Petróleos Mexicanos recently concluded the process to subscribe to an annual petrol coverage program, which will allow the company to protect its financial balance in the event of possible drops in the prices of the Mexican Export Blend, should they drop below the price established in the Income Law of the Federation.Thus, for the first time in eleven years, Pemex has its own coverage program, which will contribute to the compliance with its operation and investment commitments and will increase the certainty regarding its income, when faced with the possibility of a drop in hydrocarbon prices.
The coverage strategy for this year consisted in the partial protection of the cash flow of the company, considering a maximum of 409 thousand barrels per day for the months of May to December, at a price of 42 dollars per barrel, in accordance with the level approved by the Hon. Congress for 2017. The coverage that was subscribed provides Petróleos Mexicanos with protection, should the average monthly price of the Mexican blend drop to between 42 and 37 dollars per barrel. This is the range corresponding to the most likely scenarios regarding a downward trend of prices. Should the price drop below the 37-dollar limit, Pemex will receive the maximum amount of the protection subscribed. The investment of this operation was of 133.5 million dollars.
This kind of coverage is usual among the great oil companies worldwide, and thus, Pemex continues to align its strategy to the best international practices. Additionally, this measure adds itself to the efforts being made to attain financial discipline, as per the 2017-2021 Business Plan, whose central axis is profitability and the commitment to comply with the goal of financial balance.
The coverage subscribed to by Petróleos Mexicanos complements the one subscribed to by the Ministry of Finance and Public Credit. While the latter insures the oil income of the Federal Government, the one used by Pemex protects the balance of the company.