CORPORATES CREDIT OPINION 16 December 2020 Update RATINGS Petroleos Mexicanos Domicile Mexico City, Ciudad de Mexico, Mexico Long Term Rating Ba2 Type LT Corporate Family Ratings Outlook Negative Please see the ratings section at the end of this report for more information. The ratings and outlook shown reflect information as of the publication date. Contacts Peter Speer +1.212.553.4565 Senior Vice President [email protected]Marianna Waltz, CFA +55.11.3043.7309 MD-Corporate Finance [email protected]Petroleos Mexicanos Semi-annual update - continued negative free cash flow in weak oil price environment Summary Petroleos Mexicanos ' (PEMEX) Ba2 Corporate Family Rating takes into consideration our Joint Default Analysis, which includes our assumptions of very high government support in case of need and very high default correlation between PEMEX and the Government of Mexico (Baa1 negative), resulting in six notches of uplift from the company's caa2 BCA. Since 2016, the government has supported PEMEX in various ways, including capital injections, tax reductions and early redemption of notes receivable from the government. PEMEX's caa2 Baseline Credit Assessment (BCA) reflects the company’s high vulnerability to low commodity prices given its excessive debt burden and weak liquidity. PEMEX’s cash flow generation and credit metrics will remain weak for the foreseeable future as the company grapples with low oil prices, ongoing debt maturities and underinvestment in exploration and production (E&P) in favor of an expansion of its refining business, which has generated losses for several years. Exhibit 1 Consistent negative free cash flow generation continues through 2021 with limited oil price recovery $7.3 $3.1 -$5.3 -$0.7 $3.3 $0.7 -$2.4 -$0.4 -$17.2 -$16.0 -$8.1 -$4.9 -$5.7 -$7.1 -$7.6 -$8.6 FCF -$9.9 FCF -$13.0 FCF -$13.4 FCF -$5.6 FCF -$2.3 FCF -$6.5 FCF -$10.0 FCF -$9.0 -$20.0 -$15.0 -$10.0 -$5.0 $0.0 $5.0 $10.0 2014 2015 2016 2017 2018 2019 2020-proj. 2021-proj. US billions Cash flow from operations Capital expenditures Free cash flow All figures and ratios are calculated using Moody’s estimates and standard adjustments. Sources: Moody's Financial Metrics TM and Moody's Investors Service (estimates) This document has been prepared for the use of Jose Galindo and is protected by law. It may not be copied, transferred or disseminated unless authorized under a contract with Moody's or otherwise authorized in writing by Moody's.
Transcript
CORPORATES
CREDIT OPINION16 December 2020
Update
RATINGS
Petroleos MexicanosDomicile Mexico City, Ciudad de
Mexico, Mexico
Long Term Rating Ba2
Type LT Corporate FamilyRatings
Outlook Negative
Please see the ratings section at the end of this reportfor more information. The ratings and outlook shownreflect information as of the publication date.
SummaryPetroleos Mexicanos' (PEMEX) Ba2 Corporate Family Rating takes into consideration ourJoint Default Analysis, which includes our assumptions of very high government supportin case of need and very high default correlation between PEMEX and the Government ofMexico (Baa1 negative), resulting in six notches of uplift from the company's caa2 BCA. Since2016, the government has supported PEMEX in various ways, including capital injections, taxreductions and early redemption of notes receivable from the government.
PEMEX's caa2 Baseline Credit Assessment (BCA) reflects the company’s high vulnerability tolow commodity prices given its excessive debt burden and weak liquidity. PEMEX’s cash flowgeneration and credit metrics will remain weak for the foreseeable future as the companygrapples with low oil prices, ongoing debt maturities and underinvestment in exploration andproduction (E&P) in favor of an expansion of its refining business, which has generated lossesfor several years.
Exhibit 1
Consistent negative free cash flow generation continues through 2021 with limited oil pricerecovery
Cash flow from operations Capital expenditures Free cash flow
All figures and ratios are calculated using Moody’s estimates and standard adjustments.
Sources: Moody's Financial MetricsTM and Moody's Investors Service (estimates)
This document has been prepared for the use of Jose Galindo and is protected by law. It may not be copied, transferred or disseminated unlessauthorized under a contract with Moody's or otherwise authorized in writing by Moody's.
» Large-scale reserves and production with access to developable resources
» Government-related issuer, with very high government support assumed
Credit challenges
» High debt amount and interest burden
» Extraordinarily high tax burden
» Weak credit metrics and intrinsic liquidity
Rating outlookThe negative outlook on PEMEX’s Ba2 rating coincides with the negative outlook on Mexico's Baa1 rating given the importance of thesovereign's credit strength and ongoing support to the company's ratings.
