Petróleos Mexicanos and Subsidiary Entities funded its employees benefits through Mexican trusts, the resources of which come from the retirement line item of PEMEX’s annual budget (an operating expense), or any other line item that substitutes or relates to this line item, or that is associated to the same line item and the interests, dividends or capital gains obtained from the investments of the trusts.
The following table show the amounts associated with PEMEX’s labor obligations:
December 31, | ||||||||
Defined Benefits Liabilities | 2018 | 2017 | ||||||
Liability for defined benefits at retirement and post-employment at the end of the year | Ps. | 1,067,317,120 | Ps. | 1,241,072,307 | ||||
Liability for other long-term benefits | 13,224,926 | 17,363,815 | ||||||
|
|
|
| |||||
Total liability for defined benefits recognized in the consolidated statement of financial position at the end of the year | Ps. | 1,080,542,046 | Ps. | 1,258,436,122 | ||||
|
|
|
|
The following tables contain detailed information regarding PEMEX’s retirement and post-employment benefits:
December 31, | ||||||||
Changes in the liability for defined benefits | 2018 | 2017 | ||||||
Liability for defined benefits at the beginning of the year | Ps. | 1,241,072,307 | Ps. | 1,202,624,665 | ||||
Recognition of the modifications in pensions plan | — | 8,327 | ||||||
Current Service cost | 20,819,804 | 13,079,341 | ||||||
Net interest | 97,571,478 | 95,402,917 | ||||||
Defined benefits paid by the fund | (5,547,170 | ) | (5,105,669 | ) | ||||
Actuarial (gains) losses in other comprehensive results due to: | ||||||||
Change in financial assumptions | (214,105,342 | ) | 47,182,448 | |||||
Change in demographic assumptions | (71,958,462 | ) | (70,012,604 | ) | ||||
For experience during the year | 53,779,484 | 10,272,231 | ||||||
In plan assets during the year | 646,318 | (453,206 | ) | |||||
Effect of the liability ceiling* | 279,674 | — | ||||||
Transfer to Long-term Benefits* | 410,775 | — | ||||||
Remeasurements | 2,146 | 26,417 | ||||||
Contributions paid to the fund | (55,653,892 | ) | (51,952,560 | ) | ||||
|
|
|
| |||||
Defined benefit liabilities at end of year | Ps. | 1,067,317,120 | Ps. | 1,241,072,307 | ||||
|
|
|
|
* | PMI |
December 31, | ||||||||
Changes in pension plan assets | 2018 | 2017 | ||||||
Plan assets at the beginning of year | Ps. | 8,485,692 | Ps. | 9,489,666 | ||||
Return on plan assets | 862,175 | 902,550 | ||||||
Payments by the pension fund | (56,834,688 | ) | (54,312,270 | ) | ||||
Company contributions to the fund | 55,653,892 | 51,952,559 | ||||||
Actuarial (gains) losses in plan assets | (653,583 | ) | 453,187 | |||||
Effect of the liability ceiling | (313,017 | ) | — | |||||
|
|
|
| |||||
Pension plan assets at the end of year | Ps. | 7,200,471 | Ps. | 8,485,692 | ||||
|
|
|
|
In 2018, the net actuarial gains recognized in other comprehensive income (loss) net of deferred income tax were Ps. (222,545,556), related to retirement and post-employment benefits. This result was due to the increase in the discount and return on plan assets rates, from 7.89% in 2017 to 9.29% in 2018, as well as to the modification in the assumptions of family composition to the retirement for active personnel, and to the modification in the mortality assumptions for retired personnel. Other factors influencing the changes were the obligations based on changes in population, age, seniority, wages, pensions and benefits, increased rates of gas, gasoline and basic basket benefits (from 3.75% to 4.00%). For retired employees,
the increase in the wage rate (from 4.77% to 5.02%), as well as the long-term inflation assumption (from 3.75% to 4.00%) also influenced the changes.
In accordance with IFRS, the discount rate of labor liabilities has been estimated using as a reference the interest rates observed in Mexican Government bonds denominated in pesos (Cetes and M bonds). During 2018, the long-term interest rates of these bonds increased by an average of 100 basis points, as a consequence of the volatility registered in the Mexican financial markets towards the end of the year. The increase in these rates directly impacted the estimation of the discount rate of labor liabilities.
Contributions from Pemex to the Pemex Labor Fund include the promissory note matured on March 31, 2018 in the amount of Ps. 2,551,024, for the assumption by the Mexican Government of the payment obligations related to pensions and retirement plans of Petróleos Mexicanos and its Subisidiary Entities (see Note 17-A).
The expected contribution to the Pemex Labor Fund for 2019 amounts to Ps. 63,235,620 and the expected payments are Ps. 68,387,355.
