Results as of the 3 rd Quarter of 2010 October 29, 2010
Forward-Looking Statement and Cautionary Note (1/2) Variations If no further specification is included, changes are made against the same period of the last year. Rounding Numbers may not total due to rounding. Financial information Excluding (i) budgetary,(ii) volumetric, (iii) revenue from sales and services including IEPS, (iv) domestic sales including IEPS, (v) petroleum products sales including IEPS, and (vi) operating income including IEPS information, the financial information included in this report is based on unaudited consolidated financial statements prepared in accordance with Normas de Informacion Financiera (Mexican Financial Reporting Standards, FRS) -formerly Mexican GAAP- issued by the Consejo Mexicano para la Investigación y Desarrollo de Normas de Información Financiera (CINIF). Based on FRS B-10 "Inflation effects", 2009 and 2010 amounts are expressed in nominal terms. Based on FRS B-3 "Income Statement and FRS C-10 Derivative Financial Instruments and Hedging Transactions, the financial income and cost of the Comprehensive Financial Result include the effect of financial derivatives. The EBITDA is a non-u.s. GAAP and non-frs measure issued by CINIF. Budgetary information is based on standards from Mexican governmental accounting; therefore, it does not include information from the subsidiary companies of Petróleos Mexicanos. Foreign exchange conversions Convenience translations into U.S. dollars of amounts in pesos for the Balance Sheet have been made at the established exchange rate, at June 30, 2010, of Ps. 12.8441 = U.S.$1.00; other translations into U.S. dollars of amounts in pesos have been made at the average exchange rates of Ps. 12.5544 = U.S.$1.00 and Ps. 12.6736 = U.S.$1.00 for the second quarter of 2010 and the first half of 2010, respectively. Such translations should not be construed as a representation that the peso amounts have been or could be converted into U.S. dollars at the foregoing or any other rate. Fiscal regime Since January 1, 2006, PEMEX has been subject to a new fiscal regime. Pemex-Exploration and Production s (PEP) tax regime is governed by the Federal Duties Law, while the tax regimes of the other Subsidiary Entities continue to be governed by Mexico s Income Tax Law. The most important duty paid by PEP is the Ordinary Hydrocarbons Duty (OHD), the tax base of which is a quasi operating profit. In addition to the payment of the OHD, PEP is required to pay other duties. Under PEMEX s current fiscal regime, the Special Tax on Production and Services (IEPS) applicable to gasoline and diesel is regulated under the Federal Income Law. PEMEX is an intermediary between the Secretary of Finance and Public Credit (SHCP) and the final consumer; PEMEX retains the amount of IEPS and transfers it to the Federal Government. The IEPS rate is calculated as the difference between the retail or final price, and the producer price. The final prices of gasoline and diesel are established by the SHCP. PEMEX s producer price is calculated in reference to that of an efficient refinery operating in the Gulf of Mexico. Since 2006, if the final price is lower than the producer price, the SHCP credits to PEMEX the difference among them. The IEPS credit amount is accrued, whereas the information generally presented by the SHCP is cash-flow. 2
Forward-Looking Statement and Cautionary Note (2/2) Hydrocarbon reserves The U.S. Securities and Exchange Commission (SEC) permits flings of oil and gas companies 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 or in our annual report to the Comisión Nacional Bancaria y de Valores (Mexican National Banking and Securities Commission, or CNBV), available at www.pemex.com. Proved reserves as of January 1, 2010 are consistent with the comments received from the independent engineering firms that audit our reserves. However, as established in the Regulatory Law to the Article 27 of the Constitution of the United Mexican States Concerning Petroleum Affairs, the National Hydrocarbons Commission is currently reviewing the hydrocarbon reserves evaluation reports; the Energy Ministry will disclose the hydrocarbon reserves of the country once this revision is completed. It is possible