[Vision2020] Petroleum Intelligence Weekly: Pemex Below Exxon & Chevron, etc.

[Phil Nisbet]

Ted

Read the articles you post more carefully.  PEMEX is a state controled 
monopoly and unlike Exxon it puts its profits not into an account that goes 
to the state holder employees, which is the profits you mention, but into 
the tax revenues which are in essence a dividend to the sole shareholder of 
PEMEX, the Mexican Government.  You will note that PEMEX provides Mexico 
with a third of all its Governmental revenues and that they pay a flat tax 
on their gross of 61%.

So while Exxon had a net profit reportable to the shareholders of $7.64 
billion dollars for the quarter, PEMEX sent 12.7 Billion dollars off to its 
soile shareholder the Mexican Government.  That was in addition to the 
$200,000,000 that they kept in hand for future investment, which is the 
profit you report as being their income.

Yes Exxon made more moeny, as I had previously noted, but their combined 
profits for the last 12 months including the 3Q are still only 29 Billion 
dollars net.

PEMEX exported 328,000,000 barrels of oil in the first 2 quarters of 2005 
which sold for 12.5 Billion dollars.  Those exported barrels sold at $37.91 
a barrel and are most likely to go off at a higher price for the remainder 
of the year, a price that was $10 a barrel higher than last years.  Lifting 
and export costs subtracted, PEMEX will make almost as much on that exported 
oil as Exxon made in net profits for all its operations.  But unlike Exxon, 
the funds will simply be passed on to the shareholder, the Mexican 
Government.  That does not include the domestic oil market in Mexico or the 
down stream end of PEMEX business.

So my point to you sits valid.  PEMEX (Who is solely owned by the Government 
of Mexico) has gone from down at number 9 to making as much money as Exxon 
in its export catergory alone.

Yes Exxon pays Taxes, however, calling the sole shrareholders cut a tax is 
pretty disingenious of the Mexican government.  In essence, since the 
Government owns PEMEX, its simply a tax free entity that is passing one 
whale of a dividend to the sole shareholder.

I would also point out to you that PEMEX also has other government controled 
situations that make it less profitable on the downstream side.  The price 
of gasoline is fixed not by the market, but by the government in Mexico, so 
the large increase in gasoline proces that Exxon gained on the current 
downstream from places other than the US, is lost to PEMEX.  Mexico keeps 
its domestic gasoline prices artificially low as a 'social' benefit  You 
will find a similar artificially low gasoline price for Saudi Arabia and 
most of the other oil producing third world countries.

You note that Exxon lifts close to 4 million barrels of oil a day and that 
is about a million gallons more than PEMEX.  If you look at the price of 
lifting though, they have high cost and high transport costs, since most of 
the wells they own are from small fields spread all over the world.

But it was interesting to note that you did slip in figures that have 
further bearing on the subject of Exxon.

"Profit from worldwide oil and natural gas exploration and production 
operations jumped 28 percent, to $4.91 billion. Production decreased 4.3 
percent, to 3.91 million barrels a day."

Thats because Exxon has been very active in Natural Gas development and is 
making money hand over fist in that arena.  There is no comparable in PEMEX 
or in Aramco to the NG boom in the USA.  In that particular arena, the 
reserves and the production of NG are lead by the USA.

Most of the profits Exxon is making are from down stream products in other 
countries and from NG production and sales.  If on the other hand, PEMEX was 
run in a manner similar to EXXON, they would be much closer to them in 
overall profits and since their overall lifting costs are much lower than 
those of Exxon, they would actually stand out as the larger of the two.

But PEMEX low balls its down stream products for the purposes of 
governmental social action and also drains PEMEX's till to fund the 
government itself.  Its hard to see that we would see a change in PIW 
listings because of the way that accounting and ownership treat the two 
different entities.  But if PEMEX was a real corporation, as I noted, I 
would prefer to have been a shareholder of theirs to being one of Exxon's.

