petroleos mexicanos vp-sr credit officer crediticia/pbc_114278… · vp-sr credit officer...

CORPORATES

CREDIT OPINION12 October 2018

Update

RATINGS

Petroleos MexicanosDomicile Mexico City, Ciudad de

Mexico, Mexico

Long Term Rating Baa3

Type LT Issuer Rating - FgnCurr

Outlook Stable

Please see the ratings section at the end of this reportfor more information. The ratings and outlook shownreflect information as of the publication date.

Contacts

Nymia Almeida 52-55-1253-5707VP-Sr Credit [email protected]

Marianna Waltz, CFA 55-11-3043-7309MD-Corporate [email protected]

CLIENT SERVICES

Americas 1-212-553-1653

Asia Pacific 852-3551-3077

Japan 81-3-5408-4100

EMEA 44-20-7772-5454

Petroleos MexicanosSemi-Annual Update

SummaryPetroleos Mexicanos (PEMEX)'s Baa3 ratings are based on its b3 Baseline Credit Assessment(BCA, a measure of a company's standalone credit strength) and takes into consideration thecompany's large proved hydrocarbon reserves; daily production averaging 2,592,994 barrelsof oil equivalent per day (boe/d) in the twelve months ended June 30, 2018; dominant roleand integrated operations in the energy industry in Mexico; and position as a major crude oilexporter to the US. However, its ratings are affected by high liquidity risk; a heavy tax burdenand resulting negative free cash flow; high financial leverage and low interest coverage; andchallenges related to crude production and reserve replacement.

Exhibit 1

Reserve profile evolutionPetroleos Mexicanos

1,253 1,159 1,080 972 903 903

12,102

9,412 8,383

7,526 6,847

6,169

9.7

8.17.8 7.7 7.6

6.8

0.0

2.0

4.0

6.0

8.0

10.0

12.0

-

2,000

4,000

6,000

8,000

10,000

12,000

14,000

2014 2015 2016 2017 2018e 2019e

ye

ars

millio

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 opinionand do not represent the view of the issuer.Source: Moody's Financial Metrics™

https://www.surveygizmo.com/s3/1133212/Rate-this-research?pubid=PBC_1142782https://www.moodys.com/credit-ratings/Petroleos-Mexicanos-credit-rating-94100

MOODY'S INVESTORS SERVICE CORPORATES

PEMEX's Baa3 ratings also take into consideration our joint default analysis, which includes our assumptions of very high governmentsupport in case of need and very high default correlation between PEMEX and the Government of Mexico (A3 stable), resulting in sixnotches of uplift from the company's b3 BCA.

Credit strengths

» Large size of reserves and production compared with those of its peers

» The 2013 energy law benefits the company in the medium term, although it is also accompanied with execution risk

» Government-related issuer, with very high implied government support

Credit challenges

» Weak liquidity and declining reserve life

» High fiscal and debt burden

» Weak operating and credit metrics

Rating outlookThe stable outlook on PEMEX's Baa3 ratings reflects mostly the stable outlook on the rating of the government of Mexico. However, italso reflects our opinion that the company's standalone credit profile will continue weak in the foreseeable future.

Factors that could lead to an upgrade

» Lower liquidity risk, better operating profile, lower debt and higher retained cash flow.

» Better operating metrics and a lower tax burden that supports higher levels of internal funding for capital spending and prospectsfor a solid trend of increases in production and reserves could benefit the company's BCA.

» Our current expectations of very high sovereign support would have to remain unchanged for an upgrade to be considered.

Factors that could lead to a downgrade

» Growing liquidity concerns, material increase in financial leverage, or significant deterioration in production could result in areduction of PEMEX's BCA and a downgrade of its debt ratings.

» Because PEMEX's ratings benefit from implicit support from the government of Mexico, a downgrade of the government's rating ora change in our assumptions about government support could lead to a downgrade of PEMEX's ratings.

2 12 October 2018 Petroleos Mexicanos: Semi-Annual Update

https://www.moodys.com/credit-ratings/Mexico-Government-of-credit-rating-489500


Key indicators

Exhibit 2

Petroleos Mexicanos

US Millions Dec-14 Dec-15 Dec-16 Dec-17

LTM

(Jun-18) 2018-proj. 2019-proj.

Average Daily Production (MBOE / Day) 3,432.4 3,174.0 2,950.8 2,661.6 2,593.0 2,475.3 2,475.3

Total Proved Reserves (MMBOE) 12,101.8 9,412.0 8,383.0 7,525.8 7,525.8 6,847.3 6,168.8

Crude Distillation Capacity (mbbls/day) 1,602.0 1,640.0 1,602.0 1,627.0 1,627.0 1,627.0 1,627.0

Downstream EBIT/Total Throughput Barrels (17.68)$ (11.01)$ (10.29)$ (13.30)$ (7.18)$ (2.50)$ (2.50)$

EBIT / Interest Expense 6.5x -0.4x 1.4x 2.1x 2.5x 3.0x 2.3x

RCF / Net Debt 3.0% -0.6% -0.5% 3.1% 3.9% 5.8% 1.9%

Debt / Book Capitalization 142.2% 195.4% 163.7% 185.7% 187.2% 190.8% 208.6%

EBIT / Avg. Book Capitalization 40.2% -2.9% 12.9% 19.3% 23.9% 31.8% 25.7%

Source: Moody’s Financial Metrics™. 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 of the issuer. Periods are Financial Year-End unless indicated. LTM = Last Twelve Months.

