pemex outlookri.pemex.com/files/content/dcf_pemex_outlook_041019_i.pdf · 4 dcf-a /october 19, 2004...

DCF-A /19 de Octubre de 2004

PEMEX Outlook

1DCF-A /October 19, 2004

Forward-looking Statement Disclaimer

This presentation contains forward-looking statements. We may also make written or oral forward-looking statements in our periodic reports to the National Banking and Securities Commission and the Securities and Exchange Commission, in our annual report, in our proxy statements, in our offering circulars and prospectuses, in press releases and other written materials and in oral statements made by our officers, directors or employees to third parties. Statements that are not historical facts, including statements about our beliefs and expectations, are forward looking-statements. These are good faith statements based on current plans, estimates and projections and therefore you should not place undue reliance on them. Forward-looking statements speak only as of the date they were made, and we undertake no obligation to update publicly any of them in light of new information or future events.Forward-looking statements involve inherent risks and uncertainties. We caution you that a number of important factors could cause actual results to differ materially from those contained in any forward-looking statement.


Cautionary Note

The U.S. Securities and Exchange Commission (SEC) permits oil and gas companies, in their filings with the SEC, to disclose only proved reserves that a company has demonstrated by actual production or conclusive formation tests to be economically and legally producible under existing economic and operating conditions. We use certain terms in this document, such as total reserves, probable reserves and possible reserves, that the SEC's guidelines strictly prohibit us from including in filings with the SEC. Investors are urged to consider closely the disclosure in our Form 20-F, “File No. 0-99”, available from us at www.pemex.com or Marina Nacional 329 Floor 38 Col. Huasteca, Mexico City 11311 or at (52 55) 1944 9700. You can also obtain this Form from the SEC by calling 1-800-SEC-0330.EBITDA, free cash-flow and discretionary cash-flow are non-GAAP measures, which are calculated as described above. They are presented because PEMEX believes that they are widely accepted financial indicator of its ability to service or incur debt. EBITDA, free cash-flow and discretionary cash-flow should not be considered as indicators of financial performance, as an alternative to cash flow, as a measure of liquidity, or as being comparable to similarly named measures of other companies.The total debt calculation includes, in addition to documented debt, the items that are usually considered as debt by the financial markets.

http://www.pemex.com/


Agenda

PEMEX’s Highlights

Operations

Capex Program and Financial Profile

Challenges


Pemex is the 8th Largest Integrated Oil Company in the World

Third largest producer of crude oil in the world(1)

Eighth largest integrated oil company in the world(1)

Proved reserves equivalent to more than 12 years of production(2)

Low cost producer vs. market average

Key supplier of crude oil to the US market

Mexico’s largest company with 2003 revenues of 57 billion dollars

Sole producer of crude oil, natural gas and refined products in Mexico

Sole marketer of refined products in Mexico

1) Based on PIW 2002 Rankings, December 2003, Petroleum Intelligence Weekly2) 2003 production levels and proved reserves in accordance with the definition under Rule 4.10(a) of

Regulation S-X under the U.S. Securities Act of 1933


Integrated Oil Majors

Crude GasReserves

Crude GasProduction

Place Company Country Sales

1

2

3

4

5

6

7

8

9

10

Saudi Aramco

Exxon Mobil

PDVSA

NIOC

RD Shell

BP

Chevron Texaco

PEMEX

Total

Petrochina

Saudi Arabia

US

Venezuela

Iran

Netherlands & UK

UK

US

México

France

China

1

14

5

3

17

19

21

8

23

15

4

13

7

3

15

16

23

29

22

18

1

5

4

2

6

9

10

3

14

7

8

2

12

6

3

4

11

16

10

19

6

1

7

15

2

3

4

11

5

12

(1) (1)

Source: Petroleum Intelligence Weekly December 20031) Does not consider the reserves adjustments announced since January 2004


