Pemex Swings to $1 Billion Profit Buoyed by High Oil Prices
(Bloomberg) --
Petroleos Mexicanos swung to a profit in the second quarter, a rare positive signal for the struggling state oil company as it seeks to attract private partners, boost flagging output and slash its massive debt load.
Pemex posted an 18 billion peso ($1 billion) profit in the period that ended June 30, according to a company filing Friday. It was the company’s first quarterly profit since it reported a $3.2 billion gain a year ago. Pemex said results were largely buoyed by more sales and higher global oil prices amid continued tensions between the US and Iran in the Strait of Hormuz.
Crude and condensate production rose to 1.66 million barrels per day, up 1.7% from a year earlier, the company said. Natural gas output was more than 4 billion cubic feet per day, a nearly 12% increase from a year prior. Crude processing rose.
Pemex’s total financial debt stood at $77.5 billion at the end of June, according to the filing.
While the company has slashed its total debt in the past year, it’s still far from reaching financial self-sufficiency, a goal President Claudia Sheinbaum hopes the company will achieve by 2027. Sheinbaum has funneled upward of $40 billion in financial support to the company since taking office to help it cope with huge debt payments, high payroll costs and inefficiencies at its refineries.
It still may not be enough. The government has earmarked $14 billion in its budget to cover Pemex’s debts this year, but Fitch Ratings Inc. expects even more support to cover an estimated $10 billion operating shortfall by year-end, analysts at the credit assessor wrote in a note earlier this month.
Mexico Finance Minister Edgar Amador on Thursday ruled out the government providing additional state funds for Pemex during the rest of the year.
All that financial support also hasn’t meaningfully turned around output. Pemex pumps about half as much crude as it did at its peak over 20 years ago.
In a bid to reverse the trend, Sheinbaum is calling on private companies to partner with Pemex to boost crude production to about 1.8 million barrels per day. Although the company has signed several contracts with local private sector producers this year, few international oil majors have jumped aboard, and a bidding process for projects at four major Pemex oil fields was canceled earlier this month.
Juan Carlos Carpio, Pemex’s new chief executive officer, who took the company’s reins after former CEO Victor Rodriguez resigned in May, will now be tasked with continuing to slash debt while also sealing joint venture contracts with partners and increasing efficiency at Pemex’s loss-making refineries.
For its part, Pemex has secured some tie-ups with billionaire Carlos Slim’s Grupo Carso SAB de CV to develop its aging oil and gas fields. It’s also exploring a partnership with Brazil’s Petroleo Brasileiro SA to begin looking for crude deep under the Gulf of Mexico.
The company’s reputation, however, continues to be tarred by accidents and environmental disasters. In April, the company said faulty infrastructure caused a massive oil spill in the Gulf of Mexico. A March blowout at a well in Veracruz state has sparked a fire that has been burning for months. Multiple fires and explosions have also rocked Pemex’s flagship Dos Bocas refinery and other processing facilities this year.
(Updates to add additional details on company background and government support starting in fifth paragraph.)
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