ProfileFounded in 1938, PEMEX is Mexico's productive state-owned enterprise. The company's oil-dominant status should gradually changederived from the energy reform in 2013, although, in the foreseeable future, PEMEX will remain the main energy company in thecountry, with fully integrated operations in oil and gas exploration and production (E&P), refining, distribution and retail marketing, aswell as petrochemicals.

PEMEX is also a leading crude oil exporter, around 60% of its crude exported to various countries, mainly to the US. In June 2018, thecompany posted $83.5 billion in revenues and $108.5 billion in assets and produced an average of 1,880 thousand barrels of per day(bpd) of crude oil. In 2017, PEMEX's royalties, tax, duties and other payments to the government amounted to $20 billion, equivalent toabout 17.6% of the latter's annual budget. As of that year, PEMEX had total proved reserves of 7.5 billion barrels of oil equivalent (boe),which represented 8 years of reserve life.

Exhibit 3

Revenue breakdown by business segmentExhibit 4

EBITDA breakdown by business segment

E&P29%

Industrial Transformation37%

Logistics2%

Trading Companies28%

Others4%

Industrial Transformation refers mostly to refining and marketingData as of June 2018Source: PEMEX's Q2 Mexican Stock Exchange financial report

E&P92%

Industrial Transformation-3%

Logistics-1%

Trading Companies2%

Others-3%

Industrial Transformation refers mostly to refining and marketing.Data as of June 2018Source: PEMEX's Q2 Mexican Stock Exchange financial report



Detailed credit considerationsHigh fiscal burden and elevated financial leverageIn 2014-16 period, PEMEX's leverage increased to fund large outflows for taxes, duties and capital spending without achieving sustainedincreases in production or operating efficiencies. In 2015 in particular, despite the sharp decline in oil prices that began in late 2014,the company's operating expenses were resilient, with negative effect on credit metrics. The year 2016 represented a turnaround, andPEMEX focused on cost optimization and standardization of processes, reducing operating expenses by around 45%. Year 2017 was ofstabilization: revenue grew as a result of higher crude and fuel prices as well as higher gasoline sales; expenses were stable, in line withPEMEX's cost-efficiency policy implemented since 2016. The company is currently focused on strategic and profitable activities; so farin 2018, PEMEX had an increase of about 23% in revenues in the last 12-month ended June 30 as a result of higher prices; however,production has declined about 7% compared to the same period in 2017.

PEMEX's pretax cash flow is robust and could support high levels of investment, but capital retention and investment have beenstymied by its heavy tax burden. PEMEX has the lowest production costs in Latin America, about $10-13 per barrel, including royalties,although its tax burden was equivalent to roughly $57 per barrel in 2017, according to the company.

PEMEX has traditionally paid out all of its EBITDA in the form of taxes and duties, leaving it with the need to incrementally raise debt tofinance fixed charges and capital spending. However, since 2016 and as a result of the energy reform, PEMEX had been able to farmoutexisting producing fields under more reasonable tax frameworks, which has reduced the company's tax burden to 70% of consolidatedEBITDA in 2017, for instance. We expect that tax burden will remain stable in 2018. In 2019, tax burden could decline further if PEMEXis able to continue to farmout existing producing fields, together with a reduction to 65% in shared profit right (DUC).

We believe that the company will continue to provide most of its operating cash to fund at least 15% of the government's annualbudget in the next three to four years. In the longer term, however, it is uncertain if PEMEX will continue to focus on E&P activities or ifit will increase exposure to refining. If it increased its portfolio of E&P projects, its tax burden could gradually decline, based on the newtax regime for the oil industry, as established in the 2013 energy law. If and when this happens, we would reassess our assumptions forsupport and dependence related to the government under our joint default analysis.

Exhibit 5

Leverage trendDebt to EBITDA

2.9x

20.6x

7.8x

6.1x5.3x 4.8x

6.1x

0.0x

5.0x

10.0x

15.0x

20.0x

25.0x

2014 2015 2016 2017 Jun-2018(L) 2018e 2019e

Data as adjusted by Moody's. Leverage for 2018-19 based on a 7% decline in production for 2018 according to 1H2018 results, stable production for 2019 and crude prices of 68.5 dbp for2018 and 60 dpb for 2019.Source: Moody's Financial Metrics™

Large reserves but production is set to stabilize only in the medium termPEMEX's large proved hydrocarbon reserves, which as of December 31, 2017 (last available reserve report) amounted to 7.5 billion boeand were equal to almost 8 years of life, declined from over 10 years of life early in the century due to high taxation and a legacy ofunder or inefficient investment that have hurt its reserve base and production growth.



