PEMEX unaudited financial results report as of September 30, 2006

Transcription

1 (5255) November 6, 2006 PEMEX unaudited financial results report as of September 30, 2006 Financial highlights PEMEX, Mexico s oil and gas company and the ninth largest integrated oil company in the world (1), headed by Luis Ramírez Corzo, announced its unaudited consolidated financial results as of September 30, Total sales increased 10%, as compared to the third quarter of 2005, reaching Ps billion (US$25.2 billion) (2) Income before taxes and duties increased 31%, as compared to the third quarter of 2005, to Ps billion (US$17.4 billion) Net income was Ps billion (US$2.6 billion) in the third quarter of 2006 Table 1 Financial results summary Third quarter (July - Sep.) Nine months ending Sep. 30, Change Change 2006 (Ps. mm) (US$mm) (Ps. mm) (US$mm) Total sales 250, ,508 10% 25,846 25, , ,369 17% 119,406 73,441 Domestic sales (1) 132, ,696 6% 7,464 12, , ,410 8% 29,861 36,968 Exports 118, ,812 16% 18,382 12, , ,960 29% 89,545 36,472 Income before taxes and duties (1) 146, ,630 31% 44,935 17, , ,429 20% 85,308 45,793 Taxes and duties 160, ,772 1% 2,197 14, , ,901 6% 25,643 41,379 Net income (loss) (20,386) 28, % 49,244 2,625 (12,998) 48, % 61,526 4,414 EBITDA (2) 184, ,860 17% 31,091 19, , ,298 27% 130,152 56,333 EBITDA / Interest expense (3) *Derived from unaudited consolidated financial statements prepared in accordance with Financial Information Regulations (NIF) issued by the Consejo Mexicano para la Investigación y Desarrollo de Normas de Información Financiera (CINIF). Inflation recognition is also in accordance with Mexican GAAP. Accordingly, peso figures are presented in constant Mexican pesos as of September 30, (1) I2005 sales include the Special Tax on Production and Services (IEPS), collected by PEMEX and then paid to the Mexican Government (as part of taxes and duties). In 2006, the IEPS rate was negative, representing amounts owing by the Government to PEMEX; these amounts are recorded as "Other revenues" (2) Excludes IEPS. (3) Excludes capitalized interest. (1) Petroleum Intelligence Weekly Ranking, December (2) Amounts in US dollars are translated at the September 30, 2006 exchange rate of Ps per US dollar. PEMEX financial results report as of September 30, /38

2 Operational highlights In the third quarter of 2006, natural gas production rose 13%, to 5,478 million cubic feet per day (MMcfd) On August 30, 2006, natural gas production registered a historical record of 5,648 MMcfd Total liquid hydrocarbons production totaled 3,698 Mbd, 0.3% less than the production in the third quarter of 2005: Crude oil production decreased 40 Mbd, or 1%, to 3,247 Mbd Natural gas liquids production increased by 7%, to 451Mbd Gas flaring represented 4.7% of total natural gas production, as compared to 4.9% in the third quarter of 2005 Crude oil exports averaged 1,697 Mbd, 1.3% lower than the volume registered during the third quarter of 2005 Operating items Exploration and production Crude oil production During the third quarter of 2006, crude oil production averaged 3,247 Mbd, 1% less than the 3,286 Mbd average for the third quarter of Heavy crude oil production decreased by 5%, which was partially offset by increases in light and extra-light crude oil production of 6% and 23%, respectively. Despite the important increase, of 20 Mbd in heavy crude oil production of the Ku- Maloob Zaap fields, as compared to the same period of 2005, total heavy crude oil production decreased primarily due to the increasing gas-oil and water-oil contacts in the wells of the Cantarell fields. The increases in light and extra-light crude oil production were due to the progress in the completion and workover of wells, as well as the installation of additional infrastructure in the Litoral de Tabasco and Abkatún-Pol-Chuc fields in the Southeast Marine Region. Notably, the production volume of light crude has surpassed 1.0 MMbd since June Table 2 Production of liquid hydrocarbons Third quarter (July - Sep.) Nine months ending Sep. 30, Change Change (Mbd) (Mbd) Liquid hydrocarbons 3,709 3, % (11) 3,781 3,753-1% (28) Crude oil 3,286 3,247-1% (40) 3,342 3,307-1% (36) Heavy 2,335 2,211-5% (124) 2,408 2,305-4% (103) Light % % 29 Extra-light % % 38 Natural gas liquids (1) % % 8 (1) Includes condensates. PEMEX financial results report as of September 30, /38

3 Natural gas production Natural gas production increased 13%, as compared to the third quarter of 2005; nonassociated gas production increased 24%, while associated gas production grew 6%. The increase in non-associated natural gas production was mainly due to the increase of production in the Veracruz and Burgos basins, located in the North Region. The growth in associated natural gas production was a result of the completion and repair of wells in the Ixtal, Sinán and Taratunich fields, within the Southwest Marine Region. It is worth mentioning that during the third quarter of 2006 the Lankahuasa and Arquimia fields reached their highest estimated production, reaching 100 and 160 MMcfd, respectively. A historical natural gas production record of 5,648 MMcfd was registered on August 30, Gas flaring In the third quarter of 2006, gas flaring represented 4.7% of total natural gas production. The decrease with respect to the third quarter of 2005 was due to optimization of operations in the handling of natural gas, although gas flaring resulted from maintenance to the Samaria-Cactus pipeline. Table 3 Production of natural gas and gas flaring Third quarter (July - Sep.) Nine months ending Sep. 30, Change Change (MMcfd) (MMcfd) Total 4,839 5,478 13% 638 4,781 5,286 11% 505 Associated 2,945 3,130 6% 186 2,948 3,076 4% 128 Non-associated 1,895 2,347 24% 453 1,833 2,210 21% 377 Natural gas flaring % % 37 Gas flaring / total production 4.9% 4.7% 3.7% 4.1% Wells During the third quarter of 2006, the number of new wells completed totaled 147, a reduction of 17 compared to the third quarter of 2005 Exploration wells drilled totaled 19 (8 more than in the third quarter of 2005), due to an increase in the amount of drilling equipment in the Burgos Basin as well as increased activity in the Campeche Poniente and Coatzacoalcos projects within the Southwest Marine Region. Development wells drilled totaled 128, a reduction of 25 as compared to the third quarter or 2005, as a result of a reduction in the amount of operating equipment in the Burgos project and a reduction in the activity level in the Veracruz project. Nevertheless, production in both areas increased. PEMEX financial results report as of September 30, /38

