Mexican Petroleum 6-K Current report (foreign)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM6-K

REPORT OF FOREIGN PRIVATE ISSUER

PURSUANT TO RULE13a-16 OR15d-16

UNDER THE SECURITIES EXCHANGE ACT OF 1934

For the month of September, 2019

Commission File Number0-99

PETRÓLEOS MEXICANOS

(Exact name of registrant as specified in its charter)

MEXICAN PETROLEUM

(Translation of registrant’s name into English)

United Mexican States

(Jurisdiction of incorporation or organization)

Avenida Marina Nacional No. 329

Colonia Verónica Anzures

11300 Ciudad de México

México

(Address of principal executive offices)

Indicate by check mark whether the registrant files or will file annual reports under cover of Form20-F or Form40-F.

Form20-F  ☒             Form40-F  ☐

Indicate by check mark if the registrant is submitting the Form6-K in paper as permitted by RegulationS-T Rule 101(b)(1)

Yes   ☐            No  ☒

Indicate by check mark if the registrant is submitting the Form6-K in paper as permitted by RegulationS-T Rule 101(b)(7)

Yes  ☐            No  ☒

Indicate by check mark whether the registrant by furnishing the information contained in this form is also thereby furnishing the information to the Commission pursuant to Rule12g3-2(b) under the Securities Exchange Act of 1934.

Yes  ☐            No  ☒

RECENT DEVELOPMENTS

The following discussion of PEMEX’s recent results should be read in conjunction with the annual report on Form20-F of Petróleos Mexicanos for the fiscal year ended December 31, 2018 as filed with the U.S. Securities and Exchange Commission (which we refer to as the SEC) on April 30, 2019 (which we refer to as the Form20-F) and, in particular, “Item 4—Information on the Company” and “Item 5—Operating and Financial Review and Prospects” in the Form20-F and with the unaudited condensed consolidated interim financial statements of PEMEX included in this report beginning on pageF-1. In this document, “PEMEX” refers to Petróleos Mexicanos, the following operating subsidiaries—Pemex Exploración y Producción (Pemex Exploration and Production), Pemex Transformación Industrial (Pemex Industrial Transformation), Pemex Logística (Pemex Logistics), Pemex Fertilizantes (Pemex Fertilizers), for periods prior to July 1, 2019, Pemex Perforación y Servicios (Pemex Drilling and Services) and Pemex Etileno (Pemex Ethylene), and, for periods prior to July 27, 2018, Pemex Cogeneración y Servicios (Pemex Cogeneration and Services) (which we refer to collectively as the subsidiary entities), and the subsidiary companies listed in Note 5 to the unaudited interim consolidated financial statements included herein. Petróleos Mexicanos hereby designates this report on Form6-K as being incorporated by reference into the Offering Circular dated April 17, 2018, relating to its U.S. $102,000,000,000 Medium-Term Notes Program, Series C, due 1 Year or More from Date of Issue, and the Prospectus dated November 16, 2018 filed pursuant to Rule 424(b)(3) (File/Film Number:333-227508 / 181190058).

Exchange Rates

On September 6, 2019, the noon buying rate for cable transfers in New York reported by the Board of Governors of the Federal Reserve System was Ps. 19.5575 = U.S. $1.00.

We maintain our consolidated financial statements and accounting records in Mexican pesos (pesos or Ps.). Unless otherwise indicated, we have translated all peso amounts to U.S. dollars in this report as of and for thesix-months ended June 30, 2019, including all convenience translations of our unaudited condensed consolidated interim financial statements included herein, at an exchange rate of Ps. 19.1685 = U.S. $1.00, which is the exchange rate that theSecretaría de Hacienda y Crédito Público (Ministry of Finance and Public Credit) instructed us to use on June 30, 2019, and all peso amounts to U.S. dollars in this report as of and for the year ended December 31, 2018 at an exchange rate of Ps. 19.6829 = U.S. $1.00, which is the exchange rate that the Ministry of Finance and Public Credit instructed us to use on December 31, 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.

Pemex Cogeneration and Services

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 theDiario Oficial de la Federación (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 assumed by, and transferred to, Pemex Industrial Transformation, and 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 July 27, 2018.

Government Equity Capital Contribution

On September 11, 2019, the Mexican Government announced that it will make an equity capital contribution in the amount of U.S. $5.0 billion (or its equivalent in Mexican pesos) to Petróleos Mexicanos. We intend to use these funds to reduce our overall indebtedness and manage the maturity profile of our debt. For more information on other recent support measures implemented by the Mexican Government, see “Liquidity and Capital Resources—Overview—Government Support.”

Pemex Drilling and Services and Pemex Ethylene

On July 25, 2019, as a result of the merger of Pemex Drilling and Services into Pemex Exploration and Production and of Pemex Ethylene into Pemex Industrial Transformation, the Board of Directors of Petróleos Mexicanos issued theDeclaratoria de Extinción de Pemex Perforación y Servicios(Declaration of Extinction of Pemex Drilling and Services) and theDeclaratoria de Extinción de Pemex Etileno(Declaration of Extinction of Pemex Ethylene), both of which were published in the Official Gazette of the Federation on July 30, 2019 and became effective on July 1, 2019. As of July 1, 2019, all of the assets, liabilities, rights and obligations of Pemex Drilling and Services were assumed by, and transferred to, Pemex Exploration and Production, and Pemex Exploration and Production became, as a matter of Mexican law, the successor to Pemex Drilling and Services. As of July 1, 2019, all of the assets, liabilities, rights and obligations of Pemex Ethylene were assumed by, and transferred to, Pemex Industrial Transformation, and Pemex Industrial Transformation became, as a matter of Mexican law, the successor to Pemex Ethylene. Pemex Drilling and Services and Pemex Ethylene were in turn dissolved effective as of July 1, 2019.

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Selected Financial Data

The selected financial data as of December 31, 2018 is derived from the audited consolidated financial statements of PEMEX included in the Form20-F. The selected financial data as of June 30, 2019 and for thesix-month periods ended June 30, 2018 and 2019 is derived from the unaudited condensed consolidated interim financial statements of PEMEX included in this report, which were prepared in accordance with International Accounting Standard (IAS) 34 “Interim Financial Reporting” (IAS 34).

For the year ended December 31, 2018, we recognized a net loss of Ps. 180.4 billion and had negative equity of Ps. 1,459.4 billion, which resulted in negative working capital of Ps. 54.7 billion. Cash flows from operating activities were Ps. 141.8 billion for the year ended December 31, 2018. These results have led us to state in our audited consolidated financial statements as of December 31, 2018 that there exists substantial doubt about our ability to continue as a going concern. As of and for thesix-month period ended June 30, 2019, we recognized a net loss of Ps. 88.5 billion and had negative equity of Ps. 1,673.0 billion. We had negative working capital of Ps. 175.5 billion as of June 30, 2019. We have disclosed the circumstances that have caused these negative trends and the actions we are taking to face them as noted below. See “Item 5—Operating and Financial Review and Prospects—Overview” and “Item 5—Operating and Financial Review and Prospects—Liquidity and Capital Resources” in the Form20-F and Note 2(c) to our unaudited condensed consolidated interim financial statements included herein. As of December 31, 2018, June 30, 2019 and the date hereof, there exists substantial doubt about our ability to continue as a going concern. However, we continue operating as a going concern for the reasons described herein, including in our unaudited condensed consolidated interim financial statements.

Accordingly, we have prepared our unaudited condensed consolidated interim financial statements on a going concern basis, which assumes that we can meet our payment obligations.

In this report we include selected financial data from our statement of financial position as of June 30, 2019 and from our statement of comprehensive income and our statement of cash flows for thesix-month period ended June 30, 2019. In addition, we include selected financial data from our statement of financial position as of December 31, 2018, as well as the statement of comprehensive income and the statement of cash flows for thesix-month period ended June 30, 2019 for comparison purposes.

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SELECTED FINANCIAL DATA OF PEMEX

	As of and for the period ended(1)
	December 31,			June 30,(2)
	2018			2018			2019
	(millions of pesos, except ratios)
Statement of Comprehensive Income Data
Net sales		Ps. 1,681,119			Ps. 833,570			Ps. 732,900
Operating income		367,400			227,279			113,487
Financing income		31,557			10,970			7,079
Financing cost		(120,727	)		(56,973	)		(61,297	)
Derivative financial instruments (cost) income —Net		(22,259	)		(9,293	)		(4,980	)
Exchange gain (loss) —Net		23,659			2,505			52,827
Net (loss) income for the period		(180,420	)		(49,860	)		(88,509	)
Statement of Financial Position Data (end of period)
Cash and cash equivalents		81,912			n.a.			44,419
Total assets		2,075,197			n.a.			2,021,266
Long-term debt		1,890,490			n.a.			1,721,702
Total long-term liabilities		3,086,826			n.a.			3,193,300
Total (deficit) equity		(1,459,405	)		n.a.			(1,673,009	)
Statement of Cash Flows
Depreciation and amortization		153,382			73,925			72,642
Acquisition of wells, pipelines, properties, plant and equipment(3)		(94,004	)		(32,524	)		(31,132	)

Note: n.a. = Not applicable.

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

(2) Unaudited.

(3) Includes capitalized finance cost.

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

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Capitalization of PEMEX

The following table sets forth the capitalization of PEMEX as of June 30, 2019.

	As of June 30, 2019(1)(2)
	(millions of pesos or U.S. dollars)
Long-term leases(3)	Ps.	92,139		U.S.$	4,807
Long-term external debt		1,525,444			79,581
Long-term domestic debt		196,258			10,239
Total long-term debt(4)		1,721,702			89,820
Total long-term leases and long-term debt		1,813,841			94,627
Certificates of Contribution “A”(5)		381,544			19,905
Mexican Government contributions to Petróleos Mexicanos		43,731			2,281
Legal reserve		1,002			52
Accumulated other comprehensive result		(78,144	)		(4,077	)
Accumulated deficit from prior years		(1,933,107	)		(100,848	)
Net (loss) income for the period(6)		(88,405	)		(4,612	)
Total controlling interest		(1,673,379	)		(87,299	)
Totalnon-controlling interest		370			19
Total (deficit) equity		(1,673,009	)		(87,280	)
Total capitalization	Ps.	140,832		U.S.$	7,347

Note: Numbers may not total due to rounding.

(1) Unaudited. Convenience translations into U.S. dollars of amounts in pesos have been made at the established exchange rate of Ps. 19.1685 = U.S. $1.00 as of June 30, 2019. Such translations should not be construed as a representation that the peso amounts have been or could be converted into U.S. dollar amounts at the foregoing or any other rate.

(2) As of June 30, 2019, there has been no material change in the capitalization of PEMEX since December 31, 2018, except for our undertaking of new financings disclosed under “Liquidity and Capital Resources—Recent Financing Activities” in this report.

(3) Total long-term leases does not include short-term leases of Ps. 7,232 million (U.S. $377 million) as of June 30, 2019.

(4) Total long-term debt does not include short-term indebtedness of Ps. 279,220 million (U.S. $14,567 million) as of June 30, 2019.

(5) Equity instruments held by the Federal Government of Mexico (which we refer to as the Mexican Government).

(6) Excluding amounts attributable tonon-controlling interests of Ps. 104.0 million.

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

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Operating and Financial Review and Prospects

Results of Operations of PEMEX—For the six months ended June 30, 2019 compared to the six months ended June 30, 2018

General

The selected consolidated interim financial information set forth below is derived from our unaudited condensed consolidated interim financial statements included elsewhere in this report. This interim financial information should be read in conjunction with the Form20-F and, in particular, “Item 4—Information on the Company” and “Item 5—Operating and Financial Review and Prospects” in the Form20-F, and with the unaudited condensed consolidated interim financial statements of PEMEX included in this report beginning on pageF-1.

	Six months ended June 30,(1)
	2018			2019(2)
	(millions of pesos or U.S. dollars)
Net Sales
Domestic		Ps. 492,040			Ps. 416,531		U.S.$	21,730
Export		337,242			311,469			16,249
Services income		4,287			4,899			256
Total sales		833,569			732,899			38,235
Impairment (reversal) of wells, pipelines, properties, plant and equipment, net		(42,360	)		9,598			501
Cost of sales		580,975			538,731			28,105
Gross income		294,954			184,570			9,629
Other revenues—Net		7,724			5,854			305
Transportation and distribution expenses		11,199			11,043			576
Administrative expenses		64,201			65,894			3,438
Operating income		227,278			113,487			5,920
Financing income		10,970			7,079			369
Financing cost		(56,973	)		(61,297	)		(3,198	)
Derivative financial instruments (cost)—Net		(9,293	)		(4,980	)		(260	)
Foreign exchange gain—Net		2,505			52,827			2,756
Loss (profit) sharing in joint ventures and associates		848			(15	)		(1	)
Income before taxes, duties and other		175,335			107,101			5,586
Total taxes, duties and other		225,196			195,609			10,205
Net income (loss) for the period		(49,861	)		(88,508	)		(4,619	)
Other comprehensive results for the period		5,402			(150,094	)		(7,830	)
Comprehensive result for the period		Ps. (44,459)			Ps. (238,602)		U.S.$	(12,449	)

Note: Numbers may not total due to rounding.

(1) Unaudited.

(2) Convenience translations into U.S. dollars of amounts in pesos have been made at the established exchange rate of Ps. 19.1685 = U.S. 1.00 at June 30, 2019. Such translations should not be construed as a representation that the peso amounts have been or could be converted into U.S. dollars at the foregoing or any other rate.

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

Results of Operations of Petróleos Mexicanos, the Subsidiary Entities and the Subsidiary Companies—in the first six months of 2019 as compared to the first six months of 2018

Total Sales

Total sales decreased by 12.1% or Ps. 100.7 billion in the first six months of 2019, from Ps. 833.6 billion in the first six months of 2018 to Ps. 732.9 billion in the first six months of 2019, mainly due to a 15.3% decrease in domestic sales, as further discussed below.

Domestic Sales

Domestic sales decreased by 15.3% in the first six months of 2019, from Ps. 492.0 billion in the first six months of 2018 to Ps. 416.5 billion in the first six months of 2019, mainly due to decreases in the sales prices of gasoline, diesel, and liquefied petroleum gas. Domestic sales of petroleum products decreased by 12.7% in the first six months of 2019, from Ps. 423.2 billion in the first six months of 2018 to Ps. 369.3 billion in the first six months of 2019, mainly due to a 6.4% decrease in the average price of gasoline and a 3.7% decrease in the average price of diesel. The sales volume of diesel, gasoline and fuel oil decreased 9.7%, 6.9% and 20.6%, respectively, in the first six months of 2019 as compared to the same period in 2018, as a result of decreased demand, which in turn was primarily the result of an increase in average sales prices.

Domestic sales of natural gas decreased by 42.3% in the first six months of 2019, from Ps. 27.4 billion in the first six months of 2018 to Ps. 15.8 billion in the first six months of 2019, mainly due to a 56.3% decrease in its average sales price.

Domestic sales of liquefied petroleum gas (LPG) decreased by 32.3% in the first six months of 2019, from Ps. 26.3 billion in the first six months of 2018 to Ps. 17.8 billion in the first six months of 2019, mainly as a result of a 24.4% decrease in its average sales price.

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Export Sales

Export sales decreased by 7.6% in peso terms in the first six months of 2019 (with U.S. dollar-denominated export revenues translated to pesos at the exchange rate on the date of the corresponding export sale) from Ps. 337.2 billion in the first six months of 2018 to Ps. 311.5 billion in the first six months of 2019. This decrease was mainly due to a 4.3% decrease in the weighted average Mexican export crude oil price in the first six months of 2019, compared to the first six months of 2018. From January 1, 2018 to June 30, 2018, the weighted average Mexican export crude oil price was U.S. $61.40 per barrel, compared to U.S. $58.73 per barrel in the same period of 2019.

Crude oil and condensate sales decreased by 9.2%, from Ps. 251.1 billion in the first six months of 2018 to Ps. 228.1 billion in the first six months of 2019, and in U.S. dollar terms decreased by 7.6%, from U.S. $13.2 billion in the first six months of 2018 to U.S. $12.2 billion in the first six months of 2019. The weighted average price per barrel of crude oil exports in the first six months of 2019 was U.S. $58.73, 4.3% lower than the weighted average price of U.S. $61.40 in the first six months of 2018.

Export sales of petroleum products, including products derived from natural gas and natural gas liquids decreased by 32.4%, from Ps. 29.3 billion in the first six months of 2018 to Ps. 19.8 billion in the first six months of 2019, primarily due to a decrease in the average sales price of fuel oil and naphthas.

For thesix-month period ended June 30, 2019, the average exchange rate of the U.S. dollar against the Mexican peso was Ps. 19.1724 to U.S. $1.00, compared to Ps. 19.0653 to U.S. $1.00 during the same period of 2018, representing a depreciation of the Mexican peso against the U.S. dollar by Ps. 0.1071 (or 0.6%), which had a favorable effect on our export sales of Ps. 3.5 billion.

Service Income

Service income increased by 13.9% in the first six months of 2019, from Ps. 4.3 billion in the first six months of 2018 to Ps. 4.9 billion in the first six months of 2019, mainly as a result of an increase in transportation services provided by Pemex Logistics to third parties.

Net Impairment of Wells, Pipelines, Properties, Plant and Equipment

Net impairment of wells, pipelines, properties, plant and equipment increased by Ps. 52.0 billion in the first six months of 2019 as compared to the first six months of 2018, from recognition of a net reversal of impairment of Ps. 42.4 billion as of June 30, 2018 to a net impairment of Ps. 9.6 billion as of June 30, 2019.

For the six-month period ended June 30, 2019, we recognized a net impairment, which was mainly due to (1) an impairment of Ps. 50.9 billion in the cash generating units of Pemex Exploration and Production, as a result of (i) a natural decline in production of Ps. 32.2 billion of the Cantarell, Chuc, Tsimin Xux, Crudo Ligero Marino and Burgos projects and (ii) a decrease in crude oil and gas prices of Ps. 43.5 billion and (iii) effects of the appreciation of the peso against the U.S. dollar from a peso/U.S. dollar exchange rate of Ps. 19.6829 = U.S. $1.00 as of December 31, 2018 to a peso/U.S. dollar exchange rate of Ps. 19.1685 = U.S. $1.00 as of June 30, 2019 of Ps. 3.9. This impairment was partially offset by (1) a reversal of impairment of Ps. 39.8 billion in the cash generating units of Pemex Logistics, mainly due to (i) a decrease innon-operating losses of 84%, from Ps. 16.9 billion as of June 30, 2018 to Ps. 2.7 billion as of June 30, 2019 and (ii) a decrease in the discount rate, from 13.55% at December 31, 2018 to 12.90% at June 30, 2019 and (2) a net reversal of impairment of Ps. 1.6 billion in the cash generating units of Pemex Industrial Transformation, mainly due to (i) an increase in processing of refined products due to maintenance of our refineries carried out in 2018, (ii) a decrease in the discount rate of cash generating units of refined products, petrochemicals and gas of 0.5%, 2.6% and 0.7%, respectively. See Note 13(d) to our unaudited condensed consolidated interim financial statements included herein.

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As of June 30, 2018, we recognized a net reversal of impairment in the cash generating units of Pemex Exploration and Production of Ps. 36.7 billion, as a result of a reversal of impairment of Ps. 38.2 billion mainly due to (i) a 9.3% increase in the forward price of crude oil, from U.S. $55.89 per barrel as of December 31, 2017 to U.S. $61.08 per barrel as of June 30, 2018, (ii) improvements in the crude oil projects with the highest oil output, including Aceite Terciario del Golfo in Cantarell, as well as the Tsimin Xux, Antonio J. Bermúdez, Crudo Ligero Marino and Cuenca de Macuspana projects and (iii) the direct assignment of transportation and hydrocarbon treatment of service goods in theKu-Maloob-Zaap project, which contributed to the Cantarell project having lower charges for the distribution of goods and services. The foregoing was offset by an impairment of Ps. 1.5 billion in the Burgos and Lakach projects, mainly due to a 15.2% decrease in the price of gas, from U.S. $4.92 per million cubic feet as of December 31, 2017 to U.S. $4.17 per million cubic feet as of June 30, 2018 and (ii) an increase in the discount rate of 2%, as compared to December 31, 2017.

As of June 30, 2018, we also recognized a net reversal of impairment in the cash generating units of Pemex Industrial Transformation of Ps. 7.8 billion, primarily due to (i) an increase in income related to transportation fees, (ii) the appreciation of the U.S. dollar against the peso, from a peso/U.S. dollar exchange rate of Ps. 19.7867 = U.S. $1.00 as of December 31, 2017 to a peso/U.S. dollar exchange rate of Ps. 19.8633 = U.S. $1.00 as of June 30, 2018 and (iii) an increase in the discount rate of cash generating units of refined products, gas and aromatics by 0.2%, 5% and 0.3%, respectively. The impairment of the Salina Cruz refinery resulted from cash flows being insufficient to cover the net value of the assets, mainly due to the temporary closing of operations for major maintenance of the refinery’s plants.

In addition, as of June 30, 2018, we recognized an impairment of Ps. 2.2 billion in the cash generating units of Pemex Fertilizers, primarily due to (i) a decrease in the operations of our productive plants; (ii) an increase in the price of raw material and (iii) the increase in the sale price being insufficient to cover the increase in operating costs.

Cost of Sales

Cost of sales decreased by 7.3%, from Ps. 581.0 billion in the first six months of 2018 to Ps. 538.7 billion in the first six months of 2019. This decrease was mainly due to (1) a decrease of Ps. 50.5 billion in import purchases, primarily Magna gasoline, Premium gasoline, diesel and natural gas, due to a decrease in the average prices of these products and a decrease in the volume of imports to meet demand in the domestic market and (2) a Ps. 7.2 billion decrease in taxes and duties on exploration and extraction of hydrocarbons resulting from lower average sales prices in the first six months of 2019 compared to the first six months of 2018. This decrease was partially offset by (1) a Ps. 12.0 billion increase in the commercial activities of P.M.I. Comercio Internacional, S. A. de C. V., P.M.I. Norteamérica, S. A. de C. V., P.M.I. Trading DAC and Mex Gas Internacional, S. L. (which we refer to as the Trading Companies) and (2) a Ps. 6.3 billion increase in operating expenses.

Operating Expenses

Total operating expenses (including distribution, transportation, sales expenses and administrative expenses) increased by 2.0%, from Ps. 75.4 billion for the first six months of 2018 to Ps. 76.9 billion for the first six months of 2019, mainly due to an increase in administrative expenses relating to the periodic cost of employee benefits.

Other Revenues / Expenses, Net

Other revenues, net, decreased by Ps. 1.9 billion in the first six months of 2019, from net revenues of Ps. 7.7 billion in the first six months of 2018 to net revenues of Ps. 5.8 billion in the first six months of 2019. This decrease was mainly due to the recognition in 2018 of income from contracts for participation rights in the Cárdenas-Mora, Misión, Santuario and Ogarrio blocks that was not present in the same period in 2019.

