Moody's rates Pemex debt Baa1

Moody's de México said it assigned Baa1 global local-currency bond and Aaa.mx national scale ratings to Petroleos Mexicanos SAB de CV's proposed issuances of up to Ps. 20 billion of senior unsecured certificados bursatiles.

The outlook is stable.

The agency said Pemex's ratings reflect its position as Mexico's largest corporation and its monopoly status as the country's sole producer of crude oil, natural gas and refined products. Although Pemex's debt is not guaranteed by the Mexican government, Moody's ratings reflect implicit government support given the company's strategic importance.

Moody's said Pemex faces numerous operational and financial challenges: it has not fully replaced production for many years, crude oil reserves have declined steadily in tandem with the sharp decline of the giant Cantarell oil field, and despite its ample pre-tax cash flow, the company's capital retention and re-investment have been stymied by a heavy tax burden, resulting in a high debt burden.

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