4 Table 4 Drilling activity and inventory of wells Third quarter (July - Sep.) Nine months ending Sep. 30, Change Change (Number of wells) (Number of wells) Wells drilled % (17) % (65) Development % (25) % (65) Exploration % % 0 Total operating wells (1) 5,723 6,180 8% 457 Injection % 25 Production 5,485 5,917 8% 432 Crude 3,046 3,136 3% 90 Non-associated gas 2,439 2,781 14% 342 (1) As of September 30, of each year Seismic information During the third quarter of 2006, the area covered by new 2D seismic studies increased 5% as compared to the same quarter of This was mainly due to an increase in the level of activity in the South Region in order to identify areas with probable hydrocarbons content. The area explored by 3D seismic decreased 28%, mainly because exploratory activities focused on analyzing and interpreting information obtained previously. Table 5 Seismic studies Seismic Third quarter (July - Sep.) Nine months ending Sep. 30, Change Change 2D (km) % 37 3,326 1,326-60% (2,000) 3D (km 2 ) 1, % (316) 6,841 2,129-69% (4,712) Discoveries Our main discoveries in the third quarter of 2006 were: Table 6 Main discoveries Successful wells in Project 3Q06 Geologic age Initial production Type Burgos Cheche-1 Eocene 2.4 MMcfd Dry gas Burgos General-8 Paleocene 12.0 MMcfd Dry gas Campeche Poniente Homol-101 Jurasic 1.2 Mbd Light crude Burgos Mareógrafo Paleocene 6.6 MMcfd Dry gas PEMEX financial results report as of September 30, /38

5 Jujo- Tecominoacán Project The Jujo-Tecominoacán field constitutes the second largest reservoir in the South Region, after A.J. Bermúdez. The Jujo-Tecominoacán field is part of the Jujo- Tecominoacán productive area and is located 73 km south of Villahermosa, Tabasco. Jujo-Tecominoacán, a naturally fractured field, produces light crude (38 API). This field was discovered in 1980 with the drilling of the Jujo 2-A well, initiating production in October The development concentrated in the Jujo area until 1983, when the Tecominoacán 101-B well was drilled. The blocks comprising this field are hydraulically connected. The Jujo-Tecominoacán project was approved in 2002 under the PIDIREGAS investment scheme with the objective of maximizing oil recovery through pressure maintenance. The main activities during the project s 4 years of execution are: Acquisition of 670 km 2 of 3D seismic Completion of 20 development wells Workover of 52 exploitation wells accumulated production of 182 million barrels of crude oil equivalent (MMboe) As of December 31, 2005, proved reserves in the Jujo-Tecominoacán field are 534 million barrels (MMb) of crude oil and 1,295 million cubic feet of natural gas (MMcf). The goals for 2006 are to reach an average annual production of 90 Mbd and 99 MMcfd. The following activities are planned: Completion of 5 development wells Workover of 25 major wells For the period, the project considers a total investment of 13 billion pesos, to carry out the following activities: Completion of 11 development wells 34 workovers (25 focused on gas injection optimization) Construction of 6 km of oil and gas pipelines, 25 km of oil pipelines and 15 km gas pipelines The execution of the above program is expected to allow the project to reach an average production of 89 Mbd in PEMEX financial results report as of September 30, /38

6 Cantarell s estimated production From January to September 2006, 9 wells were completed and 39 major repairs were carried out in the Cantarell project, achieving an average production of 1,845 Mbd of oil and 728 MMcfpd of natural gas. For the last quarter of 2006 the program considers the completion of 6 wells and 16 major repairs, as well as infrastructure to manage the contents of nitrogen and water in crude oil. The analytical models used to predict the behavior of Cantarell have been updated to include new information collected during the period, in order to improve the accuracy of oil and gas production estimates. Cantarell s average oil production for 2006 has been revised to 1,800 Mbd. To manage Cantarell s decline, the following activities have been planned: Construct a nitrogen elimination plant in Ciudad Pemex by 2007 Continue injecting dry gas to pneumatic lift coming from wells in the Narváez field, to dilute nitrogen content in the injection of gas Operate a dehydrating plant at Nohoch Convert six separation units from two phase to three phase to extract water and produce oil, thus, complying with commercial specifications Deep waters The exploration activities have confirmed the initial estimates of the prospective resources located in the Gulf of México. To date, PEMEX has drilled the Chuktah-201, Nab-1 and Noxal-1 wells, demonstrating the presence of hydrocarbons in the last two wells. Currently the fourth well, Lacach-1, is being drilled in order to evaluate the hydrocarbon potential in the Gulf of Mexico-B exploratory project. Lacach-1 is the deepest well ever drilled in Mexico, with a water depth of 988 meters and sub-sea depth of 4,000 meters (3,800 meters already have drilled up to date), located 124 km northeast from Coatzacoalcos, Veracruz. The exploration strategy for deep waters is comprised by three main activities: Increase the number of authorized exploratory locations, to accelerate the incorporation of proved reserves. Strengthen deep water capabilities and know-how along the Exploration and Production value chain (exploration, drilling, development and exploitation) with intensive training of specialists. Increase PEMEX s execution capability through the incorporation of third parties in areas which are not feasible for PEMEX to explore and develop. For this purpose, there are being elaborated contract models that incorporate services companies best practices. PEMEX financial results report as of September 30, /38