Production Profile

3.1 2.9

3.43.23.13.03.0

1997 1998 1999 2000 2001 2002 2003

Crude oil production (MMbd)

4.8 4.84.54.44.5

4.74.5

1997 1998 1999 2000 2001 2002 2003

Natural gas production (MMMcfd)

1.5 1.5 1.61.51.51.41.5

1997 1998 1999 2000 2001 2002 2003

Refined products (MMbd)

Crude oil production has grown steadily since 1999

The decreasing trend of natural gas production has been reversed in 2003

Refined products production has increased slightly


Crude Oil and Natural Gas Reserves

Long life of proven reserves of over 12 years and 3P life of 30 years based on 2003 production(2)

18.9

29.1

48.0

Proved Probable &Possible

3P(1)

Reserves as of December 31, 2003MMMboe

1) In accordance with the definition of proved reserves under Rule 4.10(a) of Regulation S-X under the U.S. Securities Act of 1933. Probable and possible reserves were obtained through the difference between 3P reserves and proved reserves. PEMEX filings with SEC only report proved reserves

2) Reserves as of December 31, 2003 and based on 2003 production (average daily production of 4.3 MMboed)


Efficient Producer

2002 Lifting CostUS$/boe

2.33.0 3.3

3.8

5.1

6.6 6.7

0.01.02.03.04.05.06.07.08.0

Total Stat Oil BP ChevronTexaco

ExxonMobil

ConocoPhillips

Source: Herold and PEMEX


Important Supplier of Crude Oil to the U.S.

PEMEX’s exports by region 2003(1)

U.S. Importsby region 2003(2)

100% = 1.8 MMbd 100% = 9.6 MMbd

18%

16%

17%12%

16%

21%

9%

3%

9%

79%

Saudi Arabia

Europe

Other Non-OPEC

VenezuelaOther OPEC

MexicoCanada

Rest of America

Far East USA

1) Source: PEMEX 2) Source: Energy Information Administration (EIA)


EBITDA of the Major Integrated Oil Companies

EBITDA 2003MMMUS$

32.2 31.7

25.122.6

19.817.0

11.7 11.0 9.7

0.0

5.0

10.0

15.0

20.0

25.0

30.0

35.0

ExxonMobil

BP Total RD Shell ChevronTexaco

ConocoPhillips

Petrobras Stat Oil

Source: Bloomberg, excluding PEMEX


PEMEX EBITDA 2003

8.4

23

3.6

31.7

3.50.324.3

47.3

55.7

MMMUS$

Total sales

Total sales net of IEPS

Costs and expenses

Operating income net

of IEPS

Other revenues

D&A(2) EBITDACost of the reserve(3)

IEPS(1)

(1) Special Tax on Production and Services(2) Depreciation and amortization(3) Cost of the reserve for retirement payments, pensions and indemnities


PEMEX EBITDA 2003 reconciliation

MMMUS$

Net loss Taxes and duties

34.0 3.6-0.1

31.7

IEPS(1) CFC(2) D&A(3) Cumulative effect(5)

-3.6

-8.42.7

EBITDA

3.5

Cost of the reserve(4)

(1) Special Tax on Production and Services(2) Comprehensive financing cost(3) Depreciation and amortization(4) Cost of the reserve for retirement payments, pensions and indemnities(5) Cumulative effect due to the adoption of new accounting standards


Agenda


Operations


Challenges


Untapped Exploration Potential

dd

Veracruz basin

Southeastbasins

Frente Sierra Madre Oriental

Tampico

Misantla

Deep-waterGulf of Mexico

Source: PEMEX

Burgos

Chihuahua

Sabinas

Sierra de Chiapas

Non productive basins

Macuspana

Productive basins

With non associated gas

Yucatánplatform

On-shore 1,923,040Continental shelf 263,259Deep-water 567,477TOTAL 2,753,776Non prospective 1,699,190Prospective 1,054,586