Factors that could lead to an upgrade
» An upgrade is unlikely given the negative outlook for Mexico's Baa1 rating and Moody's expectations for continued negative freecash flow at PEMEX.
Factors that could lead to a downgrade
» A downgrade of Mexico's Baa1 rating would likely result in a downgrade of PEMEX's rating.
» For an affirmation of PEMEX’s Ba2 rating following a sovereign downgrade, the company’s BCA would have to substantiallyimprove. Factors that could lead to a much higher BCA would be the company's ability to strengthen its liquidity position andideally internally fund sufficient capital reinvestment to fully replace reserves and deliver modest production growth, and generateFCF for debt reduction.
» Because PEMEX's rating is highly dependent on support from the Government of Mexico, a change in our assumptions aboutgovernment support and its timeliness could lead to a downgrade of PEMEX's rating.
» A lowering of the BCA could also lead to a downgrade of PEMEX's rating. Factors that could lead to a lower BCA include materialincreases in net debt, an operating performance worse than forecasted, reserve declines and decreases in reserves life.
This publication does not announce a credit rating action. For any credit ratings referenced in this publication, please see the ratings tab on the issuer/entity page onwww.moodys.com for the most updated credit rating action information and rating history.
2 16 December 2020 Petroleos Mexicanos: Semi-annual update - continued negative free cash flow in weak oil price environment
This document has been prepared for the use of Jose Galindo and is protected by law. It may not be copied, transferred or disseminated unlessauthorized under a contract with Moody's or otherwise authorized in writing by Moody's.
MOODY'S INVESTORS SERVICE CORPORATES
Key indicators
Exhibit 2
Petroleos MexicanosPetroleos Mexicanos
US Millions Dec-15 Dec-16 Dec-17 Dec-18 Dec-19
LTM
(Sep-20) 2020-proj. 2021-proj.
Average Daily Production (MBOE / Day) 3,174.0 2,950.8 2,663.8 2,442.7 2,284.1 2,295.0 2,050 2,100
All figures and ratios are calculated using Moody’s estimates and standard adjustments. Moody's Forecasts (f) or Projections (proj.) are Moody's opinion and do not represent the views ofthe issuer. Periods are Financial Year-End unless indicated. LTM = Last Twelve Months.Source: Moody’s Financial Metrics™ and Moody's Investors Service (estimates)
ProfileFounded in 1938, PEMEX is Mexico's productive state-owned oil and gas enterprise. The company is the main energy company in thecountry, with fully integrated operations in oil and gas including exploration and production (E&P), refining, distribution and retailmarketing, as well as petrochemicals.
PEMEX is a leading crude oil exporter; around 65% of its crude is exported to various countries, mainly to the US and Canada (about60%). In the twelve months ended September 30, 2020, the company posted $47.4 billion in revenue and had $83 billion in assets;in the same period, PEMEX produced an average of 1,690 thousand barrels per day (mbpd) of crude oil (excluding partners). In 2019,PEMEX's royalties, tax, duties and other payments to the government amounted to around $22.6 billion.
Exhibit 3
Revenue breakdown by business segmentExhibit 4
Operating income breakdown by business segment
Exploration and Production32%
Industrial Transformation51%
Others1%
Commercial entities16%
Exploration and Production32%
Industrial Transformation51%
Others1%
Commercial entities16%
Industrial Transformation refers mostly to refining and marketing. Others includefertilizers, logistics, and other operating subsidiaries. Revenue includes only sales toexternal clients.Data as of September 2020.Sources: PEMEX's third quarter Mexican Stock Exchange financial report
-60%
-40%
-20%
0%
20%
40%
60%
80%
100%
2016 2017 2018 2019 9M20
E&P TRI Trading companies Logistics Others
Industrial Transformation (TRI) refers mostly to refining and marketing. Others includefertilizers, ethylene, perforation, logistics and other operating subsidiaries.Source: PEMEX's 20-F reports and third quarter Mexican Stock Exchange financial report
Detailed credit considerationsHigh tax and interest burden have limited capital investment and resulted in persistently negative FCFFor many years, PEMEX's large outflows for duties, other taxes and interest have consumed its pretax and interest cash flow, resulting inlittle or negative cash flow from operations. Thus all of its capital spending had to be debt funded, constraining its capital reinvestmentand leading to years of declining production and proved reserves. Therefore, debt levels have risen, while the upstream asset base hasbeen depleted and the downstream refining assets have suffered from underinvestment and weak capacity utilization.