As of December 31, 2018 and 2017, the amounts and types of plan assets are as follows:
December 31, | ||||||||
2018 | 2017 | |||||||
Plan Assets | ||||||||
Cash and cash equivalents | Ps. | 4,976,125 | Ps. | 135,757 | ||||
Held-for-sale financial assets | — | 1,034,178 | ||||||
Debt instruments | 2,224,346 | 7,315,757 | ||||||
|
|
|
| |||||
Total plan assets | Ps. | 7,200,471 | Ps. | 8,485,692 | ||||
|
|
|
| |||||
December 31, | ||||||||
2018 | 2017 | |||||||
Changes in Defined Benefit Obligations (DBO) | ||||||||
Defined benefit obligations at the beginning of the year | Ps. | 1,249,557,999 | Ps. | 1,212,114,331 | ||||
Service costs | 18,365,156 | 19,762,661 | ||||||
Financing costs | 98,759,209 | 96,331,015 | ||||||
Past service costs | (103,845 | ) | — | |||||
Payments by the fund | (62,388,283 | ) | (59,417,940 | ) | ||||
Amount of (gains) and losses recognized through other comprehensive income(1) | (232,284,320 | ) | (12,594,541 | ) | ||||
Liquidated obligations | (457,168 | ) | — | |||||
Modifications to the pension plan | 2,782,151 | (6,609,657 | ) | |||||
Remeasurements | 2,139 | (1,471 | ) | |||||
Reductions | — | (26,399 | ) | |||||
|
|
|
| |||||
Defined benefit obligations at the end of year | Ps. | 1,074,233,038 | Ps. | 1,249,557,999 | ||||
|
|
|
|
(1) | These gains and losses are due to changes in financial assumptions, demographics and experience during the year. |
The asset ceiling test was not applied because there was a deficit of labor liabilities at the beginning and end of the year.
The effect of an increase or decrease of one percentage point in the discount rate is a-10.56% increase or a 13.00% decrease in defined benefit obligations, respectively.
The effect of an increase or decrease of one percentage point in the increase rate in medical services with respect to the cost and obligations related to medical services point is a 2.15% increase or a-1.69% decrease in defined benefit obligations, respectively.
The effect of an increase or decrease of one percentage point in the inflation is a 8.54% and-7.54%, respectively in defined benefit obligations.
The effect of an increase or decrease of one percentage point in the wage is a 1.25% and-1.10%, respectively in defined benefit obligations.
The effects previously mentioned were determined using the projected unit credit method which was the same method used in the prior valuation.
Assumptions regarding future mortality are based on EMSSA2009 to Unique Circular of the Comisión Nacional de Seguros y Fianzas (National Commission of Insurance and Bonds) and include changes to the mortality rate established in 2018. For the December valuation, the mortality table for retired personnel was updated using an actuarial proposal based on the experience of Petróleos Mexicanos and its Subisidiary Entities. The mortality table for the incapacitated personnel is the EMSSInc-IMSS2012 and for the disabled personnel the EMSSInv-IMSS2012.
PEMEX’s plan assets are held in the FOLAPE trust, which is managed by BBVA Bancomer, S. A. and a technical committee for the trust that is comprised of personnel from Petróleos Mexicanos and the trust.
The following tables present additional fair value disclosure about plan assets and indicate their rank, in accordance with IFRS 13, as of December 31, 2018 and 2017:
Fair value measurements as of December 31, 2018 | ||||||||||||||||
Plan assets | Quoted prices in active markets for identical assets (level 1) | Significant observable inputs (level 2) | Significant unobservable inputs (level 3) | Total | ||||||||||||
Cash and cash equivalents | Ps. | 4,976,125 | Ps. | — | Ps. | — | Ps. | 4,976,125 | ||||||||
Debt instruments | 2,224,346 | — | — | 2,224,346 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total | Ps. | 7,200,471 | Ps. | — | Ps. | — | Ps. | 7,200,471 | ||||||||
|
|
|
|
|
|
|
| |||||||||
Fair value measurements as of December 31, 2017 | ||||||||||||||||
Plan assets: | Quoted prices in active markets for identical assets (level 1) | Significant observable inputs (level 2) | Significant unobservable inputs (level 3) | Total | ||||||||||||
Cash and cash equivalents | Ps. | 135,757 | Ps. | — | Ps. | — | Ps. | 135,757 | ||||||||
Held-for-sale financial assets | 1,034,178 | — | — | 1,034,178 | ||||||||||||
Debt instruments | 7,315,757 | — | — | 7,315,757 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total | Ps. | 8,485,692 | Ps. | — | Ps. | — | Ps. | 8,485,692 | ||||||||
|
|
|
|
|
|
|
|
As of December 31, 2018 and 2017, the principal actuarial assumptions used in determining the defined benefit obligation for the plans are as follows:
December 31, | ||||||||
2018 | 2017 | |||||||
Rate of increase in salaries | 5.02 | % | 4.77 | % | ||||
Rate of increase in pensions | 4.00 | % | 3.75 | % | ||||
Rate of increase in medical services | 7.65 | % | 7.65 | % | ||||
Inflation assumption | 4.00 | % | 3.75 | % | ||||
Rate of increase in basic basket for active personnel | 5.00 | % | 5.00 | % | ||||
Rate of increase in basic basket for retired personnel | 4.00 | % | 3.75 | % | ||||
Rate of increase in gas and gasoline | 4.00 | % | 3.75 | % | ||||
Discount and return on plan assets rate | 9.29 | % | 7.89 | % | ||||
Average length of obligation (years) | 15.04 | 18.40 |
In accordance with IFRS, the discount rate of labor liabilities has been estimated using as a reference the interest rates observed in Mexican Government bonds denominated in pesos (Cetes and M bonds). During 2018, the long-term interest rates of these bonds increased by an average of 100 basis points, as a consequence of the volatility registered in the Mexican financial markets towards the end of the year. The increase in these rates directly impacted the estimation of the discount rate of labor liabilities.
