Fitch: Round Zero Neutral for Pemex's Credit Quality

CHICAGO--()--Pemex's request to retain the rights to continue operating its existing production, and to develop an estimated 83% of its current proved and probable (2P) reserves, is in line with expectations and neutral to the company's credit quality, according to Fitch Ratings.

Pemex will still participate in future biddings for oil fields, including those foregone during round zero. Pemex also requested to retain 31% of the prospective resources.

If the proposal, sent to the Mexican secretary of energy (SENER) and the National Hydrocarbons Commission (CNH), is accepted, it will result in minimal loss of operating areas and grant the company sufficient production and exploratory acreage to remain the dominant player in Mexico's oil and gas industry for the foreseeable future. This request allows Pemex to retain sufficient reserves and resources to grow production in the future.

Fitch considers the likelihood of Pemex losing any significant exploration and production fields as part of energy reform to be low. Pemex's request stems from the company's requirement to submit -- during the 90 days following the reform's approval -- a plan to SENER and the CNH for the exploration and production (E&P) blocks the company chooses to continue operating. According to a constitutional amendment, Pemex is required to show that it has the technical, financial, and procurement capabilities to continue operating in such E&P areas.

Although SENER will have until September 17 of this year to issue a resolution on Pemex's requests, the secretary is contemplating the possibility of approving them in multiple stages, starting with areas with existing operations. For the areas where Pemex had reported commercial discoveries prior to the reform's approval, the company will be given an additional three years, extendable by two more years, to continue exploratory efforts. In the event that existing E&P areas are not awarded to Pemex, the reform entitles Pemex to compensation in accordance to a valuation set by SENER.

The 83% of 2P reserves Pemex requested, amount to approximately 20.6 billion barrels of oil equivalent (boe), while the 31% of prospective resources amounts to 34.5 billion boe. Approximately 74% of the requested prospective resources are considered conventional. Should SENER grant Pemex's request in its entirety, there would be an approximately 78.3 billion boe of prospective resources and around 4.2 billion boe of 2P reserves available to offer during future bidding rounds.

For more information, a special report titled 'Mexico's Energy Reform' is available on the Fitch Ratings web site at www.fitchratings.com.

Additional information is available at 'www.fitchratings.com'.

Applicable Criteria and Related Research:

--Mexico's Energy Reform (Long-Term Positive for Mexico and Pemex; Challenging for CFE) (Feb.4 2014)

Applicable Criteria and Related Research:

Mexico's Energy Reform (Long-Term Positive for Mexico and Pemex; Challenging for CFE)

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=731275

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Contacts

Fitch Ratings
Lucas Aristizabal
Director
+1-312-368-3260
Fitch Ratings, Inc.
70 W Madison Street
Chicago, IL 60602
or
Xavier Olave
Associate Director
+1-212-908-7895
or
Sergio Rodriguez
Senior Director
+52 81 8399 9100
or
Media Relations:
Elizabeth Fogerty, +1-212-908-0526 (New York)
elizabeth.fogerty@fitchratings.com

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Contacts

Fitch Ratings
Lucas Aristizabal
Director
+1-312-368-3260
Fitch Ratings, Inc.
70 W Madison Street
Chicago, IL 60602
or
Xavier Olave
Associate Director
+1-212-908-7895
or
Sergio Rodriguez
Senior Director
+52 81 8399 9100
or
Media Relations:
Elizabeth Fogerty, +1-212-908-0526 (New York)
elizabeth.fogerty@fitchratings.com