3 16 December 2020 Petroleos Mexicanos: Semi-annual update - continued negative free cash flow in weak oil price environment
This document has been prepared for the use of Jose Galindo and is protected by law. It may not be copied, transferred or disseminated unlessauthorized under a contract with Moody's or otherwise authorized in writing by Moody's.
MOODY'S INVESTORS SERVICE CORPORATES
During 2019, the government provided PEMEX with about $10 billion of support, comprised of $6.3 billion in capital contributions,$1.5 billion in tax cuts and $2.1 billion in early redemption of promissory notes. In April 2020, the government announced a MXN65billion (around $3 billion, depending on exchange rates) royalty cut for PEMEX for the remainder of 2020. This announcement implies areduction in the royalty tax rate to about 40% in 2020, which, if sustained in 2021 and beyond would strengthen the company's abilityto increase capital investment as oil prices recover. The government also contributed MXN46 billion (about $2.3 billion) to PEMEX tohelp fund the construction of the new Dos Bocas refinery, and has approved MXN45 billion in 2021.
The coronavirus induced collapse in oil prices and destruction of demand for refined products has caused a steep drop in revenues forPEMEX. The company's oil production was also reduced in coordination with other global oil producers included the OPEC+ countriesand the US, further hurting revenues. While management has worked to reduce costs and the company will benefit from the tax cut,we forecast that the company's negative free cash flow increased significantly in 2020 to $10 billion. This negative free cash flow hasbeen funded with debt, predominantly through borrowings on its revolving credit facilities and other financing transactions, thereforeincreasing debt in 2020.
We assume that oil prices will average $40/bbl WTI and $45/bbl Brent in 2021. That implies roughly flat oil prices compared tothe average for 2020, but with less extreme volatility and somewhat higher production with reduced voluntary cuts. These factorscombined with full year benefits of 2020 cost cuts results in our forecasting operating cash flow in 2021 that is closer to break-even.This benefit is partially offset by a modest rise in capital spending per the company's objective to keep crude oil production at leaststable. Overall, we forecast $9 billion of negative free cash flow in 2021.
Reserves increased in 2019, but we expect long running decline to resume in 2020-21 as capital investment remainsrestrainedThe current administration installed a new senior management team at PEMEX in December 2018 with a mandate to stabilizeoil production and improve reserve replacement. PEMEX did increase capital spending in 2019 and management focused its E&Pexploration and development activities in areas where it has more expertise and success rates, with more projects in the shallowwater and onshore and less funds devoted to deepwater projects. The company also greatly expanded workover activity and enhancedrecovery efforts to increase oil production and add reserves by boosting recovery rates from existing reservoirs.
These efforts resulted in PEMEX replacing its proved reserves at a rate of 120% in 2019, the first time it has replaced its reserves atover 100% in many years. Much of the reserve additions were from revisions related to increased recovery estimates. The companystabilized oil production over the course of 2019 and even achieved modest monthly sequential increases in the last few months ofthe year, but lower value gas production was allowed to decline, so total oil and gas production declined. This net reserve increasecombined with the overall production decline boosted the company's reserve life to 8.4 years at 2019 annual production levels.
Exhibit 5
Reserves and reserve life increased in 2019, but decline expected to resume with more investment needed
12.1
9.48.4
7.56.8 7.0 6.5 5.9
1.3 1.2 1.1 1.0 0.9 0.8 0.8 0.8
9.7
8.17.8 7.7 7.7
8.4 8.6
7.9
0.0
2.0
4.0
6.0
8.0
10.0
12.0
0.0
2.0
4.0
6.0
8.0
10.0
12.0
14.0
2014 2015 2016 2017 2018 2019 2020e 2021e
Ye
ars
Billio
n B
OE
Total production Total proved reserves Reserve life
All figures and ratios are calculated using Moody's estimates and standard adjustments. Moody's forecasts are Moody's opinion and do not represent the view of the issuerSource: Moody’s Financial Metrics™ and Moody's Investors Service (estimates)
4 16 December 2020 Petroleos Mexicanos: Semi-annual update - continued negative free cash flow in weak oil price environment
This document has been prepared for the use of Jose Galindo and is protected by law. It may not be copied, transferred or disseminated unlessauthorized under a contract with Moody's or otherwise authorized in writing by Moody's.