that differences arise, particularly in the probable and possible reserves associated to Chicontepec. Bids Only results from bids occurred between April 1 and June 30, 2010 are included. For further information, please access www.compranet.gob.mx. Forward-looking statements This report contains forward-looking statements. We may also make written or oral forward-looking statements in our periodic reports to the CNBV and the SEC, in our annual reports, 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. We may include forward-looking statements that address, among other things, our: drilling and other exploration activities; import and export activities; projected and targeted capital expenditures ; costs; commitments; revenues; liquidity, etc. Actual results could differ materially from those projected in such forward-looking statements as a result of various factors that may be beyond our control. These factors include, but are not limited to: changes in international crude oil and natural gas prices; effects on us from competition; limitations on our access to sources of financing on competitive terms; significant economic or political developments in Mexico; developments affecting the energy sector; and changes in our regulatory environment. Accordingly, you should not place undue reliance on these forward-looking statements. In any event, these statements speak only as of their dates, and we undertake no obligation to update or revise any of them, whether as a result of new information, future events or otherwise. These risks and uncertainties are more fully detailed in PEMEX s most recent Form 20-F filing with the SEC (www.sec.gov), and the PEMEX prospectus filed with the CNBV and available through the Mexican Stock Exchange (www.bmv.com.mx). These factors could cause actual results to differ materially from those contained in any forward-looking statement. PEMEX PEMEX is Mexico s national oil and gas company. Created in 1938, it is the exclusive producer of Mexico s oil and gas resources. The operating subsidiary entities are Pemex-Exploration and Production, Pemex-Refining, Pemex-Gas and Basic Petrochemicals and Pemex-Petrochemicals. The principal subsidiary company is PMI. 3
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3Q10 Financial Highlights Billion pesos Billion dollars 2009 2010 2010 Jul.-Sep. Jul.-Sep. Change Jul.-Sep. Total revenue from sales and services Operating Income Income before Taxes and Duties 293 318 24 8% 25 144 136 (8) -6% 11 144 156 12 8% 12 Net Income (loss) (4) (3) 1 (.2) EBITDA (1) 200 203 3 1% 16 Jan. Sep. Jan. Sep. Change Jan. Sep. Funds provided by operating activities before taxes and duties 483 549 66 14% 44 (1) Earnings before interests, taxes, depreciation and amortization. Excludes IEPS. 5
3Q10 Operating Highlights 2009 2010 Production Jul.-Sep. Jul.-Sep. Change Upstream Crude Oil (Mbd) 2,567 2,567-1% Condensates (Mbd) 43 46 2 5% Natural Gas (MMcfd) 6,564 6,339 (225) -3% Downstream Dry Gas (MMcfd) Natural Gas Liquids (Mdb) Petroleum Products (Mbd) Petrochemical Products (Mt) 3,574 3,578 4 378 380 1 1,456 1,362 (94) -6% 1,344 1,376 33 2% 6
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Crude Oil Production 2009 Jul.-Sep. 2010 Jul.-Sep. 11% 13% Heavy Light 32% 58% 33% Extra-light 55% 2,567 Mbd 2,567Mbd 23% 77% Offshore Onshore 25% 75% 8
Natural Gas Production and Gas Flaring Gas Production (1) Gas Flaring (1) Million cubic feet Million cubic feet per day -3% per day -34% 6,564 6,339 Non-associated 2,550 2,406 Associated 4,014 3,933 755 495 3Q09 3Q10 Non-associated 39% 38% Associated 61% 62% 3Q09 (1) Does not include nitrogen. 3Q10 9
Discoveries Project Well Inititial Production Holok-Temoa Samaria- Luna Comacalco Lakach-2DL Palapa-301 7.9 28.7 12.9 3,044 Pachira-1 3,019 Ool-1 8.8 Burgos Alambra-1 0 1.5 Cucaña 0 0 3.3 Dry Gas (MMcfd) Wet Gas (MMcfd) Crude Oil (bd) 10