7 Gas and basic petrochemicals Gas processing and dry gas production During the third quarter of 2006, total on-shore natural gas processing increased by 14%. This increase was attributable to: An increase of 353 MMcfd in sweet wet gas processing due to the rise in nonassociated natural gas production from the Burgos and the Veracruz Basins An increase of 191 MMcfd in sour wet gas processing due to increases in light and extra-light crude oil production at the Marine Regions. As a result of the increase in wet gas and sour wet gas processing, in the third quarter of 2006, dry gas production and natural gas liquids production increased 18% and 7% respectively, as compared to the same period of Table 7 Natural gas processed and dry gas production Third quarter (July - Sep.) Nine months ending Sep. 30, Change Change (MMcfd) (MMcfd) On-shore gas processed 3,790 4,334 14% 544 3,884 4,159 7% 275 Sour wet gas 3,064 3,255 6% 191 3,162 3,241 2% 79 Sweet wet gas 726 1,079 49% % 196 Production Dry gas 3,082 3,622 18% 539 3,135 3,432 9% 297 Natural gas liquids (Mbd) (1) % % 8 (1) Includes other streams to fractionation. Infrastructure works The cryogenic plant 4 of the Burgos Gas Processing Center (BGPC), with a processing capacity of 200 MMcfd, started operations during July A request for proposals to build plants 5 and 6 of the BGPC was published in September It is expected that sweet wet gas processing will reach 1,200 MMcfd in During the third quarter of 2006 the bidding of the pipeline surrounding the city of Jalapa was published. This work is part of the project to build the Emiliano Zapata compression station. On August , the Burgos-Peñitas naphtha pipeline, with a 24 Mbd capacity, started operations. This pipeline transports natural gasolines from the BGPC to the Texas border, where it interconnects with the Valero pipeline going to Brownsville. PEMEX financial results report as of September 30, /38

8 Refining Processing During the third quarter of 2006, total crude oil processing decreased by 1% as compared to the same period of The processing of heavy currents decreased 12%, while the processing of light currents increased by 7%. The increase in total crude oil processing was mainly due to programmed maintenance works during the quarter. The decrease of heavy crude oil currents was compensated by the increase in the process of reconstituted crude oil, using Isthmus crude oil in the topping plant of La Cangrejera Complex, with the purpose to increase distillates production and decrease fuel oil production. Table 8 Crude oil processing Third quarter (July - Sep.) Nine months ending September 30, Change Change (Mbd) (Mbd) Total processed 1,287 1,278-1% (9) 1,301 1,285-1% (16) Heavy Currents % (65) % (40) Light Currents % % 24 Capacity utilization Production During the third quarter of 2006, the primary distillation capacity utilization rate decreased to 83.0% from 83.6% in the third quarter of 2005, as a consequence of the decrease in crude oil processing. During the third quarter of 2006, total refined products production increased by 10 Mbd to 1,544Mbd. Gasoline production remained stable. As a result of the processing of Isthmus crude at the topping facilities at La Cangrejera Complex, diesel production increased by 6%, while fuel oil production decreased by 6%. Table 9 Refining production Third quarter (July - Sep.) Nine months ending Sep. 30, Change Change (Mbd) (Mbd) Total production 1,534 1,544 1% 10 1,565 1,552-1% (13) Gasolines % % (6) Fuel oil % (19) % (24) Diesel % % 10 Liquefied petroleum gas (LPG) (1) % % (2) Jet Fuel % (1) % 0 Other (2) % % 7 (1)Includes Pemex Gas production (2)Includes mainly parafines, furfural extract and aeroflex. PEMEX financial results report as of September 30, /38

9 Variable refining margin Our variable refining margin is an estimate of our operating income per barrel of crude oil processed. Operating income is calculated as total revenues minus the cost of: Raw materials Fuel oil and natural gas used to operate the refineries, and Electric power, water and catalysts (auxiliary services). In the third quarter of 2006, PEMEX s variable refining margin increased by 54%, to US$8.59 per barrel, from US$5.58 per barrel in the third quarter of This increase was primarily a result of higher production of refined products with greater added value, mainly diesel, and higher international prices of refined products. Franchises As of September 30, 2006, the number of franchised gas stations rose by 6%, to 7,455, from 7,041 as of September 30, PEMEX financial results report as of September 30, /38

10 Petrochemicals Production Total petrochemicals production during the third quarter of 2006 was 2,796 thousand tons (Mt), 8% greater than the total petrochemicals production in the same quarter of This increase was mainly driven by increased production of ethane derivatives due to the commencement of operations of the Pajaritos ethylene plant (which has been closed for more than two years due to maintenance), to better performance of operations in the Morelos ethylene oxide plant and to production of polyethylene of the new Swing plant, also in the Morelos Petrochemical Complex. Ammonia production decreased by 6%, mainly due to maintenance works at the Cosoleacaque plant during September. The production of acrylonitrile halted due to a lack of demand caused by higher acrylonitrile prices. Table 10 Production of petrochemicals Third quarter (July - Sep.) Nine months ending Sep. 30, Change Change (Mt) (Mt) Total production 2,599 2,796 8% 197 7,959 8,211 3% 252 Methane derivatives Ammonia % (8) % 63 Methanol % (4) % (27) Ethane derivatives Ethylene % % 38 Ethylene oxide % % 13 Low density polyethylene % % 35 High density polyethylene % (0) % (2) Vinyl chloride % % 55 Aromatics and derivatives Toluene % (3) % (42) Ethylbenzene % % (6) Benzene % (3) % (32) Propylene and derivatives Acrylonitrile 21 N/D N/D - - Polypropylene % (12) % (29) Others (1) 1,701 1,871 10% 170 5,215 5,456 5% 241 (1) Includes glycols, heavy reformed, oxygen, hydrogen, nitrogen, clorhidric acid, muriatic acid, hexane, heptanes and others. Infrastructure works During the third quarter of 2006, the procurement, engineering and construction activities at the Swing plant in the Morelos Petrochemical Complex were finished, allowing the plant to produce 300 Mt per year of low and high linear polyethylene. PEMEX financial results report as of September 30, /38