PEMEX's daily production averaged 2,593 thousand barrels of oil equivalent per day (boed/d) in the 12 months ended June 30, 2018and has been declining since 2004 given natural decline of certain fields, as well as the company's limited ability to invest efficiently,given limited capital and a lack of technological expertise in deepwaters, where growth opportunities exist. For instance, lower spendinglevels in recent years have affected the company's crude oil production, which has declined over the past years, averaging roughly2,266 thousand bpd in 2015, 2,154 thousand bpd in 2016 and 1,948 thousand bpd in 2017, a fall of around 5% to 9%, on an annualbasis. However, according to the company, production reached a bottom level in 2017 and will marginally increase starting in 2018on the back of higher capital spending and higher production mainly from areas that were farmout starting in 2017. However, weestimate that production of oil equivalent (crude oil plus natural gas) will decline 7% in 2018 and stabilize in 2019. We recognize thatthe company is now focused on profitable barrels, not necessarily on production volumes.

Total capital spending in 2017 amounted to $4.9 billion. In 2018, we expect capital investments to amount around to $4.5 billion,similar to 2017 levels but lower than the $8.1 billion in 2016 and the $16 billion spent in 2015. E&P usually takes about 80% of thecompany's annual capital investments.

Exhibit 6

Unleveraged cash margin evolutionPetroleos Mexicanos

$52.05

$21.83

$16.52

$21.49

$35.37

$28.33

$10.00

$20.00

$30.00

$40.00

$50.00

$60.00

2014 2015 2016 2017 2018e 2019e

US

/bb

l

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 issuer.Source: Moody's Financial Metrics™

On March 3, 2017, PEMEX signed its first deepwater farm-out contract with BHP Billiton for the development of the Trion field, locatedin the Perdido area, a $7.4 billion project (source: CNH, Comision Nacional de Hidrocarburos). The investment will total $1.9 billion forBHP Billiton and $600 million for PEMEX by the time initial production is achieved. In the long- to medium term, larger oil productionwould help boost PEMEX's cash generation and gradually reduce its high dependence on external funding. PEMEX expects the Trionfield to produce 120,000 barrels per day by 2025; initial production is expected by 2023.

The deepwater Gulf of Mexico and unconventional shale resources provide the greatest prospects for long-term reserves andproduction growth in Mexico, but they also present major capital, development and technology challenges. While PEMEX has plannedto increase its deepwater exploration spending and has had several significant oil and gas discoveries, much of its future success willdepend on the new government's energy agenda.



Exhibit 7

Despite Cantarell's production decline, Ku-Maloob-Zaap production has remained stableBreakdown by asset

0

500

1000

1500

2000

2500

3000

3500

4000

Ene/2000 Ene/2001 Ene/2002 Ene/2003 Ene/2004 Ene/2005 Ene/2006 Ene/2007 Ene/2008 Ene/2009 Ene/2010 Ene/2011 Ene/2012 Ene/2013 Ene/2014 Ene/2015 Ene/2016 Ene/2017

thousa

nd b

arre

ls p

er d

ay

Cantarell Ku-Maloob-Zaap Others

Data as of January 2017.Source: PEMEX

Capital spending under strainPEMEX's legacy of underinvestment was changed during 2012-14, when there was a significant step-up in capital spending andgovernment approvals of increasing budgets. However, given smaller cash flow derived from lower oil prices since 2014, the companycut capital expenditure, as discussed in “large reserves, but negative production growth prospect in the medium term” section.

Exhibit 8

Capital spending and lifting cost evolutionPetroleos Mexicanos

13.0 11.6

3.7 3.5

1.2 2.0

$9.37 $9.70

$8.50

$13.59 $13.00 $13.00

$2.00

$4.00

$6.00

$8.00

$10.00

$12.00

$14.00

$16.00

-

2.0

4.0

6.0

8.0

10.0

12.0

14.0

2014 2015 2016 2017 2018e 2019eU

S/B

OE

US

bill

ion

s

E&P Capital Spending E&P Production Costs / BOE

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 issuer.Source: Moody's Financial Metrics™

The largest portion of investments will continue to be directed to upstream, mostly in the southeastern basins where Cantarell andKu-Maloob-Zaap are located. In 2017, PEMEX proceeded with its farm-out agenda, starting with the Ayin-Batsil in shallow waters,Cardenas-Mora and Ogarrio in onshore fields and also participated in CNH rounds in 2017-18, expanding its fields' portfolio.

Despite the need to reduce dependence on fuel imports, lack of resources prompted the company to look for partners in downstreamsegment. Investments for the reconfiguration of refineries, for instance, were reassessed to be carried out through joint ventures. In2017, the company completed the installation of the fractional tower at the coker plant in the Tula refinery. The Salamanca and SalinaCruz refineries are scheduled to be reconfigured in the next few years, most probably with partners. The Tula refinery is currently underreconfiguration.



