(Updates with CEO comment on capital expenditures in 14th paragraph.)
Nov. 1 (Bloomberg) -- Petroleos Mexicanos, Mexico’s state- owned oil company, is considering listing securities linked to specific assets as soon as the first quarter of 2014 to help lower its funding costs.
Pemex, as the company is known, is interested in raising capital through real-estate trusts, known as Fibras, or structured securities known as CKDs, Chief Executive Officer Emilio Lozoya said in an interview yesterday in Mexico City.
The securities may be listed on Mexico’s stock exchange by “I would expect the first quarter of next year,” Lozoya said. While the exact moment securities would begin trading hasn’t been determined, Pemex “could reap tremendous efficiencies that will impact our bottom line very soon,” he said.
Lowering costs will help the producer, which has posted four straight quarterly losses partly because of taxes, as the nation considers ending Pemex’s production monopoly. Lozoya welcomed President Enrique Pena Nieto proposed legislation to permit companies such as Exxon Mobil Corp. and Chevron Corp. to pump Mexican oil for the first time since 1938, saying it would allow Pemex to increase its output.
It “will allow us to grow much faster, to invest along with co-investors more, and grow our balance sheet and increase profitability,” Lozoya said. “The main driver of our growth will be new investments, and new exploration and production discoveries. The prospects are very bright.”
The legislation will be discussed in the current congressional session.
The third-largest crude exporter to the U.S. is heading for its ninth straight year of output declines. Third-quarter crude production of 2.506 million barrels per day was 1.6 percent lower than the same period a year earlier. Pemex lost 39.2 billion pesos ($3.05 billion) in the third quarter.
“Every barrel of oil is more and more expensive to obtain,” Lozoya said. “Mexico’s energy industry requires more investment to increase production and to offer the economy competitive energy prices.”
Income from Pemex crude funds about a third of Mexico’s federal budget, and tax revenue in Mexico is the lowest as a percentage of gross domestic product among 34 members of the Organization for Economic Cooperation and Development. The energy reforms will lower the company’s taxes to free up capital for future investments and production, Lozoya said.
“If you do not foresee an energy reform in Mexico, the only other way to raise capital is by increasing debt,” Lozoya said. “Clearly, this government does not think that is the right way to increase investment capacity.”
Mexico has the biggest proven oil reserves in Latin America after Venezuela and Brazil, with 13.87 billion barrels, and shale-gas resources that may be as much as 460 trillion cubic feet, according to data compiled by Pemex.
Mexican real estate investment trusts, known as fibras, have raised about $5.24 billion in eight different equity offerings over the last 12 months, according to data compiled by Bloomberg. Lozoya said in June that Pemex could package assets or projects into trust certificates or other instruments to tap into funds from the nation’s growing pension system to unlock money for its equipment needs.
Pemex will need an estimated trillion dollars of investment for extraction of prospective reserves in the next 50 years, Lozoya said. To do so, current annual investment must be increased to $62 billion from $25 billion.
After five years Mexico’s energy reform could free up $10 billion of investment capacity annually for Pemex in the next five years though “we would still be short tens of billions of dollars of capital needed to really exploit our reserves,” Lozoya said, referring to the nation’s resources.
Pemex is mulling separating its drilling and logistics units from the holding company to reduce inefficiencies and maxmize profit, Lozoya said. The units would become separate entities and assist Pemex to expand internationally, he said.
“If we put all our drilling equipment into one entity that provides drilling services to Pemex and also other players in the world, it would be one of the three largest drilling companies in the world,” he said.
--With assistance from Jonathan Roeder and Nacha Cattan in Mexico City. Editors: Robin Saponar, Andrew Hobbs