Basins explored 174,400% of basins explored 17

Area (km 2)

Prospective


E&P Projects: Cantarell

Production 1996 2003 Increase

Crude oil (Mbd) 1,074 2,096 93%Associated natural gas (MMcfd) 443 770 74%

Largest oil field in Mexico and eighth largest in the world

2004 expected production: 2.1 MMbd of crude oil and 774 MMcfd of natural gas

Proved remaining reserves of 6.9 MMMboe

Recovery capability of 60% (world's average is 35%)

Cantarell facts

Year

Pressure and production

Nitrogeninjection Pressure

maintenance

Increase in production

The injection of nitrogen in Cantarell has slowed the pressure decline and increased production

Production

Pressure


Revamping of Refineries

Crude Oil Refining Centers

5

5

5Salina Cruz5

Minatitlán

Tula5

5

CadereytaMadero

Salamanca

Refineries: 6Refining capacity (MMbd): 1.5

Modernization of the the refining system:

Main projects

Distribution (Maritime terminals modernization, SCADA)Production facilities (Lubricant plant in Salamanca, Minatitlán revamping)Gasoline (improvements in quality and mix of grades)

Increase in heavy crude processing capacityShift in product mix towards high octane gasolines and middle distillatesOptimization of the crude oil blend

Minatitlán refinery revamping is expected to be finished in 2007– Total estimated capex: MMMUS$2.4– Expected incremental production of gasolines: 97 Mbd– Expected incremental production of intermediate

distillates: 49 Mbd


Expanding the Natural Gas Production Capacity

Gas Processing CentersPEMEX is investing to:

Increase import-export capacity (interconnections with the U.S.)

Enhance flexibility of transportation system

New projects:

nReynosa

n

Poza Rica

Cd PemexNuevo PemexCactus

Matapionche

Pajaritos

Morelos

nn

nn

n n

n

Cangrejera

La Venta

n

– New compression stations to increase the transport capacity in the area of Monterrey and Chihuahua

– Capacity expansion of the processing system in northern Mexico to capture natural gas liquids (4 cryogenic plants: 2 in 2004 and 2 more in the following years)

Sweetening Plants Capacity of 4,503MMcfd

Cryogenic Plants Capacity of 4,592 MMcfd


Petrochemicals

Petrochemical centers Opportunities in the petrochemical process:

Investment in profitable petrochemical chains

New projects:5

5

5

5

55

Camargo

Tula

San Martín Texmelucan

Pajaritos

Cosoleacaque Cangrejera

Morelos5

5

Escolín – Expecting capacity expansions on the ethane chain in actual plants to gain domestic market share in the polyethylene business

– Seeking possible joint ventures with private sector in minority role companies to integrate the value chains


Agenda


Operations


Challenges


Crude Oil and Natural Gas Production

Incremental Production

0

2,000

4,000

6,000

8,000

10,000

1993

1995

1997

1999

2001

2003

2005

2007

2009

0

1,000

2,000

3,000

4,000

5,000

1993

1995

1997

1999

2001

2003

2005

2007

2009

Crude oilproduction capacityMbd

Natural gas production capacityMMcfd

Historic Forecast

Historic Forecast Base Production

New Exploration Production

The oil industry requires large investments for maintaining and increasing reserves and production levels

Investment lags accumulate problems in the future

Source: PEMEX


Historical and Projected CAPEX

PidiregasNon - Pidiregas

By type of projectMMMUS$

Note: Pidiregas: Long-term productive infrastructure projectsNon-Pidiregas: Budgetary InvestmentsP = Projected