MOODY'S INVESTORS SERVICE CORPORATES
We have forecasted moderate increases in capital spending in 2020 and 2021, based on the government and management's continuedobjectives of boosting production and reserves offset by the cash flow pressures from low oil prices. While the company maderemarkable progress in reserves replacement in 2019, we don't believe that the large positive revisions from enhanced recovery arelikely to be repeatable in that magnitude going forward. We still see the need for much higher capital investment than forecasted forPEMEX to develop the discoveries it announced in 2019 and add more reserves through exploration and development to consistentlyachieve 100% reserve replacement. These considerations combined with potential negative reserve revisions caused by low oil pricesdrive our expectation that reserves will resume their decline in 2020 and 2021.
New refinery adds to PEMEX's capital spending burden with doubtful returns on investment and cost overrun risksA key objective of the current administration's energy agenda is for PEMEX to build a new refinery and improve the operationalperformance of the existing refineries to make Mexico more self-sufficient in refined products. Given ample refining capacity, bothglobally and in North America, and the additional medium term demand pressures brought on by the coronavirus pandemic, webelieve the economic returns from this investment are likely to be low. In addition, if the new refinery is completed and the existingrefineries' operational capacity is increased as planned, this will add exposure to lower margin fuel production and reduce PEMEX'scrude exports and therefore its US dollar revenue generation, increasing its credit risk.
However, the more near-term challenges are the risks of cost overruns and delays on completion of the new refinery. The governmentbelieves that the project should cost $8 billion and take no more than three years to complete and mandated PEMEX to construct thenew refinery. We believe that the project could end up costing more than the $10 billion-$12 billion suggested by tenders provided byinternational construction firms in 2019 given the government's and PEMEX's limited know-how of refinery building. Construction ofnew refineries or major expansions in recent years have experienced delays, cost overruns and some have even not been completed.This project places a burden on the company's management resources and will ultimately require more sovereign support to fund thecapital investment. The government has expressed an intention to fund the new refinery through capital contributions as demonstratedin 2020 and 2021.
Government support is critical to the rating and need for support continuesPEMEX's Ba2 rating takes into consideration our Joint Default Analysis, which includes our assumption of very high government supportin case of need and very high default correlation between PEMEX and the Government of Mexico, resulting in six notches of uplift fromthe company's caa2 BCA. Since 2016, the government has supported PEMEX in various ways, including capital injections, tax reductionsand early redemption of notes receivable from the government. In the latest example, in November 2020 the government entered intoan exchange with PEMEX of approximately MXN129 billion of notes receivable held by PEMEX from the government for marketablegovernment securities. PEMEX then used these securities to obtain MXN96 billion (around $4.8 billion) from a structured transactionwith a financial institution. The proceeds of this transaction were used to repay borrowings on its revolving credit facilities.
In 2020, PEMEX issued $5 billion of senior notes in January which was fortuitously timed prior to the onset of the pandemic. Thecompany was able to issue another $1.5 billion in October 2020, with the total proceeds of both offerings effectively refinancingsubstantially all of its senior notes maturities in 2020. The government provided the capital contribution for Dos Bocas as planned. Thecompany's remaining cash requirements will be funded predominantly with debt, primarily through use of committed credit facilitiesand other financings, including the aforementioned structured transaction backed by the government notes.
Looking to 2021, we expect a similar amount of cash requirements, including $6 billion of senior notes maturities as shown in Exhibit6. With only the Dos Bocas capital contribution known that leaves $14.7 billion of cash requirements, well in excess of the company'sexpected availability under its committed credit facilities. For purposes of our 2021 financial forecasts, we have assumed that the $6billion of senior notes maturities will be refinanced through new notes issuances, and that the remainder of the need with be fundedhalf with debt financings at PEMEX and the rest through government support. How these requirements will actually be met is subjectto PEMEX's access to debt capital, and ultimately we expect the government to provide support as needed.
5 16 December 2020 Petroleos Mexicanos: Semi-annual update - continued negative free cash flow in weak oil price environment
This document has been prepared for the use of Jose Galindo and is protected by law. It may not be copied, transferred or disseminated unlessauthorized under a contract with Moody's or otherwise authorized in writing by Moody's.