Close relationship with the government and evolving corporate governancePEMEX's Baa3 ratings take into consideration our joint default analysis, which includes our assumptions that there is i) a very highlikelihood of extraordinary support from the government of Mexico to avoid default and ii) a very high default correlation betweenPEMEX and the government, resulting in six notches of uplift from the company's b3 BCA. Our view on the likelihood of supportconsiders the prominent role of PEMEX in the Mexican economy and its 100% government ownership, as well as both verbal supportand factual evidence of support in 2016 by the government. We believe that it is important for the government to facilitate PEMEX'scontinued access to the capital markets, given the company’s role in generating hard foreign currency through oil exports and in payinglarge annual amounts in duties, royalties and taxes, which in aggregate represent about 18% of the government’s annual budget.

Since October 2014 and as a result of the energy reform, occurred in late 2013, PEMEX is a productive state-owned enterprise, withmore management autonomy with regard to investment allocation. Also, although PEMEX's Chief Executive Officer is appointed bythe president of Mexico, the company's Board of Directors is 50% independent. The Board is formed of five representatives from theMexican government, including the Minister of Energy (who serves as Chairperson of the Board) and the Minister of Finance, as well asfive experienced independent members. The company also has an Audit Committee; Human Resources and Compensation Committee;a Strategy and Investment Committee; and an Acquisitions, Leasing, Public Works and Services Committee.

However, the government continues to exert outright influence on PEMEX's decisions. For instance, the company's “net financialbalance” (the result of income less expenses, capital expenditures and interest expenses), as well as its maximum borrowing threshold,must follow the government's guidance and are approved first by PEMEX's Board and then by the Congress on an annual basis. Inturn, government support to the company is exemplified by the MXN20,000 million and MXN10,000 million injected as cash equitycontribution in 2014 and 2015, respectively. In 2016, evidence of this support was the MXN184,200 million in equity injection for thepension liability, on top of the $4.2 billion support announced in April 2016, including $1.5 billion in cash. In addition, in August 2017,the government granted certain fiscal benefits to PEMEX related to exploratory assets, which will help improve return on investment;the fiscal benefit amounted to about MXN7,800 million, was retroactive and applied up to 150,000 barrels of oil in non-profitablefields after taxes. These events validated our assumption of a very high implicit government support for the national oil company.

In mid-September 2018, PEMEX announced a MXN30 billion ($1.5 billion) reduction in its negative financial balance for 2018, tominus MXN49 billion, which will reduce the company's external funding needs in the year. The reduction is mainly a consequence ofadditional cash generation from higher oil prices in the first half of 2018. PEMEX also expects to increase margins in the sale of fuel andto reduce administrative expenses, as well as further savings or income on several other fronts.

Starting in December 2018, the Government of Mexico will have a new administration. Mexico's new energy agenda and its focuson fuel self-sufficiency raises uncertainties about wether PEMEX can continue to take advantage of favorable oil prices and solidinvestment appetite from foreign companies. The energy agenda of the incoming Lopez Obrador administration poses three particularrisks for Mexico’s national oil company: controlling fuel prices, requiring capital spending on building or upgrading refineries, anddelaying oil and gas auctions.

PEMEX benefits from the 2013 energy law, but with executional riskThe most important change from the 2013 energy law reform was the end of PEMEX's monopoly to its current status as a productivestate-owned enterprise. The new law also i) triggered changes in the company's board of directors, which became more independent, ii)established a range of contract structures to attract private investment in the entire oil and gas value chain, and iii) opened up PEMEXto a more standard corporate and tax structure. In addition, new upstream contract structures will have provisions to allow privatecompanies to book reserves (even though they remain assets of the state), removing a major impediment to earlier attempts to spurprivate investment in oil development in Mexico.

The 2013 law broadens the range of models for investment in Mexico, from the pre-existing service contracts to profit-sharingcontracts, production-sharing contracts and licenses. Production-sharing or other licensing arrangements between the state andprivate oil companies, where the companies can be paid in cash and oil, are likely to be more attractive to international oil companies,particularly in higher-risk areas, such as the deepwater Gulf of Mexico, unconventional shale or even the complex Chicontepec field. Insome cases, PEMEX could enter into the contracts and bid jointly with private partners. The new structures are a key step in attractingmajor oil companies and their technology.


https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_191731https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1023632https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1133808https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1133808


PEMEX continues to take advantage of Mexico’s 2013 energy law, strengthening its portfolio of oil and gas assets and consolidating itsoffshore position in deepwater fields. However, PEMEX’s ability to continue to enter into associations with other oil companies that canprovide much-needed capital or technology to increase production in mature fields or develop deepwater fields implies a third risk. Asa candidate, President-elect Lopez Obrador said he intends to review all contracts that foreign companies have signed since 2015 toexplore and produce oil and natural gas in Mexico’s onshore and offshore oil fields, whether in partnership with PEMEX or not, in orderto ensure that there had been no wrongdoing in the contracts. Because the contracts are public and the supporting auctions have beentransparent, it appears unlikely that the new administration would find anything that would justify canceling the agreements. Even so,the review process could postpone any new oil auctions indefinitely, stifling PEMEX’s production, profitability and already weak creditmetrics.

