“Pemex is a liquid credit that a lot of investors are overweight,” said Aaron Gifford, emerging markets sovereign debt analyst at T. Rowe Price Group in Baltimore. “As a result, it tends to come under additional pressure during a risk-averse environment.”
Pemex bonds due 2032 have fallen 12.5% since the beginning of June, compared with a 4.6% drop in notes from Brazil’s state-owned Petroleo Brasileiro due 2031, and a 9.9% drop in notes with a similar term. of Colombia’s Ecopetrol, which were also affected by the election of leftist President Gustavo Petro. Meanwhile, Petróleos del Perú’s debt maturing in 2032 lost 7.7%.
That performance is due in part to the fact that the Mexican driller has the highest debt load of any major oil company. At the same time, it highlights a central dilemma for the company that hasn’t made an annual profit since 2013 but needs plenty of cash to pump more oil in the years to come.
As pressure mounts, “a debt sale at the wrong time, price and size didn’t help,” said Hari Hariharan, chief executive of New York-based NWI Management. “Pemex was one of the most extended credits among emerging market investors. I guess a combustion of all these factors caused the widening.”
There are also no expectations of a significant rebound in the short term, despite the fact that the president, Andrés Manuel López Obrador, has offered an implicit guarantee on the debt.
“While valuations are cheap, we probably need to see a positive catalyst and new inflows before Pemex can significantly outperform,” Gifford said.