Mexico’s state-owned oil company, Petroleos Mexicanos (Pemex) ended its contract with the agency Fitch Ratings; consequently, Fitch Ratings will no longer rate the oil company, not in a local or global level. Pemex announced the contract will be over this Thursday.
Firstly, the news comes less than a week after the company posted its 2020 fourth quarter results, with a $3,23 million net profit. However, its operations made losses, its financial debt rose and its crude production fell.
Secondly, Fitch Ratings was the first of the big financial agencies to downgrade Pemex’s bonds to a speculative grade. In early March, 2020, the company declared Pemex, also, as one of the most vulnerable oil companies in Latin America.
Thirdly, the company said in a statement that the decision comes for the need to “optimize the acquisition of rating services, in order to face the very difficult economic context of today.”
However, sources quoted by Reuters confirmed the decision to drop Fitch Ratings was due to “the quality of service and the technical seriousness of the reports.”
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Pemex send the wrong message
Moreover, the company underlined. “Our decision does not imply any risk or obstacle for further value emissions of Pemex; whether is in the national or international market.” Indeed, the company terminated just the Fitch Ratings contract; and also decided to keep the S&P’s and Moody’s.
Experts and journalists criticize the company’s decision, as Fitch was one of the few agencies to have a “firm hand” with the company. “Probably the message that investors will receive is that Pemex does not want an agency that rates them badly. They will lose trust on Pemex”, said Gabriela Siller, Banco BASE head analyst.
Moreover, Luis Gonzali, co-director at Franklin Templeton, said that the market considers it best practice to have contracts with the three main credit rating agencies. He agreed that the drop of Fitch “sends the wrong message to global investors.”
Finally, Mexico’s oil company is considered as the world’s most indebted oil company. As of today, the company has four out of five of its ratings downgraded by Fitch.