11 International trade (3) Crude oil exports In the third quarter of 2006, PEMEX s crude oil exports averaged 1,697 Mbd, 1% lower than the volume registered during the third quarter of Approximately 85% of total crude oil exports were heavy crude oil (Maya), while the rest consisted of light and extra-light crude oil (Isthmus and Olmeca). 82% of the total crude oil exports were delivered to the United States, while the remaining 18% was distributed among Europe (10%), the rest of the Americas (7%) and the Far East (1%). In the third quarter of 2006, the weighted average export price of the Mexican crude oil basket was US$58.09 per barrel, as compared to US$49.54 per barrel in the third quarter of 2005, representing a 17% increase. Refined products and petrochemicals exports Exports of refined products averaged 182 Mbd, 2% higher than in the third quarter of This was mainly due to the increase in the processing of Isthmus crude at the Cangrejera Complex. The main refined products exported during the third quarter of 2006 were naphtha and jet fuel. Petrochemical exports increased by 5%, or 10 Mt, totaling 205 Mt for the quarter. This was attributable primarily to the starting of the new Swing plant in the Morelos Petrochemical Complex. The main petrochemical products exported during the third quarter of 2006 were sulphur (4), ethylene and low-density linear polyethylene. Table 11 Exports (1) Third quarter (July - Sep.) Nine months ending Sep. 30, Change Change Crude oil exports (Mbd) (2) Total 1,719 1,697-1% (23) 1,793 1,837 2% 43 Heavy 1,414 1,435 2% 21 1,525 1,534 1% 10 Light % (58) % 18 Extra-light % % 15 Average price (US$/b) % % 13 Refined products (Mbd) % % 4 Petrochemicals (Mt) % % (38) (1) Source: PMI. Does not consider third party operations by PMI. (2) Excludes the volume of crude oil under processing agreements. (3 ) According to data provided by Pemex International (PMI). (4) Notwithstanding that sulphur is not a petrochemical product, it is included in this group for reporting simplification. PEMEX financial results report as of September 30, /38

12 Imports In the third quarter of 2006, natural gas imports averaged 494 MMcfd, 9% higher than the imports registered during the third quarter of 2005, due to an increase in domestic demand by CFE. Imports of refined products increased by 6%, from 384 Mbd in the third quarter of 2005 to 407 Mbd in the third quarter of This increase was mainly attributable to higher domestic demand of gasoline and diesel. Petrochemical imports increased by 15%, to 104 Mt, mainly due to higher demand for isobutene for gasolines. The main imported products were isobutanes, toluene, xylene and methanol. Table 12 Imports (1) Third quarter (July - Sep.) Nine months ending Sep. 30, Change Change Natural gas (MMcfd) % % (60) Refined products (Mbd) (2) % % 50 Petrochemicals (Mt) % % 89 (1) Source: PMI except natural gas imports. Does not consider third party trading operations by PMI. (2) Includes the volume of imported products under processing agreements. Also, 59 Mbd and 57 Mbd of LPG for the third quarter of 2005 and 2006, respectively; and 63 Mbd and 65 Mbd of LPG for the January - September period of 2005 and 2006, respectively. PEMEX financial results report as of September 30, /38

13 Financial results as of September 30, 2006 Sales Total sales Domestic sales During the third quarter of 2006, total sales, including the special tax on production and services, or IEPS, increased by 10% in constant pesos, from Ps billion in the third quarter of 2005 to Ps billion in the third quarter of The growth was mainly due to higher prices of crude oil and refined products. During the third quarter of 2006, domestic sales, including IEPS, increased 6%, from Ps billion to Ps billion. Domestic sales, net of IEPS, increased 7%, from Ps billion to Ps billion. The increase in domestic sales was attributable to the following: Natural gas sales decreased 11%, from Ps billion to Ps billion, due to a 23% decrease in average price, from US$8.12 to US$6.29 per million British Thermal Unit (MMBtu) and to the depreciation of the exchange rate, which was partially offset by a 20% increase in volume, from 2,590 MMcfd to 3,104 MMcfd. Sales of refined products, net of IEPS, grew 11%, from Ps billion to Ps billion. Refined products sales volume decreased 1%, from 1,757 Mbd to 1,740 Mbd. In the third quarter of 2006, the IEPS generated by these sales was credited to other taxes and the final disbursement totaled zero, as compared to Ps. 2.2 billion paid in the third quarter of Sales of refined products, including IEPS, increased by 9%, from Ps billion to Ps billion Petrochemical sales increased by 12%, from Ps. 5.5 billion to Ps. 6.1 billion and the sales volume fell 2%, from 966 Mt to 944 Mt. Table 13 Domestic sales* Third quarter (July - Sep.) Nine months ending Sep. 30, Change Change 2006 (Ps. mm) (US$mm) (Ps. mm) (US$mm) Domestic sales including IEPS 132, ,696 6% 7,463 12, , ,410 8% 29,860 36,968 Domestic sales without IEPS 130, ,696 7% 9,682 12, , ,410 13% 48,276 36,968 Natural gas 22,449 19,988-11% (2,460) 1,818 58,764 59,465 1% 701 5,409 Refined products including IEPS 104, ,591 9% 9,265 10, , ,331 10% 28,833 30,048 Refined products 102, ,591 11% 11,483 10, , ,331 17% 47,249 30,048 Gasoline 50,794 58,620 15% 7,826 5, , ,772 20% 28,159 15,079 Diesel 21,021 22,407 7% 1,387 2,038 59,998 65,683 9% 5,685 5,975 LPG 12,282 12,768 4% 486 1,161 36,344 38,884 7% 2,541 3,537 Other 18,011 19,795 10% 1,784 1,801 49,128 59,992 22% 10,864 5,457 IEPS 2, % (2,219) - 18, % (18,416) - Petrochemical products 5,457 6,116 12% ,287 16,613 2% 326 1,511 *Derived from unaudited consolidated financial statements prepared in accordance with Mexican generally accepted accounting principles (Mexican GAAP) issued by the Instituto Mexicano de Contadores Públicos. Inflation recognition is also in accordance with Mexican GAAP. Accordingly, peso figures are presented in constant Mexican pesos as of September 30, PEMEX financial results report as of September 30, /38

