(Bloomberg) -- Just as Petroleos Mexicanos’ bonds finally recovered from last year’s rout, a dismal earnings report sent them tumbling back down.
Pemex said on April 30 that its oil output declined 12 percent in the first quarter from a year ago, while its refineries operated at just 34 percent of capacity. In the next five days, yields on the company’s bonds maturing in 2027 jumped 31 basis points to 6.539 percent, making them the laggards among Mexican peers in that period.
The results are another blow to Pemex, the world’s most indebted oil major with about $106.5 billion in outstanding debt. The government of Andres Manuel Lopez Obrador has plans to restore the company to its former glory, but struggled to reverse more than a decade of production declines, leaving investors unconvinced.
"Pemex’s problems run deep, and international financial markets don’t have faith that it will do what’s needed to solve them,” said Alejandra Leon, Mexico energy analyst at IHS Markit. “We haven’t seen any indication that Pemex has implemented concrete action to reverse production declines, and what was surprising is that the refining business didn’t reflect higher income from combating fuel theft that was part of the rescue package.”
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