3.1 2.6 3.0 3.0 2.2 1.7 1.0

2.0 2.94.5 3.9 5.6

8.411.0

1998 1999 2000 2001 2002 2003 2004P

5.1 5.5

7.56.9

7.8

10.1

12.0


CAPEX 2004

By line of business

14%

86%

Exploration

Development11.1

0.10.3 0.5

E&PRefiningGas and Basic PetrochemicalsOthers

Total MMMUS$ 12 Total MMMUS$ 11.1


EBITDA and Interest Coverage

EBITDA EBITDA / Interest

MMMUS$ Times15.2x

12.1x13.4x

0

2

4

6

8

10

12

14

16

2001 2002 2003

20.7 22.0

31.7

0

5

10

15

20

25

30

35

2001 2002 2003

Note: EBITDA net of sales taxes (IEPS). Interest expense does not include capitalized interest


Debt-to-Reserves Ratio vs. Peers

Debt 2003 / Proved reserves

2.0

0.40.6

1.51.3

1.1

2.3

1.3 1.4

0.0

0.5

1.0

1.5

2.0

2.5

ExxonMobil

RD Shell Total BP ChevronTexaco

ConocoPhillips

Stat Oil Petrobras

Source: Companies’ financial statements as of December 31, 2003 and proved reserves data as of December 31, 2002 (other than PEMEX)1) Financial statements and proved reserves data as of December 31, 2003. Debt is the sum of documented debt, notes payable to

contractors and sale of future account receivable2) Does not consider the reserves adjustments announced since January 2004

US$ / boe

AAA AA

(1)

A B

(2)


Credit Profile Relative to Integrated Majors

Exxon Mobil

BBB-Baa1

18.94.3

11.910.1

AA+Aa2

19.34.0

13.38.0

AA+Aa1

17.63.5

13.712.4

AAAAaa

21.74.2

14.012.9

AAAa2

11.22.4

12.78.4

AAAa2

11.92.6

12.45.6

A-A3

7.81.1

19.96.2

RD Shell

Total BP Chevron Texaco

ConocoPhillips

Ba2

10.51.8

15.95.7

Petrobras(1)

AA1

4.31.1

10.93.4

Statoil(3)

Senior Unsecured RatingsS&PMoody´s

Operating DataProven Reserves (MMMboe) (2)

Production (MMboed)(4)

Proven Reserves Life (years)CAPEX (MMMUS$)

Source: Bloomberg. Companies’ financial statements as of December 31, 2003 and proved reserves data as of December 31, 2002 (other than PEMEX)

1) EBITDA net of IEPS (special tax on production and services)2) PEMEX’s proved reserves in accordance with the definition under Rule 4.10(a) of Regulation S-X under the U.S. Securities Act of 1933. Data

as of December 31, 20033) Does not consider reserves adjustments announced since January 20044) When the conversion factor is not available, one million cubic feet of natural gas = 5.2 barrels of oil equivalent


Agenda


Operations


Challenges


Challenges

Increase efficiencyFiscal regime proposalImplement corporate governance best practices

Challenges


Challenges: Implementing Value Management Oriented to Efficiency

Implementing projects oriented to value creation

Implementing best practices in projects management

Optimization of plants and pipelines

Optimization of the procurement process

Value management for corporate (medical and telecommunications) services

Improving risk management

Implementing compensation according to performance


Challenges: Fiscal Regime Proposal

New hydrocarbons should be taxed competitively according to fiscal regime in countries with similar geological conditionsOld hydrocarbons should be taxed in order to fit the short-term needs of the Mexican Federal Government

Old hydrocarbons

New hydrocarbons

Time

$


Challenges: Implementing Corporate Governance Best Practices

Improve corporate governance

Continue to incorporate best practices:

– Independent board members

– Audit Committee

– Prompt disclosure of information

– Compensation based on performance

– Clear mandate to create value

Increased operational and financial autonomy

Arms length relationship with government

Improve transparency and credibility of the management process

PEMEX budget is part of the federal budget

Inefficient audit system

Legal restrictions for joint ventures

DCF-A /19 de Octubre de 2004

pemex outlookri.pemex.com/files/content/dcf_pemex_outlook_041019_i.pdf · 4 dcf-a /october 19, 2004...

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