14 Table 14 Volume of domestic sales (1) Third quarter (July - Sep.) Nine months ending Sep. 30, Change Change Natural gas (MMcfd) 2,590 3,104 20% 514 2,675 2,969 11% 294 Refined products (Mbd) 1,757 1,740-1% (17) 1,764 1, % (3) Gasoline % % 48 Diesel % % 27 LPG % (5) % (8) Other % (81) % (71) Petrochemicals (Mt) % (22) 2,828 2,814 0% (14) Exports During the third quarter of 2006, export sales totaled Ps billion (US$12.4 billion), 16% higher than the Ps billion registered in the third quarter of The distribution of such sales for the third quarter of 2006, as compared to the third quarter of 2005, was as follows: Crude oil and condensates export sales increased 14%, from Ps billion to Ps billion, mainly as a result of an increase of 17% in the crude export price, from US$49.54 US$ 8.09, which partially offset by a 1.3% decrease in the volume of crude oil and condensate exports, from 1,719 Mbd to 1,697 Mbd. Refined products export sales rose 24%, from Ps billion to Ps billion, while the volume of refined products exports grew by 2%, from 180 Mbd to 182 Mbd. Petrochemical products export sales increased by 65%, from Ps. 0.6 billion to Ps. 1.1 billion, and the volume of petrochemical exports increased by 5%, from 195 to 205 Mt. Table 15 Exports Third quarter (July - Sep.) Nine months ending Sep. 30, Change Change 2006 (Ps. mm) (US$mm) (Ps. mm) (US$mm) Total exports 118, ,813 16% 18,383 12, , ,960 29% 89,545 36,472 Crude oil and condensates 106, ,612 14% 15,252 11, , ,249 29% 81,376 32,769 Refined products 11,423 14,137 24% 2,714 1,286 29,442 38,028 29% 8,586 3,459 Petrochemical products 646 1,063 65% ,100 2,683-13% (417) 244 *Derived from unaudited consolidated financial statements prepared in accordance with Mexican Firnancial Information Rules (Mexican GAAP) issued by the Instituto Mexicano de Contadores Públicos. Inflation recognition is also in accordance with Mexican GAAP. Accordingly, peso figures are presented in constant Mexican pesos as of September 30, PEMEX financial results report as of September 30, /38

15 Costs and operating expenses Costs and operating expenses Costs and operating expenses increased by 25%, or Ps billion, as compared to the third quarter of 2005, to Ps billion (US$11.2 billion). This variation was mainly due to: an increase of Ps billion in the cost of purchase of products to third parties by PMI an increase of Ps 10.2 billion in the variation of inventories, an increase of Ps. 2.4 billion in depreciation and amortization an increase of Ps. 2.0 billion in imports of products, an increase of Ps. 1.2 billion in the cost of the reserve for retirement payments, an increase of Ps. 1.2 billion in exploration and non-successful drilling expenses, an increase of Ps. 0.4 billion in upkeep and maintenance, a decrease of Ps. 5.1 billion in operating costs, and a decrease of Ps. 2.6 billion in manufacturing expenses Cost of sales In the third quarter of 2006, cost of sales increased 35%, or Ps billion, to Ps billion (US$9.6 billion). The increase was the result of the following: an increase of Ps billion in the cost of purchase of products to third parties by PMI an unfavorable effect of Ps billion in the variation of inventories, an increase of Ps. 2.4 billion in depreciation and amortization, an increase of Ps. 2.0 billion in imports of products, an increase of Ps. 1.2 billion in exploration and non-successful drilling expenses, an increase of Ps. 0.7 billion in the reserve for retirement payments, an increase of Ps. 0.5 billion in upkeep and maintenance a favorable effect of Ps. 2.6 billion in manufacturing, and a favorable effect of a Ps. 2.4 billion reduction in operating expenses, primarily supplies and materials purchases Distribution expenses Administrative expenses During the third quarter of 2006, distribution expenses decreased by 2%, from Ps. 5.8 billion to Ps. 5.7 billion (US$0.5 billion). The decrease is mainly due to lower operating expenses, 7.5%, or Ps. 0.3 billion in operating expenses, mainly in upkeep and maintenance. During the third quarter of 2006, administrative expenses decreased 14%, from Ps to Ps billion (US$1.1 billion), mainly accounted by a Ps. 2.5 billion reduction in operating expenses, partially offset by a Ps. 0.6 billion increase in reserve for retirement payments. PEMEX financial results report as of September 30, /38