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Financing Income

Financing income decreased by Ps. 3.9 billion in the first six months of 2019, from Ps. 11.0 billion in the first six months of 2018 to Ps. 7.1 billion in the first six months of 2019. This decrease was mainly due to theone-time recognition of the premium from certain notes exchanged in February 2018. See “Item 5—Operating and Financial Review and Prospects—Liquidity and Capital Resources—Financing Activities” in the Form20-F.

Financing Costs

Financing costs increased by Ps. 4.3 billion in the first six months of 2019, from Ps. 57.0 billion in the first six months of 2018 to Ps. 61.3 billion in the first six months of 2019, mainly due to an increase in interest expenses in the first six months of 2019 as a result of higher levels of indebtedness resulting from foreign currency exchange rate effects.

Derivative Financial Instruments (Cost), Net

Derivative financial instruments (cost) income, net, decreased by Ps. 4.3 billion, from a derivative financial instruments cost of Ps. 9.3 billion in the first six months of 2018 to a derivative financial instruments cost of Ps. 5.0 billion in the first six months of 2019, mainly as a result of embedded derivative gains in crude oil sales transactions.

Foreign Exchange Gain, Net

A substantial portion of our debt (86.7%) as of June 30, 2019 is denominated in foreign currency. Foreign exchange income increase by Ps. 50.3 billion, from a foreign exchange income of Ps. 2.5 billion in the first six months of 2018 to a foreign exchange income of Ps. 52.8 billion in the first six months of 2019, primarily as a result of the appreciation of the peso against the U.S. dollar for the first six months of 2019 as compared to the first six months of 2018. The value of the peso in U.S. dollar terms depreciated by 0.4% from Ps. 19.7867 to U.S. $1.00 as of December 31, 2017 to Ps. 19.8633 to U.S. $1.00 as of June 30, 2018, as compared to a 2.6% appreciation of the peso in U.S. dollar terms from Ps. 19.6829 to U.S. $1.00 as of December 31, 2018 to Ps. 19.1685 to U.S. $1.00 as of June 30, 2019.

Taxes, Duties and Other

The profit-sharing duty and other duties and taxes paid decreased by 13.1% in the first six months of 2019, from Ps. 225.2 billion in the first six months of 2018 to Ps. 195.6 billion in the first six months of 2019, mainly due to the 4.3% decrease in the weighted average export price of Mexican crude oil, from U.S. $61.40 per barrel in the first six months of 2018 to U.S. $58.73 per barrel in the first six months of 2019. Duties and taxes represented 26.7% and 27.0% of total sales in the first six months of 2019 and 2018, respectively.

Net Income/Loss

In the first six months of 2019, we had a net loss of Ps. 88.5 billion, as compared to a net loss of Ps. 49.9 billion in the first six months of 2018.

This decrease was mainly the result of (1) a Ps. 50.5 billion decrease in purchases for resale, mainly due to a decrease in gasoline and diesel imports, (2) a Ps. 50.3 billion gain in foreign exchange, mainly due to the appreciation of the peso against the U.S. dollar, (3) a Ps. 29.6 billion decrease in taxes and duties, mainly due to a decreases in hydrocarbon production and prices and (4) a Ps. 14.2 billion increase in savings, mainly due to a 83.8% decrease innon-operating losses from fuel theft.

These effects were partially offset by (1) a Ps. 100.7 billion decrease in total sales, mainly due to a decrease in prices of gasoline and diesel and a decrease in the volume of Mexican crude oil exports and (2) a Ps. 52.0 billion increase in net impairment of wells, pipelines, properties, plant and equipment.

Other Comprehensive Results

In the first six months of 2019, we reported a net loss of Ps. 150.1 billion in other comprehensive results as compared to net income of Ps. 5.4 billion in the first six months of 2018, mainly due to an increase in the employee benefits reserve as a result of the discount rate analysis related to employee benefits liability. For the six-month period ended June 30, 2019, PEMEX recognized net actuarial losses in other comprehensive income (loss) net of deferred income tax for Ps. 149.0 billion, related to retirement and post-employment benefits as a result of a decrease in discount and return on plan assets’ rates, which mainly took place in the second quarter of 2019.

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Changes in the Statement of Financial Position of Petróleos Mexicanos, the Subsidiary Entities and the Subsidiary Companies—from December 31, 2018 to June 30, 2019

Assets

Cash and cash equivalents decreased by Ps. 37.5 billion, or 45.8%, in the first six months of 2019, from Ps. 81.9 billion as of December 31, 2018 to Ps. 44.4 billion as of June 30, 2019, mainly due to an increase in payments to suppliers and contractors and payments on our debt instruments and taxes.

Accounts receivable, net, increased by Ps. 14.8 billion, or 8.9%, in the first six months of 2019, from Ps. 167.1 billion as of December 31, 2018 to Ps. 181.9 billion as of June 30, 2019, mainly due to (i) a Ps. 10.2 billion increase in accounts receivable from sundry debtors, mainly in the form of reimbursements for fees charged for customs related services and (ii) a Ps. 3.8 billion increase in accounts receivable from sales to domestic customers.

The current portion of our promissory notes decreased by Ps. 33.4 billion, or 87.4% in the first six months of 2019, from, Ps. 38.2 billion as of December 31, 2018 to Ps. 4.8 billion as of June 30, 2019, mainly due to payments of the current portion of four promissory notes with original maturities ranging from 2039 to 2042.

Wells, pipelines, properties, plant and equipment, net, decreased by Ps. 71.2 billion, or 5.1%, in the first six months of 2019 mainly due to (i) Ps. 69.0 billion in depreciation, (ii) Ps. 1.0 billion of disposals of wells, pipelines, properties, plant and equipment, (iii) the recognition of an impairment of Ps. 9.6 billion and (iv) the recognition ofright-of-use assets in the amount of Ps. 24.2 billion pursuant to the implementation of the new accounting standard IFRS 16 “Leases” (IFRS 16). This decrease was partially offset by Ps. 32.6 billion of acquisitions of wells, pipelines, properties, plant and equipment. See Note 13 to our unaudited condensed consolidated interim financial statements included herein.

As of January 1, 2019, we applied IFRS 16. As a result of the initial adoption of this standard, we recognized Ps. 88.9 billion ofright-of-use assets as of June 30, 2019. See Note 4 to our unaudited condensed consolidated interim financial statements included herein.

Derivative financial instruments decreased by Ps. 2.7 billion in the first six months of 2019, from Ps. 22.4 billion as of December 31, 2018 to Ps. 19.7 billion as of June 30, 2019, mainly due to the decrease in the value of favorable cross-currency swaps by the appreciation of the U.S. dollar against most of the currencies for which we are covered, as well as a decrease in the value of crude oil options and currency options.

Liabilities

Total debt, including accrued interest, decreased by Ps. 81.4 billion, or 3.9%, from Ps. 2,082.3 billion as of December 31, 2018 to Ps. 2,000.9 billion as of June 30, 2019, mainly due to the impact of the 2.6% appreciation of the peso against the U.S. dollar in the first six months of 2019 and the reclassification of financial leases to separate line items—short-term leases and long-term leases—pursuant to the adoption of IFRS 16.

Liabilities to suppliers and contractors decreased by Ps. 20.8 billion, or 13.9%, from Ps. 149.8 billion as of December 31, 2018 to Ps. 129.1 billion as of June 30, 2019, mainly due to payments made in the period.

10

Taxes and duties payable decreased by Ps. 21.0 billion, or 32.2%, in the first six months of 2019, from Ps. 65.3 billion as of December 31, 2018 to Ps. 44.3 billion as of June 30, 2019, mainly due to a Ps. 7.7 billion decrease in theDerecho por la Utilidad Compartida (Profit-sharing Duty) and a Ps. 10.6 billion decrease in theImpuesto Especial sobre Producción y Servicios (Special Tax on Production and Services, or IEPS Tax) on the sale of automotive fuels due to the decrease in automotive fuel sales.

Derivative financial instruments liabilities increased by Ps. 0.6 billion, or 3.8%, in the first six months of 2019, from Ps. 15.9 billion as of December 31, 2018 to Ps. 16.5 billion as of June 30, 2019. This increase was mainly due to the increase in the fair value of cross-currency swaps.

Employee benefits liabilities increased by Ps. 185.3 billion, or 17.1%, in the first six months of 2019, from Ps. 1,080.5 billion as of December 31, 2018 to Ps. 1,265.8 billion as of June 30, 2019. This increase was mainly due to the recognition of the increased net cost for the period.

As of January 1, 2019, we applied IFRS 16 and recognized short-term leases and long-term leases in the amount of Ps. 99.4 billion as of June 30, 2019. See Note 4 to our unaudited condensed consolidated interim financial statements included herein.

Equity (Deficit), Net

Deficit, net, increased by Ps. 213.6 billion, or 14.6%, from a deficit of Ps. 1,459.4 billion as of December 31, 2018 to a deficit of Ps. 1,673.0 billion as of June 30, 2019. This increase in deficit was mainly due to Ps. 88.5 billion in net loss and Ps. 150.1 billion in other comprehensive loss, including currency translation effect and employee benefits actuarial losses for the first six months of 2019, partially offset by a Ps. 25.0 billion increase in Certificates of Contribution “A” from the Mexican Government as of June 30, 2019.

Liquidity and Capital Resources

Overview

During the first six months of 2019, our liquidity position was adversely affected mainly due to the increase in our short-term debt due to the transfer from long-term debt. This negative impact to our liquidity position was offset by an increase in accounts receivable due to the increase in oil prices in the first quarter of 2019 compared to oil prices in the same period of 2018 and a decrease in the balance of accounts payable to suppliers in the first six months of 2019 due to payments made by us.

Our principal uses of new funds in the first six months of 2019 were primarily the payment of debt maturities due during the same period and strengthening our cash flow through the actions listed below. We met this requirement primarily with cash provided by cash flows from borrowings, which amounted to Ps. 420.3 billion. During the first six months of 2019, our net cash flow used in operating activities amounted to Ps. 2.5 billion and our net cash flow used in investing activities amounted Ps. 36.4 billion, which included cash flow from investing activities of Ps. 4.8 billion (other notes receivable) and cash flow used in investing activities of Ps. 41.2 billion in the acquisition of wells, pipelines, properties, plant and equipment and intangible assets.

For 2019, we forecasted a 64.5% increase in capital expenditures as compared to the amounts spent on capital expenditures in 2018. Our budget for 2019 includes a total of Ps. 273.1 billion for capital expenditures, includingnon-capitalizable maintenance. Our capital expenditures budget net ofnon-capitalizable maintenance is Ps. 159.1 billion. We expect to direct Ps. 98.2 billion (or 61.7% of our total capital expenditures net ofnon-capitalizable maintenance) to exploration and production programs in 2019. This investment in exploration and production activities reflects our focus on maximizing the potential of our hydrocarbon reserves and our most productive projects. In addition, in 2019 we expect to direct Ps. 57.5 billion (or 36.1% of our total capital expenditures net ofnon-capitalizable maintenance) to our industrial transformation segment, in particular to the construction of our new Dos Bocas refinery. With this budget, our management expects that we will be able to maintain our medium- and long-term growth plans without the need to incur more indebtedness than the amount included in our approved financing program for 2019.

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As of June 30, 2019, we owed our suppliers Ps. 129.1 billion, as compared to Ps. 149.8 billion as of December 31, 2018. As a result of the decrease in 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 2019 because, in collaboration with the Mexican Government, we have begun to implement initiatives intended to help us meet our working capital needs, continue to service our debt as it comes due and improve our capital expenditure programs, as further described below:

• Our New Business Plan.On July 16, 2019, we announced our business plan for 2019 through 2023, which we refer to as our 2019-2023 Business Plan. The 2019-2023 Business Plan is described below.

• Government Support.The Mexican Government has announced that, as part of itsPrograma de Fortalecimiento de Petróleos Mexicanos (Strengthening Program for Petróleos Mexicanos), it would provide a support program to help improve our financial position and increase our production and, in turn, our profitability. In connection with this program, from January 1, 2019 to the date hereof, the Mexican Government made a Ps. 25.0 billion equity contribution to Petróleos Mexicanos, which was recognized as an increase in Certificates of Contribution “A”. On May 13, 2019, theSecretaría de Hacienda y Crédito Público (Ministry of Finance and Public Credit) announced that it would increase the fiscal incentives available to us in 2019, which are expected to reduce our tax burden for this fiscal year by approximately Ps. 30.0 billion.

• Modified Financing Strategy.We intend to continue our strategy of decreased reliance on debt financing and we expect further liability management transactions in 2019 will allow us to improve the terms of our outstanding debt, in line with our objective of reducing our net debt. As part of this strategy, we entered into a commitment letter with three financial institutions on May 13, 2019 to renew and refinance our current lines of credit with maturity dates in 2019 and early 2020. The commitment letter contemplates refinancing of our existing lines of credit in an aggregate amount of U.S $8.0 billion.

• Crude Oil Hedge Program. We continue to carry out our crude oil hedge program in order to partially protect our cash flows from decreases in the price of Mexican crude oil.

• No Payment of Dividend.The Mexican Government announced that we were not required to pay a state dividend in 2018 and we will not be required to pay one in 2019.

TheLey de Ingresos de la Federación para el Ejercicio Fiscal de 2019 (the Federal Revenue Law for the Fiscal Year 2019) applicable to us as of January 1, 2019 provides for the incurrence of up to Ps. 112.8 billion of net indebtedness through a combination of domestic and international capital markets offerings and borrowings from domestic and international financial institutions.

We have a substantial amount of debt. Due to our heavy tax burden, our cash flow from operations in recent years has not been sufficient to fund our capital expenditures and other expenses and, accordingly, our debt has significantly increased and our working capital has deteriorated. Relatively low oil prices and declining production have also had a negative impact on our ability to generate positive cash flows, which, together with our heavy tax burden, has further exacerbated our ability to fund our capital expenditures and other expenses. Despite the relatively low and fluctuating oil prices and our heavy tax burden, our cash flow from operations in 2018, together with our funds from financing activities, was sufficient to fund our capital expenditures and other expenses. We expect that net cash flows from our operations and financing activities will also be sufficient to meet our working capital requirements, debt service and capital expenditures for 2019.

As of June 30, 2019, our total indebtedness, including accrued interest, was Ps. 2,000.9 billion (U.S. $104.4 billion), in nominal terms, which represents a 3.9% decrease in peso terms compared to our total indebtedness, including accrued interest, of Ps. 2,082.3 billion (U.S. $105.8 billion) as of December 31, 2018. As of June 30, 2019, 34.0% of our existing debt, or Ps. 681.1 billion (U.S. $35.5 billion), including accrued interest, is scheduled to mature in the next three years. Our working capital decreased from a negative working capital of Ps. 54.7 billion (U.S. $2.8 billion) as of December 31, 2018 to a negative working capital of Ps. 175.4 billion (U.S. $9.2 billion) as of June 30, 2019. 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 refinancing of existing indebtedness). In addition, we are taking actions to improve our financial position, as discussed above.

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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. 1,265.8 billion (U.S. $66.0 billion) and Ps. 1,080.5 billion (U.S. $54.9 billion) as of June 30, 2019 and December 31, 2018, respectively; (7) the persistence of our operating expenses amid 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 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-. On June 6, 2019, Moody’s Investors Service announced the revision of its outlook for our global local currency credit rating from stable to negative and affirmed our global foreign currency rating as Baa3 and our global local currency credit rating as Aa3. On June 6, 2019, Fitch Ratings lowered our credit rating fromBBB- to BB+ (one step below investment grade) in both global local and global foreign currency and affirmed the outlook for our credit ratings as negative.

Any further lowering of our credit ratings 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 operate our business and meet our existing obligations, financial condition and results of operations.

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.

Going Concern

Our unaudited condensed consolidated interim financial statements have been prepared on a going concern basis, which assumes that we can meet our payment obligations. As we describe in Note 2(c) to our unaudited condensed consolidated interim financial statements included herein, there exists substantial doubt about our ability to continue as a going concern. We discuss the circumstances that have caused these negative trends, as well our plans in regard to these matters in Note 2(c) to our unaudited condensed consolidated interim financial statements included herein. We intend to continue taking actions to improve our results of operations, capital expenditure plans and financial condition. We continue operating as a going concern, and our consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

New Business Plan

On July 16, 2019, we announced our 2019-2023 Business Plan. The 2019-2023 Business Plan was approved by the Board of Directors of Petróleos Mexicanos. The 2019-2023 Business Plan describes, among other things, the proposed foundations for our modernization, which are intended to increase our competitiveness and improve our long-term financial viability, while addressing structural issues related to our fiscal burden and level of indebtedness.

The 2019-2023 Business Plan sets forth certain objectives we hope to achieve with respect to our operations. We intend to accelerate and increase the development of oil and gas reserves and to increase hydrocarbons production both in newly discovered reservoirs and fields currently in operation. For newly discovered reservoirs, we plan to increase production by focusing oneasy-to-access shallow waters and terrestrial areas, as well as working to reduce the time between discovery and first production. For fields currently in operation, we intend to increase production by developing new wells and undertaking major repairs. The 2019-2023 Business Plan also contemplates the gradual expansion of our refining capacity for fuel and petrochemical production through, among other things, increased investment in the rehabilitation of the National Refining System and the construction of a new refinery in Dos Bocas, Tabasco. We believe that this increase in investment supports the gradual recovery of domestic crude oil processing in the coming years. Furthermore, we plan to develop our transportation, storage and distribution infrastructure with the aim of accommodating our planned production growth, to update measuring, monitoring and quality control systems relating to pipeline transport and storage terminals and to continue our work to reduce product loss and infrastructure damages relating to fuel theft. Finally, the 2019-2023 Business Plan proposed to encourage the participation of the private sector in our operations through long-term service contracts for oil production (contratos de servicios de largo plazo para la producción del petróleo, or CSIEEs), which will be incentive-based and have terms between 15 and 25 years. CSIEE contracts are expected to replace farm-outs as a vehicle for private sector involvement, although existingfarm-out arrangements will be maintained for the duration of their respective terms.

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The 2019-2023 Business Plan also sets forth certain objectives relating to our financial position. It describes our intent not to increase our net indebtedness over the period covered by the plan by relying on revenues generated from increased production throughout the value chain and reducing our reliance on external sources of financing. Through this strategy and the achievement of our operational objectives, our goal is to generate a financial balance surplus by 2021. Following the achievement of a financial balance surplus, the 2019-2023 Business Plan contemplates the gradual reduction of our net indebtedness. For more information on our financial balance goal, see “Item 4—Information on the Company—General Regulatory Framework” in the Form20-F.

The Mexican Government has announced it plans to support the objectives set forth in the 2019-2023 Business Plan by reducing our tax burden and providing capital contributions. The Mexican Government plans to reduce theDerecho por la Utilidad Compartida (Profit-Sharing Duty), the most significant tax we pay, from 65% to 54% by 2021. We intend to invest the tax savings resulting from this adjustment in the exploration and production activities described above. In addition, the Mexican Government has announced it plans to make capital contributions to PEMEX. See “Liquidity and Capital Resources—Overview—Government Support” above.

Cash Flows from Operating, Investing and Financing Activities

During the first six months of 2019, net funds used in operating activities totaled Ps. 2.5 billion, as compared to net funds provided by operating activities of Ps. 64.2 billion in the first six months of 2018. During the first six months of 2019, our net cash flows used in investing activities totaled Ps. 36.4 billion, as compared to net cash flows used in investing activities of Ps. 35.3 billion in the first six months of 2018. During the first six months of 2019, new financings totaled Ps. 420.3 billion and payments of principal and interest totaled Ps. 474.5 billion, as compared to Ps. 449.9 billion and Ps. 473.2 billion, respectively, during the first six months of 2018. During the first six months of 2019, we applied net funds of Ps. 31.1 billion to acquisitions of wells, pipelines, properties, plant and equipment, as compared to Ps. 32.5 billion in the first six months of 2018.

As of June 30, 2019, our cash and cash equivalents totaled Ps. 44.4 billion, as compared to Ps. 81.9 billion as of December 31, 2018. See Note 8 to our unaudited condensed consolidated interim financial statements included herein for more information about our cash and cash equivalents.

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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 June 30, 2019 and December 31, 2018.

	As of
	June 30, 2019		December 31, 2018
	(millions of pesos)
Borrowing base under lines of credit		Ps.  65,030		Ps.152,170
Cash and cash equivalents		44,419		81,912
Liquidity		Ps.109,449		Ps.235,082

Our lines of credit are fully committed and accordingly available at any time.

The following table summarizes our sources and uses of cash for thesix-month periods ended June 30, 2019 and 2018:

	For the six-month period ended June 30,
	2019			2018
	(millions of pesos)
Net cash flows (used in) from operating activities		Ps.  (2,451	)		Ps.  64,248
Net cash flows (used in) from investing activities		(36,387	)		(35,312	)
Net cash flows from (used in) financing activities		2,470			(23,269	)
Effect of change in cash value		(1,125	)		5,988
Net increase (decrease) in cash and cash equivalents		Ps.(37,493	)		Ps.  11,655

Note: Numbers may not total due to rounding.

Recent Financing Activities

During the period from May 1, 2019 to September 9, 2019, Petróleos Mexicanos participated in the following financing activities:

• On June 19, 2019, Petróleos Mexicanos entered into a credit line of Ps. 5.0 billion at a rate to TIIE plus 115 basis points, due July 2019.

• On June 28, 2019, Petróleos Mexicanos entered into a U.S. $5.5 billion revolving credit facility due 2024 and a U.S. $2.5 billion term loan facility due 2024.

During the period from May 1, 2019 to September 6, 2019, Holdings Holland Services, B.V. (formerly P.M.I. Holdings B.V.), as debtor, obtained U.S. $7,737 million in financing from its revolving credit lines and repaid U.S. $8,442 million. As of April 30, 2019, the outstanding amount was U.S. $ 705 million. As of September 6, 2019, there was no outstanding amount.

As of June 30, 2019 and as of the date of this report, we were not in default under any of our financing agreements.

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Business Overview

Production

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

	Six months ended June 30,
	2018		2019		Change			%
Operating Highlights
Production
Crude oil (tbpd)		1,884		1,690		(194	)		(10.3	)
Natural gas (mmcfpd)		4,823		4,811		(12	)		(0.2	)
Petroleum products (tbpd)		677		608		(69	)		(10.2	)
Dry gas from plants (mmcfpd)		2,457		2,266		(191	)		(7.8	)
Natural gas liquids (tbpd)		252		222		(30	)		(11.9	)
Petrochemicals (tt)		1,340		1,277		(63	)		(4.7	)
Average crude oil exports (tbpd)(1)
Olmeca		n.a.		n.a.		n.a.			n.a.
Isthmus		61.82		n.a.		(61.8	)		(100.0	)
Maya		1,156.73		1,149.62		(7.1	)		(0.6	)
Total		1,218.56		1,149.62		(68.9	)		(5.6	)
Value of crude oil exports (value in millions of U.S. dollars)(1)	U.S.$	13,136.22	U.S.$	12,142.61		(993.6	)		(7.6	)
Average PEMEX crude oil export prices per barrel(2)
Olmeca		n.a.		n.a.		n.a.			n.a.
Isthmus	U.S.$	64.54		n.a.		(64.5	)		(100.0	)
Maya		59.38		58.65		(0.7	)		(1.2	)
Weighted average price(3)	U.S.$	59.56	U.S.$	58.36		(1.20	)		(2.0	)
West Texas Intermediate crude oil average price per barrel(4)	U.S.$	65.45	U.S.$	57.24		(8.2	)		(12.5	)

Notes: Numbers may not total due to rounding.

tbpd = thousands of barrels per day

mmcfpd = millions of cubic feet per day

tt = thousands of tons

n.a. not available

(1) The volume and value of crude oil exports reflects customary adjustments by the PMI Group to reflect the percentage of water in each shipment as of June 30, 2019.