MOODY'S INVESTORS SERVICE CORPORATES
Exhibit 6
PEMEX financed most of its 2020 funding needs, but a similar funding gap for 2021 could require more government support
US billions 2020 2021
Cash flow from operations -2.4 -0.4
Capital spending -7.6 -8.6
Free Cash Flow -10.0 -9.0
Pension payments -2.0 -2.0
Maturing senior notes -6.5 -6.0
Cash requirements -18.5 -17.0
Capital contribution for Dos Bocas 2.3 2.3
Debt issuance and other financings 16.0
Use of cash 0.2
Financing and/or government support requirements - -14.7
The pension payments represent a portion of the company's pension costs that are reported in the company's cash flow from operations that are reclassified by Moody's to financingactivities under our standard adjustments. While not included in Moody's adjusted negative free cash flow, that cash outflow needs to be financed and is therefore captured in cashrequirements.Source: PEMEX and Moody's Investors Service (estimates)
Environmental, social and governance considerationsThe coronavirus outbreak, the government measures put in place to contain it, and the weak global economic outlook continue todisrupt economies and credit markets across sectors and regions. Our analysis has considered the effect on the performance of PEMEXfrom the current weak Mexico's economic activity and a gradual recovery for the coming months. Although an economic recoveryis underway, it is tenuous and its continuation will be closely tied to containment of the virus. As a result, the degree of uncertaintyaround our forecasts is unusually high. We regard the coronavirus outbreak as a social risk under our ESG framework, given thesubstantial implications for public health and safety.
Environmental considerations incorporated into our credit analysis of PEMEX are primarily related to potential carbon dioxideregulations, but also include natural and man-made hazards. Social risks are primarily related to demographic and societal trends andresponsible production. These risks could influence regional moves toward less carbon-intensive sources of energy, which could reducethe demand for oil, gas and refined products. Given the company's weak credit profile captured in its caa2 BCA, the emerging risksrelated to future laws and regulations that could accelerate the rate of energy transition were not material factors in PEMEX's ratings.
PEMEX aims to continuously improve its environmental performance through efficient use of energy and water resources whileminimizing the effects from its operations on human health and ecosystems where the company carries out its activities. Throughexternal environmental audits, PEMEX ensures that its business lines comply with legal and other environmental requirements thatenable greater eco-efficiency in hydrocarbon exploitation and transformation processes. In the same way, the response plans toenvironmental emergencies are evaluated, decreasing the likelihood of accidents with adverse impacts on the environment.
In terms of social responsibility, PEMEX continuously strengthens the capacities of its staff and communication with the communitiesnear its operations. In addition, the company develops an effective and independent dispute resolution mechanism; ensures that itsplanning processes incorporate social and environmental externalities associated with them; to identify and map the non-technicalrisks associated with its operation to anticipate and manage them more effectively; and, in general, to consolidate a clean operationthat generates real and tangible benefits for them.
The primary governance considerations incorporated into our analysis of PEMEX is its 100% ownership and direct control by theGovernment of Mexico. Therefore, the company's management and budget are subject to both fiscal and public policy considerations
6 16 December 2020 Petroleos Mexicanos: Semi-annual update - continued negative free cash flow in weak oil price environment
This document has been prepared for the use of Jose Galindo and is protected by law. It may not be copied, transferred or disseminated unlessauthorized under a contract with Moody's or otherwise authorized in writing by Moody's.
MOODY'S INVESTORS SERVICE CORPORATES
and not solely commercial considerations. The government has implemented the Petroleos Mexicanos Law, under which PEMEX isgoverned by a 10-member board of directors composed by the Ministry of Energy, the Ministry of Finance, the Mexican government’srepresentatives appointed by the president of Mexico and five independent members (not public officials and not former PEMEXemployees or any of its productive companies, subsidiaries or affiliated companies in the two years prior to the designation) appointedby the president of Mexico, subject to ratification by the Senate. PEMEX has to comply with local (Mexican Stock Exchange) andinternational regulations (Securities and Exchange Commission) in terms of compliance and reporting.
Liquidity analysisPEMEX's intrinsic liquidity is weak and highly dependent on government support because of its persistent negative free cash flowgeneration and ongoing debt maturities. As of September 30, 2020, PEMEX had $1.6 billion in cash. In early October 2020, thecompany issued $1.5 billion of senior notes due 2025. As of October 20, 2020, PEMEX had $2.05 billion and MXN700 millionin unused committed revolving facilities. In November 2020 the company initiated the structured transaction using marketablegovernment securities. The approximately $4.8 billion of proceeds from this financing were used to repay revolving credit facilities,increasing the unused committed capacity. The company has $6 billion of notes maturing in 2021 and substantial negative free cashflow that well exceed its unused committed credit facilities capacity. How these requirements will be met is subject to PEMEX's accessto debt capital, and ultimately we expect the government to provide support as needed.
At September 30, 2020, PEMEX's committed USD revolving credit facilities consisted of two facilities amounting to $1.95 billion and$5.5 billion that expire in January 2021 and June 2024, respectively. The company also has two peso denominated facilities for MXN28billion and MXN9 billion with expiration dates in November 2022 and November 2023. In December 2020 the company renewed the$1.95 billion facility with a $1.5 billion facility with an expiration in 2023.