16 Cost of the reserve for retirement payments The cost of the reserve for retirement payments, pensions and indemnities increased by 8% in the third quarter of 2006, from Ps billion to Ps billion. This cost is distributed among cost of sales, distribution expenses and administrative expenses. Operating income 1% increase Operating income in the third quarter of 2006 totaled Ps billion (US$14.0 billion), 1% higher than the comparable figure for the third quarter of 2005 of Ps billion. Excluding IEPS, operating income grew 2%, or Ps. 3.2 billion, to Ps billion (US$14.0 billion) from Ps billion in the third quarter of Comprehensive financing cost Reduction in comprehensive financing cost During the third quarter of 2006, PEMEX s comprehensive financing cost decreased by Ps billion, from a cost of Ps billion in the third quarter of 2005 a gain of Ps billion (US$1 billion). This reduction was caused by: a decrease of Ps. 7.8 billion in net interest expense (interest expense minus interest income), an increase of Ps billion in foreign exchange gains, and an increase of Ps. 1.5 billion in the monetary gain. Net interest expense Net interest expense decreased by 49%, from Ps billion to Ps. 8.1 billion (US$0.7 billion). Interest expense, considering capitalized interests, decreased by Ps. 4.0 billion, while interest income increased by Ps. 3.8 billion. Foreign exchange gain Monetary gain Net foreign exchange gains totaled Ps billion (US$0.9 billion) in the third quarter of 2006 as compared to a net foreign exchange loss of Ps. 0.2 billion in the third quarter of This decrease was primarily a consequence of the depreciation of the Mexican peso against the US dollar by 2.5% during the third quarter of 2006, as compared to an appreciation of 0.1% in the comparable period of The monetary gain was Ps. 4.7 billion (US$0.4 billion), representing an increase of Ps.1.5 billion as compared to the monetary gain for the third quarter of This gain was mainly due to the higher rate of inflation, 1.5% in the third quarter of 2006, as compared to a 1.0% inflation rate in the same period of PEMEX financial results report as of September 30, /38

17 Table 16 Comprehensive financing cost Third quarter (July - Sep.) Nine months ending Sep. 30, Change Change 2006 (Ps. mm) (US$mm) (Ps. mm) (US$mm) Comprehensive financing cost 13,002 (6,608) -151% (19,610) (601) 7,426 19, % 12,401 1,803 Interest income (1,856) (5,661) 205% (3,805) (515) (15,047) (15,318) 2% (271) (1,393) Interest expense 17,821 13,808-23% (4,013) 1,256 45,228 37,206-18% (8,021) 3,384 Foreign exchange loss (gain) 200 (10,085) -5143% (10,285) (917) (16,674) 5, % 21, Monetary loss (gain) (3,163) (4,671) 48% (1,507) (425) (6,081) (7,312) 20% (1,231) (665) *Derived from unaudited consolidated financial statements prepared in accordance with Mexican Firnancial Information Rules (Mexican GAAP) issued by the Instituto Mexicano de Contadores Públicos. Inflation recognition is also in accordance with Mexican GAAP. Accordingly, peso figures are presented in constant Mexican pesos as of September 30, Other revenues IEPS credit In the third quarter of 2006, other net revenues totaled Ps billion (US$2.9 billion), as compared to Ps 7.2 billion during the third quarter of The increase in net revenues was mainly due to income of Ps billion generated by crediting the IEPS tax rate, indicating revenues owed by the Government to PEMEX. Income before taxes and duties 31% Increase During the third quarter of 2006, income before taxes and duties was Ps billion (US$17.4 billion), as compared to Ps billion during the same period of the previous year. The 31% increase was mainly the result of: an increase of Ps. 1.0 billion in operating income, an increase of Ps billion in other net revenues, and a decrease of Ps billion in comprehensive financing cost. PEMEX financial results report as of September 30, /38

18 Taxes and duties 1.4% increase During the third quarter of 2006, taxes and duties paid increased by 1.4%, from Ps billion to Ps billion. As a percentage of total sales, taxes and duties equaled 59% in 2006 and 64% in Ordinary hydrocarbons duty and others Since January 1, 2006, PEMEX has been subject to a new fiscal regime, under which Pemex-Exploration and Production is governed by the Federal Duties Law and the tax regime for the other Subsidiary entities continues to be governed by Mexico s Income Tax Law. The most important duty paid by Pemex-Exploration and Production is the ordinary hydrocarbons duty (OHD), which tax base is a quasi operating profit. In addition to the payment of the OHD, Pemex-Exploration and Production pays the following duties under the new fiscal regime: Duty on crude oil extraction, Extraordinary duty on crude oil exports, Duty on hydrocarbons for the stabilization fund, Duty on hydrocarbons for the fund for scientific and technological research on energy, Duty on hydrocarbons for fiscal monitoring of oil activities, Additional Duty (for low crude oil extraction), and Excess gains duty. During the third quarter of 2006, the amount paid of OHD and other duties (excluding the excess gains duty) increased by Ps billion to Ps billion (US$12.6 billion). IEPS Under the current fiscal regime, the special tax on production and services (IEPS), which applies to domestic sales of gasoline and automotive diesel, continues to be regulated by Mexico s Income Tax Law. IEPS is paid by the end consumer of gasoline and automotive diesel and PEMEX is an intermediary between the Ministry of Finance (Secretaría de Hacienda y Crédito Público) and the end consumer. PEMEX collects the IEPS and passes it on to the federal government. The difference between the retail price and the estimated production cost of gasoline and diesel is primarily IEPS. The Ministry of Finance determines the retail price of gasoline and diesel. The estimated production cost of gasoline and diesel is based on the production cost of an efficient refinery located in the Gulf of Mexico. During the nine months of 2005 and 2006, the estimated production cost of gasoline and diesel was higher than the retail price. In accordance to Mexico s Income Tax Law, the difference was credited against the other taxes and duties paid by PEMEX. This credit was recorded as other net revenues. During the third quarter of 2006, IEPS paid by PEMEX was credited to other taxes and the final disbursement totaled zero, compared to the Ps. 2.2 billion payment in the third quarter of PEMEX financial results report as of September 30, /38