(2) Average price during period indicated based on billed amounts.

(3) On September 9, 2019, the weighted average price of PEMEX’s crude oil export mix was U.S. $57.54 per barrel.

(4) On September 9, 2019, the West Texas Intermediate crude oil spot price was U.S. $57.85 per barrel.

Source: Petróleos Mexicanos and the PMI Group.

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Crude oil production decreased by 10.3% in the first six months of 2019, from 1,884 thousand barrels per day in the first six months of 2018 to 1,690 thousand barrels per day in the first six months of 2019. This decrease was mainly due to:

• a 16.8% reduction in production of light crude oil, primarily due tooil-water contact at the Xanab field and a natural decline in production of mature fields and increased fractional flow of wells at certain fields in the South Marine and Southeastern Marine regions and the shallow water blocks.

• a 35.2% reduction in production of extra light crude oil, primarily due to the increased inflow of water at the Xanab field and a natural decline in production of mature fields and increased fractional flow of wells at certain fields in the South Marine and Southeastern Marine regions and the shallow water blocks .

• a 2.0% decrease in production of heavy crude oil, primarily due to adverse weather conditions that prevented loading crude to export ships and the natural decline in some offshore fields such asKu-Maloob-Zaap and Akal.

During the first six months of 2019, natural gas production decreased by 0.2 %, from 4,823 million cubic feet per day in the first six months of 2018 to 4,811 million cubic feet per day in the same period of 2019. This decrease in production was primarily a result of a 11.0% decrease innon-associated gas production during this period, mainly due to an accelerated decline in production at the Burgos, Veracruz, Reynosa, Macuspana-Muspac and Litoral de Tabasco business units and the reallocation of resources to crude oil production assets in the northern blocks. This decrease was partially offset by a 2.9% increase in associated gas production, primarily due to increased well performance at the Cantarell,Ku-Maloob-Zaap, Veracruz and Macuspana-Muspac business units.

Production of petroleum products decreased by 10.2% in the first six months of 2019, from 677 thousand barrels per day in the first six months of 2018 to 608 thousand barrels per day in the first six months of 2019. This decrease was due to lower crude oil processing. Crude oil yields depend on the quality of crude and the configuration of the refinery in which that crude is processed.

During the first six months of 2019, dry gas production decreased by 7.8%, as compared to the same period of 2018, due to the decreased availability of wet gas. Production of natural gas liquids decreased by 11.9%, or 30 thousand barrels per day, in the first six months of 2019.

The production of petrochemical products decreased to 63 thousand tons, a 4.7% decrease as compared to the first six months of 2018, primarily due to the following:

• a 118 thousand ton decrease in ammonia production due to the suspension of the supply of raw materials (natural gas) in the first half of 2019;

• a 19 thousand ton decrease in production of propylene, mainly due to lower crude oil processing at the Salina Cruz and Tula refineries; and

• a 61 thousand ton reduction in sulfur production, as a result of lower production at the Cactus Processing Complex mainly due to corrective maintenance work at the Cactus Processing Complex and a decreased supply of sour wet gas.

This decrease in production of petrochemical products was offset in part by a 255 thousand ton increase in aromatics and derivatives chain production, mainly due to stable operation of the aromatics train at the Cangrejera Petrochemical Complex during the first six months of 2019.

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Exploration and Production

On June 11, 2019 we received approval from theComisión Nacional de Hidrocarburos (National Hydrocarbon Commission, or CNH) to drill an ultra-deepwater well in the Perdido Fold Belt. We currently intend to spend approximately U.S.$ 106 million over four years on this project, with drilling planned for the second quarter of 2021.

On July 17, 2019 we announced that we would not seek private partners for the joint development of several onshore farm-outs and cancelled the auction scheduled for October 2019. We will instead award service contracts to develop 20 shallow-water and onshore fields.

On July 3, 2019 we announced that we had assigned 67% of Pemex Exploration and Production’s budget to the exploration and development in the shallow waters region and the shores of Tabasco. In 2019, we plan to drill 50 wells, 20 of which are already in the process of being drilled or finished as of the date hereof.

Legal Proceedings

Audits and Other Investigations by the Mexican Government

On May 22, 2019, the Secretaría de la Función Pública (Ministry of Public Function, or the SFP) announced that it had sanctioned two former executive officers of PEMEX. One former executive officer was banned from holding public sector positions for ten years as a result of an administrative liability proceeding for, among other issues, providing false information in his statement of assets filed with the SFP and omitting material bank account information. The other former executive officer was fined an aggregate amount of approximately Ps. 620 million and banned from holding public sector positions for 15 years in connection with irregularities in the acquisition of Grupo Fertinal, S.A. de C.V. by PMX Fertilizantes Pacífico, S.A. de C.V., one of our subsidiary companies, for Ps. 4,322.8 million.

On May 28, 2019, theFiscalía General de la República (Federal Attorney General’s Office) announced that it had obtained several arrest warrants related to a criminal complaint filed by PEMEX in March 2019 in connection with alleged criminal acts related to the acquisition of Agro Nitrogenados, S.A. de C.V., a subsidiary of Altos Hornos de México, S.A.B. de C.V., among other events.

On July 30, 2019, the SFP announced that it had sanctioned a former executive officer of PEMEX. This former executive officer previously served as Corporate Director of Alliances and New Businesses of Petróleos Mexicanos and as Director General of P.M.I. Comercio Internacional, S.A. de C.V. The former executive officer was fined an aggregate amount of approximately Ps. 4,206 million and banned from holding public sector positions for ten years in as a result of an administrative liability proceeding for, among other things, allegedly concealing material information about the condition of the assets acquired in the acquisition of Agro Nitrogenados, S.A. de C.V.

Odebrecht

On July 5, 2019, the Federal Attorney General’s Office announced that it had obtained several arrest warrants against a former executive officer of PEMEX and other members of his family in connection with alleged crimes related to Odebrecht. On July 25, 2019, the Federal Attorney General’s Office announced that the German authorities confirmed the arrest of one of these individuals. The Federal Attorney General’s Office has announced that it is preparing the documentation necessary to extradite such former executive officer to Mexico. PEMEX is collaborating with the SFP, the Liabilities Unit at Petróleos Mexicanos and the Federal Attorney General’s Office.

Actions Against the Illicit Market in Fuels

On July 18, 2019, the Federal Attorney General’s Office announced that it had executed an arrest warrant issued against a former public officer of PEMEX. The arrest warrant was issued in connection with alleged involvement in organized crime related to the illicit market in fuels. The Federal Attorney General’s Office announced that, as of July 18, 2019, it had executed five arrest warrants in connection with such proceedings.

18

National Program to Combat Corruption

On August 30, 2019, thePrograma Nacional de Combate a la Corrupción y a la Impunidad, y de Mejora de la Gestión Pública 2019-2024(the National Program to Combat Corruption and Impunity and to Improve Public Management 2019-2024, or National Program to Combat Corruption) was approved by the President of Mexico and published in the Official Gazette of the Federation. The National Program to Combat Corruption is applicable to all ministries and entities of the Mexican Government, including PEMEX. The main objectives of the National Program to Combat Corruption are to combat the causes and effects of corruption directly, combat all levels of administrative impunity in the Mexican Government, promote efficiency and effectiveness of public management, promote the professionalization and efficient management of the human resources of the Mexican Government and promote the efficient and responsible use of the assets of the Mexican Government.

Directors and Executive Officers

On June 20, 2019, the Senate ratified Mr. Francisco José Garaicochea y Petrirena as an independent member to the Board of Directors of Petróleos Mexicanos appointed by the President of Mexico. Mr. Garaicochea y Petrirena´s term will end on September 18, 2020. He is replacing Mr. Carlos Elizondo Mayer-Serra, who resigned on April 30, 2019.

As of the date of this report, two seats on the Board of Petróleos Mexicanos remain vacant following the resignations of Ms. María Teresa Fernández Labardini in March 2019 and Mr. Octavio Francisco Pastrana Pastrana in April 2019.

Effective July 1, 2019, Ms. Luz María Zarza Delgado was appointed by the Board of Directors of Petróleos Mexicanos as General Counsel of Petróleos Mexicanos.

Employees

Effective August 1, 2019, Petróleos Mexicanos and theSindicato de Trabajadores de la República Mexicana (the Petroleum Workers’ Union of the Mexican Republic) amended their collective bargaining agreement. The amended agreement provides for a 3.37% increase in wages and a 1.80% increase in benefits, and will regulate their labor relations until July 31, 2020.

Transportation and Distribution

On July 1, 2019, a pipeline carrying liquefied petroleum gas exploded in the municipality of Celaya in the State of Guanajuato. Two people were injured as a result of the explosion, which was caused by an accidental perforation by excavation equipment.

On August 2, 2019, a gas pipeline leak led authorities to evacuate approximately 2,000 people from the municipality of Nextlalpan, Mexico State. The pipeline leak was the result of illicit fuel theft.    

19

PETRÓLEOS MEXICANOS,

PRODUCTIVE STATE-OWNED SUBSIDIARIES

AND SUBSIDIARY COMPANIES

UNAUDITED CONDENSED CONSOLIDATED

INTERIM FINANCIAL STATEMENTS

AS OF JUNE 30, 2019 AND DECEMBER 31, 2018 AND

FOR THE THREE ANDSIX-MONTH PERIODS ENDED JUNE 30, 2019 AND 2018

PETRÓLEOS MEXICANOS, PRODUCTIVE STATE-OWNED SUBSIDIARIES

AND SUBSIDIARY COMPANIES

UNAUDITED CONDENSED CONSOLIDATED

INTERIM FINANCIAL STATEMENTS

AS OF JUNE 30, 2019 AND DECEMBER 31, 2018

AND FOR THE THREE ANDSIX-MONTH PERIODS ENDED JUNE 30, 2019 AND 2018

Index

Contents	Page
Unaudited condensed consolidated interim financial statements of:
Financial position		F-3
Comprehensive income		F-4
Changes in equity (deficit)		F-6
Cash flows		F-7
Notes to the unaudited condensed consolidated interim financial statements		F-8 to F-49

F - 2

PETRÓLEOS MEXICANOS, PRODUCTIVE STATE-OWNED SUBSIDIARIES AND SUBSIDIARY COMPANIES

UNDAUDITED CONDENSED CONSOLIDATED INTERIM STATEMENTS OF FINANCIAL POSITION

AS OF JUNE 30, 2019 AND DECEMBER 31, 2018

(Figures stated in thousands, except as noted)

	Note		June 30, 2019			December 31, 2018
ASSETS
Current assets:
Cash and cash equivalents		8	Ps.	44,419,226		Ps.	81,912,409
Accounts receivable, net		9		181,929,754			167,139,778
Inventories		10		74,101,984			82,022,568
Current portion of notes receivable		15-a		4,787,760			38,153,851
Held—for—sale non—financial assets		11		320,749			1,253,638
Equity instruments				245,440			245,440
Derivative financial instruments				19,721,166			22,382,277
Total current assets				325,526,079			393,109,961
Non-current assets:
Investments in joint ventures and associates		12		16,203,794			16,841,545
Wells, pipelines, properties, plant and equipment, net		13		1,331,324,698			1,402,486,084
Long-term notes receivable, net of current portion		15-a		118,777,357			119,828,598
Deferred income taxes and duties				123,595,728			122,784,730
Rights of use		4		88,859,498			—
Intangible assets, net		14		12,565,059			13,720,540
Other assets		15-b		4,414,170			6,425,810
Totalnon-current assets				1,695,740,304			1,682,087,307
Total assets			Ps.	2,021,266,383		Ps.	2,075,197,268
LIABILITIES
Current liabilities:
Short-term debt and current portion of long—term debt		16		279,220,148			191,795,709
Short-term leases		4		7,232,147			—
Suppliers				129,055,001			149,842,712
Taxes and duties payable				44,302,555			65,324,959
Accounts and accrued expenses payable				24,648,915			24,917,669
Derivative financial instruments				16,516,449			15,895,245
Total current liabilities				500,975,215			447,776,294
Long-term liabilities:
Long-term debt, net of current portion		16		1,721,701,699			1,890,490,407
Long-term leases, net of current portion		4		92,138,649			—
Employee benefits				1,265,760,293			1,080,542,046
Provisions for sundry creditors		18		102,136,292			101,753,256
Other liabilities				6,673,758			9,528,385
Deferred taxes				4,889,006			4,512,312
Total long-term liabilities				3,193,299,697			3,086,826,406
Total liabilities				3,694,274,912			3,534,602,700
EQUITY (DEFICIT)
Controlling interest:
Certificates of Contribution “A”		19		381,544,447			356,544,447
Mexican Government contributions				43,730,591			43,730,591
Legal reserve				1,002,130			1,002,130
Accumulated other comprehensive result				(78,143,928	)		71,947,067
Accumulated deficit:
From prior years				(1,933,106,785	)		(1,752,732,435	)
Net loss for the period				(88,405,384	)		(180,374,350	)
Total controlling interest				(1,673,378,929	)		(1,459,882,550	)
Totalnon-controlling interest				370,400			477,118
Total equity (deficit)				(1,673,008,529	)		(1,459,405,432	)
Total liabilities and equity (deficit)			Ps.	2,021,266,383		Ps.	2,075,197,268

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

F - 3

PETRÓLEOS MEXICANOS, PRODUCTIVE STATE-OWNED SUBSIDIARIES AND SUBSIDIARY COMPANIES

UNAUDITED CONDENSED CONSOLIDATED INTERIM STATEMENTS OF COMPREHENSIVE INCOME

FOR THESIX-MONTH PERIODS ENDED JUNE 30, 2019 AND 2018

(Figures stated in thousands, except as noted)

	Note		2019			2018
Net sales:
Domestic			Ps.	416,531,433		Ps.	492,040,219
Export				311,469,108			337,242,333
Services income				4,899,280			4,287,490
Total of sales				732,899,821			833,570,042
Impairment (reversal) of wells, pipelines, properties, plant and equipment, net		13		9,598,041			(42,360,452	)
Cost of sales				538,730,728			580,975,521
Gross income				184,571,052			294,954,973
Other revenues, net				5,853,706			7,724,055
General expenses:
Distribution, transportation and sale expenses				11,043,340			11,199,349
Administrative expenses				65,894,070			64,200,984
Operating income				113,487,348			227,278,695
Financing income[1]				7,078,792			10,969,569
Financing cost[2]				(61,297,474	)		(56,972,817	)
Derivative financial instruments (cost), net				(4,980,405	)		(9,292,906	)
Foreign exchange gain, net				52,826,948			2,505,317
				(6,372,139	)		(52,790,837	)
(Profit) loss sharing in joint ventures and associates		12		(15,145	)		848,136
Income before duties, taxes and other				107,100,064			175,335,994
Profit sharing duty, net				194,281,715			226,686,236
Income tax (benefit) expense				1,327,501			(1,489,847	)
Total duties, taxes and other				195,609,216			225,196,389
Net loss				(88,509,152	)		(49,860,395	)
Other comprehensive results:
Items that will be reclassified subsequently to profit or loss:
Currency translation effect				(1,125,842	)		5,402,474
Items that will not be reclassified subsequently to profit or loss:
Actuarial (losses) – employee benefits				(148,968,103	)		—
Total other comprehensive results				(150,093,945	)		5,402,474
Total comprehensive loss			Ps.	(238,603,097	)	Ps.	(44,457,921	)
Net loss attributable to:
Controlling interest			Ps.	(88,405,384	)	Ps.	(49,861,456	)
Non-controlling interest				(103,768	)		1,061
Net (loss)			Ps.	(88,509,152	)	Ps.	(49,860,395	)
Other comprehensive results attributable to:
Controlling interest			Ps.	(150,090,995	)	Ps.	5,398,118
Non-controlling interest				(2,950	)		4,356
Total other comprehensive results			Ps.	(150,093,945	)	Ps.	5,402,474
Comprehensive (loss) income:
Controlling interest			Ps.	(238,496,379	)	Ps.	(44,463,338	)
Non-controlling interest				(106,718	)		5,417
Total comprehensive (loss)			Ps.	(238,603,097	)	Ps.	(44,457,921	)

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

^[1]  Includes financing income from investments.

^[2]  Mainly interest on debt and interest from leases pursuant to IFRS 16 adoption.

F - 4

PETRÓLEOS MEXICANOS, PRODUCTIVE STATE-OWNED SUBSIDIARIES AND SUBSIDIARY COMPANIES

UNAUDITED CONDENSED CONSOLIDATED INTERIM STATEMENTS OF COMPREHENSIVE INCOME

FOR THE THREE-MONTH PERIODS ENDED JUNE 30, 2019 AND 2018

(Figures stated in thousands, except as noted)

	Note	2019			2018
Net sales:
Domestic		Ps.	217,572,856		Ps.	254,251,186
Export			156,249,631			179,669,601
Services income			2,825,836			2,253,692
Total of sales			376,648,323			436,174,479
Impairment (reversal) of wells, pipelines, properties, plant and equipment, net			4,443,095			(23,322,073	)
Cost of sales			282,075,999			304,203,639
Gross income			90,129,229			155,292,913
Other revenues, net			1,808,479			3,478,841
General expenses:
Distribution, transportation and sale expenses			5,540,874			5,676,267
Administrative expenses			33,610,482			33,227,673
Operating income			52,786,352			119,867,814
Financing income[1]			3,177,496			1,849,510
Financing cost[2]			(31,442,498	)		(29,804,118	)
Derivative financial instruments income (cost), net			3,241,594			(20,966,630	)
Foreign exchange gain (loss), net			22,415,370			(118,348,021	)
			(2,608,038	)		(167,269,259	)
Profit sharing in joint ventures and associates			196,484			562,949
Income (loss) before duties, taxes and other			50,374,798			(46,838,496	)
Profit sharing duty, net			103,904,515			118,611,725
Income tax expense			(739,820	)		(2,277,715	)
Total duties, taxes and other			103,164,695			116,334,010
Net loss			(52,789,897	)		(163,172,506	)
Other comprehensive results:
Items that will be reclassified subsequently to profit or loss:
Currency translation effect			(1,712,316	)		11,936,184
Items that will not be reclassified subsequently to profit or loss:
Actuarial (losses) – employee benefits			(148,968,103	)		—
Total other comprehensive results			(150,680,419	)		11,936,184
Total comprehensive loss		Ps.	(203,470,316	)	Ps.	(151,236,322	)
Net loss attributable to:
Controlling interest		Ps.	(52,666,761	)	Ps.	(163,162,314	)
Non-controlling interest			(123,136	)		(10,192	)
Net (loss)		Ps.	(52,789,897	)	Ps.	(163,172,506	)
Other comprehensive results attributable to:
Controlling interest		Ps.	(150,679,438	)	Ps.	11,899,164
Non-controlling interest			(981	)		37,020
Total other comprehensive results		Ps.	(150,680,419	)	Ps.	11,936,184
Comprehensive (loss) income:
Controlling interest		Ps.	(203,346,199	)	Ps.	(151,263,150	)
Non-controlling interest			(124,117	)		26,828
Total comprehensive loss		Ps.	(203,470,316	)	Ps.	(151,236,322	)

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

^[1]  Includes financing income from investments.

^[2]  Mainly interest on debt and interest from leases pursuant to IFRS 16 adoption.

