Mexico cuts production and reserve forecasts after prices slid

ADAM WILLIAMS and ANDREA NAVARRO

MEXICO CITY (Bloomberg) -- Mexico’s National Hydrocarbons Commission lowered the country’s estimates for proven oil reserves and state-run Petroleos Mexicanos cut its 2015 production forecast after crude prices collapsed and its budget was reduced.

Pemex cut its 2015 output forecast by more than 100,000 bopd to 2.288 MMbopd, Gustavo Hernandez, exploration and production Director, said Thursday at a builders congress in Mexico City. Mexico’s proven oil reserves slid 3.1% to 13.02 Bbbl from a year earlier, Hydrocarbons Commissioner Juan Carlos Zepeda said Thursday in an interview at Bloomberg’s Mexico City offices.

Pemex’s failure to boost reserves and drilling activity shows that opening the oil industry to outsiders is needed, Zepeda said. Mexico is opening its energy industry to foreign producers for the first time since 1938. Pemex drilled 120 wells in the fourth-quarter, 36% less than a year earlier.

“These numbers are distant from the target we have as a country,” Zepeda said, referring to the reserves. “The energy reform will help by complementing Pemex’s investments and multiplying exploration, development and reserves.”

Mexico City-based Pemex posted a ninth straight quarterly loss on slumping crude prices as output tumbled to 2.36 MMbpd in the fourth-quarter. Pemex CEO Emilio Lozoya said in a January interview that the original output forecast of 2.4 MMbopd for this year was “a conservative goal.”

Curbed Growth

Mexico’s recovery rate for proven oil reserves fell to 67.4% last year, short of its target of 100%, Zepeda said.

Lower-than-expected oil production last year subtracted 0.4% point from Mexico’s economic growth, according to the Finance Ministry. Output in 2014 was 2.43 MMbopd compared with an initial target of 2.52 MMbopd, the Finance Ministry said.

“If the decline in the production platform hadn’t materialized, we would have had 2.5% growth in 2014 instead of the 2.1% we observed,” the ministry said on March 10.

Pemex is analyzing a series of actions to reduce spending after reporting a quarterly net loss of $7.75 billion and a 10% decline in sales, CFO Mario Beauregard said on an earnings conference call Feb. 27. Pemex will cut staff in the next few weeks after trimming $4.1 billion of its budget amid the fall in prices, Beauregard said last month in an interview with Radio Formula.

Crude prices have slumped about 50% in the past year. As many as 10,000 contract workers for Mexican oil service companies were laid off in early January as Pemex eliminated contracts.