PEMEX Outlook DCF-A /19 de Octubre de 2004
Forward-looking Statement Disclaimer This presentation contains forward-looking statements. We may also make written or oral forward-looking statements in our periodic reports to the National Banking and Securities Commission and the Securities and Exchange Commission, in our annual report, in our proxy statements, in our offering circulars and prospectuses, in press releases and other written materials and in oral statements made by our officers, directors or employees to third parties. Statements that are not historical facts, including statements about our beliefs and expectations, are forward looking-statements. These are good faith statements based on current plans, estimates and projections and therefore you should not place undue reliance on them. Forward-looking statements speak only as of the date they were made, and we undertake no obligation to update publicly any of them in light of new information or future events. Forward-looking statements involve inherent risks and uncertainties. We caution you that a number of important factors could cause actual results to differ materially from those contained in any forward-looking statement. 1
Cautionary Note The U.S. Securities and Exchange Commission (SEC) permits oil and gas companies, in their filings with the SEC, to disclose only proved reserves that a company has demonstrated by actual production or conclusive formation tests to be economically and legally producible under existing economic and operating conditions. We use certain terms in this document, such as total reserves, probable reserves and possible reserves, that the SEC's guidelines strictly prohibit us from including in filings with the SEC. Investors are urged to consider closely the disclosure in our Form 20-F, File No. 0-99, available from us at www.pemex.com or Marina Nacional 329 Floor 38 Col. Huasteca, Mexico City 11311 or at (52 55) 1944 9700. You can also obtain this Form from the SEC by calling 1-800-SEC-0330. EBITDA, free cash-flow and discretionary cash-flow are non-gaap measures, which are calculated as described above. They are presented because PEMEX believes that they are widely accepted financial indicator of its ability to service or incur debt. EBITDA, free cash-flow and discretionary cash-flow should not be considered as indicators of financial performance, as an alternative to cash flow, as a measure of liquidity, or as being comparable to similarly named measures of other companies. The total debt calculation includes, in addition to documented debt, the items that are usually considered as debt by the financial markets. 2
Agenda PEMEX s Highlights Operations Capex Program and Financial Profile Challenges 3
Pemex is the 8th Largest Integrated Oil Company in the World Third largest producer of crude oil in the world (1) Eighth largest integrated oil company in the world (1) Proved reserves equivalent to more than 12 years of production (2) Low cost producer vs. market average Key supplier of crude oil to the US market Mexico s largest company with 2003 revenues of 57 billion dollars Sole producer of crude oil, natural gas and refined products in Mexico Sole marketer of refined products in Mexico 1) Based on PIW 2002 Rankings, December 2003, Petroleum Intelligence Weekly 2) 2003 production levels and proved reserves in accordance with the definition under Rule 4.10(a) of Regulation S-X under the U.S. Securities Act of 1933 4
Integrated Oil Majors Reserves Production Place Company Country Crude Gas Crude Gas Sales 1 Saudi Aramco Saudi Arabia 1 4 1 8 6 2 Exxon Mobil US 14 13 5 2 1 3 PDVSA Venezuela 5 7 4 12 7 4 NIOC Iran 3 3 2 6 15 5 RD Shell Netherlands & UK 17 (1) (1) 15 6 3 2 6 BP UK 19 16 9 4 3 7 Chevron Texaco US 21 23 10 11 4 8 PEMEX México 8 29 3 16 11 9 Total France 23 22 14 10 5 10 Petrochina China 15 18 7 19 12 Source: Petroleum Intelligence Weekly December 2003 1) Does not consider the reserves adjustments announced since January 2004 5
Production Profile Crude oil production (MMbd) 3.0 3.1 2.9 3.0 3.1 3.2 3.4 Crude oil production has grown steadily since 1999 1997 1998 1999 2000 2001 2002 2003 Natural gas production (MMMcfd) 4.5 4.8 4.8 4.7 4.5 4.4 4.5 The decreasing trend of natural gas production has been reversed in 2003 1997 1998 1999 2000 2001 2002 2003 Refined products (MMbd) 1.5 1.5 1.5 1.4 1.5 1.5 1.6 Refined products production has increased slightly 1997 1998 1999 2000 2001 2002 2003 6