F - 5

PETRÓLEOS MEXICANOS, PRODUCTIVE STATE-OWNED SUBSIDIARIES AND SUBSIDIARY COMPANIES

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

FOR THESIX-MONTH PERIODS ENDED JUNE 30, 2019 AND 2018

(Figures stated in thousands, except as noted (Note 19))

	Controlling interest
	Certificates of Contribution “A”		Mexican Government contributions		Legal reserve		Accumulated other comprehensive income (loss)
							Cumulative currency translation effect			Actuarial (losses) gains on employee benefits effect			Accumulated deficit						Total			Non-controlling interest			Total Equity (deficit), net
													For the period			From prior years
Balances adjusted by the adoption of IFRS 9 as of January 1, 2018		Ps. 356,544,447		Ps. 43,730,591		Ps. 1,002,130		Ps. 44,633,012		Ps.	(196,520,194	)	Ps.	—		Ps.	(1,752,732,435	)		Ps. (1,503,342,449	)		Ps. 965,107		Ps.	(1,502,377,342	)
Total comprehensive income (loss)		—		—		—		5,398,118			—			(49,861,456	)		—			(44,463,338	)		5,417			(44,457,921	)
Balances as of June 30, 2018		Ps. 356,544,447		Ps. 43,730,591		Ps. 1,002,130		Ps. 50,031,130		Ps.	196,520,194	)	Ps.	(49,861,456	)	Ps.	(1,752,732,435	)		Ps. (1,547,805,787	)		Ps. 970,524		Ps.	(1,546,835,263	)
Balances as of January 1, 2019		Ps. 356,544,447		Ps. 43,730,591		Ps. 1,002,130		Ps. 45,920,227		Ps.	26,026,840		Ps.	—		Ps.	(1,933,106,785	)		Ps. (1,459,882,550	)		Ps. 477,118		Ps.	(1,459,405,432	)
Increase in Mexican Government contributions		25,000,000		—		—		—			—			—			—			25,000,000			—			25,000,000
Total comprehensive loss		—		—		—		(1,122,892	)		(148,968,103	)		(88,405,384	)		—			(238,496,379	)		(106,718	)		(238,603,097	)
Balances as of June 30, 2019		Ps. 381,544,447		Ps. 43,730,591		Ps. 1,002,130		Ps. 44,797,335		Ps.	(122,941,263	)	Ps.	(88,405,384	)	Ps.	(1,933,106,785	)		Ps. (1,673,378,929	)		Ps. 370,400		Ps.	(1,673,008,529	)

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

F - 6

PETRÓLEOS MEXICANOS, PRODUCTIVE STATE-OWNED SUBSIDIARIES AND SUBSIDIARY COMPANIES

UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS OF CASH FLOWS

FOR THESIX-MONTH PERIODS ENDED JUNE 30, 2019 AND 2018

(Figures stated in thousands, except as noted)

	2019			2018
Operating activities
Net (loss) income		Ps. (88,509,152	)		Ps. (49,860,395	)
Items related to investment activities
Depreciation and amortization		68,501,818			73,733,715
Amortization of intangible assets		290,794			191,196
Amortization of rights of use		3,849,213			—
Impairment (reversal) of wells, pipelines, properties, plant and equipment		9,598,041			(42,360,452	)
Exploration costs		10,923,058			9,054,121
Loss from derecognition of disposal of wells, pipelines, properties, plant and equipment		1,015,830			9,757,868
Unrealized foreign exchange (income) loss of reserve for well abandonment		(19,016	)		1,081,276
(Loss) profit sharing in joint ventures and associates		15,145			(848,136	)
Items related to financing activities
Unrealized foreign exchange (income) loss		(50,030,730	)		(1,246,452	)
Interest expense		61,297,474			56,972,817
Interest income		(7,078,792	)		(10,969,569	)
		9,853,683			45,505,989
Profit sharing duty and income tax		188,389,300			225,597,266
Taxes and duties paid		(186,083,692	)		(215,679,448	)
Derivative financial instruments		3,282,315			185,364
Accounts receivable		(14,789,978	)		(916,792	)
Inventories		7,920,584			10,533,108
Accounts payable and accrued expenses		(268,753	)		(1,909,641	)
Suppliers		(20,787,711	)		(30,484,014	)
Provisions for sundry creditors		(2,454,544	)		6,558,766
Employee benefits		36,250,145			29,471,820
Other taxes and duties		(23,762,316	)		(4,614,133	)
Net cash flows (used in) from operating activities		(2,450,967	)		64,248,285
Investing activities
Other assets		2,011,641			(4,640,976	)
Other notes receivable		2,791,772			10,101,702
Acquisition of wells, pipelines, properties, plant and equipment		(31,132,111	)		(32,524,392	)
Intangible assets		(10,058,372	)		(8,248,807	)
Net cash flows from (used in) investing activities		(36,387,070	)		(35,312,473	)
(Deficit) excess cash to apply in financing activities		(38,838,037	)		28,935,812
Financing activities
Increase in equity due to Certificates of Contribution “A”		25,000,000			—
Long-term receivables from the Mexican Government		32,311,967			—
Interest received for long-term receivable from the Mexican Government		6,392,385			—
Loans obtained from financial institutions		420,345,102			449,914,696
Debt payments, principal only		(414,060,095	)		(414,288,664	)
Payments of principal and interests from leases		(7,037,416	)		—
Interest paid on debt		(60,481,958	)		(58,895,042	)
Net cash flows from (used in) financing activities		2,469,985			(23,269,010	)
Net (decrease) increase in cash and cash equivalents		(36,368,052	)		5,666,802
Effects of foreign exchange on cash balances		(1,125,131	)		5,988,155
Cash and cash equivalents at the beginning of the period		81,912,409			97,851,754
Cash and cash equivalents at the end of the period (Note 8)		Ps. 44,419,226			Ps. 109,506,711

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

F - 7

PETRÓLEOS MEXICANOS, PRODUCTIVE STATE-OWNED SUBSIDIARIES AND SUBSIDIARY COMPANIES

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

AS OF JUNE 30, 2019 AND DECEMBER 31, 2018 AND

FOR THE THREE ANDSIX-MONTH PERIODS ENDED JUNE 30, 2019 AND 2018

(Figures stated in thousands, except as noted)

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

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

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

Once the Petróleos Mexicanos Law came into effect, Petróleos Mexicanos was transformed from a decentralized public entity to a productive state-owned company. Petróleos Mexicanos is a legal entity empowered to own property and carry on business in its own name with the purpose of carrying out exploration and extraction of crude oil and other hydrocarbons in the United Mexican States (“Mexico”). In addition, Petróleos Mexicanos performs activities related to refining, gas processing and engineering and research projects to create economic value and to increase the income of the Mexican Government, as its owner, while adhering to principles of equity and social and environmental responsibility.

The Subsidiary Entities, currently Pemex Exploración y Producción (Pemex Exploration and Production), Pemex Transformación Industrial (Pemex Industrial Transformation), Pemex Logística (Pemex Logistics) and Pemex Fertilizantes (Pemex Fertilizers) are productive state-owned subsidiaries empowered to own property and carry on business in their own 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) were Pemex-Exploración y Producción, Pemex-Refinación (Pemex-Refining),Pemex-Gas and Petroquímica Básica(Pemex-Gas and Basic Petrochemicals) and Pemex-Petroquímica (Pemex-Petrochemicals), which were 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 Officer of Petróleos Mexicanos. Pursuant to the Corporate Reorganization, the existing four Subsidiary Entities were transformed into two new productive state-owned subsidiaries, which assumed all of the rights and obligations of the existing Subsidiary 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 Subsidiary Entities: Pemex Drilling and Services, Pemex Logistics, Pemex Cogeneración y Servicios (Pemex Cogeneration and Services), Pemex Fertilizers and Pemex 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.

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On March 27, 2015, the Board of Directors of Petróleos Mexicanos approved theacuerdos de creación (creation resolutions) of each productive state-owned subsidiary. 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, modifications to the creation resolution of the productive state-owned subsidiary Pemex Exploration and Production were published in the Official Gazette of the Federation and became effective that same 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.

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 assumed by, and transferred to, Pemex Industrial Transformation, and 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 July 27, 2018.

On June 24, 2019, the Board of Directors of Petróleos Mexicanos approved the merger of Pemex Exploration and Production and Pemex Drilling and Services, as well as the merger of Pemex Industrial Transformation and Pemex Ethylene, both to become effective on July 1, 2019. Pemex Exploration and Production and Pemex Industrial Transformation will remain as merging companies and Pemex Drilling and Services and Pemex Ethylene will become extinct as merged companies. See Note 21. On June 28, 2019, related modifications to the creation resolutions of Pemex Exploration and Production, Pemex Industrial Transformation, Pemex Logistics and Pemex Fertilizers, which will become effective on July 1, were published in the Official Gazette of the Federation 2019.

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.

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• 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 affiliate companies that were formed in accordance with the applicable laws of each of the respective jurisdictions in which they were incorporated.

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

“Associates,” as used herein, means those companies in which Petróleos Mexicanos has significant influence but not control or joint control over its financial and operating policies. Petróleos Mexicanos, the Subsidiary Entities and the Subsidiary Companies are referred to collectively herein as “PEMEX” or “The Company”.

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

NOTE 2. AUTHORIZATION AND BASIS OF PREPARATION

Authorization

On September 10, 2019, these unaudited condensed consolidated interim financial statements under IFRS and the notes hereto were authorized for issuance by the following officers: Mr. Octavio Romero Oropeza, Chief Executive Officer, Mr. Alberto Velázquez García, Chief Financial Officer, Mr. Carlos Fernando Cortez González, Deputy Director of Budgeting and Accounting, and Mr. Oscar René Orozco Piliado, Associate Managing Director of Accounting.

Basis of accounting

A. Statement of compliance

PEMEX prepared its unaudited condensed consolidated interim financial statements as of June 30, 2019 and December 31, 2018, and for the three andsix-month periods ended June, 2019 and 2018, in accordance with IAS 34, “Interim Financial Reporting” (“IAS 34”) of the International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”).

These unaudited condensed consolidated interim financial statements do not include all the information and disclosures required for full annual consolidated financial statements and should be read in conjunction with PEMEX’s audited consolidated financial statements for the year ended December 31, 2018. PEMEX estimates that there is no significant impact on its unaudited condensed consolidated interim financial statements due to the seasonality of operations.

These unaudited condensed consolidated interim financial statements follow the same accounting policies and methods of computation as the most recent annual financial statements except for those new standards applicable beginning January 1, 2019.

B. Basis of measurement

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

Item	Basis of measurement
Derivative Financial Instruments (“DFIs”)	Fair Value
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

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C. Going concern

The unaudited condensed consolidated interim financial statements have been prepared on a going concern basis, which assumes that PEMEX can meet its payment obligations for the upcoming twelve months from the date of issuance of these unaudited condensed consolidated interim financial statements.

Facts and conditions

During thesix-month periods ended June 30, 2019 and 2018, PEMEX recognized a net loss of Ps. 88,509,152 and Ps. 49,860,395, respectively. In addition, PEMEX had a negative equity of Ps. 1,673,008,529 and Ps.1,459,405,432 as of June 30, 2019 and December 31, 2018, respectively, mainly due to continuous net losses and a negative working capital of Ps. 175,449,136 and Ps. 54,666,333, respectively.

PEMEX also has important debt, contracted mainly to finance investments needed to carry out its operations. Due to its heavy fiscal burden resulting from the payment of hydrocarbon extraction duties and other taxes, the cash flow derived from PEMEX’s operations in recent years has not been sufficient to fund its operating and investment costs and other expenses, so that its indebtedness has increased significantly, and its working capital has decreased in part as a result of the drop in oil prices that began at the end of 2014 and the subsequent oil price fluctuation.

Additionally, at the beginning of 2019, some rating agencies downgraded PEMEX’s credit rating, which could have an impact on the cost and terms of PEMEX’s new debt, as well as contract renegotiations during the remainder of 2019.

All these matters show the existence of substantial doubt about PEMEX’s ability to continue as a going concern.

PEMEX has budget autonomy, and is subject to the financial balance, which represents the difference between its income and its total budgeted expenditures, including the financial cost of its debt, which, is proposed by theSecretaría de Hacienda y Crédito Público (Ministry of Finance and Public Credit or “SHCP”) and approved by the Mexican Congress in thePresupuesto de Egresos de la Federación para el Ejercicio Fiscal 2019 (Federal Expenditure Budget for 2019 or “Federal Budget for 2019”).

The Federal Budget for 2019 estimates that PEMEX’s budgeted expenditures of Ps. 589,736,649 will exceed budgeted revenues of Ps. 524,291,649 by Ps. 65,445,000. The Federal Budget for 2019 also authorized PEMEX a net additional indebtedness up to Ps. 112,800,000 to cover its negative financial balance, which is considered as public debt by the Mexican Government.

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

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

• PEMEX intends to continue its strategy of financial discipline and reduction of costs and expenses of the company, seeking the efficient operation of its plants and strengthening its product sales and commercial policy.

• PEMEX plans to gradually increase crude oil production. Such increase in production is intended to support PEMEX’s goal of generating positive net returns. PEMEX expects to achieve a balanced budget in 2021.

• The Mexican Government has announced that it plans to support PEMEX through a reduction of its fiscal burden and by approving investment in new projects designed to allow an increase in crude oil production.

• The 2019-2023 Business Plan envisions a gradual recovery of the company’s crude oil processing output based on increased investment allocated to the rehabilitation of the National Refining System.

• The 2019-2023 Business Plan also contemplates that public investment would be complemented by private investment, through long-term service contracts for oil production (contratos de servicios de largo plazo para la producción del petróleo, or CSIEEs).

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As of June 30, 2019, PEMEX has stabilized its crude oil production at approximately 1,661 barrels per day and increased the volume of crude oil processed in the National Refining System as compared to December 31, 2018.

PEMEX’s business strategy is focused on the financial strengthening of the company through internal measures such as cost control, austerity policies, debt reduction, crude oil coverage, such as hedges, and combating fuel theft; as well as external measures, through thePrograma de Fortalecimiento de Petróleos Mexicanos (Strengthening Program for Petroleos Mexicanos or the “Strengthening Program”) through which the Mexican Government is expected to continue to support PEMEX through capitalizations, a stable price policy, fiscal support and support in the fight against fuel theft (see Note 19).

Petróleos Mexicanos and its Subsidiary 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 debt due to having negative equity or as a result ofnon-compliance with financial ratios.

PEMEX prepared its unaudited condensed consolidated interim financial statements as of June 30, 2019 and December 31, 2018 on a going concern basis. There are certain conditions that have generated important uncertainty and significant doubts concerning the entity’s ability to continue operating, including recurring net losses, negative working capital and negative equity. These financial statements do not contain any adjustments that would be required if they were not prepared on a going concern basis.

D.     Functional and reporting currency

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;

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.

ii. Employee benefits provision was approximately 34% and 31% of PEMEX’s total liabilities as of June 30, 2019 and December 31, 2018, respectively. This provision is computed, denominated and payable in Mexican pesos; and

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

Although the sales prices of 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, theBanco de México, requires that Mexican Government entities other than financial entities sell their foreign currency to theBanco de México in accordance with its terms, receiving Mexican pesos in exchange, which is the currency of legal tender in Mexico.

Translation of unaudited condensed consolidated interim financial statements of foreign operations

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 year for income and expenses reported in the consolidated statement of comprehensive income.

Terms definition

References in these unaudited condensed consolidated interim financial statements and the related notes to “pesos” or “Ps.” refers to Mexican pesos, “U.S. dollars” or “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.

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NOTE 3. USE OF JUDGMENTS AND ESTIMATES

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

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

The significant judgements made by management in applying the accounting policies and the key sources of estimation uncertainty were the same as those described in the Consolidated annual financial statements as of an for the year ended December 31, 2018.

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 asnon-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.

Significant estimates are reported to PEMEX audit committee.

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.

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NOTE 4. CHANGES IN SIGNIFICANT ACCOUNTING POLICIES

The accounting policies applied in the preparation of these unaudited condensed consolidated interim financial statements are consistent with those applied in the preparation of PEMEX’s annual consolidated financial statements as at and for the year ended December 31, 2018, except for the adoption of new standards effective as of January 1, 2019. PEMEX has not early-adopted any standard, interpretation or amendment that has been issued but is not yet effective.

The following new standards are effective for periods beginning in 2019.

a) IFRS 16, “Leases” (“IFRS 16”)

In January 2016, the IASB published IFRS 16 “Leases” (“IFRS 16”), which replaces IAS 17, “Leases and Guide interpretations” and related interpretations, including IFRIC 4 “Determining whether an Arrangement contains a Lease” (“IFRIC 4”).

From January 1, 2019, PEMEX applies, for the first time, IFRS 16. As required by IAS 34, the nature and effect of these changes are disclosed below. Several other amendments and interpretations apply for the first time in 2019, but do not have a material impact on the unaudited condensed consolidated interim financial statements of PEMEX.

IFRS 16 introduces a single, on balance sheet accounting model for lessees. A lessee recognizes aright-of-use asset representing its right to use the underlying asset and a lease liability representing its obligation to make lease payments. There are recognition exemptions for short-term leases and leases oflow-value assets. Lessor accounting remains similar to previous accounting policies.

PEMEX applied IFRS 16 initially on January 1, 2019 using the modified retrospective approach. There was no impact against retained earnings because as of January 1, 2019 the rights of use and the lease liability were for the same amount (in addition to a reclassification of the previously recognized finance leases). Accordingly, the comparative information presented for 2018 has not been restated and it is presented, as previously reported, under IAS 17 and related interpretations. The details of the changes in accounting policies are disclosed below.

i. Definition of a lease

Previously, PEMEX determined at contract inception whether an arrangement was or contained a lease under IFRIC 4. PEMEX now assesses whether a contract is or contains a lease based on the new definition of a lease under IFRS 16. Under IFRS 16, a contract is, or contains, a lease if the contract conveys a right to control the use of an identified asset for a period of time in exchange for consideration.

On transition to IFRS 16, PEMEX elected to apply the practical expedient to adopt the definition of lease at the time of transition. This means it applied IFRS 16 to all contracts entered into before January 1, 2019 and identified as leases in accordance with IAS 17 and IFRIC 4. The definition of a lease under IFRS 16 has been applied only to contracts entered into or modified on or after January 1, 2019.

At inception or on reassessment of a contract that contains a lease component, PEMEX allocates the consideration in the contract to each lease andnon-lease component on the basis of their relative stand-alone prices. For leases in which it is a lessee, PEMEX has elected not to separate lease andnon-lease components for leases where thenon-lease component is not significant.

ii. Leases in which PEMEX is a lessee

PEMEX recognizes assets and liabilities for its operating leases, which primarily consist of transportation and railway equipment, docks, hydrogen supply plants, electric power and steam gas storage facilities.

As a lessee, PEMEX previously classified leases as operating or finance leases based on its assessment of whether the lease transferred substantially all of the risks and rewards of ownership. Under IFRS 16, PEMEX recognizesright-of-use assets and lease liabilities for most leases, and these leases areon-balance sheet.

PEMEX has elected not to recognizeright-of-use and lease liabilities for some leases of low value assets. PEMEX recognizes the lease payments associated with these leases as an expense on a straight-line basis over the lease term.

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Significant accounting policy

PEMEX recognizes aright-of-use asset and a lease liability at the lease commencement date. Theright-of-use asset is initially measured at cost, and subsequently at cost less any accumulated depreciation and impairment losses and adjusted for certain remeasurements of the lease liability.

The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, PEMEX’s incremental borrowing rate. PEMEX uses its incremental borrowing rate as the discount rate.

The lease liability is subsequently measured as increased by the interest cost on the lease liability and decreased by lease payments made. It is remeasured when there is a change in future lease payments arising from a change in an index or rate, a change in the estimate of the amount expected to be payable under a residual value guarantee or, as appropriate, changes in the assessment of whether a purchase or extension option or reasonably certain to be exercised or a termination option is reasonably certain not to be exercised.

PEMEX has applied judgement to determine the lease term for some lease contracts in which it is a lessee that include renewal options. The assessment of whether PEMEX is reasonably certain to exercise such options impacts the lease term, which significantly affects the amount of lease liabilities andright-of-use assets recognized.

Transition

Previously, PEMEX classified a number of leases as operating leases under IAS 17. These leases include transportation and railway equipment, docks, hydrogen supply plants, electric power and steam gas storage facilities. The leases typically run for a period of up to 20 years. Some leases include an option to renew the lease for an additional 5 years or without defined plan after the end of thenon-cancellable period.

At transition, for leases classified as operating leases under IAS 17, lease liabilities were measured at the present value of the remaining lease payments, discounted at PEMEX’s incremental borrowing rate as at January 1, 2019.Right-of-use assets are measured at an amount equal to the lease liability, adjusted by the amount of any prepaid or accrued lease payments. PEMEX applied this approach to all operating leases.

PEMEX used the following practical expedients when applying IFRS 16 to leases previously classified as operating leases under IAS 17:

• Applied the exemption not to recognizeright-of-use assets and liabilities for leases with less than 12 months of lease term.

• Excluded initial direct costs from measuring theright-of-use asset at the date of initial application.

• Used hindsight when determining the lease term if the contract contains options to extend or terminate the lease.

PEMEX leases certain production equipment that were classified as finance leases under IAS 17. For these leases, the carrying amount of theright-of use asset and the lease liability at January 1, 2019 were determined at the carrying amount of the lease asset and lease liability under IAS 17 immediately before that date.

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iii. Impacts on financial statements

Impact in the transition

On transition to IFRS 16 (effective as of January 1, 2019), PEMEX’s recognized additionalright-of-use assets and additional lease liabilities. The impact on transition is summarized below.

	Total
Right of use assets		Ps.    88,540,943
Lease liability		Ps.  100,767,264

When measuring lease liabilities for leases that were classified as operating leases, PEMEX discounted lease payments using its incremental borrowing rate at January 1, 2019. The weighted-average rate applied was 8.2%.

	2019
Operating lease commitment at December 31, 2018		62,723,909
2018 leases subsequently identified		28,788,945
Operating lease commitment		91,512,854
Discounted using the incremental borrowing rate at January 1, 2019		64,604,325
—Finance lease liabilities recognized as at December 31, 2018		36,956,930
—Recognition exemption for:
—Leases oflow-value assets		(793,991	)
—Extension and termination options reasonably certain to be exercised		—
Lease liabilities recognized at January 1, 2019		Ps.100,767,264
—New leases		4,163,816
—Payments of principal and interests from leases		(7,037,416	)
—Accrued interest		4,281,068
—Foreign exchange		(2,803,936	)
Lease liabilities at June 30, 2019		Ps. 99,370,782

Impacts for the period

As a result of initial adoption of IFRS 16, PEMEX recognized Ps. 88,859,498 ofright-of-use assets and Ps. 99,370,796 of lease liabilities as at June 30, 2019.

In addition, in relation to those leases under IFRS 16, PEMEX recognized depreciation and interest costs, rather than operating lease expense. During thesix- months ended June 30, 2019, PEMEX recognized Ps. 3,849,213 of depreciation charges and Ps. 4,321,077 of interest costs from these leases.

b) IFRIC 23 – Uncertainty over Income Tax Treatments

In June 2017, the IASB published a new accounting interpretation to be applied to the determination of taxable profit (tax loss), tax bases, unused tax losses, unused tax credits and tax rates, when there is uncertainty over income tax treatments under IAS 12.

In order to make these tax assessments, an entity must consider whether it is probable that the relevant taxing authority will accept each tax treatment, or group of tax treatments, that the entity has used or plans to use in its next income tax filing:

• If the entity concludes that it is probable that a particular tax treatment will be accepted by the relevant taxing authority, that entity must determine taxable profit (tax loss), tax bases, unused tax losses, unused tax credits or tax rates consistently with the tax treatment included in its income tax filings.

• If the entity concludes that it is not probable that a particular tax treatment is accepted by the relevant taxing authority, the entity must use the most likely amount or the expected value of the tax treatment when determining taxable profit (tax loss), tax bases, unused tax losses, unused tax credits and tax rates. That calculation should be based on which method provides better predictions of the resolution of the uncertainty.

IFRIC 23 is effective for annual reporting periods beginning on or after January 1, 2019. Earlier application was permitted.

The adoption of this interpretation did not have any impact on these unaudited condensed consolidated interim financial statements because all tax positions are discussed and agreed with the SHCP prior to releasing PEMEX’s quarterly or annual financial statements.

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NOTE 5. SUBSIDIARY ENTITIES AND SUBSIDIARY COMPANIES

As of June 30, 2019, the Subsidiary Entities consolidated in these financial statements include Pemex Exploration and Production, Pemex Industrial Transformation, Pemex Drilling and Services, Pemex Logistics, Pemex Fertilizers and Pemex Ethylene. Until July 27, 2018, former Subsidiary Entity Pemex Cogeneration and Services was also consolidated in these financial statements. (See Note 1).

As of June 30, 2019, the consolidated Subsidiary Companies are as follows:

• PEP Marine, DAC. (PEP DAC)^(i)(v)

• P.M.I. Services, B.V. (PMI SHO)⁽ⁱ⁾

• P.M.I. Holdings, B.V. (PMI HBV)⁽ⁱ⁾

• P.M.I. Trading DAC (PMI DAC)^(i)(vi)

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

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

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

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

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

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

• P.M.I. Azufre Industrial, S. A. de C. V. (PMI AZIND)⁽ⁱⁱⁱ⁾

• PTI Infraestructura de Desarrollo, S. A. de C. V. (PTI ID)^(vii)

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

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

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

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

• PEMEX Procurement International, Inc. (PPI)

• Hijos de J. Barreras, S. A. (HJ BARRERAS)⁽ⁱⁱ⁾

• PEMEX Finance, Ltd. (FIN)^(iv)

• Mex Gas Internacional, S. L. (MGAS)

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

• Kot Insurance Company, AG. (KOT)

• PPQ Cadena Productiva, S.L. (PPQCP)

• III Servicios, S. A. de C. V. (III Servicios)

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

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

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

• Grupo Fertinal (GP FER)

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

• P.M.I. Trading Mexico, S.A. de C.V. (TRDMX)

• Holdings Holanda Services, B.V. (HHS)

i. Member Company of the “PMI Subsidiaries”.

ii. Non-controlling interest company.

iii. As of August 2018, this company was consolidated by MGAS.

iv. On December 17, 2018 PEMEX acquired the total shares in this company and as of December 31, 2018 this company is no longer part of thenon-controlling interest.

v. Formerly P.M.I. Marine DAC until August 2018.

vi. Formerly P.M.I. Trading Ltd. until August 2018.

vii. Formerly PMI Infraestructura de Desarrollo, S.A. de C.V. until December 2018. On May 30, 2019 these shares were transferred to Pemex Industrial Transformation.

