(Photo courtesy of www.sexenio.com.mx)

(Photo courtesy of www.sexenio.com.mx)

As it has been the case with the presentation of its quarterly results for the last year and a half or so, PEMEX began its conference call announcing its 3Q14 results with a brief overview of matters surrounding the Energy Reform and the way in which they will impact the NOC. A calendar was included, which clearly stated that PEMEX will have to finalize its transition into a Productive Enterprise of the State by December 21st, 2015. The presentation is not entirely clear as to what parameters will have to be revised or which benchmarks will have to be reached in order to ascertain that this transition has taken place; however, it does include a series of steps in that transition that have been fulfilled throughout the last couple of months. According to this calendar, October corresponds to the final conformation of PEMEX’s new administration boards.

PEMEX’s current results occur at a crossroads of trends and transitions, of which this aforementioned transition within PEMEX is only one among many. The main trend external to PEMEX or even Mexico is the surprising free fall of oil prices that has been capturing the attention of analysts and governments during the last few months; in light of this development, the fact that PEMEX’s crude oil production has continued to decline during the third quarter of 2014 (reaching a new low of 2.398 Mb/d) seems less of an entirely negative progression and more of a temporary hurdle. In other words, the fact that PEMEX is currently producing less oil per day than ever before is not that great of a loss if we consider it a temporary phase that coincides with an international low in oil prices that would render higher production a relatively unprofitable endeavor anyways.

There are also subtler but equally important trends going on within PEMEX that are parallel to its transformation into a Productive Enterprise of the State (coincidentally or causationally so), such as the renovation of gas-processing infrastructure (which is causing the burning of gas to increase in the last few quarters because certain pieces of technology need to be tested and their existing counterparts constantly be brought offline). It is important to consider the ways in which these kinds of trends interact when reading PEMEX’s results, lest one fall for the trap of calling said results yet another snapshot of PEMEX’s “inevitable slide towards irrelevancy”.

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