Crude Oil and Natural Gas Reserves Reserves as of December 31, 2003 MMMboe 48.0 18.9 29.1 Long life of proven reserves of over 12 years and 3P life of 30 years based on 2003 production (2) Proved (1) Probable & Possible 3P 1) In accordance with the definition of proved reserves under Rule 4.10(a) of Regulation S-X under the U.S. Securities Act of 1933. Probable and possible reserves were obtained through the difference between 3P reserves and proved reserves. PEMEX filings with SEC only report proved reserves 2) Reserves as of December 31, 2003 and based on 2003 production (average daily production of 4.3 MMboed) 7
Efficient Producer 2002 Lifting Cost US$/boe 8.0 7.0 6.0 5.0 4.0 3.0 2.0 1.0 0.0 2.3 3.0 3.3 3.8 5.1 Total Stat Oil BP Chevron Texaco 6.6 6.7 Exxon Mobil Conoco Phillips Source: Herold and PEMEX 8
Important Supplier of Crude Oil to the U.S. PEMEX s exports by region 2003 (1) U.S. Imports by region 2003 (2) 100% = 1.8 MMbd 100% = 9.6 MMbd Rest of America 9% Far East 3% Europe 9% USA 79% Mexico Other Non-OPEC 21% 16% Saudi Arabia 18% Canada 16% 12% Venezuela 17% Other OPEC 1) Source: PEMEX 2) Source: Energy Information Administration (EIA) 9
EBITDA of the Major Integrated Oil Companies EBITDA 2003 MMMUS$ 35.0 32.2 31.7 30.0 25.0 20.0 25.1 22.6 19.8 17.0 15.0 10.0 11.7 11.0 9.7 5.0 0.0 Exxon Mobil BP Total RD Shell Chevron Texaco Conoco Phillips Petrobras Stat Oil Source: Bloomberg, excluding PEMEX 10
PEMEX EBITDA 2003 MMMUS$ 55.7 8.4 47.3 23 24.3 0.3 3.6 3.5 31.7 Total sales IEPS (1) Total sales net of IEPS Costs and expenses Operating income net of IEPS Other revenues D&A (2) Cost of the reserve (3) EBITDA (1) Special Tax on Production and Services (2) Depreciation and amortization (3) Cost of the reserve for retirement payments, pensions and indemnities 11
PEMEX EBITDA 2003 reconciliation MMMUS$ 34.0-8.4 3.6 2.7 3.5-0.1 31.7-3.6 Net loss Taxes and duties IEPS (1) CFC (2) D&A (3) Cost of the Cumulative reserve (4) effect (5) EBITDA (1) Special Tax on Production and Services (2) Comprehensive financing cost (3) Depreciation and amortization (4) Cost of the reserve for retirement payments, pensions and indemnities (5) Cumulative effect due to the adoption of new accounting standards 12
Agenda PEMEX s Highlights Operations Capex Program and Financial Profile Challenges 13
Untapped Exploration Potential Area (km 2 ) On-shore 1,923,040 Continental shelf 263,259 Deep-water 567,477 TOTAL 2,753,776 Chihuahua Sabinas Burgos Non prospective 1,699,190 Prospective 1,054,586 Basins explored 174,400 % of basins explored 17 Productive basins Non productive basins Tampico Frente Sierra Madre Oriental Deep-water Gulf of Mexico Southeast basins d Yucatán platform With non associated gas Prospective Misantla Macuspana Source: PEMEX Veracruz basin Sierra de Chiapas 14
E&P Projects: Cantarell Pressure and production Cantarell facts Pressure Production Increase in production Nitrogen injection Largest oil field in Mexico and eighth largest in the world 2004 expected production: 2.1 MMbd of crude oil and 774 MMcfd of natural gas Proved remaining reserves of 6.9 MMMboe Recovery capability of 60% (world's average is 35%) Pressure maintenance Year Production 1996 2003 Increase Crude oil (Mbd) 1,074 2,096 93% Associated natural gas (MMcfd) 443 770 74% The injection of nitrogen in Cantarell has slowed the pressure decline and increased production 15
Revamping of Refineries Crude Oil Refining Centers Cadereyta5 5Madero Tula Salamanca 5 5 Minatitlán 5 Salina Cruz 5 Refineries: 6 Refining capacity (MMbd): 1.5 Modernization of the the refining system: Increase in heavy crude processing capacity Shift in product mix towards high octane gasolines and middle distillates Optimization of the crude oil blend Main projects Minatitlán refinery revamping is expected to be finished in 2007 Total estimated capex: MMMUS$2.4 Expected incremental production of gasolines: 97 Mbd Expected incremental production of intermediate distillates: 49 Mbd Distribution (Maritime terminals modernization, SCADA) Production facilities (Lubricant plant in Salamanca, Minatitlán revamping) Gasoline (improvements in quality and mix of grades) 16
Expanding the Natural Gas Production Capacity Gas Processing Centers Reynosa Poza Rica n Pajaritos Matapionche Cangrejera Morelos n n n n n n n n Sweetening Plants Capacity of 4,503MMcfd Cryogenic Plants Capacity of 4,592 MMcfd n La Venta Cd Pemex Nuevo Pemex Cactus PEMEX is investing to: Increase import-export capacity (interconnections with the U.S.) Enhance flexibility of transportation system New projects: New compression stations to increase the transport capacity in the area of Monterrey and Chihuahua Capacity expansion of the processing system in northern Mexico to capture natural gas liquids (4 cryogenic plants: 2 in 2004 and 2 more in the following years) 17