F - 17

NOTE 6. Segment financial information

PEMEX’s primary business is the exploration and production of crude oil and natural gas, as well as the production, processing, marketing and distribution of petroleum and petrochemical products. As of June 30, 2019, and December 31, 2018, PEMEX’s operations were conducted through nine business segments: Exploration and Production, Industrial Transformation, Cogeneration and Services (liquidated company as of July 27, 2018, see Note 1), Drilling and Services (merged into Pemex Exploration and Production as of July 1, 2019, see Note 1), Logistics, Ethylene (merged into Pemex Industrial Transformation as of July 1, 2019, see Note 1), Fertilizers, the Trading Companies and Corporate and Other Operating Subsidiary Companies. Due to PEMEX’s structure, there are significant amounts of inter-segment sales among the reporting segments, which are made at internal transfer prices established by PEMEX that are intended to reflect international market prices.

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

• The exploration and production segment earns revenues from domestic sales of crude oil and natural gas, and from exporting crude oil through certain of the Trading Companies. Export sales are made through PMI CIM to approximately 30 major customers in various foreign markets. Approximately half of PEMEX’s crude oil is sold to Pemex Industrial Transformation.

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

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

• The cogeneration segment received income from the cogeneration, supply and sale of electricity and thermal energy and also provided 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 servicing and repairing wells. This entity was merged into Pemex Exploration and Production on July 1, 2019 (see Note 1).

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

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

• 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 DAC and MGAS (the “Trading Companies”), earn revenues from trading crude oil, natural gas and petroleum and petrochemical products in international markets.

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

F - 18

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 on which it bases its decision-making.

As of/for the six-month period  ended June 30, 2019	Exploration And Production			Industrial Transformation			Drilling and Services			Logistics			Fertilizers			Ethylene			Trading companies			Corporate and other Operating Subsidiary Companies			Intersegment eliminations			Total
Sales:
Trade	Ps.	214,860,711		Ps.	407,561,704		Ps.	—		Ps.	—		Ps.	1,053,271		Ps.	5,254,234		Ps.	94,007,123		Ps.	5,263,498		Ps.	—		Ps.	728,000,541
Intersegment		166,241,281			68,180,716			2,758,454			43,660,666			292,112			722,992			252,311,975			47,721,889			(581,890,085	)		—
Services income		375,672			508,418			20,755			2,370,633			690			3,690			28,106			1,591,316			—			4,899,280
Impairment (reversal) of wells, pipelines, properties, plants and equipment		50,867,433			(1,506,747	)		—			(39,762,645	)		—			—			—			—			—			9,598,041
Cost of sales		209,909,177			492,312,212			(1,918,085	)		14,276,285			1,937,870			7,977,771			338,240,136			25,867,528			(549,872,166	)		538,730,728
Gross income (loss)		120,701,054			(14,554,627	)		4,697,294			71,517,659			(591,797	)		(1,996,855	)		8,107,068			28,709,175			(32,017,919	)		184,571,052
Other income, net		721,267			1,519,350			(14,835	)		(2,106,183	)		5,501			77,625			781,979			2,335,688			2,533,314			5,853,706
Distribution, transportation and sales expenses		125,858			12,286,678						24,654			177,428			126,064			634,632			41,833			(2,373,807	)		11,043,340
Administration expenses		28,356,378			25,324,176			282,524			3,732,200			288,990			585,069			930,345			33,891,353			(27,496,965	)		65,894,070
Operating income (loss)		92,940,085			(50,646,131	)		4,399,935			65,654,622			(1,052,714	)		(2,630,363	)		7,324,070			(2,888,323	)		386,167			113,487,348
Financing cost		(61,831,792	)		(2,994,636	)		(386,894	)		(277,517	)		(361,244	)		(185,433	)		(486,460	)		(93,245,244	)		98,471,746			(61,297,474	)
Financing income		36,589,463			1,186,966			248,966			137,788			1,655			14,090			433,616			67,324,160			(98,857,912	)		7,078,792
Derivative financial instruments (cost) income, net		(427,166	)		(7,061	)		—			—			—			—			(1,456,548	)		(3,089,630	)		—			(4,980,405	)
Foreign exchange (loss) income, net		47,969,698			1,819,036			95,658			135,322			60,910			(35,843	)		(213,525	)		2,995,692			—			52,826,948
Profit (loss) sharing in joint ventures and associates		41,331			—			—			(102	)		—			—			(108,214	)		(53,342,055	)		53,393,895			(15,145	)
Tax, duties and other		194,281,715			—			1,498,122			(5,494,811	)		—			(1,446,202	)		2,899,303			3,871,089			—			195,609,216
Net (loss) income		(79,000,096	)		(50,641,826	)		2,859,543			71,144,924			(1,351,393	)		(1,391,347	)		2,593,636			(86,116,489	)		53,393,896			(88,509,152	)
Total current assets		967,734,659			222,703,602			15,846,334			22,879,138			2,127,621			6,799,708			132,255,235			668,148,692			(1,712,968,910	)		325,526,079
Totalnon-current assets		935,557,210			331,434,730			14,291,528			148,963,481			5,138,450			19,053,127			29,749,054			1,316,919,655			(1,105,366,931	)		1,695,740,304
Total current liabilities		303,323,840			173,800,102			3,442,918			16,907,758			10,705,427			7,618,928			90,725,027			1,605,559,155			(1,711,107,940	)		500,975,215
Totalnon-current liabilities		2,180,626,808			668,180,754			10,810,759			9,514,181			767,250			399,829			4,080,484			2,026,194,414			(1,707,274,782	)		3,193,299,697
Equity (deficit), net		(580,658,779	)		(287,842,524	)		15,884,185			145,420,680			(4,206,606	)		17,834,078			67,198,778			(1,646,685,222	)		600,046,881			(1,673,008,529	)
Depreciation and amortization		57,566,428			10,292,439			369,636			1,776,954			(130,660	)		677,699			435,046			1,654,283			—			72,641,825
Net periodic cost of employee benefits excluding items recognized in other comprehensive income I		17,715,563			27,653,924			13,642			142,656			9,563			9,801			—			13,698,544			—			59,243,693

F - 19

As of/for the three-month period  ended June 30, 2019	Exploration And Production			Industrial Transformation			Drilling and Services			Logistics			Fertilizers			Ethylene			Trading companies			Corporate and other Operating Subsidiary Companies			Intersegment eliminations			Total
Sales:
Trade	Ps.	107,045,519		Ps.	213,087,765		Ps.	—		Ps.	—		Ps.	142,843		Ps.	2,700,700		Ps.	47,965,230		Ps.	2,880,430		Ps.	—		Ps.	373,822,487
Intersegment		86,769,355			35,877,615			988,780			22,014,120			176,909			350,628			135,503,344			23,837,512			(305,518,263	)		—
Services income		351,370			364,241			458			1,231,465			93			2,382			15,318			860,509			—			2,825,836
Impairment (reversal) of wells, pipelines, properties, plants and equipment		33,997,125			1,025,658			—			(30,579,688	)		—			—			—			—			—			4,443,095
Cost of sales		114,822,750			252,398,009			(1,704,256	)		6,110,536			664,543			3,865,594			181,750,667			13,557,285			(289,389,129	)		282,075,999
Gross income (loss)		45,346,369			(4,094,046	)		2,693,494			47,714,737			(344,698	)		(811,884	)		1,733,225			14,021,166			(16,129,134	)		90,129,229
Other income, net		(1,572,257	)		1,958,251			(9,515	)		(1,524,137	)		5,716			48,242			354,887			1,178,575			1,368,717			1,808,479
Distribution, transportation and sales expenses		69,224			6,510,960			—			15,453			84,125			62,997			298,504			19,871			(1,520,260	)		5,540,874
Administration expenses		14,148,822			13,045,136			112,487			1,698,837			138,311			232,554			355,234			17,343,439			(13,464,338	)		33,610,482
Operating income (loss)		29,556,066			(21,691,891	)		2,571,492			44,476,310			(561,418	)		(1,059,193	)		1,434,374			(2,163,569	)		224,181			52,786,352
Financing cost		(30,959,875	)		(2,162,469	)		(193,731	)		(163,002	)		(198,311	)		(104,727	)		(249,923	)		(46,628,477	)		49,218,017			(31,442,498	)
Financing income		18,224,325			695,508			128,280			88,716			851			6,661			227,995			33,247,323			(49,442,163	)		3,177,496
Derivative financial instruments (cost) income, net		6,852,659			(48	)		—			—			—			—			(382,741	)		(3,228,241	)		(35	)		3,241,594
Foreign exchange (loss) income, net		16,833,624			3,813,804			22,910			82,994			32,602			3,256			(166,385	)		1,792,565			—			22,415,370
Profit (loss) sharing in joint ventures and associates		41,331			—			—			(70	)		—			—			128,108			(29,859,067	)		29,886,182			196,484
Tax, duties and other		103,904,901			—			1,514,494			(7,758,534	)		—			—			915,599			4,588,235			—			103,164,695
Net (loss) income		(63,356,771	)		(19,345,096	)		1,014,457			52,243,482			(726,276	)		(1,154,003	)		75,829			(51,427,701	)		29,886,182			(52,789,897	)
Depreciation and amortization		28,929,278			2,981,151			16,032			791,649			(64,701	)		303,509			(175,177	)		569,504			—			33,351,245
Net periodic cost of employee benefits		9,365,904			14,579,394			7,614			82,381			5,681			5,860			—			7,160,134			(50,162	)		31,156,806

F - 20

As of/for the six-month period  ended June 30, 2018	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.	235,689,465		Ps.	481,690,782			—		—			—		Ps.	1,773,974		Ps.	6,563,445		Ps.	101,552,868		Ps.	2,012,018			—		Ps.	829,282,552
Intersegment		213,902,695			85,736,578			—		2,212,873			32,019,150			1,046,387			704,832			323,999,851			48,776,165			(708,398,531	)		—
Services income		—			362,963			—		25,156			2,489,437			1,948			5,578			35,821			1,366,587			—			4,287,490
(Reversal) impairment of wells, pipelines, properties, plants and equipment		(36,711,403	)		(7,803,065	)		—		—			—			2,154,016			—			—			—			—			(42,360,452	)
Cost of sales		210,101,903			563,862,842			—		1,060,852			20,167,802			3,411,785			7,353,302			417,171,921			24,906,788			(667,061,674	)		580,975,521
Gross income (loss)		276,201,660			11,730,546			—		1,177,177			14,340,785			(2,743,492	)		(79,447	)		8,416,619			27,247,982			(41,336,857	)		294,954,973
Other income, net		4,101,924			3,348,024			1,788		(1,932,918	)		(14,265,893	)		25,831			67,732			447,308			1,520,400			14,409,859			7,724,055
Distribution, transportation and sales expenses		124,828			12,392,562			—		63			15,382			179,403			82,391			232,858			37,459			(1,990,895	)		11,074,051
Administration expenses		27,360,806			21,236,183			—		352,138			4,550,764			242,689			626,410			916,991			34,198,389			(25,158,088	)		64,326,282
Operating income (loss)		252,817,950			(18,550,175	)		1,788		(1,107,942	)		(4,491,254	)		(3,139,753	)		(720,516	)		7,714,078			(5,467,466	)		221,985			227,278,695
Financing cost		(59,110,719	)		(973,317	)		—		(381,390	)		(144,266	)		(189,543	)		(25,559	)		(732,894	)		(103,576,300	)		108,161,171			(56,972,817	)
Financing income		42,975,869			4,867,481			1		142,575			612,787			2,818			11,729			370,485			70,368,989			(108,383,165	)		10,969,569
Derivative financial instruments income (cost), net		(9,682,793	)		(20,907	)		—		—			—			—			—			(1,661,925	)		2,072,712			7			(9,292,906	)
Foreign exchange income (loss), net		8,727,059			(1,599,203	)		—		(34,203	)		(98,860	)		(10,478	)		(10,478	)		265,227			(4,733,747	)		—			2,505,317
Profit (loss) sharing in joint ventures and associates		60,095			—			—		—			(553	)		—			—			432,093			(5,268,147	)		5,624,648			848,136
Tax, duties and other		226,543,089			—			—		(411,178	)		(6,126,518	)		—			—			3,865,394			1,325,602			—			225,196,389
Net Income (loss)		9,244,372			(16,276,121	)		1,789		(969,782	)		2,004,372			(3,336,956	)		(744,824	)		2,521,670			(47,929,561	)		5,624,646			(49,860,395	)
Total current assets		1,092,665,803			228,874,626			—		8,774,048			31,284,758			1,963,988			4,276,184			148,590,483			536,016,408			(1,689,878,696	)		362,567,602
Totalnon-current assets		1,017,086,700			290,516,877			—		18,345,542			147,926,918			3,711,249			18,641,665			29,257,312			1,623,232,000			(1,378,578,275	)		1,770,139,988
Total current liabilities		292,778,523			126,822,276			—		2,924,666			29,530,499			6,531,365			2,703,176			100,825,821			1,491,499,353			(1,682,597,623	)		371,018,056
Totalnon-current liabilities		2,320,582,983			628,741,519			—		12,662,944			11,153,922			109,628			142,830			4,708,826			2,184,059,366			(1,853,637,218	)		3,308,524,800
Equity (deficit), net		(503,609,003	)		(236,172,292	)		—		11,531,980			138,527,255			(965,756	)		20,071,843			72,313,148			(1,516,310,311	)		467,777,870			(1,546,835,266	)
Depreciation and amortization		59,022,608			9,303,331			—		1,150,621			2,533,607			(47,399	)		691,806			31,225			1,047,916			—			73,733,715
Net periodic cost of employee benefits		17,203,359			27,159,469			—		16,500			109,640			7,245			6,320			16,764			13,523,709			—			58,043,006

As of/for the three-month period ended June 30,  2018	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.	124,545,500		Ps.	248,780,119			—		—			—		Ps.	547,219		Ps.	3,540,187		Ps.	56,544,070		Ps.	(36,309	)		—		Ps.	433,920,786
Intersegment		116,533,145			47,205,103			—		912,297			18,918,084			602,194			434,674			177,300,060			27,308,742			(389,214,299	)		—
Services income		—			362,963			—		17,282			1,066,344			(147	)		1,906			(152,572	)		957,917			—			2,253,693
(Reversal) impairment of wells, pipelines, properties, plants and equipment		(24,054,435	)		(1,421,654	)		—		—			—			2,154,016			—			—			—			—			(23,322,073	)
Cost of sales		115,226,674			293,586,252			—		302,196			11,285,298			1,354,279			4,016,579			226,254,511			13,913,835			(361,735,985	)		304,203,639
Gross income (loss)		149,906,406			4,183,587			—		627,383			8,699,130			(2,359,029	)		(39,812	)		7,437,047			14,316,515			(27,478,314	)		155,292,913
Other income, net		(237,329	)		4,239,392			1,788		(1,824,750	)		(7,286,878	)		25,989			45,001			289,014			819,118			7,407,496			3,478,810
Distribution, transportation and sales expenses		124,828			7,390,552			—		63			5,404			80,719			26,592			112,038			18,649			(2,207,877	)		5,550,968
Administration expenses		13,236,931			11,827,902			—		163,822			2,829,545			160,967			396,344			448,659			17,855,222			(13,566,420	)		33,352,972
Operating income (loss)		136,307,318			(10,795,475	)		1,788		(1,361,252	)		(1,422,697	)		(2,574,726	)		(417,747	)		7,165,364			(2,738,238	)		(4,296,521	)		119,867,814
Financing cost		(31,271,739	)		(482,131	)		—		(192,387	)		(27,801	)		(98,667	)		(16,005	)		(417,921	)		(52,325,407	)		55,027,940			(29,804,118	)
Financing income		21,053,925			2,195,396			1		77,729			221,147			1,180			6,137			188,481			33,252,905			(55,147,391	)		1,849,510
Derivative financial instruments income (cost), net		(21,237,446	)		(32,490	)		—		—			—			—			—			(1,636,194	)		1,939,493			7			(20,966,630	)
Foreign exchange income (loss), net		(100,912,926	)		(6,328,436	)		—		(450,197	)		(246,555	)		(64,189	)		(6,188	)		437,819			(10,777,349	)		—			(118,348,021	)
Profit (loss) sharing in joint ventures and associates		60,095			—			—		—			(203	)		—			—			195,647			(131,863,453	)		132,170,863			562,949
Tax, duties and other		118,473,751			—			—		(434,958	)		(4,986,981	)		—			—			1,981,509			1,300,689			—			116,334,010
Net Income (loss)		(114,474,524	)		(15,443,136	)		1,789		(1,491,149	)		3,510,872			(2,736,402	)		(433,803	)		3,951,687			(163,812,738	)		127,754,898			(163,172,506	)
Depreciation and amortization		31,878,308			4,628,954			—		589,061			1,301,701			(23,704	)		343,410			15,598			529,336			—			39,262,664
Net periodic cost of employee benefits		8,601,680			13,579,735			—		8,250			54,821			3,623			3,161			8,382			6,761,664			—			29,021,316

⁽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).

F - 21

As of December 31, 2018	Exploration and Production			Industrial Transformation			Drilling and Services		Logistics		Fertilizers			Ethylene		Trading Companies			Corporate and Other Operating Subsidiary Companies			Intersegment eliminations			Total
Total current assets	Ps.	1,109,407,361		Ps.	238,486,786		Ps.	11,478,067	Ps.	15,343,841	Ps.	2,772,995		Ps.	8,337,752	Ps.	137,727,664		Ps.	723,490,973		Ps.	(1,853,935,478	)	Ps.	393,109,961
Totalnon-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	)	Ps.	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	)	Ps.	447,776,294
Totalnon-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	)	Ps.	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		Ps.	(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			—		Ps.	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		Ps.	114,621,614

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 on the unaudited condensed consolidated interim financial statements. For certain of the items in these unaudited condensed consolidated interim financial statements to conform 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:

F - 22

The following tables present accounting reconciliations between individual and consolidated information.

As of/for the six-month period  ended June 30, 2019	Exploration and Production			Industrial Transformation			Drilling and Services			Logistics			Fertilizers			Ethylene			Trading companies			Corporate and other Operating Subsidiary Companies
Sales:
By segment	Ps.	394,906,054		Ps.	476,895,617		Ps.	6,585,824		Ps.	46,031,299		Ps.	1,373,236		Ps.	5,980,916		Ps.	346,347,204		Ps.	54,576,703
Less unrealized intersegment sales		(13,428,390	)		(644,779	)		(3,806,615	)		—			(27,163	)		—			—			—
Total consolidated sales	Ps.	381,477,664		Ps.	476,250,838		Ps.	2,779,209		Ps.	46,031,299		Ps.	1,346,073		Ps.	5,980,916		Ps.	346,347,204		Ps.	54,576,732
Operating income (loss):
By segment	Ps.	94,924,804		Ps.	(44,795,497	)	Ps.	4,890,475		Ps.	90,416,233		Ps.	(1,217,898	)	Ps.	(2,932,267	)	Ps.	7,472,277		Ps.	(2,888,323	)
Less unrealized intersegment sales		(13,428,390	)		(644,779	)		(3,806,615	)		—			(27,163	)		—			—			—
Less unrealized gain due to production cost valuation of inventory		(1,398,963	)		(5,205,855	)		3,253,374			—			—			—			(148,207	)		—
Less capitalized refined products		(719,406	)		—			—			—			—			—			—			—
Less amortization of capitalized interest		59,490			—			—			—			—			—			—			—
Less depreciation and impairment of revaluated transferred assets		13,428,390			—			62,701			(24,801,392	)		178,495			299,045			—			—
Less intersegment leases		74,160			—			—			39,781			13,852			2,859			—			—
Total consolidated operating income (loss)	Ps.	92,940,085		Ps.	(50,646,131	)	Ps.	4,399,935		Ps.	65,654,622		Ps.	(1,052,714	)	Ps.	(2,630,363	)	Ps.	7,324,070		Ps.	(2,888,323	)
Net income (loss):
By segment	Ps.	(76,990,935	)	Ps.	(44,101,049	)	Ps.	3,333,710		Ps.	87,862,189		Ps.	(2,056,040	)	Ps.	(3,138,317	)	Ps.	2,741,843		Ps.	(86,116,489	)
Less unrealized intersegment sales		(13,428,390	)		(644,779	)		(3,806,615	)		—			(27,163	)		—			—			—
Less unrealized gain due to production cost valuation of inventory		(1,398,963	)		(5,205,855	)		3,253,374			—			—			—			(148,207	)		—
Less capitalized refined products		(719,406	)		—			—			—			—			—			—			—
Less equity method elimination		5,027			(690,143	)		—			—			544,968			—			—			—
Less amortization of capitalized interest		59,490			—			—			—			—			—			—			—
Less depreciation and impairment of revaluated transferred assets, net of deferred taxes		13,428,390			—			79,074			(16,734,941	)		178,495			1,745,247			—			—
Less intersegment leases		44,691			—			—			17,676			8,347			1,723			—			—
Total consolidated net (loss) income	Ps.	(79,000,096	)	Ps.	(50,641,826	)	Ps.	2,859,543		Ps.	71,144,924		Ps.	(1,351,393	)	Ps.	(1,391,347	)	Ps.	2,593,636		Ps.	(86,116,489	)
Total assets:
By segment	Ps.	1,930,413,591		Ps.	606,409,008		Ps.	31,748,686		Ps.	246,269,939		Ps.	8,925,558		Ps.	29,228,980		Ps.	173,520,309		Ps.	1,985,068,347
Less unrealized intersegment sales		2,068,573			(8,188,785	)		—			7,183			(74,345	)		(5,303	)		(408,059	)		—
Less unrealized gain due to production cost valuation of inventory		(5,739,253	)		(35,526,420	)		—			—			(27,163	)		—			(10,028,292	)		—
Less capitalized refined products		—			—			—			—			—			—			—			—
Less depreciation and impairment of revaluated transferred assets, net of deferred taxes		(26,545,963	)		—			(1,610,824	)		(76,962,119	)		(1,623,183	)		(3,441,070	)		(424,849	)		—
Less equity method for unrealized profits		(471,478	)		(8,563,594	)		—			(87,070	)		(589,855	)		(64,995	)		(654,820	)		—
Less amortization of capitalized interest		59,490			8,123			—			—			—			—			—			—
Less intersegment leases		3,506,909			—			—			2,614,686			655,059			135,223			—			—
Total consolidated assets	Ps.	1,903,291,869		Ps.	554,138,332		Ps.	30,137,862		Ps.	171,842,619		Ps.	7,266,071		Ps.	25,852,835		Ps.	162,004,289		Ps.	1,985,068,347
Total liabilities:
By segment	Ps.	2,480,488,430		Ps.	846,400,785		Ps.	12,381,176		Ps.	23,824,929		Ps.	10,825,966		Ps.	7,885,258		Ps.	97,409,836		Ps.	3,631,753,569
Less unrealized intersegment sales		—			(4,419,929	)		1,872,501			—			—			—			(2,604,325	)		—
Less intersegment leases		3,462,218			—			—			2,597,010			646,711			133,499			—			—
Total consolidated liabilities	Ps.	2,483,950,648		Ps.	841,980,856		Ps.	14,253,677		Ps.	26,421,939		Ps.	11,472,677		Ps.	8,018,757		Ps.	94,805,511		Ps.	3,631,753,569