Upstream Opportunity Areas Mexican E&P Contracts N 2 Content in Wet Gas Evaluation, development and production of hydrocarbons within a defined contractual framework, in order to increase execution capacity. Currently contemplating a first round of bids for mature fields in the South Region. Re-injection of sour gas into the reservoir; re-injection of high nitrogen content gas to certain reservoirs; and construction of two nitrogen recovery plants. Declination at Cantarell Increase well intervention activity; drilling of horizontal wells; and re-injection of gas in order to keep pressure in the oil s zone. Aceite Terciario i del Golfo Maximize existing wells production; increase execution capacity of well interventions; and apply new technologies through schemes such as field laboratories, non-conventional drilling, fracturing and stimulations. 11
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Crude Oil Refining Thousand barrels per day -8% 1,285 1,184184 Heavy Crude Oil 521 443 Light Crude Oil 764 742 Heavy Crude Oil 41% 37% Light Crude Oil 59% 63% 3Q09 3Q10 13
Petroleum Products Production Thousand barrels per day 3Q10 421 291 330 211 109 1,362 3Q09 463 331 320 208 134 1,455 3Q10 31% 21% 24% 15% 8% 3Q09 32% 23% 22% 14% 9% Gasolines Diesel Fuel Oil LPG and Dry Gas Others 14
Natural Gas Processing, Dry Gas and Natural Gas Liquids Production Natural Gas Processing Million cubic feet per day Dry Gas Production Million cubic feet per dar -1% 0.1% 4,469 4,435 Sweet Sour 1,075 1,022 3,395 3,413 3,574 3,578 Natural Gas Liquids Production Thousand barrels per day 0.3% Sweet 24% 23% Sour 76% 77% 378 380 3Q09 3Q10 3Q09 3Q10 15
Petrochemicals Production Thousand tons 3Q10 327 293 462 195 99 1,376 3Q09 304 201 484 236 119 1,344 3Q10 24% 21% 34% 14% 3Q09 23% 15% 36% 18% 7% 9% Ethane Derivatives Methane Derivatives Others Aromatics Derivatives Propylene Derivatives 16
Downstream Opportunity Areas Gas Quality On March 19, 2010, the new Mexican Official Standard NOM-001- SECRE-2010, Natural Gas Specifications, was published in the Official Gazette of the Federation. This standard became effective on May 18, 2010. The implemented actions to comply with the norm are: Implementation of an operation procedure to control nitrogen concentrations in gas to be processed; Modifications to the Ciudad Pemex cryogenic plant II to recover liquids from gas; Control liquidable contents through dew point control plants in the north of Veracruz; and, Monitor and follow up of quality parameters. Operational Reliability Incorporation of programs aimed to increase economical margins and reliability of the refineries equipments and facilities. Profitble Chains Optimization of the aromatics line. Resume operations of the Morelos Petrochemical Complex s acrylonitrile plant through importing polymer grade propylene. 17
Industrial Safety and Environmental Protection Frequency Index Incapacitating accidents / MMhh Severty Index Days lost/ MMhh 93% 0.70 26 26 0.36 3Q09 3Q10 3Q09 3Q10 18
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Income Statement: total revenues from sales and services Billion pesos 161 In Mexico Exports Jul. Sep. 2009 293 131 13 143 5 112 13 6 8% 7% 10% 30% 4% 30% 12% -8% 15% 171 Jul. Sep. 2010 318 145 Total In Exports revenues Mexico from sales and services 17 148 6 Dry gas 125 12 7 Crude & conden sates Petroleum products Petrochem. Petroleum products Petrochem. 20
Income Statement: costs and operating expenses Billion pesos Jul. Sep. 2009 293 150 = 125 + 25 20 24 8% 22% 25% 4% 22% 22% 318 182 = 156 + 26 25 29 Jul. Sep. 2010 Sales Operating costs and expenses Cost of sales General expenses Depreciation & Amortization Net cost of employee benefits 21
Net Income Evolution Billion pesos In Mexico Exports 9 (32) (4) 13 (11) 19 3.2 (3) Net loss 3Q09 Change in total revenues from sales and services including IEPS Change in costs and operation expenses Change in Change Change other income in in and CFR taxes participation and of subsidiary duties entities and associates Net loss 3Q10 22
Consolidated statement of Cashflows: sources and uses of resources Billion pesos 181 858 549 ( 468 ) 128 ( 133) 122 ( 135 ) Cash at the beginning of the period Revenues from operations before taxes and duties Debt issuance Total Taxes and duties Investments Amortizations Cash at the end of the period 23
Total Debt and Net Debt Billion pesos as of June 30, Total Debt -4% 683 653 Net Debt 5% Short-Term 138 112 Long-Term 545 541 531 504 Short-Term 20% 17% 2009 2010 Long-Term 80% 83% 2009 2010 24
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Investor Relations (+52 55) 1944-9700 ri@pemex.com www.pemex.com 26