19 Excess gains duty (ARE) In 2005, the excess gains duty was equal to 39.2% of the revenues from crude oil export sales in excess of the threshold price set by the Mexican Government of US$23.00 per barrel. In 2006, the excess gains duty is equal to 6.5% of the revenues from crude oil export sales in excess of US$36.50 per barrel. This duty is complemented by the extraordinary duty on crude oil exports, which is equal to 13.1% of the revenues from crude oil export sales in excess of the same threshold price. The resulting combined duty is equivalent to 19.6%, which is 50% of the excess gains duty tax rate paid in During the third quarter of 2006, the excess gains duty paid by PEMEX totaled Ps. 2.3 billion (US$0.2 billion), while in the same quarter of 2005, the excess gains duty totaled Ps billion. All of the proceeds from the excess gains duty and the extraordinary duty on crude oil exports in 2006 will be directed to the federal states of Mexico. Table 17 Taxes and duties Third quarter (July - Sep.) Nine months ending Sep. 30, Change Change 2006 (Ps. mm) (US$mm) (Ps. mm) (US$mm) Total taxes and duties 160, ,772 1% 2,197 14, , ,901 6% 25,643 41,379 Hydrocarbon duties 138, ,843 13% 18,542 14, , ,703 20% 73,207 39,997 Ordinary hydrocarbons duty 138, , % (47) 12, , ,197 6% 21,701 35,311 Duty on crude oil extraction - 10 #DIV/0! #DIV/0! 32 3 Extraordinary duty on crude oil exports - 4,512 #DIV/0! 4, ,965 #DIV/0! 12,965 1,179 Duty on hydrocarbons for the stabilization fund - 12,284 #DIV/0! 12,284 1,117-35,660 #DIV/0! 35,660 3,244 Duty on hydrocarbons for the fund for scientific and technological research on energy #DIV/0! #DIV/0! Duty for fiscal monitoring of oil activities - 7 #DIV/0! #DIV/0! 19 2 Additional duty - 1,667 #DIV/0! 1, ,513 #DIV/0! 2, Special Tax on Production and Services (IEPS) 2, % (2,219) - 18, % (18,416) - Excess gains duty 18,298 2,312-87% (15,986) ,566 6,506-84% (34,060) 592 Other taxes and duties 1,758 3, % 1, ,779 8, % 4, *Derived from unaudited consolidated financial statements prepared in accordance with Mexican generally accepted accounting principles (Mexican GAAP) issued by the Instituto Mexicano de Contadores Públicos. Inflation recognition is also in accordance with Mexican GAAP. Accordingly, peso figures are presented in constant Mexican pesos as of September 30, PEMEX financial results report as of September 30, /38

20 Net income Ps billion During the third quarter of 2006, PEMEX recorded net income of Ps billion (US$2.6 billion), compared to a net loss of Ps billion during the third quarter of The Ps billion increase in net income is explained by: an increase of Ps billion in other net revenues, an increase of Ps. 6.6 billion in the initial cumulative effect due to the adoption of new accounting standards an increase of Ps. 2.2 billion in taxes and duties, an increase of Ps. 1.0 billion in operating income, and a decrease of Ps billion in comprehensive financing cost EBITDA increased 17% During the third quarter of 2006, EBITDA increased by 17%, from Ps billion to Ps billion (US$19.6 billion). Table 18 EBITDA reconciliation Third quarter (July - Sep.) Nine months ending Sep. 30, Change Change 2006 (Ps. mm) (US$mm) (Ps. mm) (US$mm) Net income (loss) (20,386) 28, % 49,244 2,625 (12,998) 48, % 61,526 4,414 + Taxes and duties 160, ,772 1% 2,197 14, , ,901 6% 25,643 41,379 - Special Tax on Production and Services (IEPS) 2, % (2,219) - 18, % (18,416) - + Comprehensive financing cost 13,002 (6,608) -151% (19,610) (601) 7,426 19, % 12,401 1,803 + Depreciation and amortization 13,192 15,553 18% 2,361 1,415 38,406 45,653 19% 7,248 4,153 + Cost of the reserve for retirement payments 14,098 15,286 8% 1,188 1,390 43,609 50,389 16% 6,780 4,584 - Initial cumulative effect due to the adoption of new accounting standards (6,506) % 6,506 - (1,862) % 1,862 - EBITDA 184, ,860 17% 31,091 19, , ,298 27% 130,152 56,333 *Derived from unaudited consolidated financial statements prepared in accordance with Mexican Firnancial Information Rules (Mexican GAAP) issued by the Instituto Mexicano de Contadores Públicos. Inflation recognition is also in accordance with Mexican GAAP. Accordingly, peso figures are presented in constant Mexican pesos as of September 30, PEMEX financial results report as of September 30, /38

21 Total assets Increased by 5% As of September 30, 2006, total assets were Ps. 1,139.2 billion (US$103.6 billion), representing a 5%, or a Ps billion increase as compared to total assets as of September 30, The changes in the components of total assets were as follows: cash and cash equivalents decreased by 8%, or Ps. 9.2 billion, accounts receivable increased by 22%, or Ps billion, the value of inventories increased by 20%, or Ps billion, as a result of higher hydrocarbon prices, financial derivative instruments decreased by 77%, or Ps. 8.1 billion, properties and equipment increased by 5%, or Ps billion, reflecting new investments, and other assets decreased by 2.6%, or Ps. 3.0 billion, Total liabilities increased by 4% Total liabilities increased by 4%, to Ps. 1,125.8 billion (US$102.4 billion) as of September 30,2006, as compared to Ps. 1,081.4 billion as of September 30, 2005: short-term liabilities decreased by 17%, or Ps billion, to Ps billion (US$14.1 billion), primarily as a result of a 79% decrease in taxes payable, a 63% increase in liabilities associated with derivatives, and long-term liabilities increased by 9%, or Ps billion, to Ps billion (US$88.3 billion), mainly due to an 18% increase in the reserve for retirement payments, pensions and security premiums. Reserve for retirement payments The reserve for retirement payments, pensions and seniority premiums increased by 18%, from Ps billion to Ps billion (US$38.4 billion). The Ps billion increase resulted from, recognition of one more year of payroll seniority, changes in labor conditions, recognition of the seniority of employees with more than one year experience (temporary employees incorporated as permanent employees), anticipated retirement benefits concessions, changes in actuarial assumptions (natural and extraordinary factors), and a decrease in the pension fund. PEMEX financial results report as of September 30, /38

