Pemex is drowning in debt

Pemex is in danger of being accused of accounting fraud in the U.S. The oil company has stopped paying contracts to over 950 companies and does not report that debt on its financial statements

Pemex is drowning in debt
The Pemex logo is pictured during the 80th anniversary of the expropriation of Mexico's oil industry at the headquarters of state-owned oil giant – Photo: Edgard Garrido/EL UNIVERSAL
English 09/11/2019 12:08 Noé Cruz Serrano Mexico City Actualizada 12:13
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Mexico’s state oil company Pemex is in danger of being accused of accounting fraud in the United States. The oil company has stopped paying performed and recognized contracts registered in the electronic vault system of the Finance Ministry (SHCP) to over 950 companies, among which are small, medium, and big corporations, and does not report that debt on its financial statements.

The amount of the debt can exceed the MXN $100 billion, approximately USD $5.2 billion.

The problem for Pemex, according to companies involved in the issue that asked to remain anonymous for fear of being taken out from the suppliers and contractors roll, is that the oil company quotes debt instruments in the U.S. stock market, where the 2002 Sarbanes-Oxley Act, Section 302 Corporate Responsibility on Financial Reports compels companies to notify investors or bondholders when there are acquired payment obligations.

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“If you know you have an acquired debt, that you have to pay it and you do not notice it, you are committing fraud. You’re deceiving shareholders by telling them ‘I’m more efficient,’ when you’re only hiding debt.” they denounced.

Law establishes penalties for civil lawsuits of over USD $25 million for issuing false or deceiving information.

The problem is not only the penalty but Pemex’s credibility before investors, bondholders, and rating agencies, as expressed those enquired.

EL UNIVERSAL requested Pemex for its stake on this issue, but it did not obtain an immediate response.

The list of companies with pending payments since March 2019, to which this publishing house had access, includes companies such as Cotemar (MXN $2.1 billion), Dowell Schlumberger of Mexico (MXN 1.8 billion), Typhoon Offshore (MXN $1.8 billion), J Ray McDermott of Mexico (MXN $1.5 billion), Baker Hughes (MXN $1.1 billion), Cosl (MXN $1.1 billion), Solar Turbines International (MXN $831.8 million), Weatherford (MXN $743.2 million), Subtec (USD $737.8 million); Campeche Industrial Drilling Company (MXN $712.3 million), and Subaquatic Building Company (MXN $569.4 million).

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The amounts correspond to March, so the debt could have increased with time.

“There are companies that started with a debt of MXN $90 million and it is calculated that by the end of November it will ascend to MXN $400 million, so a cash hole equivalent to USD $20 million is unfeasible. The moment has come to decide to close the business or to become small because traditional finance channels, like banking, are closed,” said the companies.

On October 28, congresswoman Soraya Pérez Munguía questioned CEO of Pemex Octavio Romero Oropeza during his hearing in the lower chamber about the expenditure of MXN $40 billion, but there was no answer due to lack of time.

The affected companies explained that at the beginning of the year, due to the budget increase, Pemex started to issue service contracts for areas that had spent years without investment, which encouraged suppliers and contractors.

Last March and April, Copades (Payments and Discounts Coding), which are received by Pemex’s suppliers when they use the website to enter their invoices and receive an estimate of the time of payment, were no longer issued.

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Without explanation, they put an end and the authorized invoices that are in the vault are still pending payment.

“They are alive, valid, and covered contracts, but they are not being paid and that is very serious because it affects the whole production chain. It had not happened before, not even in the 2014 crisis,” they highlighted.

On its financial statements of the third trimester of 2019, Pemex acknowledges a liability with suppliers of MXN $124.7 billion.

Did you know Pemex aims to increase oil production by 2024?


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