Starting in December 1, 2017, sale prices of gasoline and diesel were fully liberalized throughout the country. The new pricing schemeimplemented in 2017 modifies the calculation formula of maximum prices of gasoline and diesel recognizing logistic and distributioncosts. PEMEX is a net beneficiary of higher fuel prices, which help the company to sell gasoline at prices much closer to its coststructure. This should positively affect the company's fuel retail margins starting in 2018 and somewhat mitigate its refining andmarketing high costs. Fuel retail is not a strategic business for PEMEX and competition will intensify amid free market fuel prices.However, PEMEX will continue to be the main supplier of fuel in the country for the foreseeable future.

Recent developmentsPEMEX's strategy includes entering into alliances in onshore and shallow waters to increase production and efficiency and grow itsportfolio of partners; it also includes associations in deep waters to accelerate field development and exploitation. Accordingly, in June2017, PEMEX won two blocks in Round 2.1, block 2 in alliance with Deutsche Erdoel AG and block 8 with Ecopetrol (Baa3 stable), theMexican oil company will be the operating partner, with a 50% equity stake in both blocks.

In early 2017, PEMEX signed an agreement with Air Liquide S.A. (A3 stable) for hydrogen supply at the Tula refinery. In addition,the company is selecting partners for hydrogen supply to its refineries in Cadereyta, in the state of Nuevo León, and Madero, inTamaulipas. These alliances will allow PEMEX to have more reliable access to hydrogen and reduce the frequency of unscheduledrefinery shutdowns, therefore, reducing operating costs.

In July 2017, Andeavor (formely Tesoro, Baa3 RUR-UP) signed an agreement with PEMEX to use its pipelines and its unused storagesystem in the states of Sonora and Baja California for the next three years. PEMEX plans to enter into more of these type ofagreements, which will help it maximize the use of the installed infrastructure capacity.

In October 2017, PEMEX auctioned farm-outs for the Ayin-Batsil field, unassigned; Cardenas-Mora field, a $127 million expectedinvestment in partnership with Cheiron Holdings Limited; and Ogarrio field, a $95 million expected investment in partnership withDeutsche Erodel AG.

In November 2017, PEMEX announced the Ixachi discovery, its largest onshore find in 15 years, a 70 kilometer-length area in the stateof Veracruz. This onshore well has positive results in the production of condensates and wet gas, and according to the company, it hasproved, probable and possible reserves of 366 Mboe.

In December 2017, PEMEX, Petrofac Limited (Ba1 stable) and the CNH signed the first exploration and extraction agreement forSantuario and El Golpe onshore fields located in Tabasco, which, according to PEMEX, hold proved, probable and possible reserves of135.5 million barrels and now produce 6,000 bpd. The fields are estimated to produce 31,000 bpd. The expected investment amountsto $1.6 billion.

In January 2018, PEMEX won four blocks in Round 2.4. In the Perdido area, the company won Block 2 in partnership with Royal DutchShell Plc (Shell, Aa2 stable) and Block 5 without a partner. In Cordilleras Mexicanas area, it won Block 18 without a partner, and inCuenca Salina area, it won Block 22 in association with Chevron Corporation (Aa2 stable) and Inpex Corporation (A2 stable).

In March 2018, PEMEX won seven blocks in Round 3.1, which was focused in shallow waters. In Cuencas del Sureste basin, PEMEX wonBlock 29 individually, Block 32 and 33 in partnership with Total S.A. (Total Aa3 positive), and Block 35 with Shell. In Tampico Misantlabasin, the company won Block 16 and 17 in partnership with Deutsche Erdoel and Compañia Española de Petroleo and Block 18 with


https://www.moodys.com/credit-ratings/Ecopetrol-SA-credit-rating-600011139https://www.moodys.com/credit-ratings/Air-Liquide-SA-credit-rating-600052154https://www.moodys.com/credit-ratings/Andeavor-credit-rating-735750https://www.moodys.com/credit-ratings/Petrofac-Limited-credit-rating-823192868https://www.moodys.com/credit-ratings/Royal-Dutch-Shell-Plc-credit-rating-808544449https://www.moodys.com/credit-ratings/Royal-Dutch-Shell-Plc-credit-rating-808544449https://www.moodys.com/credit-ratings/Chevron-Corporation-credit-rating-716000https://www.moodys.com/credit-ratings/INPEX-Corporation-credit-rating-821528694https://www.moodys.com/credit-ratings/Total-SA-credit-rating-755985


Compañia Española de Petroleos S.A.U. The areas PEMEX won are close to certain of its blocks in the Gulf of Mexico and will createsynergies in exploration activities by using existing infrastructure.

In February 2019, the CNH will resume the auctions with assets from a PEMEX's farmout, Round 3.2 (onshore areas) and Round 3.3(unconventional resources).