22 Equity Increase of Ps. 9.5 billion PEMEX s equity increased by Ps. 9.5 billion, from Ps. 3.9 billion to Ps billion (or US$ 1.2 billion), with respect to June 30, The change in equity was due to: An increase of Ps billion due to the capitalization of the reimbursement of the excess gains duty paid in 2005 A decrease of Ps billion in the reserve for retirement payments, pensions and seniority premiums, An increase of Ps. 8.7 billion in comprehensive income due to the application of the Bulletin C-10 Derivative Financial Instruments and Hedging Operations, An increase of Ps billion in cumulative net losses, and An increase of Ps billion due to the restatement of equity. Results by segment Refining and Petrochemical operating loss Operating income in the first nine months of 2006 totaled Ps billion, which was 13% higher than the comparable figure of 2005, Ps billion in the first nine months of Pemex-Exploration and Production s operating income totaled Ps billion, Ps billion higher than the comparable figure for the first nine months of Pemex-Gas and Basic Petrochemicals operating income totaled Ps. 8.4 billion, Ps.0.8 billion less than its operating income for the first nine months of The operating loss of Pemex Refining totaled Ps billion, Ps billion greater than its operating loss for the first nine months of Since January 1, 2006, the IEPS credited due to a negative IEPS rate is reflected in the net loss of Pemex Refining The operating loss of Pemex Petrochemicals totaled Ps. 8.0 billion in the first nine months of 2006, Ps. 1.6 billion greater than the operating loss for the first nine months of Changes in financial position Funds provided by operating activities Funds provided by operating activities totaled Ps billion (US$2.8 billion). The decrease of Ps billion was primarily due an increase in accounts receivable and other liabilities. Funds provided by financing activities Funds used in investing activities During the first nine months of 2006, funds used by financing activities totaled Ps billion (US$2.8 billion). The Ps billion increase was mainly due to the increase in bank loans and to the decrease in debt securities amortization During the first six months of 2006, funds used in investing activities totaled Ps billion (US$7.1 billion). The Ps billion increase is primarily a result of investments in fixed assets. PEMEX financial results report as of September 30, /38

23 Investing and financing and activities Investing activities Increase in 2006 CAPEX Estimated 2007 CAPEX 2006 Capital Expenditures for Upstream activities increased from US$10.4 to US$1.4 billion, as a result total investment increased to US$14.1 billion. Estimated Capital Expenditures for 2007 total US$16.0 billion (PIDIREGAS investments represent US$ 13.3 billion) Financing requirements Funds raised year to date During the first nine months of 2006, US$2.9 billion was raised, distributed as follows: US$1.5 billion from international capital markets US$0.9 billion from the Mexican capital market US$0.5 billion from export credit agencies (ECA s) Of the total amount, 69% was raised in international markets program 2007 program For 2006 PEMEX is planning to finance US$1.4 billion through ECA s. As in previous years, PEMEX may continue pre-funding its financing program for 2007 depending on market conditions. PEMEX plans to raise US$ billion to finance its investment program. This depends on the PEMEX s Budget approved indirectly by Congress in the Federal Budget for 2007 (Presupuesto de Egresos de la Federación), and on the approval on Petróleos Mexicanos investments issued by the Master Trust and/or the F/163 Capital markets Master Trust The Pemex Project Funding Master Trust, a Delaware trust controlled by, and whose debt is guaranteed by PEMEX, entered into the following financings during 2006: On February 2, 2006 it reopened two issuances originally issued on June 8, 2005: US$750 million of its 5.75% notes due in 2015 US$750 million of its 6.625% bonds due in 2035 On May 3, 2006 it signed a US$1,250 million syndicated revolving credit facility maturing in three years. This line can be used either by the Pemex Project Funding Master Trust or by Petróleos Mexicanos On May 18, 2006 it closed a US$4,250 million syndicated term loan which was used to refinance the syndicated loan signed on March 22, It is divided into two tranches: Tranch A: US$1,500 million maturing in five years Tranch B: US$2,750 million with a final maturity in seven years PEMEX financial results report as of September 30, /38

24 F/163 On June 16, 2006, the Fideicomiso F/163, a Mexican trust whose debt is guaranteed by PEMEX, issued Ps. 10,000 million of notes due in seven years. These notes (CEBURES) will pay a monthly coupon rate equivalent to the Mexican interbank rate (TIIE) less 0.07% per annum. Total debt Total debt of US$54.1 billion Net debt of US$44.4 billion As of September 30, 2006, PEMEX s total consolidated debt 4 including accrued interest totaled Ps billion (US$54.1 billion). This figure represents an increase of 11%, or Ps.56.8 billion, as compared to the figure recorded as of September 30, Net debt, or the difference between total debt and cash equivalents, increased by Ps billion, to Ps billion (US$ 44.4 billion) as of September 30, 2006, from Ps billion as of September 30, Table 19 Consolidated total debt As of September 30, Change 2006 (Ps. mm) (US$mm) Total debt 537, ,657 11% 56,804 54,092 Short-term 23,076 78, % 54,991 7,101 Long-term 514, , % 1,813 46,990 Cash & cash equivalents 116, ,905-8% (9,184) 9,724 Total net debt 421, ,751 16% 65,987 44,367 *Derived from unaudited consolidated financial statements prepared in accordance with Mexican generally accepted accounting principles (Mexican GAAP) issued by the Instituto Mexicano de Contadores Públicos. Inflation recognition is also in accordance with Mexican GAAP. Accordingly, peso figures are presented in constant Mexican pesos as of September 30, Short-term debt Long-term debt Total debt with less than twelve months maturity was Ps billion (US$7.1 billion), as of September 30, Total long-term debt was Ps billion (US$47.0 billion), as of September 30, Total consolidated debt is documented debt 4 is comprised by documented debt of Petróleos Mexicanos and the Pemex Project Funding Master Trust, the Fideicomiso F/163, RepCon Lux S.A. and Pemex Finance, Ltd PEMEX financial results report as of September 30, /38