F - 23

As of/ for the three-month period  ended June 30, 2019	Exploration and Production			Industrial Transformation			Drilling and Services			Logistics			Fertilizers			Ethylene			Trading companies			Corporate and other Operating Subsidiary Companies
Sales:
By segment	Ps.	201,587,582		Ps.	249,173,113		Ps.	3,688,922		Ps.	23,245,585		Ps.	288,366		Ps.	3,053,710		Ps.	183,483,892		Ps.	27,578,451
Less unrealized intersegment sales		(7,421,338	)		156,508			(2,699,684	)		—			31,479			—			—			—
Total consolidated sales	Ps.	194,166,244		Ps.	249,329,621		Ps.	989,238		Ps.	23,245,585		Ps.	319,845		Ps.	3,053,710		Ps.	183,483,892		Ps.	27,578,451
Operating income (loss):
By segment	Ps.	30,075,914		Ps.	(20,331,075	)	Ps.	2,955,750		Ps.	70,861,114		Ps.	(695,996	)	Ps.	(1,211,574	)	Ps.	1,841,766		Ps.	(2,163,569	)
Less unrealized intersegment sales		(7,421,338	)		156,508			(2,699,684	)		—			31,479			—			—			—
Less unrealized gain due to production cost valuation of inventory		(202,350	)		(1,517,324	)		2,346,025			—			—			—			(407,392	)		—
Less capitalized refined products		(421,403	)		—			—			—			—			—			—			—
Less amortization of capitalized interest		29,745			—			—			—			—			—			—			—
Less depreciation and impairment of revaluated transferred assets		7,421,338			—			(30,599	)		(26,424,585	)		89,247			149,522			—			—
Less intersegment leases		74,160			—			—			39,781			13,852			2,859			—			—
Total consolidated operating income (loss)	Ps.	29,556,066		Ps.	(21,691,891	)	Ps.	2,571,492		Ps.	44,476,310		Ps.	(561,418	)	Ps.	(1,059,193	)	Ps.	1,434,374		Ps.	(2,163,569	)
Net income (loss):
By segment	Ps.	(62,808,017	)	Ps.	(17,669,964	)	Ps.	1,398,714		Ps.	70,583,940		Ps.	(1,400,317	)	Ps.	(1,305,249	)	Ps.	483,221		Ps.	(51,427,701	)
Less unrealized intersegment sales		(7,421,338	)		156,508			(2,699,684	)		—			31,479			—			—			—
Less unrealized gain due to production cost valuation of inventory		(202,350	)		(1,517,324	)		2,346,025			—			—			—			(407,392	)		—
Less capitalized refined products		(421,403	)		—			—			—			—			—			—			—
Less equity method elimination		563			(314,316	)		—			—			544,968			—			—			—
Less amortization of capitalized interest		29,745			—			—			—			—			—			—			—
Less depreciation and impairment of revaluated transferred assets, net of deferred taxes		7,421,338			—			(30,598	)		(18,358,134	)		89,247			149,523			—			—
Less intersegment leases		44,691			—			—			17,676			8,347			1,723			—			—
Total consolidated net (loss) income	Ps.	(63,356,771	)	Ps.	(19,345,096	)	Ps.	1,014,457		Ps.	52,243,482		Ps.	(726,276	)	Ps.	(1,154,003	)	Ps.	75,829		Ps.	(51,427,701	)

F - 24

As of/for the six-month period  ended June 30, 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.	449,592,160		Ps.	568,641,592		Ps.	—	Ps.	3,651,556		Ps.	34,508,587		Ps.	2,822,309		Ps.	7,273,855		Ps.	425,642,969		Ps.	52,154,770
Less unrealized intersegment sales		—			(851,269	)		—		(1,413,527	)		—			—			—			(54,429	)		—
Total consolidated sales	Ps.	449,592,160		Ps.	567,790,323		Ps.	—	Ps.	2,238,029		Ps.	34,508,587		Ps.	2,822,309		Ps.	7,273,855		Ps.	425,588,540		Ps.	52,154,770
Operating income (loss):
By segment	Ps.	253,357,916		Ps.	(133,275	)	Ps.	1,788	Ps.	(380,095	)	Ps.	(2,481,028	)	Ps.	(3,317,231	)	Ps.	(1,340,824	)	Ps.	8,112,877		Ps.	(5,467,466	)
Less unrealized intersegment sales		—			(851,269	)		—		(1,413,527	)		—			—			—			(54,429	)		—
Less unrealized gain due to production cost valuation of inventory		(335,833	)		(17,565,631	)		—		388,751			—			—			—			(344,370	)		—
Less capitalized refined products		(263,624	)		—			—		—			—			—			—			—			—
Less amortization of capitalized interest		59,491			—			—		—			—			—			—			—			—
Less depreciation and impairment of revaluated transferred assets		—			—			—		296,929			(2,010,226	)		177,478			620,308			—			—
Total consolidated operating income (loss)	Ps.	252,817,950		Ps.	(18,550,175	)	Ps.	1,788	Ps.	(1,107,942	)	Ps.	(4,491,254	)	Ps.	(3,139,753	)	Ps.	(720,516	)	Ps.	7,714,078		Ps.	(5,467,466	)
Net income (loss):
By segment	Ps.	9,805,251		Ps.	2,862,326		Ps.	1,789	Ps.	(493,393	)	Ps.	2,417,967		Ps.	(3,911,486	)	Ps.	(1,069,148	)	Ps.	2,920,468		Ps.	(47,929,561	)
Less unrealized intersegment sales		—			(851,269	)		—		(1,413,527	)		—			—			—			(54,429	)		—
Less unrealized gain due to production cost valuation of inventory		(335,833	)		(17,565,631	)		—		388,751			—			—			—			(344,370	)		—
Less capitalized refined products		(263,624	)					—		—			—			—			—			—			—
Less equity method elimination		(20,913	)		(721,547	)		—		—			311			397,052			(295,984	)		1			—
Less amortization of capitalized interest		59,491			—			—		—			—			—			—			—			—
Less depreciation and impairment of revaluated transferred assets, net of deferred taxes		—			—			—		548,387			(413,906	)		177,478			620,308			—			—
Total consolidated net (loss) income	Ps.	9,244,372		Ps.	(16,276,121	)	Ps.	1,789	Ps.	(969,782	)	Ps.	2,004,372		Ps.	(3,336,956	)	Ps.	(744,824	)	Ps.	2,521,670		Ps.	(47,929,561	)
Total assets:
By segment	Ps.	2,136,833,275		Ps.	594,079,464		Ps.	—	Ps.	29,277,969		Ps.	263,496,192		Ps.	10,541,420		Ps.	32,133,052		Ps.	187,936,000		Ps.	2,159,248,408
Less unrealized intersegment sales		1,057,924			(6,241,247	)		—		—			7,184			(26,886	)		(5,304	)		(462,489	)		—
Less unrealized gain due to production cost valuation of inventory		(3,993,365	)		(59,944,861	)		—		—			—			—			—			(8,465,262	)		—
Less capitalized refined products		(263,624	)		—			—		—			—			—			—			—			—
Less depreciation and impairment of revaluated transferred assets, net of deferred taxes		(23,160,662	)		—			—		(2,158,379	)		(84,205,024	)		(1,980,175	)		(8,902,379	)		(424,850	)		—
Less equity method for unrealized profits		(780,536	)		(8,509,974	)		—		—			(86,676	)		(2,859,122	)		(307,520	)		(735,604	)		—
Less amortization of capitalized interest		59,491			8,121			—		—			—			—			—			—			—
Total consolidated assets	Ps.	2,109,752,503		Ps.	519,391,503		Ps.	—	Ps.	27,119,590		Ps.	179,211,676		Ps.	5,675,237		Ps.	22,917,849		Ps.	177,847,795		Ps.	2,159,248,408
Total liabilities:
By segment	Ps.	2,613,361,506		Ps.	759,983,725		Ps.	—	Ps.	14,700,897		Ps.	40,684,421		Ps.	6,640,993		Ps.	2,846,006		Ps.	106,245,862		Ps.	3,675,558,719
Less unrealized intersegment sales		—			(4,419,930	)		—		886,713			—			—			—			(711,215	)		—
Total consolidated liabilities	Ps.	2,613,361,506		Ps.	755,563,795		Ps.	—	Ps.	15,587,610		Ps.	40,684,421		Ps.	6,640,993		Ps.	2,846,006		Ps.	105,534,647		Ps.	3,675,558,719

F - 25

As of/ for the three-month period ended June 30,  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.	241,078,645		Ps.	296,720,853		Ps.	—		Ps.	2,207,349		Ps.	19,984,428		Ps.	1,108,542		Ps.	3,976,767		Ps.	233,694,302		Ps.	28,230,350
Less unrealized intersegment sales		—			(372,668	)		—			(1,277,770	)		—			40,724			—			(2,744	)		—
Total consolidated sales	Ps.	241,078,645		Ps.	296,348,185		Ps.	—		Ps.	929,579		Ps.	19,984,428		Ps.	1,149,266		Ps.	3,976,767		Ps.	233,691,558		Ps.	28,230,350
Operating income (loss):
By segment	Ps.	136,493,234		Ps.	2,987,364		Ps.	1,788		Ps.	(507,183	)	Ps.	3,617,999		Ps.	(2,703,572	)	Ps.	(731,022	)	Ps.	7,495,002		Ps.	(2,738,238	)
Less unrealized intersegment sales		—			(372,668	)		—			(1,277,770	)		—			40,724			—			(2,744	)		—
Less unrealized gain due to production cost valuation of inventory		(208,926	)		(13,410,171	)		—			265,755			—			—			—			(326,894	)		—
Less capitalized refined products		(6,736	)		—			—			—			—			—			—			—			—
Less amortization of capitalized interest		29,746			—			—			—			—			—			—			—			—
Less depreciation and impairment of revaluated transferred assets		—			—			—			157,946			(5,040,696	)		88,122			313,275			—			—
Total consolidated operating income (loss)	Ps.	136,307,318		Ps.	(10,795,475	)	Ps.	1,788		Ps.	(1,361,252	)	Ps.	(1,422,697	)	Ps.	(2,574,726	)	Ps.	(417,747	)	Ps.	7,165,364		Ps.	(2,738,238	)
Net income (loss):
By segment	Ps.	(113,964,651	)	Ps.	(1,834,925	)	Ps.	268,558		Ps.	(888,538	)	Ps.	6,554,611		Ps.	(3,262,300	)	Ps.	750,273		Ps.	10,669,892		Ps.	(163,812,738	)
Less unrealized intersegment sales		—			(372,668	)		—			(1,277,770	)		—			40,724			—			(2,744	)		—
Less unrealized gain due to production cost valuation of inventory		(208,926	)		(13,410,171	)		—			265,755			—			—			—			(326,894	)		—
Less capitalized refined products		(6,736	)		—			—			—			—			—			—			—			—
Less equity method elimination		(323,957	)		174,628			(266,769	)		—			(22	)		397,052			(1,497,351	)		(6,388,567	)		—
Less amortization of capitalized interest		29,746			—			—			—			—			—			—			—			—
Less depreciation and impairment of revaluated transferred assets, net of deferred taxes		—			—			—			409,404			(3,043,717	)		88,122			313,275			—			—
Total consolidated net (loss) income	Ps.	(114,474,524	)	Ps.	(15,443,136	)	Ps.	1,789		Ps.	(1,491,149	)	Ps.	3,510,872		Ps.	(2,736,402	)	Ps.	(433,803	)	Ps.	3,951,687		Ps.	(163,812,738	)

⁽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).

F - 26

As of December 31, 2018	Exploration and Production			Industrial Transformation			Drilling and Services			Logistics			Fertilizers			Ethylene			Trading Companies			Corporate and Other Operating Subsidiary Companies
Assets:
By segment	Ps.	2,161,126,244		Ps.	567,768,812		Ps.	28,400,765		Ps.	176,047,827		Ps.	10,018,775		Ps.	31,365,663		Ps.	177,684,447		Ps.	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			—			—			—			—			—			—
Total consolidated assets	Ps.	2,132,551,464		Ps.	522,008,683		Ps.	26,745,763		Ps.	115,441,065		Ps.	6,960,739		Ps.	26,109,044		Ps.	166,666,973		Ps.	2,348,486,917
Liabilities:
By segment	Ps.	2,588,734,248		Ps.	689,306,996		Ps.	12,328,030		Ps.	41,750,914		Ps.	9,791,235		Ps.	6,860,065		Ps.	104,239,692		Ps.	3,779,469,221
Less unrealized intersegment sales		—			(4,419,930	)		1,373,835			—			—			—			(1,959,546	)		—
Total consolidated liabilities	Ps.	2,588,734,248		Ps.	684,887,066		Ps.	13,701,865		Ps.	41,750,914		Ps.	9,791,235		Ps.	6,860,065		Ps.	102,280,146		Ps.	3,779,469,221

F - 27

NOTE 7. REVENUE

As of June 30, 2019 and 2018, the revenues were as follows:

A. Revenue disaggregation

For the six-month periods ended June 30,	Exploration and Production		Industrial Transformation		Drilling and Services		Logistics		Fertilizers		Ethylene		Trading Companies		Corporate and Other Operating Subsidiary Companies		Total
Geographical market 2019
United States		Ps. 118,061,110		—		—		—		—		—		Ps. 77,459,867		Ps. 296,679		Ps. 195,817,656
Other		24,839,114		—		—		—		—		—		10,072,060		1,933,688		36,844,862
Europe		71,820,398		—		—		—		—		—		2,464,472		1,255,448		75,540,318
Local		515,761		408,070,122		20,755		2,370,633		1,053,961		5,257,924		4,038,828		3,369,001		424,696,985
Total		215,236,383		408,070,122		20,755		2,370,633		1,053,961		5,257,924		94,035,227		6,854,816		732,899,821
2018
United States		121,163,393		—		—		—		—		—		77,333,272		—		198,496,665
Other		69,086,931		—		—		—		—		—		17,841,576		—		86,928,507
Europe		45,439,141		—		—		—		—		—		1,488,060		1,312,586		48,239,787
Local		—		482,053,745		25,156		2,489,437		1,775,923		6,569,023		4,925,780		2,066,019		499,905,083
Total		235,689,465		482,053,745		25,156		2,489,437		1,775,923		6,569,023		101,588,688		3,378,605		833,570,042
Major products and services 2019
Crude oil		214,720,622		—		—		—		—		—		39,222,889		—		253,943,511
Gas		140,088		33,569,750		—		—		—		—		28,667,828		—		62,377,666
Refined petroleum products		—		369,348,024		—		—		—		—		25,224,082		510,996		395,083,102
Other		—		4,643,930		—		—		1,053,271		5,254,234		892,323		4,752,504		16,596,262
Services		375,672		508,418		20,755		2,370,633		690		3,690		28,106		1,591,316		4,899,280
Total		215,236,382		408,070,122		20,755		2,370,633		1,053,961		5,257,924		94,035,228		6,854,816		732,899,821
2018
Crude oil		235,689,465		—		—		—		—		—		—		—		235,689,465
Gas		—		54,742,573		—		—		—		—		22,737,680		—		77,480,253
Refined petroleum products		—		425,632,977		—		—		1,773,975		6,563,445		77,151,280		—		511,121,677
Other		—		1,315,231		—		—		—		—		1,663,907		2,012,019		4,991,157
Services		—		362,964		25,156		2,489,437		1,948		5,578		35,821		1,366,586		4,287,490
Total		235,689,465		482,053,745		25,156		2,489,437		1,775,923		6,569,023		101,588,688		3,378,605		833,570,042
Timing of revenue recognition 2019
Products transferred at a point in time		214,860,711		407,561,704		—		—		1,053,271		5,254,234		94,007,120		5,263,501		728,000,541
Products and services transferred over the time		375,672		508,418		20,755		2,370,633		690		3,690		28,106		1,591,316		4,899,280
Total		215,236,383		408,070,122		20,755		2,370,633		1,053,961		5,257,924		94,035,226		6,854,817		732,899,821
2018
Products transferred at a point in time		235,689,465		481,690,781		—		—		1,773,975		6,563,445		101,552,867		2,012,019		829,282,552
Products and services transferred over the time		—		362,964		25,156		2,489,437		1,948		5,578		35,821		1,366,586		4,287,490
Total		235,689,465		482,053,745		25,156		2,489,437		1,775,923		6,569,023		101,588,688		3,378,605		833,570,042

F - 28

For the three-month periods  ended June 30,	Exploration and Production		Industrial Transformation			Drilling and Services		Logistics		Fertilizers			Ethylene			Trading Companies			Corporate and Other Operating Subsidiary Companies			Total
Geographical market 2019
United States		Ps. 55,653,757		—			—		—		—			—			Ps. 40,167,941			Ps. 296,679			Ps. 96,118,377
Other		15,397,546		—			—		—		—			—			2,609,641			511,693			18,518,880
Europe		35,913,730		—			—		—		—			—			1,484,837			676,142			38,074,709
Local		431,856		213,452,006			458		1,231,465		142,936			2,703,082			3,718,127			2,256,427			223,936,357
Total		107,396,889		213,452,006			458		1,231,465		142,936			2,703,082			47,980,546			3,740,941			376,648,323
2018
United States		65,226,191		—			—		—		—			(65,434	)		42,722,821			(16,676	)		107,866,902
Other		36,123,786		—			—		—		—			—			9,437,826			(936,643	)		44,624,969
Europe		23,195,523		—			—		—		—			—			521,055			1,021,972			24,738,550
Local		—		249,143,082			17,282		1,066,344		547,073			3,607,528			3,709,794			852,955			258,944,058
Total		124,545,500		249,143,082			17,282		1,066,344		547,073			3,542,094			56,391,496			921,608			436,174,479
Major products and services 2019
Crude oil		106,965,033		—			—		—		—			—			39,222,889			—			146,187,922
Gas		80,485		13,824,246			—		—		—			—			16,610,932			—			30,515,663
Refined petroleum products		—		219,058,188			—		—		—			—			(8,432,302	)		510,996			211,136,882
Other		—		(19,794,669	)		—		—		142,843			2,700,700			563,710			2,369,436			(14,017,980	)
Services		351,370		364,241			458		1,231,465		93			2,382			15,318			860,509			2,825,836
Total		107,396,888		213,452,006			458		1,231,465		142,936			2,703,082			47,980,547			3,740,941			376,648,323
2018
Crude oil		124,545,500		—			—		—		—			—			—			—			124,545,500
Gas		—		23,068,895			—		—		—			—			16,356,716			—			39,425,611
Refined petroleum products		—		225,024,299			—		—		1,773,975			6,563,445			38,599,568			—			271,961,287
Other		—		765,591			—		—		(1,226,755	)		(3,023,257	)		1,416,390			56,420			(2,011,611	)
Services		—		284,297			17,282		1,066,344		(147	)		1,906			18,822			865,188			2,253,692
Total		124,545,500		249,143,082			17,282		1,066,344		547,073			3,542,094			56,391,496			921,608			436,174,479
Timing of revenue recognition 2019
Products transferred at a point in time		107,045,519		213,087,765			—		—		142,843			2,700,700			47,965,227			2,880,433			373,822,487
Products and services transferred over the time		351,370		364,241			458		1,231,465		93			2,382			15,318			860,509			2,825,836
Total		107,396,889		213,452,006			458		1,231,465		142,936			2,703,082			47,980,545			3,740,942			376,648,323
2018
Products transferred at a point in time		124,545,500		248,858,785			—		—		547,220			3,540,188			56,372,674			56,420			433,920,787
Products and services transferred over the time		—		284,297			17,282		1,066,344		(147	)		1,906			18,822			865,188			2,253,692
Total		124,545,500		249,143,082			17,282		1,066,344		547,073			3,542,094			56,391,496			921,608			436,174,479

B. Practical expedients

1) Expiration of contracts.

PEMEX has no outstanding performance obligations to disclose as of June 30, 2019 due to the nature of its operations. PEMEX��s outstanding performance obligations expire within one year or less.

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

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

F - 29

NOTE 8. CASH AND CASH EQUIVALENTS

a. As of June 30, 2019 and December 31, 2018, cash and cash equivalents were as follows:

	June 30, 2019		December 31, 2018
Cash on hand and in banks(i)		29,050,047		41,974,735
Highly liquid investments(ii)		15,369,179		39,937,674
	Ps.	44,419,226	Ps.	81,912,409

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

(ii) Mainly composed of short–term Mexican Government investments.

NOTE 9. ACCOUNTS RECEIVABLE, NET

As of June 30, 2019 and December 31, 2018, accounts receivable and other receivables were as follows:

	June 30, 2019		December 31, 2018
a. Customers
Domestic customers, net		52,288,258		48,520,478
Export customers, net		42,277,915		39,220,037
Total customers	Ps.	94,566,173	Ps.	87,740,515
b. Other account receivable
Sundry debtors(i)		63,556,256		53,388,512
Taxes to be recovered and prepaid taxes		17,876,854		18,405,990
Employees and officers		3,851,089		6,333,216
Advances to suppliers		982,395		597,700
Other accounts receivable		1,096,987		673,845
Total account receivable	Ps.	87,363,581	Ps.	79,399,263
Total account receivable, net	Ps.	181,929,754	Ps.	167,139,778

(i) Mainly Special Tax on Production and Services.

NOTE 10. INVENTORIES

As of June 30, 2019 and December 31, 2018, inventories were as follows:

	June 30, 2019		December 31, 2018
Refined and petrochemicals products		44,307,117		43,134,519
Products in transit		12,792,093		16,260,213
Crude oil		12,328,561		16,708,606
Materials and products in stock		4,518,022		5,292,796
Materials in transit		618		490,403
Gas and condensate products		155,573		136,031
	Ps.	74,101,984	Ps.	82,022,568

F - 30

NOTE 11.HELD-FOR-SALE CURRENTNON-FINANCIAL ASSETS

As of December 31, 2018, Pemex Logistics had 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 maintain a presence in the market.

The details relating to the potential sale of these assets were classified as “reserved”, pursuant to Article 110, sections VIII and XIII of theLey 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.

As of June 30, 2019, as the criteria established for the sale of such assets were not met, Pemex Logístics did not continue to classify most of these assets as held for sale. Due to this situation, the amount ofheld-for-sale currentnon-financial assets was Ps. 139,648 as of June 30, 2019.

In addition, there are Ps.181,101 inheld-for-sale assets to Centro Nacional de Gas Natural.

