Moody's places Pemex ratings under review for downgrade

By Giselle Rodríguez

Moody's de México placed Petróleos Mexicanos' global foreign currency and global local currency A3 ratings as well as its Aaa.mx national scale rating under review for downgrade.

The review was prompted by the company's weak cash generation and financial profile so far in 2015, and Moody's view of further deterioration in the next years.

Moody's expects that depressed oil prices will further undercut Pemex's cash flow generation and result in rising balance sheet leverage over the next several years. The company has increased debt for a number of years to fund large outflows for taxes, duties and capital spending, without achieving any sustained increases in production or operating efficiencies.

The ratings agency added that the "company will have much larger borrowing needs to fund negative free cash flow now that oil prices have fallen more than 60% compared to a year ago."