Exhibit 9

PEMEX as a strategic partner for companies in the oil and gas industry in MexicoSummary of PEMEX's areas assigned in auctions and farmouts

Perdido Area

Block 3

Round 1.4

Tampico

Misantla

Block 2

Round 2.1

Southeastern

Basins

Block 8

Round 2.1

Trion

1st Farm-out

Cardenas-

Mora

3rd Farm-Out

Ogarrio

3rd Farm-Out Ek-Balam

Santuario & El

Golpe

Perdido Area

Block 2

Round 2.4

Perdido Area

Block 5

Round 2.4

Cordilleras

mexicanas

Block 18

Round 2.4

Cuenca Salina

Block 22

Round 2.4

Partner Chevron and

Inpex

Deutsche

Erdoel AG

Ecopetrol BHP Billiton Cheiron

Holdings

Limited

Deutsche

Erdoel AG

N.A. Petrofac Shell N.A. N.A. Chevron and

Inpex

Total expected investment

(USD million)

2,017 578 807 7,424 127 95 5,000 1,590 6,131 6,131 3,318 4,747

Type of Hydrocarbon light crude light crude and

dry gas

light crude light crude and

gas

light crude light crude heavy crude light crude and

gas

light crude light crude dry and wet gas heavy crude

Auction date 5-Dec-16 5-Dec-16 4-Oct-17 4-Oct-17 2-May-17 18-Dec-1719-Jun-17 31-Jan-18

Tampico Misantla

Area 16

Round 3.1

Tampico Misantla

Area 17

Round 3.1

Tampico Misantla

Area 18

Round 3.1

Cuencas del Sureste

Area 29

Round 3.1

Cuencas del Sureste

Area 32

Round 3.1

Cuencas del Sureste

Area 33

Round 3.1

Cuencas del Sureste

Area 35

Round 3.1

Partner Deutsche Erdoel

AG and Cía.

Española de

Petroleos

Deutsche Erdoel

AG and Cía.

Española de

Petroleos

Cía. Española de

Petroleos

N.A. Total Total Shell

Total expected investment (US

millions)

$ 569 $ 569 $ 569 $ 541 $ 474 $ 541 $ 541

Type of Hydrocarbon light crude and dry

gas

light crude light crude light crude heavy crude and dry gas light crude heavy crude

Auction Date 27-Mar-18

Source: PEMEX, CNH



Liquidity analysisPEMEX's liquidity position is weak. Over the 18 months from July 2018 to December 2019, the company will have about $13.6 billionin assured liquidity sources compared to $18 billion in liquidity needs (capital expenditures, interest payments and debt maturities),according to our estimates, and will remain dependent upon debt market access for the difference. Assured liquidity sources arecomprised of $5.6 billion of cash and $8 billion unused committed revolver facilities (maturing in 2019, 2020 and 2021). We estimatethat uses are comprised of negative free cash flow of $9 billion and debt maturities of $8.6 billion.

It is worth noting that, since 2017, PEMEX has entered into hedges equivalent to around 20% of crude production, which help to reduceearnings' downside risk. PEMEX has also been able to access the capital markets: in February 2018, it issued $4 billion in global notesdue in 2028 and 2048, of which $1.8 billion were used to repurchase existing notes. In addition, in May 2018, PEMEX issued CHF 365million due in December 2023, and EUR 3.1 billion in four tranches maturing between 2022 and 2029; improving its debt maturityprofile.

Exhibit 11

Debt maturity profileData as of June 2018

$5.5

$8.0$3.9 $4.4

$6.9 $10.0$11.1

$67.7

$0.0

$10.0

$20.0

$30.0

$40.0

$50.0

$60.0

$70.0

$80.0

Cash, as of June 2018 2018 2019 2020 2021 2022 +2023

US

bill

ion

s

Cash Revolving facilities Long-term borrowings

Source: PEMEX



Rating methodology and scorecard factorsThe Global Integrated Oil & Gas Industry rating methodology yields an indicated rating of B2 as of the 12 months ended June 30, 2018,compared with PEMEX's BCA of b3. The methodology outcome reflects the company's weak financial metrics and high liquidity risk.The Baa3 assigned rating is based on Moody's assumption of very high government support in case of need.

Exhibit 12

Rating factorsPetroleos Mexicanos

Methodology: Energy, Oil & Gas - Integrated

Factor 1: SCALE (25%) Measure Score Measure Score

a) Average Daily Production (Mboe/d) 2,592.99 Aa 2,475.30 Aa

b) Proved Reserves (Million boe) 7,525.83 Aa 6,168.84 Aa

c) Total Crude Distillation Capacity (mbbl/day) 1,627.00 A 1,627.00 A

Factor 2: BUSINESS POSITION (20%)

a) Business Position Baa Baa Baa Baa

Factor 3: PROFITABILITY AND RETURNS (10%)