Other long-term benefits
Petróleos Mexicanos and Subsidiary Entities has established other long-term benefit plans for its employees, to which employees do not contribute, which correspond to the seniority premiums payable for disability, death and survivor benefits (payable to the widow and beneficiaries of worker), medical service, gas and basic basket for beneficiaries. Benefits under these plans are based on an employee’s salary and years of service completed at separation date. Obligations and costs of such plans are recorded in accordance with actuarial valuations performed by independent actuaries.
The amounts recognized for long-term obligations for the years ended December 31, 2018 and 2017 are as follows:
December 31, | ||||||||
2018 | 2017 | |||||||
Change in the liability for defined benefits | ||||||||
Liabilities defined benefit at the beginning of year | Ps. | 17,363,815 | Ps. | 17,784,771 | ||||
Present cost services | (18,085 | ) | — | |||||
Charge to income for the year | 2,885,875 | 3,277,847 | ||||||
Actuarial (gains) losses recognized in income due to: | ||||||||
Change in financial assumptions | (3,741,132 | ) | 878,516 | |||||
Change in demographic assumptions | (751,052 | ) | (1,015,274 | ) | ||||
For experience during the year | (2,259,569 | ) | (3,558,599 | ) | ||||
Real interest, excluding earned interests | 125,485 | — | ||||||
Effect of the liability ceiling | 33,344 | — | ||||||
Benefits paid | (2,980 | ) | (3,446 | ) | ||||
Transfer to the post-employment benefit fund recognized in other comprehensive income | (410,775 | ) | — | |||||
|
|
|
| |||||
Liabilities defined benefit at the end of year | Ps. | 13,224,926 | Ps. | 17,363,815 | ||||
|
|
|
|
The expected long-term benefit payments amount to Ps.300,869.
The effects on liabilities for long-term benefits at the end of the period are:
The effect of an increase or decrease of one percentage point in the discount rate is a -14.80% increase or a 19.25% decrease, respectively, in defined benefit obligations.
The effect of an increase or decrease of one percentage point in the increase rate in medical services with respect to the cost and obligations related to medical services is a 4.64% increase or a -3.32% decrease, respectively, in defined benefit obligations.
The effect of an increase or decrease of one percentage point in the inflation is a 0.48% increase or a 1.73% decrease, respectively, in defined benefit obligations.
The effect of an increase or decrease of one percentage point in the wage is a 4.26% increase or a 3.88% decrease, respectively in defined benefit obligations.
The principal actuarial assumptions used in determining the defined benefit obligation for the plans are as follows:
December 31, | ||||||||
2018 | 2017 | |||||||
Rate of increase in salaries | 5.02 | % | 4.77 | % | ||||
Inflation assumption | 4.00 | % | 3.75 | % | ||||
Rate of increase in basic basket for active personnel | 5.00 | % | 5.00 | % | ||||
Rate of increase in basic basket for retired personnel | 4.00 | % | 3.75 | % | ||||
Rate of increase in gas and gasoline | 4.00 | % | 3.75 | % | ||||
Discount and return on plan assets rate | 9.29 | % | 7.89 | % | ||||
Average length of obligation (years) | 15.04 | 18.40 |
In accordance with IFRS, the discount rate of labor liabilities has been estimated using as a reference the interest rates observed in Mexican Government bonds denominated in pesos (Cetes and M bonds). During 2018, the long-term interest rates of these bonds increased by an average of 100 basis points, as a consequence of the volatility registered in the Mexican financial markets towards the end of the year. The increase in these rates directly impacted the estimation of the discount rate of labor liabilities.