Exhibit 7
Debt maturity profile for notes and other long term debts outstanding through 2025Senior notes issued in USD and other currencies converted to USD
$6.0 $5.5
$6.3
$8.5
$5.5
$0.0
$1.0
$2.0
$3.0
$4.0
$5.0
$6.0
$7.0
$8.0
$9.0
2021 2022 2023 2024 2025
US
billion
s
LT maturities
Data from third quarter 2020 earnings presentation and does not include revolving credit facilities, short term credits or accrued interest. The 2025 amount was adjusted for the $1.5 billionsenior notes due 2025 issued in October 2020.Source: PEMEX
7 16 December 2020 Petroleos Mexicanos: Semi-annual update - continued negative free cash flow in weak oil price environment
This document has been prepared for the use of Jose Galindo and is protected by law. It may not be copied, transferred or disseminated unlessauthorized under a contract with Moody's or otherwise authorized in writing by Moody's.
a) Average Daily Production (Mboe / d) 2,295 Aa 2,100 Aa
b) Proved Reserves (MMboe) 7,019 Aa 6,000 Aa
c) Crude Distillation Capacity (Mbbls / d) 1,640 A 1,640 A
Factor 2 : Business Profile (25%)
a) Business Profile Baa Baa Baa Baa
Factor 3 : Profitability and Efficiency (10%)
a) EBIT / Average Book Capitalization 6.2% Ba 14% Baa
b) Downstream EBIT / Total Throughput Barrels ($ / bbl) -$29.7 Ca -$11 Ca
Factor 4 : Leverage and Coverage (25%)
a) EBIT / Interest Expense 0.4x Ca 1.0x B
b) RCF / Net Debt 7.7% B 7% B
c) Total Debt / Book Capitalization 271.3% Ca 287% Ca
Factor 5 : Financial Policy (20%)
a) Financial Policy Ba Ba Ba Ba
Rating:
Scorecard-Indicated Outcome from Factors 1-5 Ba1 Ba1
Notching Factor: Government Policy Framework 6 6 6
a) Scorecard-Indicated Outcome After Notching Factor Caa1 Caa1
b) Rating Assigned for non-GRIs or BCA Assigned for GRIs Ba2
Government-Related Issuer
a) Baseline Credit Assessment
b) Government Local Currency Rating
c) Default Dependence
d) Support
e) Actual Rating Assigned
Very High
Very High
Ba2
Current
LTM 9/30/2020
Moody's 12-18 Month Forward
View As of Dec-20
Factor
caa2
Baa1
All ratios are based on 'Adjusted' financial data and incorporate Moody's Global Standard Adjustments for Non-Financial Corporations. As of 9/30/2020(L). Moody's forward view does notrepresent the view of the issuer, and unless noted in the text, does not incorporate significant acquisitions and divestitures.Source: Moody’s Financial Metrics™ and Moody's Investors Service (estimates)
Ratings
Exhibit 9
Category Moody's RatingPETROLEOS MEXICANOS
Outlook NegativeCorporate Family Rating Ba2Senior Unsecured Ba2Commercial Paper -Dom Curr NPNSR Senior Unsecured A2.mxNSR Commercial Paper MX-2NSR BACKED Senior Unsecured A2.mx
Source: Moody's Investors Service
8 16 December 2020 Petroleos Mexicanos: Semi-annual update - continued negative free cash flow in weak oil price environment
This document has been prepared for the use of Jose Galindo and is protected by law. It may not be copied, transferred or disseminated unlessauthorized under a contract with Moody's or otherwise authorized in writing by Moody's.