Petrochemicals Petrochemical centers 5 Camargo Escolín Tula 5 San Martín Pajaritos 5 Texmelucan 5 Morelos 5 5 Cosoleacaque 5 5 Cangrejera Opportunities in the petrochemical process: Investment in profitable petrochemical chains New projects: Expecting capacity expansions on the ethane chain in actual plants to gain domestic market share in the polyethylene business Seeking possible joint ventures with private sector in minority role companies to integrate the value chains 18
Agenda PEMEX s Highlights Operations Capex Program and Financial Profile Challenges 19
Crude Oil and Natural Gas Production Crude oil production capacity Mbd 5,000 4,000 3,000 2,000 Incremental Production Historic Forecast Base Production New Exploration Production Natural gas production capacity MMcfd 1,000 0 10,000 8,000 6,000 4,000 2,000 0 1993 1995 1997 1999 2001 2003 Historic 2005 2007 2009 Forecast The oil industry requires large investments for maintaining and increasing reserves and production levels Investment lags accumulate problems in the future Source: PEMEX 1993 1995 1997 1999 2001 2003 2005 2007 2009 20
Historical and Projected CAPEX By type of project MMMUS$ Pidiregas Non - Pidiregas 12.0 10.1 5.1 5.5 2.0 2.9 7.5 7.8 6.9 4.5 3.9 5.6 8.4 11.0 3.1 2.6 3.0 3.0 2.2 1.7 1.0 1998 1999 2000 2001 2002 2003 2004P Note: Pidiregas: Long-term productive infrastructure projects Non-Pidiregas: Budgetary Investments P = Projected 21
CAPEX 2004 By line of business E&P Refining Gas and Basic Petrochemicals Others 11.1 Development 86% 0.1 0.3 0.5 Exploration 14% Total MMMUS$ 12 Total MMMUS$ 11.1 22
EBITDA and Interest Coverage EBITDA EBITDA / Interest MMMUS$ 35 31.7 30 25 20.7 22.0 20 15 10 5 0 2001 2002 2003 Times 16 14 12 10 8 6 4 2 0 15.2x 13.4x 12.1x 2001 2002 2003 Note: EBITDA net of sales taxes (IEPS). Interest expense does not include capitalized interest 23
Debt-to-Reserves Ratio vs. Peers Debt 2003 / Proved reserves US$ / boe 2.5 2.3 2.0 2.0 1.5 1.5 1.3 1.1 1.3 1.4 1.0 0.5 0.4 0.6 0.0 (1) Exxon Mobil (2) RD Shell Total BP Chevron Texaco Conoco Phillips Stat Oil Petrobras AAA AA A B Source: Companies financial statements as of December 31, 2003 and proved reserves data as of December 31, 2002 (other than PEMEX) 1) Financial statements and proved reserves data as of December 31, 2003. Debt is the sum of documented debt, notes payable to contractors and sale of future account receivable 2) Does not consider the reserves adjustments announced since January 2004 24
Credit Profile Relative to Integrated Majors (1) Exxon Mobil (3) RD Shell Total BP Chevron Texaco Conoco Phillips Statoil Petrobras Senior Unsecured Ratings S&P Moody s BBB- Baa1 AAA Aaa AA+ Aa2 AA Aa2 AA+ Aa1 AA Aa2 A- A3 A A1 Ba2 Operating Data Proven Reserves (MMMboe) (2) Production (MMboed) (4) Proven Reserves Life (years) CAPEX (MMMUS$) 18.9 4.3 11.9 10.1 21.7 4.2 14.0 12.9 19.3 4.0 13.3 8.0 11.2 2.4 12.7 8.4 17.6 3.5 13.7 12.4 11.9 2.6 12.4 5.6 7.8 1.1 19.9 6.2 4.3 1.1 10.9 3.4 10.5 1.8 15.9 5.7 Source: Bloomberg. Companies financial statements as of December 31, 2003 and proved reserves data as of December 31, 2002 (other than PEMEX) 1) EBITDA net of IEPS (special tax on production and services) 2) PEMEX s proved reserves in accordance with the definition under Rule 4.10(a) of Regulation S-X under the U.S. Securities Act of 1933. Data as of December 31, 2003 3) Does not consider reserves adjustments announced since January 2004 4) When the conversion factor is not available, one million cubic feet of natural gas = 5.2 barrels of oil equivalent 25
Agenda PEMEX s Highlights Operations Capex Program and Financial Profile Challenges 26
Challenges Challenges Increase efficiency Fiscal regime proposal Implement corporate governance best practices 27
Challenges: Implementing Value Management Oriented to Efficiency Implementing projects oriented to value creation Implementing best practices in projects management Optimization of plants and pipelines Optimization of the procurement process Value management for corporate (medical and telecommunications) services Improving risk management Implementing compensation according to performance 28
Challenges: Fiscal Regime Proposal $ Old hydrocarbons New hydrocarbons Time New hydrocarbons should be taxed competitively according to fiscal regime in countries with similar geological conditions Old hydrocarbons should be taxed in order to fit the shortterm needs of the Mexican Federal Government 29
Challenges: Implementing Corporate Governance Best Practices Improve corporate governance Improve transparency and credibility of the management process PEMEX budget is part of the federal budget Inefficient audit system Legal restrictions for joint ventures Continue to incorporate best practices: Independent board members Audit Committee Prompt disclosure of information Compensation based on performance Clear mandate to create value Increased operational and financial autonomy Arms length relationship with government 30
DCF-A /19 de Octubre de 2004