NOTE 21. PROVISIONS FOR SUNDRY CREDITORS
At December 31, 2018 and 2017, the provisions for sundry creditors and others is as follows:
2018 | 2017 | |||||||
Provision for plugging of wells (Note 15) | Ps. | 84,050,900 | Ps. | 68,797,600 | ||||
Provision for trails in process (Note 29) | 6,483,078 | 7,812,689 | ||||||
Provision for environmental costs | 11,219,278 | 11,067,134 | ||||||
|
|
|
| |||||
Ps. | 101,753,256 | Ps. | 87,677,423 | |||||
|
|
|
|
The following tables show the allowance account for plugging of wells, trials in progress and environmental costs:
Plugging of wells | ||||||||
2018 | 2017 | |||||||
Balance at the beginning of the year | Ps. | 68,797,600 | Ps. | 64,967,710 | ||||
Increase (decrease) capitalized in fixed assets | 22,313,529 | (3,791,482 | ) | |||||
Unwinding of discount against income | (6,953,200 | ) | 7,774,000 | |||||
Amount used | (107,029 | ) | (152,628 | ) | ||||
|
|
|
| |||||
Balance at the end of the year | Ps. | 84,050,900 | Ps. | 68,797,600 | ||||
|
|
|
| |||||
Trials in progress | ||||||||
2018 | 2017 | |||||||
Balance at the beginning of the year | Ps. | 7,812,689 | Ps. | 15,119,692 | ||||
Additions against income | 1,194,547 | 2,835,357 | ||||||
Provision cancellation | (2,502,807 | ) | (1,973,153 | ) | ||||
Amount used | (21,351 | ) | (8,169,207 | ) | ||||
|
|
|
| |||||
Balance at the end of the year | Ps. | 6,483,078 | Ps. | 7,812,689 | ||||
|
|
|
| |||||
Environmental costs | ||||||||
2018 | 2017 | |||||||
Balance at the beginning of the year | Ps. | 11,067,134 | Ps. | 8,230,476 | ||||
Additions against income | 1,390,838 | 3,203,982 | ||||||
Provision cancellation | (1,106,693 | ) | (312,937 | ) | ||||
Amont used | (132,001 | ) | (54,387 | ) | ||||
|
|
|
| |||||
Balance at the end of the year(1) | Ps. | 11,219,278 | Ps. | 11,067,134 | ||||
|
|
|
|
(1) | PEMEX is subject to the provisions of theLey General del Equilibrio Ecológico y la Protección al Ambiente (General Law on Ecological Equilibrium and Environmental Protection). To comply with this law, environmental audits of PEMEX’s larger operating, storage and transportation facilities have been or are being conducted. Following the completion of such audits, PEMEX has signed various agreements with theProcuraduría Federal de Protección al Ambiente (Federal Attorney of Environmental Protection) to implement environmental remediation and improve environmental plans. Such plans contemplate remediation for environmental damages, as well as related investments for the improvement of equipment, maintenance, labor and materials. |
Provision for plugging of wells
PEMEX records a provision at present value for the future plugging cost of an oil production facility or pipeline at the time that it is built.
The plugging provision represents the present value of plugging costs related to oil and gas properties. These provisions have been created based on internal estimates of PEMEX. PEMEX has made certain assumptions based on the current economic environment that PEMEX believes provide a reasonable basis on which to estimate the future liability. These estimates are reviewed regularly to take into account any material changes in the assumptions. However, actual plugging costs in the long run will depend on future market prices for the necessary plugging work, which reflect market conditions at the time the work is being performed.
Moreover, the time of plugging depends on when the fields cease to have economically viable production rates, which, in turn, depends on the inherently uncertain future prices of oil and gas.
NOTE 22. DISCLOSURE OF CASH FLOW
The following items represent non-cash transactions and are presented for disclosure purposes:
For the years ended December 31, | ||||||||||||
2018 | 2017 | 2016 | ||||||||||
Investing activities | ||||||||||||
Available-for-sale financial assets(1) | — | 5,564,130 | 207,817 | |||||||||
Financing activities | ||||||||||||
Financed Public Works Contracts | — | — | 146,217,292 | |||||||||
Currency translation effect(2) | 846,191 | 6,096,459 | 21,386,903 | |||||||||
Accrued interest not charged(3) | 9,333,347 | 9,053,852 | 3,597,654 | |||||||||
Accrued interest unpaid(4) | 5,437,633 | 8,734,131 | 9,326,945 |
(1) | Due to the change in fair value of
|