CREDIT RATINGS ISSUED BY MOODY'S INVESTORS SERVICE, INC. AND/OR ITS CREDIT RATINGS AFFILIATES ARE MOODY’S CURRENT OPINIONS OF THE RELATIVE FUTURECREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES, AND MATERIALS, PRODUCTS, SERVICES AND INFORMATION PUBLISHED BY MOODY’S(COLLECTIVELY, “PUBLICATIONS”) MAY INCLUDE SUCH CURRENT OPINIONS. MOODY’S INVESTORS SERVICE DEFINES CREDIT RISK AS THE RISK THAT AN ENTITY MAYNOT MEET ITS CONTRACTUAL FINANCIAL OBLIGATIONS AS THEY COME DUE AND ANY ESTIMATED FINANCIAL LOSS IN THE EVENT OF DEFAULT OR IMPAIRMENT. SEEMOODY’S RATING SYMBOLS AND DEFINITIONS PUBLICATION FOR INFORMATION ON THE TYPES OF CONTRACTUAL FINANCIAL OBLIGATIONS ADDRESSED BY MOODY’SINVESTORS SERVICE CREDIT RATINGS. CREDIT RATINGS DO NOT ADDRESS ANY OTHER RISK, INCLUDING BUT NOT LIMITED TO: LIQUIDITY RISK, MARKET VALUE RISK, ORPRICE VOLATILITY. CREDIT RATINGS, NON-CREDIT ASSESSMENTS (“ASSESSMENTS”), AND OTHER OPINIONS INCLUDED IN MOODY’S PUBLICATIONS ARE NOT STATEMENTSOF CURRENT OR HISTORICAL FACT. MOODY’S PUBLICATIONS MAY ALSO INCLUDE QUANTITATIVE MODEL-BASED ESTIMATES OF CREDIT RISK AND RELATED OPINIONS ORCOMMENTARY PUBLISHED BY MOODY’S ANALYTICS, INC. AND/OR ITS AFFILIATES. MOODY’S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND PUBLICATIONS DONOT CONSTITUTE OR PROVIDE INVESTMENT OR FINANCIAL ADVICE, AND MOODY’S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND PUBLICATIONS ARE NOTAND DO NOT PROVIDE RECOMMENDATIONS TO PURCHASE, SELL, OR HOLD PARTICULAR SECURITIES. MOODY’S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS ANDPUBLICATIONS DO NOT COMMENT ON THE SUITABILITY OF AN INVESTMENT FOR ANY PARTICULAR INVESTOR. MOODY’S ISSUES ITS CREDIT RATINGS, ASSESSMENTS ANDOTHER OPINIONS AND PUBLISHES ITS PUBLICATIONS WITH THE EXPECTATION AND UNDERSTANDING THAT EACH INVESTOR WILL, WITH DUE CARE, MAKE ITS OWN STUDYAND EVALUATION OF EACH SECURITY THAT IS UNDER CONSIDERATION FOR PURCHASE, HOLDING, OR SALE.
MOODY’S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS, AND PUBLICATIONS ARE NOT INTENDED FOR USE BY RETAIL INVESTORS AND IT WOULD BE RECKLESSAND INAPPROPRIATE FOR RETAIL INVESTORS TO USE MOODY’S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS OR PUBLICATIONS WHEN MAKING AN INVESTMENTDECISION. IF IN DOUBT YOU SHOULD CONTACT YOUR FINANCIAL OR OTHER PROFESSIONAL ADVISER. ALL INFORMATION CONTAINED HEREIN IS PROTECTED BYLAW, INCLUDING BUT NOT LIMITED TO, COPYRIGHT LAW, AND NONE OF SUCH INFORMATION MAY BE COPIED OR OTHERWISE REPRODUCED, REPACKAGED, FURTHERTRANSMITTED, TRANSFERRED, DISSEMINATED, REDISTRIBUTED OR RESOLD, OR STORED FOR SUBSEQUENT USE FOR ANY SUCH PURPOSE, IN WHOLE OR IN PART, IN ANYFORM OR MANNER OR BY ANY MEANS WHATSOEVER, BY ANY PERSON WITHOUT MOODY’S PRIOR WRITTEN CONSENT.
MOODY’S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND PUBLICATIONS ARE NOT INTENDED FOR USE BY ANY PERSON AS A BENCHMARK AS THAT TERM ISDEFINED FOR REGULATORY PURPOSES AND MUST NOT BE USED IN ANY WAY THAT COULD RESULT IN THEM BEING CONSIDERED A BENCHMARK.
All information contained herein is obtained by MOODY’S from sources believed by it to be accurate and reliable. Because of the possibility of human or mechanical error as wellas other factors, however, all information contained herein is provided “AS IS” without warranty of any kind. MOODY'S adopts all necessary measures so that the information ituses in assigning a credit rating is of sufficient quality and from sources MOODY'S considers to be reliable including, when appropriate, independent third-party sources. However,MOODY’S is not an auditor and cannot in every instance independently verify or validate information received in the rating process or in preparing its Publications.
To the extent permitted by law, MOODY’S and its directors, officers, employees, agents, representatives, licensors and suppliers disclaim liability to any person or entity for anyindirect, special, consequential, or incidental losses or damages whatsoever arising from or in connection with the information contained herein or the use of or inability to use anysuch information, even if MOODY’S or any of its directors, officers, employees, agents, representatives, licensors or suppliers is advised in advance of the possibility of such losses ordamages, including but not limited to: (a) any loss of present or prospective profits or (b) any loss or damage arising where the relevant financial instrument is not the subject of aparticular credit rating assigned by MOODY’S.