a) EBIT/Average Book Capitalization 23.95% Aa 25.70% Aaa

b) Downstream EBIT/Total Throughput Barrels ($/bbl) -$7.18 Ca -$2.50 Ca

Factor 4: FINANCIAL POLICY (20%)

a) Financial Policy Ba Ba Ba Ba

Factor 5: LEVERAGE AND COVERAGE (25%)

a) EBIT / Interest Expense 2.52x Ba 2.30x Ba

b) Retained Cash Flow/Net Debt 3.88% Caa 1.90% Ca

c) Total Debt/Capital 187.18% Ca 208.60% Ca

Factor 6: CONSTRAINTS RELATED TO GOVERNMENT'S POLICY GOALS (0%)

a) Constraints Related to Government's Policy Goals 4 4

Rating Outcome:

a) Indicated Rating from Grid B2 B1

b) Actual Rating Assigned Baa3 Baa3

Government-Related Issuer

a) Baseline Credit Assessment

b) Government Local Currency Rating

c) Default Dependence

d) Support

e) Final Rating Outcome

Very High

Baa3

Current

LTM (Jun-18)

Moody's Forward View

Next 12-18 months (as

of Oct-18)

Factor

b3

A3

Very High

All ratios are based on 'Adjusted' financial data and incorporate Moody's Global Standard Adjustments for Non-Financial Corporations.This represents Moody's forward view, not the view of the issuer, and unless noted in the text, does not incorporate significant acquisitions and divestitures.Source: Moody’s Financial Metrics™



Appendix

Exhibit 13

Peer snapshot

(in US millions)

FYE

Dec-16

FYE

Dec-17

LTM

Jun-18

FYE

Dec-16

FYE

Dec-17

LTM

Jun-18

FYE

Dec-16

FYE

Dec-17

LTM

Jun-18

FYE

Dec-16

FYE

Dec-17

LTM

Jun-18

FYE

Dec-16

FYE

Dec-17

LTM

Jun-18

Revenue $57,622 $74,069 $83,502 $200,628 $237,162 $261,554 $127,925 $149,099 $167,918 $81,405 $88,827 $92,632 $183,008 $240,208 $271,445

Avg. Prod. (MBOE/day) 2,951 2,662 2,593 4,053 3,985 3,852 2,345 2,455 2,540 2,503 2,497 2,447 3,307 3,631 3,690

Proved Reserves (MMBOE) 8,383 7,526 7,526 19,974 21,221 21,221 10,911 10,868 10,868 9,593 9,686 9,686 17,561 18,182 18,182

Distil. Capacity (MB/day) 1,602 1,627 1,627 4,907 4,918 4,918 2,011 2,021 2,021 2,176 2,176 2,176 1,880 1,892 1,892

EBIT/Avg Book Capital 12.9% 19.3% 23.9% 3.7% 7.1% 8.5% 5.3% 8.1% 9.9% 7.9% 8.8% 11.0% 1.1% 5.7% 7.6%

DS EBIT/Throughput Bbls (10.3)$ (13.3)$ (7.2)$ 7.3$ 7.7$ 7.8$ 10.3$ 10.6$ 10.4$ 17.8$ 11.2$ 11.7$ 9.1$ 11.2$ 11.6$

EBIT / Int. Exp. 1.4x 2.1x 2.5x 7.0x 12.0x 13.2x 6.2x 7.4x 8.5x 1.9x 2.2x 2.7x 1.1x 4.9x 5.8x

RCF / Net Debt -0.5% 3.1% 3.9% 20.3% 32.3% 35.7% 27.1% 40.9% 34.7% 16.3% 21.3% 26.0% 19.1% 25.4% 26.6%

Total Debt/Capital 163.7% 185.7% 187.2% 20.1% 19.3% 21.2% 47.8% 44.2% 42.7% 68.7% 64.4% 63.1% 48.5% 47.8% 46.6%

Source: Moody’s Financial Metrics™. All figures & ratios calculated using Moody’s estimates & standard adjustments. FYE = Financial Year-End. LTM = Last Twelve Months. RUR* = Ratings under Review, where UPG = for upgrade and DNG = for downgrade.

Baa3 Stable Aaa Stable Aa3 Positive Ba2 Stable A1 Positive

Petroleos Mexicanos Exxon Mobil Corporation Total S.A. Petroleo Brasileiro S.A. - P BP p.l.c.

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

2014 2015 2016 2017 LTM

Avg. Prod. (MBOE/day)

0

5,000,000

10,000,000

15,000,000

20,000,000

25,000,000

30,000,000

2014 2015 2016 2017 LTM

Proved Reserves (MBOE)

0

1,000

2,000

3,000

4,000

5,000

6,000

2014 2015 2016 2017 LTM

Distil. Capacity (MB/day)

-5.0x0.0x5.0x

10.0x15.0x20.0x25.0x30.0x35.0x40.0x45.0x

2014 2015 2016 2017 LTM

EBIT / Int. Exp.

