From Reuters

The chief executive of Mexico’s national oil company Pemex said on Wednesday it must move toward a stock exchange listing like Saudi Arabia’s Aramco has done but that such a step would take years.

Speaking at an oil conference in London, Carlos Trevino pointed to a call by the head of Mexico’s National Hydrocarbons Commission to float a minority stake in Pemex.

“I think he is right,” Trevino said. “Pemex needs to perform a little bit better … We must be moving in that direction like many (national oil companies) have done.”

Trevino cited an improvement in Pemex’s compliance discipline as a step toward a possible market debut.

Pemex controls the majority of hydrocarbon reserves in Mexico although the sector has been open to foreign investment for the past four years. It still lacks funding to properly explore and develop the assets, the regulator has said.

The front-runner for presidential elections scheduled for July, leftist Andres Manuel Lopez Obrador, is skeptical of current President Enrique Nieto’s energy reforms. A presidential term runs for six years.

“Maybe in the next seven years we will be seeing the IPO,” Trevino said. One advantage of an IPO, he added, would be to protect Pemex against politicians freezing prices or handing out free products by having a new equity investor on the board.

“Those populist decisions are very difficult to implement if you have to share the equity of the company. The temptations for the politicians are bigger if they do not affect any private interest in the company.”

But before the IPO can happen, the new projects Pemex is working on with international oil companies such as Shell or Chevron have to improve costs, production and reserves numbers, he said.

“Thinking about any IPO, you sell a lot of ideas but you also need to sell a lot of numbers.”

Pemex aims to reach an output of 1.95 million barrels per day this year. This compares with around 3.2 million barrels per day in 2004, according to the regulator, which said Pemex could reach such levels again if it had access to more funds, which could be helped by an IPO.

Pemex has hedged about half of its production at a floor of $48.5 a barrel for 2018 and will publish its 2019 hedging program in September, Trevino said, adding no price floor had been set and no banks had been approached yet to do 2019 hedges.


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