To the extent permitted by law, MOODY’S and its directors, officers, employees, agents, representatives, licensors and suppliers disclaim liability for any direct or compensatorylosses or damages caused to any person or entity, including but not limited to by any negligence (but excluding fraud, willful misconduct or any other type of liability that, for theavoidance of doubt, by law cannot be excluded) on the part of, or any contingency within or beyond the control of, MOODY’S or any of its directors, officers, employees, agents,representatives, licensors or suppliers, arising from or in connection with the information contained herein or the use of or inability to use any such information.
NO WARRANTY, EXPRESS OR IMPLIED, AS TO THE ACCURACY, TIMELINESS, COMPLETENESS, MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE OF ANY CREDITRATING, ASSESSMENT, OTHER OPINION OR INFORMATION IS GIVEN OR MADE BY MOODY’S IN ANY FORM OR MANNER WHATSOEVER.
Moody’s Investors Service, Inc., a wholly-owned credit rating agency subsidiary of Moody’s Corporation (“MCO”), hereby discloses that most issuers of debt securities (includingcorporate and municipal bonds, debentures, notes and commercial paper) and preferred stock rated by Moody’s Investors Service, Inc. have, prior to assignment of any credit rating,agreed to pay to Moody’s Investors Service, Inc. for credit ratings opinions and services rendered by it fees ranging from $1,000 to approximately $2,700,000. MCO and Moody’sInvestors Service also maintain policies and procedures to address the independence of Moody’s Investors Service credit ratings and credit rating processes. Information regardingcertain affiliations that may exist between directors of MCO and rated entities, and between entities who hold credit ratings from Moody’s Investors Service and have also publiclyreported to the SEC an ownership interest in MCO of more than 5%, is posted annually at www.moodys.com under the heading “Investor Relations — Corporate Governance —Director and Shareholder Affiliation Policy.”
Additional terms for Australia only: Any publication into Australia of this document is pursuant to the Australian Financial Services License of MOODY’S affiliate, Moody’s InvestorsService Pty Limited ABN 61 003 399 657AFSL 336969 and/or Moody’s Analytics Australia Pty Ltd ABN 94 105 136 972 AFSL 383569 (as applicable). This document is intendedto be provided only to “wholesale clients” within the meaning of section 761G of the Corporations Act 2001. By continuing to access this document from within Australia, yourepresent to MOODY’S that you are, or are accessing the document as a representative of, a “wholesale client” and that neither you nor the entity you represent will directly orindirectly disseminate this document or its contents to “retail clients” within the meaning of section 761G of the Corporations Act 2001. MOODY’S credit rating is an opinion as tothe creditworthiness of a debt obligation of the issuer, not on the equity securities of the issuer or any form of security that is available to retail investors.
Additional terms for Japan only: Moody's Japan K.K. (“MJKK”) is a wholly-owned credit rating agency subsidiary of Moody's Group Japan G.K., which is wholly-owned by Moody’sOverseas Holdings Inc., a wholly-owned subsidiary of MCO. Moody’s SF Japan K.K. (“MSFJ”) is a wholly-owned credit rating agency subsidiary of MJKK. MSFJ is not a NationallyRecognized Statistical Rating Organization (“NRSRO”). Therefore, credit ratings assigned by MSFJ are Non-NRSRO Credit Ratings. Non-NRSRO Credit Ratings are assigned by anentity that is not a NRSRO and, consequently, the rated obligation will not qualify for certain types of treatment under U.S. laws. MJKK and MSFJ are credit rating agencies registeredwith the Japan Financial Services Agency and their registration numbers are FSA Commissioner (Ratings) No. 2 and 3 respectively.
MJKK or MSFJ (as applicable) hereby disclose that most issuers of debt securities (including corporate and municipal bonds, debentures, notes and commercial paper) and preferredstock rated by MJKK or MSFJ (as applicable) have, prior to assignment of any credit rating, agreed to pay to MJKK or MSFJ (as applicable) for credit ratings opinions and servicesrendered by it fees ranging from JPY125,000 to approximately JPY250,000,000.
MJKK and MSFJ also maintain policies and procedures to address Japanese regulatory requirements.
REPORT NUMBER 1253627
9 16 December 2020 Petroleos Mexicanos: Semi-annual update - continued negative free cash flow in weak oil price environment
This document has been prepared for the use of Jose Galindo and is protected by law. It may not be copied, transferred or disseminated unlessauthorized under a contract with Moody's or otherwise authorized in writing by Moody's.