NOTE 12. INVESTMENTS IN JOINT VENTURES AND ASSOCIATES

The investments in joint ventures and associates as of June 30, 2019 and December 31, 2018, were as follows:

	Percentage of investment			June 30, 2019		December 31, 2018
Deer Park Refining Limited		49.99	%		14,081,172		14,731,030
Sierrita Gas Pipeline LLC		35.00	%		1,056,866		1,068,995
Frontera Brownsville, LLC.		50.00	%		465,919		472,898
Texas Frontera, LLC.		50.00	%		221,065		228,564
CH 4 Energía, S. A.		50.00	%		154,515		155,878
Administración Portuaria Integral de Dos Bocas, S. A. de C.V.		40.00	%		159,809		118,478
Ductos el Peninsular, S. A. P. I. de C. V.		30.00	%		17,142		17,244
Other-net		Various			47,306		48,458
				Ps.	16,203,794	Ps.	16,841,545

Profit (loss) sharing in joint ventures and associates:

	For thesix-month period ended June 30,
	2019			2018
Deer Park Refining Limited		(187,351	)		375,671
Administración Portuaria Integral de Dos Bocas, S.A. de C.V.		41,331			60,095
Frontera Brownsville, LLC		26,324			17,089
Texas Frontera, LLC		25,517			43,966
CH4 Energía S.A. de C.V.		(1,210	)		—
Sierrita Gas Pipeline LLC		80,346			56,422
Ductos el Peninsular, S. A. P. I. de C. V.		(102	)		(552	)
PMV Minera, S.A. de C.V.		—			3,707
Petroquímica Mexicana de Vinilo, S. A. de C. V.		—			291,738
Profit sharing in joint ventures and associates, net	Ps.	(15,145)		Ps.	848,136

F - 31

	For the three-month period ended June 30,
	2019			2018
Deer Park Refining Limited		95,505			149,403
Administración Portuaria Integral de Dos Bocas, S.A. de C.V.		41,331			60,095
Frontera Brownsville, LLC		14,323			(2,962	)
Texas Frontera, LLC		12,793			31,055
CH4 Energía S.A. de C.V.		—			(18	)
Sierrita Gas Pipeline LLC		32,603			46,262
Ductos el Peninsular, S. A. P. I. de C. V.		(71	)		(202	)
PMV Minera, S.A. de C.V.		—			1,219
Petroquímica Mexicana de Vinilo, S. A. de C. V.		—			278,097
Profit sharing in joint ventures and associates, net		Ps. 196,484			Ps. 562,949

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

• Deer Park Refining Limited. On March 31, 1993, PMI NASA acquired 49.99% of the Deer Park Refinery. In its capacity as general partner of Deer Park Refining Limited Partnership, Shell is responsible for the operation and management of the refinery, the purpose of which is to provide oil refinery services to PMI NASA and Shell for a processing fee. Shell is responsible for determining the crude oil and production materials requirements and both partners are required to contribute in equal amounts. Deer Park returns to PMI NASA and Shell products in the same amounts. Shell is responsible for purchasing the total amount of finished products in stock at market prices. This joint venture is recorded under the equity method.

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

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

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

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

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

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

F - 32

NOTE 13. WELLS, PIPELINES, PROPERTIES, PLANT AND EQUIPMENT, NET

	Plants				Drilling equipment			Pipelines			Wells			Buildings			Offshore platforms			Furniture and equipment			Transportation equipment			Construction in progress (1)			Land			Unproductive fixed assets			Other fixeded assets			Total fixed assets
Investment
Balances as of December 31, 2017		Ps. 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			—			118,652			Ps. 3,155,845,995
Acquisitions		4,297,491				305,607			482,014			9,621,436			167,620			2,074,119			283,073			107,284			17,214,414			292,678			(106	)		—			34,845,630
Reclassifications		1,335,376				—			(1,969,381	)		—			(12,140	)		(4,039,499	)		(44,167	)		20,915			600,671			12,119			2,707,617			(870	)		(1,389,359	)
Capitalization		272,222				—			1,140,129			7,538,411			99,766			—			—			206,896			(9,257,424	)		—			—			—			—
Impairment		6,886,753				—			(1,481,865	)		30,832,289			(835,859	)		7,310,570			—			—			(351,436	)		—			—			—			42,360,452
Disposals		(3,242,791	)			(897,685	)		(426,983	)		(8,297,844	)		(242,061	)		—			(407,078	)		(801,084	)		(258,407	)		(310,546	)		(2,707,511	)		—			(17,591,990	)
Balances as of June 30, 2018		765,574,411				22,851,038			479,612,090			1,307,442,202			63,877,797			318,775,131			50,889,480			22,705,647			137,684,200			44,540,950			—			117,782			3,214,070,728
Balances as of January 1, 2018		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			—			118,652			3,155,845,995
Acquisitions		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		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		25,752,538				—			2,456,977			21,269,614			991,061			—			163,000			227,334			(50,828,761	)		—			—			(31,763	)		—
Impairment		20,226,139				—			(59,632,531	)		59,774,797			(831,561	)		12,133,524			—			(6,981,561	)		(3,269,810	)		—			—			—			21,418,997
Disposals		(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	)
Balances as of December 31, 2018		811,270,391				20,080,965			421,235,950			1,379,323,723			64,845,163			326,482,265			52,020,042			15,159,952			129,352,513			44,351,625			—			32,659			3,264,155,248
Transfers to rights of use assets		(5,637,961	)			(7,963,261	)		(5,783,371	)		—			—			(8,851,232	)		—			—			—			—			—			—			(28,235,825	)
Acquisitions		4,623,141				210,844			512,037			7,477,698			119,323			2,184,207			75,897			465,417			16,885,989			130,358			—			—			32,684,911
Reclassifications		74,415				—			294,243			—			(33,143	)		(569,349	)		(74,457	)		(11,472	)		72,483			(8,997	)		34,369			—			(221,908	)
Capitalization		(733,039	)			—			3,425,057			17,134,504			136,730			2,717,556			—			—			(22,668,697	)		(12,111	)		—			—			—
Impairment		(12,255,884	)			—			40,929,028			(30,023,378	)		(113,944	)		(7,016,372	)		—			(490,943	)		(626,548	)		—			—			—			(9,598,041	)
Disposals		(2,390,129	)			(235,382	)		(285,152	)		—			(69,895	)		—			(1,143,516	)		(114,172	)		(478,128	)		(52,588	)		(34,369	)		(32,659	)		(4,835,990	)
Balances as of June 30, 2019		794,950,934				12,093,166			460,327,792			1,373,912,547			64,884,234			314,947,075			50,877,966			15,008,782			122,537,612			44,408,287			—			—			3,253,948,395
Accumulated depreciation and amortization
Balances as of December 31, 2017		Ps. (394,024,147	)			(5,013,984	)		(159,959,414	)		(908,399,636	)		(41,041,009	)		(165,207,235	)		(38,972,938	)		(6,718,306	)		—			—			—			—			Ps. (1,719,336,669	)
Depreciation and amortization		(19,911,542	)			(1,078,808	)		(7,808,357	)		(35,229,793	)		(933,896	)		(6,877,975	)		(1,411,430	)		(481,914	)		—			—			—			—			(73,733,715	)
Reclassifications		(244,470	)	��		—			224,869			—			19,614			1,344,469			65,719			(20,842	)		—			—			—			—			1,389,359
Disposals		1,588,131				264,028			161,353			5,187,467			90,274			—			367,418			175,451			—			—			—			—			7,834,122
Balances as of June 30, 2018		(412,592,028	)			(5,828,764	)		(167,381,549	)		(938,441,962	)		(41,865,017	)		(170,740,741	)		(39,951,231	)		(7,045,611	)		—			—			—			—			(1,783,846,903	)
Balances as of January 1, 2018		(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	)
Depreciation and amortization		(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		(212,207	)			(45,953	)		232,680			—			17,387			1,344,469			(3,003,850	)		(94,772	)		—			—			—			—			(1,762,246	)
Disposals		2,558,780				408,502			1,262,358			5,187,467			125,769			—			2,643,297			625,618			—			—			—			—			12,811,791
Balances as of December 31, 2018		(436,603,123	)			(5,998,481	)		(173,264,040	)		(973,467,746	)		(42,924,256	)		(179,831,090	)		(42,161,378	)		(7,419,050	)		—			—			—			—			(1,861,669,164	)
Transfers to rights of use assets		890,204				886,946			587,478			—			—			1,140,589			—			—			—			—			—			—			3,505,217
Depreciation and amortization		(21,630,874	)			(206,741	)		(6,380,511	)		(30,670,322	)		(993,686	)		(7,096,538	)		(1,245,955	)		(277,191	)		—			—			—			—			(68,501,818	)
Reclassifications		(56,185	)			—			40,977.00			—			51,782.00			106,066			77,788			1,480			—			—			—			—			221,908
Disposals		1,944,186				204,388			560,215			(151,405	)		108,143			—			1,074,195			80,438			—			—			—			—			3,820,160
Balances as of June 30, 2019		Ps. (455,455,792	)			(5,113,888	)		(178,455,881	)		(1,004,289,473	)		(43,758,017	)		(185,680,973	)		(42,255,350	)		(7,614,323	)		—			—			—			—			Ps. (1,922,623,697	)
Wells, pipelines, properties, plant and equipment—net as of June 30, 2018		Ps. 352,982,383				17,022,274			312,230,541			369,000,240			22,012,780			148,034,390			10,938,249			15,660,036			137,684,200			44,540,950			—			117,782			Ps. 1,430,223,825
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			Ps. 1,402,486,084
Wells, pipelines, properties, plant and equipment—net as of June 30, 2019		Ps. 339,495,142				6,979,278			281,871,911			369,623,074			21,126,217			129,266,102			8,622,616			7,394,459			122,537,612			44,408,287			—			—			Ps. 1,331,324,698
Depreciation rates		3 to 5	%			5	%		2 to 7	%		—			3 to 7	%		4	%		3 to 10	%		4 to 20	%		—			—			—			—			—
Estimated useful lives		20 to 35				20			15 to 45			—			33 to 35			25			3 to 10			5 to 25			—			—			—			—			—

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a. As of June 30, 2019 and 2018, the financing cost identified with fixed assets in the construction or installation stage, capitalized as part of the value of such fixed assets, was Ps. 1,414,807 and Ps.1,033,422, respectively.

b. The combined depreciation of fixed assets and amortization of wells for thesix-month periods ended June 30, 2019, and 2018, recognized in operating costs and expenses, was Ps. 68,501,818, and Ps. 73,733,715, respectively, which includes costs related to plugging and abandonment of wells for the periods ended June 30, 2019 and 2018 of Ps. 3,176,782 and Ps. 528,541, respectively.

c. As of June 30, 2019 and December 31, 2018, provisions relating to future plugging of wells costs amounted to Ps. 83,952,700 and Ps. 84,050,900, respectively, and are presented in the “Provisions for plugging of wells” (see Note 18).

d. As of June 30, 2019, PEMEX recognized a net impairment of Ps. 9,598,041, which is presented as a separate line item in the consolidated statement of comprehensive income as follows:

i. As of June 30, 2019, the net impairment was as follows:

	Impairment		(Reversal of impairment)			Impairment / (Reversal of impairment)
Pemex Exploration and Production		50,867,433		—			50,867,433
Pemex Industrial Transformation		2,068,489		(3,575,236	)		(1,506,747	)
Pemex Logistics		—		(39,762,645	)		(39,762,645	)
Total		Ps. 52,935,922		Ps. (43,337,881	)		Ps. 9,598,041

Cash Generating Units of Pemex Logistics

Cash Generating Units of pipelines

As of June 30, 2019, Pemex Logistics recognized a reversal of impairment in the Cash Generating Unit (“CGU”) of pipelines for Ps (39,762,645), mainly due to a decrease innon-operating losses, from Ps. 16,900 in the first six months of 2018 to Ps. 2,742 in the first six months of 2019. In addition, the discount rate decreased from 13.55% at the end of 2018 to 12.90% at the end of June 2019.

The recoverable amounts of the assets as of June 30, 2019, corresponding to the discounted cash flows at the rate of 12.90% are the following:

TAD, TDGL, TOMS (Storage terminals)		62,640,651
Pipelines		63,654,137
Primary logistics		96,668,712
Total	Ps.	222,963,500

Cash Generating Units of Pemex Exploration and Production

As of June 30, 2019, Pemex Exploration and Production recognized a net impairment of Ps. 50,867,433 mainly due to: (i) a decrease in the volumes of production profiles in the economic horizon generating a negative effect of Ps. 32,228,000, mainly in the following projects and amounts: Chuc project (Ps. 19,674,000), Tsimin Xux project (Ps. 11,919,000), Cantarell project (Ps.11,374,000), Marine Light Crude project (Ps. 6,704,000) and Burgos project (Ps. 1,737,000); these effects were partially offset by the Yaxché CGU in the amount of Ps. 19,180,000 due to the incorporation of new proved reserves mainly from the Xikin, Mulach, Pokche and Uchbal fields; (ii) a decrease in oil and gas prices generating a negative effect of Ps. 43,525,000, affecting the Cantarell CGU in the amount of Ps. 30,365,000; (iii) a decrease in exchange rate from Ps.19.6829 = U.S. $1.00 as of December 31, 2018 to Ps. 19.1685 = U.S.

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$1.00 of June 30, 2019, resulting in a negative effect of Ps. 3,890,000. These effects were offset by (i) a benefit in the discount rate of Ps. 22,197,000 mainly corresponding to the Cantarell CGU benefit in the discount rate of Ps. 15,695,000 for the anticipation of production in the first five years and (ii) a benefit for lower tax payment of Ps. 6,579,000.

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

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

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:

Average crude oil price	54.99 USD/bl
Average gas price	4.60 USD/mpc
Average condensates price	32.14 USD/bl
Discount rate	7.20% annual

The total forecast production, calculated with a horizon of 25 years is 6,487 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 June 30, 2019, Pemex Industrial Transformation recognized a net reversal of impairment of Ps. (1,506,747).

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

Madero Refinery		1,295,995
Minatitlán Refinery		65,544
Salina Cruz Refinery		706,950
Impairment		2,068,489
Tula Refinery		(3,575,236	)
Reversal of impairment		(3,575,236	)
Net reversal of impairment	Ps.	(1,506,747	)

The net reversal of impairment was mainly due to (i) an increase in the projected refinery processing due to the maintenance carried out in 2018; (ii) a decrease in the discount rate of cash generating units of refined products, petrochemicals and gas by 0.5%, 2.6% and 0.7%, respectively; and (iii) the appreciation of the peso against the U.S. dollar, from a peso/U.S. dollar exchange rate of Ps.19.6829 = U.S. $1.00 as of December 31, 2018 to Ps. 19.1685 = U.S. $1.00 as of June 30, 2019.

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

F - 35

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

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 crude oil Price	63.98 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	19.1685 mxp/usd		19.1685 mxp/usd	19.1685 mxp/usd
Useful lives of the cash generating units	Average 14 years		Average 8 years	Average 7 years
Discount rate	11.42% annually		10.31% annually	8.57% annually
Period(*)	2020-2035		2020-2028	2020-2027

^(*) The first 5 years are projected and stabilize at year 6.

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

Minatitlán Refinery	52,441,176
Madero Refinery	18,493,971
Salina Cruz Refinery	7,880,342
Total value in use	Ps. 78,815,489

ii. As of June 30, 2018, the net reversal of impairment was as follows:

	(Impairment)			Reversal of impairment		Reversal of impairment / (Impairment)
Pemex Exploration and Production	Ps.	(1,459,374	)	Ps.	38,170,777	Ps.	36,711,403
Pemex Fertilizers		(2,154,016	)		—		(2,154,016	)
Pemex Industrial Transformation		(11,529,001	)		19,332,066		7,803,065
Total	Ps.	(15,142,391	)	Ps.	57,502,843	Ps.	42,360,452

Cash Generating Unit of Pemex Exploration and Production

As of June 30, 2018, Pemex Exploration and Production recognized a net reversal of impairment in the amount of Ps. 36,711,403, integrated by a reversal of impairment from Ps. 38,170,777 mainly due to (i) an increase of 9.3% in the forward prices of crude oil, from U.S. $55.89 per barrel as of December 31, 2017 to U.S. $61.08 per barrel as of June 30, 2018, favoring the crude oil projects with the highest oil output, including the Aceite Terciario del Golfo, Cantarell; Tsimin Xux, Antonio J. Bermúdez, Crudo Ligero Marino and Cuenca de Macuspana projects and (ii) the reallocation of resources towards oil fields with highest profitability and net cash flows that contributed to more a more efficient distribution of goods and services, primarily in the Ku Maloob Zaap and Cantarell Project. The foregoing was offset by (i) an impairment of Ps. 1,459,374 in the Burgos and Lakach projects, mainly due to a 15.2% decrease in the price of gas, from 4.92 usd / mcf as of December 31, 2017 to 4.17 usd / mcf as of June 30, 2018 and (ii) a slight increase in the discount rate of 2%, with respect to the last quarter of 2017.

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 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:

Average crude oil price	61.08 USD/bl
Average gas price	4.17 USD/mpc
Average condensates price	36.85 USD/bl
Discount rate	14.72% annual

The total forecast production, calculated with a horizon of 25 years is 6,625 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.

F - 36

Cash Generating Units of Pemex Industrial Transformation

As of June 30, 2018, Pemex Industrial Transformation recognized a reversal of impairment of Ps. 7,803,065.

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

Minatitlán Refinery	Ps.	10,851,186
Madero Refinery		8,480,880
Salina Cruz Refinery		(11,529,001	)
Net reversal of impairment	Ps.	7,803,065

The reversal of impairment was mainly due to (i) an increase in income related to transportation fees; (ii) the appreciation of the U.S. dollar against the peso, from a peso—U.S. dollar exchange rate of Ps. 19.7867 to U.S. $1.00 as of December 31, 2017 to a peso—U.S. dollar exchange rate of Ps. 19.8633 to U.S. $1.00 as of June 30, 2018; and (iii) an increase in the discount rate of cash generating units of refined products, gas and aromatics by 0.2%, 5% and 0.3%, respectively. The impairment of the Salina Cruz refinery resulted from cash flows being insufficient to cover the net value of the assets, mainly due to the temporary closing of operations for major maintenance of the refinery’s plants.

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 that 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.

F - 37

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 crude oil Price	52.3 U.S. dollars	N.A.	N.A.
Processed volume	1,100 mbd	3,085 mmpcd of sour gas	Variable because the load inputs are diverse
Rate of U.S. dollar	Ps.19.8633 mxp/usd	Ps.19.8633 mxp/usd	Ps.19.8633 mxp/usd
Useful lives of the cash generating units	Average 14 years	Average 8 years	Average 7 years
Discount rate	11.76% anually	10.82% anually	9.33% anually
Period	2019-2034	2019-2029	2019-2024

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 sales to be carried out. As of June 30, 2018, the value in use for the impairment or reversal of impairment of fixed assets was as follows:

Minatitlán Refinery	Ps. 41,290,257
Madero Refinery	20,843,922
	Ps. 62,134,179

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 9.33%.

As of June 30, 2018, Pemex Fertilizers recognized an impairment of Ps. 2,154,016. The impairment is presented as a separate line item in the consolidated statement of comprehensive income.

NOTE 14. INTANGIBLE ASSETS, NET

At June 30, 2019 and December 31, 2018, intangible assets, net amounted to Ps. 12,565,069 and Ps.13,720,540, respectively, as follows:

a. Wells unassigned to a reserve

	June 30, 2019			December 31, 2018			June 30, 2018
Wells unassigned to a reserve:
Balance at the beginning of period		9,779,239			9,088,563			9,088,563
Additions to construction in progress		6,125,723			20,352,351			9,810,680
Transfers against expenses		(2,794,486	)		(12,934,906	)		(8,447,877	)
Transfers against fixed assets		(4,252,187	)		(6,726,769	)		(2,359,312	)
Balance at the end of period		Ps. 8,858,289			Ps. 9,779,239			Ps. 8,092,054

b. Other intangible assets

	June 30, 2019			December 31, 2018
Rights of way		2,357,608			2,352,066
Licenses		4,269,671			4,214,635
Exploration expenses, evaluation of assets and concessions		2,228,376			2,255,551
Accumulated amortization		(5,148,885	)		(4,880,951	)
Balance at the end of period		Ps. 3,706,770			Ps. 3,941,301

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NOTE 15. MEXICAN GOVERNMENT LONG-TERM NOTES RECEIVABLE AND OTHER ASSETS

A. Long-term notes receivable

As of June 30, 2019 and December 31, 2018, the balance of long-term notes receivable was as follows:

	June 30, 2019		December 31, 2018
Promissory notes issued by the Mexican Government		117,804,927		118,827,894
Other long-term notes receivable(1)		972,430		1,000,704
Total long-term notes receivable		Ps. 118,777,357		Ps. 119,828,598

⁽¹⁾ Mainly collection rights related to Value Added Tax from thenon-recourse factoring contract between Pemex Logistics and Banco Mercantil del Norte, S.A.

Promissory notes issued by the Mexican Government

	June 30, 2019		December 31, 2018
Long-term promissory notes issued by the Mexican Government		122,592,687		156,981,745
Less: current portion of notes receivable issued by the Mexican Government		4,787,760		38,153,851
Long-term promissory notes		Ps. 117,804,927		Ps. 118,827,894

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 promissory notes.

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As of June 30, 2019 and December 31, 2018, these promissory notes amounted to Ps. 117,804,927 and Ps. 118,827,894, respectively. PEMEX intends to hold them to maturity. These promissory notes will be converted into cash with annual maturity dates from 2020 up to 2036, ranging a yield rate from 5.39% to 7.00% as follows:

As of June 30, 2019
Number of Promissory Notes	Maturity	Yield Rate Range	Principal Amount
1	2020	5.39%		4,787,760
1	2021	5.57%		5,687,136
1	2022	5.74%		6,317,444
1	2023	5.88%		6,908,240
1	2024	5.99%		7,314,070
5	2025-2029	6.06% to 6.62%		38,785,090
5	2030-2034	6.70% to 6.90%		38,379,397
2	2035-2036	6.95% to 7.00%		14,413,550
Total promissory notes				122,592,687
Less: current portion				4,787,760
Long-term notes receivable				Ps. 117,804,927

From January 1 to June 30, 2019 and 2018 PEMEX recognized Ps. 4,315,294 and Ps. 4,764,834, respectively in accrued yields from these promissory notes. This amount was recognized as financing income in the consolidated statement of comprehensive income.

Yield rates for these promissory notes are fixed all throughout their lifespans and up to their maturities. In addition, PEMEX believes the promissory notes do not have a credit risk because they are issued by the Mexican Government in Mexican pesos. The expected credit losses as of June 30, 2019 are zero.

B. Other assets

As of June 30, 2019 and December 31, 2018, the balance of other assets was as follows:

	June 30, 2019		December 31, 2018
Insurance		1,319,855		3,591,079
Payments in advance		1,287,462		1,114,513
Other		1,806,853		1,720,218
Total other assets		Ps. 4,414,170		Ps. 6,425,810

NOTE 16. DEBT

The Federal Income Law applicable to PEMEX as of January 1, 2019, published in the Official Gazette of the Federation on December 28, 2018, authorized Petróleos Mexicanos and its Subsidiary Entities to incur an internal net debt up to Ps. 4,350,000 and an external net debt up to U.S. $5,422,500. PEMEX can incur additional internal or external debt, as long as the total amount of net debt (Ps. 112,000,000 equivalent to U.S. $5,640,000) does not exceed the ceiling established by the Federal Income Law.

