Pemex Posts $1B Q2 Profit — But S&P Sees Cash Shortfalls By 2027

MEXICO CITY — Petróleos Mexicanos reported a net profit of 18.02 billion pesos, about $1.04 billion, for the three months to June 30, in a filing to the Mexican Stock Exchange.

How that was reported depended entirely on which comparison the reader was handed.

Bloomberg described a company swinging to profit, noting it was Pemex's first quarterly profit since a $3.2 billion gain a year earlier. Mexico News Daily led with a near-70% annual decline in net profit — accurate, since the company earned 59.51 billion pesos in the second quarter of 2025. Industry trade press noted the company had returned to positive net income after a 46 billion-peso loss in the first quarter of this year.

Pemex itself said it recorded favourable results across its main operational and financial indicators.

All of it is correct. Against Q1 2026, this was a recovery. Against Q2 2025, a sharp deterioration. Against the operating line, a genuine improvement — operating income reached 85.5 billion pesos, reversing an operating loss of roughly 11 billion pesos a year earlier, on sales and services revenue of 510.4 billion pesos, up 30.3% annually.

Which is a reminder that a state oil company reporting into a politically supervised environment can produce a quarter that supports almost any narrative. The useful question is what the numbers say about solvency.

What drove the quarter

The revenue improvement was substantially external. Bloomberg reported that results were buoyed by higher sales and higher global oil prices amid continued US-Iran tensions around the Strait of Hormuz. Crude and condensate production rose 1.7% year-on-year to 1.66 million barrels per day, natural gas output exceeded 4 billion cubic feet per day for a gain of nearly 12%, and total hydrocarbon production averaged about 2.24 million barrels of oil equivalent per day, up 4.6%.

Production is up, but modestly. The price environment did the heavy lifting, and Pemex does not control it.

The company attributed the fall in net profit to a 177% annual increase in financial costs, higher tax obligations, and an unfavourable exchange rate as the peso appreciated around 2.5% against the dollar during the quarter — an unusual case of currency strength being reported as a corporate headwind, and a consequence of holding dollar-denominated debt while earning substantially in pesos.

The balance sheet, and the caveat

The debt story is the one the company chose to lead with, and it is real. Financial debt stood at $77.5 billion at June 30, down 9.1% from the end of 2025, with short-term obligations reduced to about 16% of the total. Pemex said the shift eased immediate financial pressures and improved flexibility, consistent with a commitment to avoid net debt expansion.

For the most indebted oil company in the world, a 9.1% reduction in six months is not a trivial achievement.

But S&P Global Ratings, which in April maintained Pemex's Mexican national scale issuer credit rating at mxAAA with a stable outlook, attributed that rating entirely to federal government support, according to Mexico Business News's account of the assessment. The agency also set out where the strain sits.

S&P projects Pemex revenues plateauing at 1.53 trillion pesos in 2026 before falling 14.1% to 1.315 trillion pesos in 2027. Against capital expenditure of 279 billion pesos and negative funds from operations of 29 billion pesos, it forecasts the free operating cash flow deficit widening to 392 billion pesos in 2026, from a deficit of 30 billion pesos in 2025 — a thirteenfold increase. And it projects recurring liquidity shortfalls in 2027 and 2028 unless internal cash generation improves substantially through higher upstream production and operational efficiency.

So the debt is being reduced while the cash flow deficit expands by an order of magnitude. Those are not contradictory. They describe a company servicing its obligations with support rather than with earnings.

Why this is a sovereign story

This is the part that matters to anyone holding Mexican risk.

Pemex debt is not really corporate debt. Its domestic top-tier rating exists because the federal government stands behind it, and the government has repeatedly stepped in — S&P noted that coordination with the state and a 31.5 billion-peso debt issuance in February mitigated near-term liquidity pressure. If S&P's 2027 and 2028 projections are right, the state will be asked again.

That request will arrive into an already-strained fiscal position. Mexico's budget deficit reached 5.7% of GDP in 2024, a 36-year high, and the consolidation targets the Sheinbaum administration initially set have proved difficult to hold. Growth has been weak — analysts put 2025 at around 0.5%, a fourth consecutive year of deceleration placing Mexico near the bottom of the G20 and OECD, with only a modest rebound forecast for 2026.

The government's strategy is to grow Pemex out of the problem, including through partnerships with private companies as it pursues fuel self-sufficiency. Reuters reported alongside the results that progress on that front has been slower than intended.

The second-quarter profit is therefore a genuinely better number arriving inside a structurally unchanged situation. Higher oil prices driven by conflict in the Middle East improved a quarter. They did not fix a company whose own rating agency expects it to run out of cash in two years without either substantially more production or substantially more state money.

For investors, the question raised by these results is not whether Pemex made money between April and June. It is how much of Mexico's fiscal capacity is committed to an oil company that cannot yet fund itself — and what that leaves for everything else, at a moment when the country's trade relationship with the United States is being renegotiated annually.