Pemex (Petroleos Mexicanos) could end up expending around USD 1.6 billion to acquire Royal Dutch Shell Plc’s Deer Park Refinery, with over two times the price declared in May 2021, even as its finances as so dreary the government is inoculating billions of dollars into the state oil producer.
Pemex’s Acquisition of Deer Park Refinery
Pemex has beseeched around USD 1.6 billion to acquire the Houston refinery, with an inclusive capitalization from Mexico’s National Infrastructure Fund and a loan from commercial banks, Pemex documents indicated to Bloomberg. The financial aids will be utilized to pay off over USD 1 billion of the refinery’s debt, a faction of the deal that wasn’t evident when it was first declared.
The Deer Park acquisitions would secure crucial US fuel supplies as Mexican President Andres Manuel Lopez Obrador strives to enhance state control of the nation’s energy markets and extend its refining capacity. The agreement arrives as Pemex, the globe’s most leveraged oil firm receives a USD 3.5 billion capital inoculation from the government focussed on hindering its USD 113 billion debt burden.
Pemex had declared in May 2021 that the purchase price of the refinery was USD 596 million. However, that price solely encompassed Shell’s share of the debt of the collaborative venture with Pemex’s trading wing PMI, within which both entities possessed a 50% stake and not the comprehensive debt of the refinery.
Pemex Chief Executive Officer Octavio Romero stated in May 2021 that the refinery’s debt was estimated at around USD 980 million, but it wasn’t certain whether the firm was brainstorming to pay it off.
The pronouncement to purchase the refinery was authenticated by Pemex’s board of directors on November 3rd, as per a document received from the board meeting, in which the amounts were redacted.
Additionally, documents portrayed that Pemex will also need to recompense Shell for assets like inventories, apart from paying off debt to accomplish the transaction.
In a Pemex statement at the period of the announcement, the firm noted that the price of inventories, inclusive of refinery inputs and merchandise for purchase, was an extra amount that would be given to the seller at the closing of the deal and will be grounded on actual volumes and predominant market rates.
Deer Park has afflicted approximately USD 380 million in disposable losses so far in 2021, as per one of the documents.
Bloomberg earlier reported that Deer Park’s compulsory shutdown during the Texas freeze amid February and market instability during the pandemic led it to post losses of around USD 360 million through July.
The additional costs will put even more burden on Pemex’s funds and Mexico’s reserves, with the purchase being dependent vastly on federal financing.
Pemex’s debt now peaks at USD 113 billion, more than any other oil firm in the world, and it is devoid of a clear-cut strategy to inverse the long-tenure production declines.
Pemex declared that it will receive a USD 3.5 billion capital inoculation from the government, this week, as a faction of a transaction to pay down obligations and also go onboard on an array of bond buybacks and new issuance to inhibit the cost to service its borrowings.
The Deer Park refinery purchase is likely to be accomplished in the dusk of 2021, whilst the Committee on Foreign Investment in the US is still reviewing the sale, Shell stated in a statement on November 30th 2021.