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

During the period from January 1 to June 30, 2019, PEMEX participated in the following financing activities:

• On June 19, 2019, Petróleos Mexicanos entered into a credit line of Ps. 5,000,000 at a rate to TIIE plus 115 basis points, due July 2019.

• On June 28, 2019, Petróleos Mexicanos entered into a U.S. $5,500,000 revolving credit facility due 2024 and a U.S. $2,500,000 term loan facility due 2024.

As of June 30, 2019, Petróleos Mexicanos had U.S. $7,450,000 and Ps. 29,000,000 in available credit lines in order to ensure liquidity, of which U.S. $2,610,000 and Ps. 15,000,000 are available.

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

From January 1 to June 30, 2019, HHS obtained U.S. $10,290,000 from its revolving credit line and repaid U.S. $10,770,000. As of December 31, 2018, the outstanding amount under this revolving credit line was U.S. $700,000. As of June 30, 2019, the outstanding amount under this revolving credit line was U.S. $220,000.

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 June 30, 2019 and December 31, 2018 and as of the date of the issuance of these unaudited condensed consolidated interim financial statements, PEMEX was in compliance with the covenants described above.

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The following table presents the roll-forward of total debt of PEMEX for each of the periods ended June 30, 2019 and December 31, 2018, which includes short and long-term debt:

	June 30, 2019(i)			June 30, 2018(i)
Changes in total debt:
At the beginning of the period		Ps. 2,082,286,116			Ps. 2,037,875,071
Transfers to lease liabilities		(36,956,930	)		—
Loans obtained – financing institutions		420,345,102			449,914,696
Debt payments		(414,060,095	)		(414,288,664	)
Accrued interest		57,016,407			56,972,817
Interest paid		(60,481,958	)		(58,895,042	)
Foreign exchange		(47,226,795	)		(1,246,452	)
At the end of the period		Ps. 2,000,921,847			Ps. 2,070,332,426

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

As of June 30, 2019 and December 31, 2018, PEMEX used the following exchange rates to translate the outstanding balances in foreign currencies to pesos in the statement of financial position:

	June 30, 2019		December 31, 2018
U.S. dollar		19.1685		19.6829
Japanese yen		0.1779		0.1793
Pounds sterling		24.3056		25.0878
Euro		21.7907		22.5054
Swiss francs		19.6277		19.9762
Canadian dollar		14.6268		14.4138
Australian dollar		13.4179		13.8617

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NOTE 17. 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 June 30, 2019 and December 31, 2018. 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 June 30, 2019 In thousands of pesos	FVTPL			FVOCI –  debt instruments		FVOCI –  equity instruments		Financial assets at amortized cost		Other financial liabilities			Total carrying amount			Level 1		Level 2			Level 3		Total
Financial assets measured at fair value
Derivative financial instruments	Ps.	19,721,166			—		—		—		—		Ps.	19,721,166			—		19,721,166			—		19,721,166
Equity instruments		—			—		245,440		—		—			245,440			—		245,440			—		245,440
Total	Ps.	19,721,166			—		245,440		—		—		Ps.	19,966,606
Financial assets not measured at fair value
Cash and cash equivalents	Ps.	—			—		—		44,419,226		—		Ps.	44,419,226			—		—			—		—
Accounts receivable, net		—			—		—		181,929,754		—			181,929,754			—		—			—		—
Investments in joint ventures, associates and other		—			—		—		16,203,794		—			16,203,794			—		—			—		—
Long-term notes receivable		—			—		—		123,565,117		—			123,565,117			—		—			—		—
Total	Ps.	—			—		—		366,117,891		—		Ps.	366,117,891
Financial liabilities measured at fair value
Derivative financial instruments	Ps.	(16,516,449	)		—		—		—		—		Ps.	(16,516,449	)		—		(16,516,449	)		—		(16,516,449	)
Total	Ps.	(16,516,449	)		—		—		—		—		Ps.	(16,516,449	)
Financial liabilities not measured at fair value
Suppliers	Ps.	—			—		—		—		(129,055,001	)	Ps.	(129,055,001	)		—		—			—		—
Accounts and accrued expenses payable		—			—		—		—		(24,648,915	)		(24,648,915	)		—		—			—		—
Leases		—			—		—		—		(99,370,796	)		(99,370,796	)		—		(105,830,735	)		—		(105,830,735	)
Debt		—			—		—		—		(2,000,921,847	)		(2,000,921,847	)		—		(1,905,835,048	)		—		(1,905,835,048	)
Total	Ps.	—			—		—		—		(2,253,996,559	)	Ps.	(2,253,996,559	)

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	Carrying amount															Fair value hierarchy
As of December 31, 2018 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	)

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

b. Fair value hierarchy

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

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

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

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

c. Fair value of DFIs

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

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

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

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

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

d. Accounting treatment applied and impact in the financial statements

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

As of June 30, 2019 and December 31, 2018, 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. 3,204,717 and Ps. 6,487,032, respectively. As of June 30, 2019 and December 31, 2018, PEMEX did not have any DFIs designated as hedges for accounting purposes.

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

For the periods ended June 30, 2019 and 2018, PEMEX recognized a loss of Ps. 11,477,510 and Ps. 9,292,906, respectively, in the “Derivative financial instruments (cost) income, net” line item with respect to DFIs treated as instruments entered into for trading purposes.

In accordance with established accounting policies, PEMEX has analyzed the different contracts that PEMEX has entered into and has determined that according to the terms thereof none of these agreements meet the criteria to be classified as embedded derivatives. Accordingly, as of June 30, 2019 and December 31, 2018, PEMEX did not recognize any embedded derivatives (foreign currency or index).

As of June 30, 2019, PEMEX recognized a gain of Ps. 6,497,105, 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.

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NOTE 18. PROVISIONS FOR SUNDRY CREDITORS

As of June 30, 2019 and December 31, 2018, the provisions for sundry creditors and others is as follows:

	June 30, 2019		December 31, 2018
Provision for plugging of wells (Note 13)		83,952,700		84,050,900
Provision for trials in process (Note 20)		6,838,518		6,483,078
Provision for environmental costs		11,345,074		11,219,278
		Ps. 102,136,292		Ps. 101,753,256

NOTE 19. EQUITY (DEFICIT), NET

A. Certificates of Contribution “A”

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

On December 24, 2015, the Mexican Government, through the SHCP, issued anon-negotiable promissory note of Ps. 50,000,000 due December 31, 2050 for the assumption by the Mexican Government of the payment obligations related to pensions and retirement plans of Petróleos Mexicanos and its Subsidiary Entities (see Note15-A).

On April 21, 2016, the Mexican Government made an equity contribution to Petróleos Mexicanos in the amount of Ps. 26,500,000 following the guidelines established in the Ley Federal de Presupuesto y Responsabilidad Hacendaria (“the Federal Budget and Fiscal Responsibility”). This contribution was recognized as an increase in Certificates of Contribution “A.”

On August 3, 2016, the Mexican Government issued Ps. 184,230,586 in exchange for the Ps. 50,000,000non-negotiable promissory note issued to Petróleos Mexicanos on December 24, 2015, which was recognized as a Ps. 135,439,612 increase in equity. The Ps. 135,439,612 increase in equity was the result of the Ps. 184,230,586 value 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 Petróleos Mexicanos received the promissory notes (see Note15-A). During the firstsix-months of 2019 Petróleos Mexicanos received Ps. 25,000,000 from the Mexican Government, to help improve PEMEX´s financial position and increase PEMEX’s production and, in turn, its profitability, as part of the Strengthening Program for Petróleos Mexicanos.

PEMEX’s permanent equity is as follows:

	Amount
Certificates of Contribution “A” as of December 31, 2016		Ps. 356,544,447
Increase in Certificates of Contribution “A” during 2017		—
Certificates of Contribution “A” as of December 31, 2017		356,544,447
Increase in Certificates of Contribution “A” during 2018		—
Certificates of Contribution “A” as of December 31, 2018		Ps. 356,544,447
Increase in Certificates of Contribution “A” during 2019		25,000,000
Certificates of Contribution “A” as of June 30, 2019		Ps. 381,544,447

B. Mexican Government contributions

As of June 30, 2019 and December 31, 2018 there were no Mexican Government contributions.

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C. Legal reserve

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

As of June 30, 2019 and December 31, 2018, there were no changes to the legal reserve.

D. Accumulated other comprehensive income (loss)

As a result of the discount rate analysis related to employee benefits liability, for the six-month period ended June 30, 2019, PEMEX recognized net actuarial losses in other comprehensive income (loss) net of deferred income tax for Ps. 148,968,103 related to retirement and post-employment benefits as a result of a decrease in discount and return on plan assets’ rates, which mainly took place in the second quarter of 2019.

E. Accumulated deficit from prior years

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

F. Non-controlling interest

Effective July 1, 2005, PEMEX entered into an option agreement with BNP Paribas Bank & Trust Cayman Limited , giving an option to acquire 100% of the shares of Pemex Finance, Ltd.; the option was not exercised and was terminated on July 20, 2015. On July 1, 2015, PEMEX also entered into a new option agreement with SML Trustees Limited to acquire 100% of the shares of Pemex Finance, Ltd, which allows PEMEX to have control over Pemex Finance Ltd. because of the potential voting rights. As of the date of these consolidated financial statements the option agreement has been exercised.

Until November 30, 2018, the financial results of Pemex Finance, Ltd. were included in the consolidated financial statements of PEMEX. Under IFRS, variations in income and equity from Pemex Finance, Ltd. were presented in the consolidated statements of changes in equity (deficit), net as“non-controlling interest”, and as net income and comprehensive income for the year, attributable tonon-controlling interest, in the consolidated statements of comprehensive income, due to the fact that PEMEX did not own any of the shares of Pemex Finance, Ltd.

On December 17, 2018, PEMEX exercised its option to purchase all shares of Pemex Finance Ltd., and as of December 31, 2018, this company is no longer presented as a“non-controlling interest”.

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

As of June 30, 2019, December 31, 2018 and June 30, 2018,non-controlling interest represented gains of Ps. 370,400, Ps. 477,118 and Ps.970,524, respectively, in PEMEX’s equity (deficit).

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NOTE 20. CONTINGENCIES

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

PEMEX is involved in various civil, tax, criminal, administrative, labor and commercial lawsuits and arbitration proceedings. The results of these proceedings are uncertain as of the date of these unaudited condensed consolidated interim financial statements. As of June 30, 2019, and December 31, 2018, PEMEX had accrued a reserve of Ps. 6,838,518, and Ps. 6,483,078, respectively, for these contingent liabilities.

As of June 30, 2019, the current status of the principal lawsuits in which PEMEX is involved is as follows:

• On April 4, 2011, Pemex Exploration and Production was summoned before theSéptima Sala Regional Metropolitana (“Seventh Regional Metropolitan Court”) of theTribunal Federal de Justicia Fiscal y Administrativa (“Tax and Administrative Federal Court”) in connection with an administrative claim (No.4957/11-17-07-1) filed by EMS Energy Services de México, S. de R.L. de C.V. and Energy Maintenance Services Group I. LLC requesting that Pemex Exploration and Production’s termination of the public works contract be declared null and void. In a concurrent proceeding, the plaintiffs also filed an administrative claim (No.13620/15-17-06) against Pemex Exploration and Production before theSexta Sala Regional Metropolitana (“Sixth Regional Metropolitan Court”) of the Tax and Administrative Federal Court in Mexico City seeking damages totaling U.S. $193,713 related to the above-mentioned contract. Pemex Exploration and Production filed a response requesting the two administrative claims be joined in a single proceeding, which was granted on May 10, 2016 by the Seventh Regional Metropolitan Court. On May 3, 2017, the proceeding was closed for a judgment to be issued. On April 30, 2019, a judgment was issued by the Segunda Sección de la Sala Superior (“Second Section of the Superior Court”) in favor of Pemex Exploration and Production. On June 25, 2019, the plaintiffs filed an amparo (D.A. 397/2019) before theTercer Tribunal Colegiado en Materia Administrativa del Primer Circuito (“Third Administrative Joint Court of the First Circuit”). As of the date of these financial statement, a final resolution is still pending.

• On June 11, 2015, theSegunda Sala Regional del Noreste (“Second Regional Northeast Court”) notified Pemex Industrial Transformation of an administrative claim (file no.2383/15-06-02-4) filed by Severo Granados Mendoza, Luciano Machorro Olvera and Hilario Martínez Cerda, as President, Secretary and Treasurer of the Ejido Tepehuaje, seeking Ps. 2,094,232 in damages due to a hydrocarbon spill on their land. Pemex Industrial Transformation filed a response to this claim. Each party filed its expert’s environmental opinion and Second Regional Northeast Court appointed an independent expert, who issued his opinion on June 6, 2018 stating that no damages were caused. On June 22, 2018, the pleadings stage was opened. On August 31, 2018, pleadings were filed. On September 11, 2018, the proceeding was closed and the file was sent to the Superior Court, and, on October 11, 2018, it was accepted for a judgment to be issued. On May 6, 2019, a judgment was issued in favor of Pemex Industrial Transformation. On June 19, 2019, the plaintiffs filed an amparo against this resolution before theVigésimo Primero Tribunal Colegiado en Materia Administrativa del Primer Circuito (“Twenty-first Administrative Joint Court of the First Circuit”). As of the date of these financial statement, a final resolution is still pending.

• On July 8, 2011, Pemex Exploration and Production was summoned in connection with an administrative claim (no. 4334/1111026) filed by Compañía Petrolera La Norma, S.A., against the Chief Executive Officer of Petróleos Mexicanos and the Chief Executive Officer of Pemex-Exploration and Production before the Segunda Sala RegionalHidalgo-México (“Hidalgo-Mexico Second Regional Court”) of the Tax Administrative Federal Court in Tlalnepantla, Estado de México. The plaintiff is seeking compensation for the cancellation of its alleged petroleum rights concessions and damages for up to Ps.1,552,730. On August 20, 2014, the proceeding was sent to the Second Section of The Superior Court of the Tax and Administrative Federal Court(4334/11-11-02-6/1337/14-S2-07-04). On September 7, 2017, a motion was filed questioning a signature’s authenticity. On December 4 and 5, 2017, a documentary expert’s opinion was filed by the plaintiff and a new expert was designated by Pemex Exploration and Production to issue his opinion. On April 18, 2018, each party filed its pleadings and the claim was sent to the Second Section of the Superior Court. On September 20, 2018, the Superior Court ruled that the plaintiff did not provide evidence to support its claim. The plaintiff filed an amparo (D.A. 731/2018) against this resolution and Pemex Exploration and Production filed its response. On May 17, 2019, the Décimo Noveno Tribunal Colegiado en Materia Administrativa del Primer Circuito (Nineteenth Administrative Joint Court of the First Circuit) issued a judgment requesting the Supreme Court to hear this claim. As of the date of these financial statement, its admission to the Supreme Court is still pending.

• On December 12, 2017, Pemex Exploration and Production was summoned in connection with an arbitration claim (no. 23217/JPA) filed by SUBSEA 7 de México, S. de R. L. de C.V. (“SUBSEA 7”) seeking U.S. $153,000 related to additional expenses in connection with a pipelines construction contracts (No. 420832856 and 420833820). On January 5, 2018 Pemex Exploration and Production filed a response to this claim. The appointment of the chairperson of the arbitration trial is still pending. On September 14, 2018, the defendant received the claim briefs including documentation and related evidence, and the amount sought under this claim was increased to U.S. $310,484. On January 4, 2019 a response was filed by the defendant. On February 14, 2019, SUBSEA 7 filed its reply. On April 5, 2019 Pemex Exploration and Production filed its rejoinder. In June 2019, a hearing was held. As of the date of these financial statements the pleadings to be filed by the parties are still pending.

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• On August 1, 2017, Pemex Exploration and Production was summoned in connection with an administrative claim (no.11590/17-17-06-2) filed by Proyectos y Cimentaciones Industriales, S.A. de C.V. before the Sixth Regional Metropolitan Court seeking Ps. 800,000 and U.S. $12.82 and to have the settlement certificate dated March 22, 2017 related to services agreement declared null and void. On September 25, 2017 Pemex Exploration and Production filed a response to this claim. On September 4, 2018, the parties filed their pleadings. The claim was submitted to the Superior Court. As of the date of these financial statements, a final judgment is still pending. On May 16, 219, the Second Section of the Superior Court issued a judgment in favor of Pemex Exploration and Production. On July 1, 2019, theDécimo Primer Tribunal Colegiado en Materia Administrativa (Eleventh Administrative Joint Court) admitted an amparo (no. 399/2019) filed by the plaintiffs. As of the date of these financial statement, a final resolution is still pending.

• In March 2018, Pemex Drilling and Services was summoned before the International Centre for Dispute Resolution of the American Arbitration Association in connection with an arbitration claim (No.01-18-0001-1499) filed by Loadmaster Universal Rigs, Inc., Loadmaster Drilling Technologies, LLC, Ulterra Drilling Technologies Mexico, S.A. de C.V. and Kennedy Fabricating, LLC seeking U.S.$ 139,870 in connection with the construction and acquisition of two pieces of modular drilling equipment for approximately U.S. $139,870. On June 6, 2018, the plaintiffs responded to the counterclaim filed by Pemex Drilling and Services. On September 28, 2018, Pemex Drilling and Services filed a motion rejecting the jurisdiction of the arbitration. On December 19, 2018, the parties exchanged documentation. On February 11, 2019 the plaintiffs filed their first brief. On March 29, 2019 the defendants filed their response. On April 29, 2019 the plaintiffs filed their second brief. On June 17, 2019, the defendants filed their rejoinders. The hearing is scheduled for September 2019 in Mexico City. As of the date of these financial statement, a final resolution is still pending.

• On February 6, 2019, theSala Regional del Golfo Norte (North Gulf Regional Court) of Federal Court of Justice for Tax and Administrative Matters summoned Pemex Drilling and Services in connection with a claim(752/17-18-01-7) filed by Micro Smart System of Mexico, S. de R.L. de C.V., challenging a settlement statement dated March 14, 2017 related to a works contract number 424049831 dated December 9, 2009, seeking the payment of: U.S. $240,448 for work performed and U.S. $284 for work estimates. On February 22, 2019, Pemex Drilling and Services filed a motion against the resolution that admitted this claim. On March 13, 2019, two resolutions were notified: 1) On February 19, 2019, a judgment issued on November 15, 2018 related to an amparo filed was issued (No. 179/2018); and 2) on February 26, 2019, a complaint motion filed by Pemex Drilling and Services was admitted against the resolution admitting this claim, which was notified to the plaintiff on March 19, 2019 and denied on April 10, 2019. On May 18, 2019, a response to this claim was admitted and evidence was filed by the defendant, which were rejected by the plaintiff on May 24, 2019. As of the date of these financial statement, pleadings to be filed by the parties are still pending.

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

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NOTE 21. SUBSEQUENT EVENTS

Between July 1 to September 6, 2019, HHS obtained U.S. $ 3,396,000 and repaid U.S. $3,616,000 in financing from its revolving credit lines. As of June 30, 2019, the outstanding amount was U.S. $ 220,000. As of September 6, 2019, there was no outstanding amount.

As of September 9, 2019, the Mexicanpeso-U.S. dollar exchange rate was Ps. 19.6834 per U.S. dollar, which represents a 2.7% depreciation of the value of the peso in U.S. dollar terms as compared to the exchange rate as of June 30, 2019, which was Ps. 19.1685 per U.S. dollar.

As of September 9, 2019, the weighted average price of the crude oil exported by PEMEX was U.S. $ 57.54 per barrel. This represents a price decrease of approximately 6.1% as compared to the average price as of June 30, 2019, which was U.S. $61.28 per barrel.

On July 25, 2019, as a result of the merger of Pemex Drilling and Services into Pemex Exploration and Production and of Pemex Ethylene into Pemex Industrial Transformation, the Board of Directors of Petróleos Mexicanos issued the Declaratoria de Extinción de Pemex Perforación y Servicios (Declaration of Extinction of Pemex Drilling and Services) and the Declaratoria de Extinción de Pemex Etileno (Declaration of Extinction of Pemex Ethylene), both of which were published in the Official Gazette of the Federation on July 30, 2019 and became effective on July 1, 2019. As of July 1, 2019, all of the assets, liabilities, rights and obligations of Pemex Drilling and Services were assumed by, and transferred to, Pemex Exploration and Production, and Pemex Exploration and Production became, as a matter of Mexican law, the successor to Pemex Drilling and Services. As of July 1, 2019, all of the assets, liabilities, rights and obligations of Pemex Ethylene were assumed by, and transferred to, Pemex Industrial Transformation, and Pemex Industrial Transformation became, as a matter of Mexican law, the successor to Pemex Ethylene. Pemex Drilling and Services and Pemex Ethylene were in turn dissolved effective as of July 1, 2019

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Petróleos Mexicanos
By:	/s/ Emmanuel Quevedo Hernández
	Emmanuel Quevedo Hernández
	Associate Managing Director of Finance

Date: September 11, 2019

FORWARD-LOOKING STATEMENTS

This report contains words, such as “believe,” “expect,” “anticipate” and similar expressions that identify forward looking statements, which reflect our views about future events and financial performance. We have made forward looking statements that address, among other things, our:

• exploration and production activities, including drilling;

• activities relating to import, export, refining, transportation, storage and distribution of petrochemicals, petroleum, natural gas and oil products;

• activities relating to our lines of business;

• projected and targeted capital expenditures and other costs;

• trends in international and Mexican crude oil and natural gas prices;

• liquidity and sources of funding, including our ability to continue operating as a going concern;

• farm outs, joint ventures and strategic alliances with other companies; and

• the monetization of certain of our assets.

Actual results could differ materially from those projected in such forward looking statements as a result of various factors that may be beyond our control. These factors include, but are not limited to:

• general economic and business conditions, including changes in international and Mexican crude oil and natural gas prices, refining margins and prevailing exchange rates;

• credit ratings and limitations on our access to sources of financing on competitive terms;

• our ability to find, acquire or gain access to additional reserves and to develop, either on our own or with our strategic partners, the reserves that we obtain successfully;

• the level of financial and other support we receive from the Mexican Government;

• 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 and the United States;

• developments affecting the energy sector;

• changes in, or failure to comply with, our legal regime or regulatory environment, including with respect to tax, environmental regulations, fraudulent activity, corruption and bribery;

• receipt of governmental approvals, permits and licenses;

• natural disasters, accidents, blockades and acts of sabotage or terrorism;

• the cost and availability of adequate insurance coverage; and

• the effectiveness of our risk management policies and procedures.

Accordingly, you should not place undue reliance on these forward looking statements. In any event, these statements speak only as of their dates, and we undertake no obligation to update or revise any of them, whether as a result of new information, future events or otherwise.