-10.0%

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

80.0%

2014 2015 2016 2017 LTM

RCF / Net Debt

0.0%

50.0%

100.0%

150.0%

200.0%

250.0%

2014 2015 2016 2017 LTM

Total Debt/Capital

Petroleos Mexicanos (Baa3) Exxon Mobil Corporation (Aaa) Total S.A. (Aa3) Petroleo Brasileiro S.A. - PETROBRAS (Ba2) BP p.l.c. (A1)



Exhibit 14

Summary financialsHistorical and Projected Data

2014 2015 2016 2017 LTM 2018-proj. 2019-proj.

E&P Revenue 85,320.27 43,634.90 33,067.14 40,434.28 31,505.42 46,583.2 40,219.7

Non-E&P Revenue 34,015.27 30,061.51 24,555.04 33,634.86 51,996.63 30,340.7 30,340.7

Total Revenue 119,335.54 73,696.41 57,622.18 74,069.13 83,502.04 76,923.9 70,560.4

EBIT 49,586.12 -2,924.79 11,514.42 18,828.04 23,622.08 27,758.4 21,394.9

EBITDA 60,346.57 7,687.18 19,585.09 27,136.36 32,017.69 34,846.9 28,483.4

Funds from Operations 5,552.33 -1,048.33 -866.15 5,249.82 6,648.67 9,702.4 3,338.9

Retained Cash Flow 5,552.33 -1,048.33 -866.15 5,249.82 6,648.67 9,702.4 3,338.9

Cash Flow from Operations 7,262.03 3,085.73 -5,261.02 -706.37 2,635.66 3,746.2 -2,617.3

Capital Expenditures -17,168.27 -16,046.02 -8,122.65 -4,870.30 -5,018.35 -4,500.0 -4,500.0

Free Cash Flow -9,906.24 -12,960.28 -13,383.67 -5,576.67 -2,382.69 -753.8 -7,117.3

Cash + Marketable Securities 8,372.13 6,332.46 8,076.36 5,055.26 5,571.23 5,001.2 5,001.2

Total Debt 175,363.87 158,262.38 153,288.83 165,948.67 168,470.02 166,702.5 173,819.8

Book Capitalization 123,300.43 80,980.27 93,639.12 89,380.30 90,003.24 85,337.1 81,294.0

Average Daily Production (MBOE / Day) 3,432.42 3,173.97 2,950.82 2,661.64 2,592.99 2,475.33 2,475.33

Total Proved Reserves (MMBOE) 12,101.83 9,412.00 8,383.00 7,525.83 7,525.83 6,847.3 6,168.8

Reserve Life (Total Proved, years) 9.7 8.1 7.8 7.7 8.0 7.6 6.8

E&P Revenues / BOE 68.10$ 37.66$ 30.62$ 41.62$ 33.29$ 51.56$ 44.52$

E&P Production Costs / BOE 9.37$ 9.70$ 8.50$ 13.59$ 15.52$ 13.00$ 13.00$

E&P G&A Costs / BOE 6.68$ 6.13$ 5.60$ 6.55$ 7.06$ 3.19$ 3.19$

E&P Unleveraged Cash Margin / BOE 52.05$ 21.83$ 16.52$ 21.49$ 10.71$ 35.37$ 28.33$

E&P Cash Interest Expense / BOE 6.10$ 6.44$ 7.57$ 9.06$ 9.91$ 7.44$ 7.44$

E&P Leveraged Cash Margin / BOE 45.95$ 15.40$ 8.95$ 12.42$ 0.80$ 27.93$ 20.89$

Leveraged Full-Cycle Ratio 2.6x -0.2x -0.4x -0.7x 0.0x 1.6x 1.2x

SUMMARY FINANCIALS (US millions)

E&P OPERATING METRICS

All figures and ratios are calculated using Moody's estimates and standard adjustments.This represents Moody's forward view, not the view of the issuer, and unless noted in the text, does not incorporate significant acquisitions and divestitures.Source: Moody's Financial Metrics™; Moody's Investors Service



Exhibit 15

Debt adjustmentsPetroleos Mexicanos

105,329.60

63,140.42 168,470.02

As Reported Debt Pensions Moody's-Adjusted Debt

US

mill

ions

Data as of June 2018All figures and ratios are calculated using Moody's estimates and standard adjustments.Source: Moody’s Financial Metrics™

Exhibit 16

EBITDA adjustmentsPetroleos Mexicanos

17,917.13

5,150.81

8,967.59 32,017.69

(17.84)

As Reported EBITDA Pensions Unusual Non-Standard Adjustments Moody's-Adjusted EBITDA

US

mill

ions

Data as of June 2018All figures and ratios are calculated using Moody's estimates and standard adjustments.Source: Moody’s Financial Metrics™

Ratings

Exhibit 17Category Moody's RatingPETROLEOS MEXICANOS

Outlook StableIssuer Rating Baa3Senior Unsecured Baa3Commercial Paper -Dom Curr P-3NSR Senior Unsecured Aa3.mxNSR Commercial Paper MX-1NSR BACKED Senior Unsecured Aa3.mx

Source: Moody's Investors Service



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