Phil Nisbet






>From: Tbertruss at aol.com
>To: pcnisbet1 at hotmail.com, vision2020 at moscow.com
>Subject: [Vision2020] Petroleum Intelligence Weekly: Pemex Below Exxon & 
>Chevron, etc. Date: Sat, 27 Aug 2005 20:35:48 EDT
>
>
>Phil et. al.
>
>Let's review my comments regarding what oil corporations are doing "one 
>heck
>of a lot better," as you phrased it, among the four corporations you listed 
>in
>your comparison.  Remember that my subject heading reads "Pemex Below Exxon 
>&
>Chevron:"
>
>From my post on 8/21/05:
>
>Phil wrote on 8/18/05:
>
>"PEMEX or Aramco are doing one heck of a lot better than Exxon or Chevron,
>because they simply own more oil and produce more oil than do the down 
>streamers
>like the US oil
>firms have become."
>
>"So who is 'making money'?  The big winners are the top exporters, Saudi
>Arabia, Russia and Norway and the big losers are the USA, Japan and China
>since they import the largest amount of fuel."
>
>You are at least partly incorrect in your assessment that Pemex and Aramco
>are doing "one heck of a lot better" than Exxon or Chevron, depending on 
>how you
>measure the complex set of variables involved.  I am not sure why you say 
>the
>"big losers are the USA..."  To find the "big losers" in the USA in the 
>world
>marketplace for oil profits we must examine the "big losers" among US based
>oil corporations, the problem being they are not such "big losers." 
>------------------------------------------------------------------------------
>------------------------
>
>http://www.energyintel.com/DocumentDetail.asp?document_id=111082
>
>I merely said your comments are "partly incorrect..., depending..."   The 
>PIW
>rankings (available at the link above) I referenced, based on 2002
>operational data, listed Saudi Aramco as the number one oil corporation in 
>the world,
>and Exxon/Mobil number two, therefore the data I presented before does not
>contradict your assessment regarding comparing Aramco to Exxon/Mobil, and 
>this at a
>time before the current spike in crude prices.  I do think claiming that
>Pemex is doing "one heck of a lot better" than Exxon/Mobil is a major 
>stretch, in
>2002 or now in 2005, and this is what my subject heading focused on.  
>Again,
>this depends on how you evaluate the status of a corporation, a very 
>complex
>issue that results in disagreements even among financial experts.  I will
>explore this in more detail below:
>
>The current record setting spike in crude oil prices will have effects that
>cannot be predicted precisely.  Will crude oil prices come down by years 
>end,
>go higher, or remain stable?  We shall see.
>
>However, all I need to demonstrate to support my original claim that you 
>are
>"at least partly incorrect..., depending..." is to reveal the most recent 
>2005
>second quarter profit figures showing Exxon/Mobil "ahead" of Pemex.  As far
>as these 2005 results demonstrate, I think it is false to claim that Pemex 
>is
>doing "one heck of a lot better" than Exxon/Mobil.
>
>Here is a source for data on Exxon/Mobil's second quarter 2005 profits:
>
>
>http://www.washingtonpost.com/wp-dyn/content/article/2005/07/28/AR2005072802085_pf.html
>
>Exxon Mobil Corp., the world's largest publicly traded oil company, said
>yesterday that second-quarter profit rose 32 percent, to $7.64 billion, as 
>Asia
>and North America used more crude oil and gasoline.
>
>The quarterly profit was the third-highest in the company's history. 
>Revenue
>climbed 25 percent, to $88.57 billion, Exxon said. A doubling of oil prices
>since 2003 has put the Irving, Tex.-based company on a pace to surpass 
>Wal-Mart
>Stores Inc. this year as the largest U.S. company by total revenue.
>
>Profit from worldwide oil and natural gas exploration and production
>operations jumped 28 percent, to $4.91 billion. Production decreased 4.3 
>percent, to
>3.91 million barrels a day.
>
>The gap between crude oil costs and prices for refined fuels was the widest
>ever, as consumption rose faster than supplies. Exxon's refining and 
>marketing
>profit rose 34 percent, to $2.02 billion, mostly outside the United States.
>------------------------------------------------------------------------------
>----
>Please focus on that last statement above:  "refining and marketing profit
>rose 34 percent... mostly outside the United States."  This reveals how
>multinational Exxon/Mobil's operations are, when they make more profit off 
>refining
>and marketing outside the huge US market.  This data supports my earlier 
>point
>that was revealed from the PIW data from 2002 that a major strength of
>Exxon/Mobil is their number one position in refining capacity.
>------------------------------------------------------------------------------
>-----
>And again, bolstering my claim that one of Exxon/Mobil's strengths as a
>company is their huge refining capacity, consider the following 
>information:
>
>http://www.freerepublic.com/focus/f-news/1465359/posts
>
>Persistently strong refining and marketing margins also helped boost the
>company's bottom line.
>
>"Oil and gas production volumes (and earnings) were disappointing in the
>quarter, but this was offset by a now-familiar bonanza in the refining and
>marketing division - particularly in the U.S.," Credit Suisse First Boston 
>analysts
>said in a research note.
>------------------------------------------------------------------------------
>--------
>"A now-familiar bonanza in the refining and marketing division?"  And this
>coming in the second quarter 2005, showing that the crude oil spike at this 
>time
>is not slowing Exxon/Mobil's profits from refining and marketing, in part
>made possible by Exxon/Mobil's position as having the number one refining
>capacity in the world.
>------------------------------------------------------------------------------
>--------
>Consider the comparison between the profit figures for Exxon/Mobil given
>above for "refining and marketing" at $2.02 billion, to the profit from 
>"world
>wide oil and natural gas exploration and production" at $4.91 billion.  
>This
>suggests, rather, if correct, it "proves," that the "upstream" side of 
>Exxon/Mobil
>generates more profit than the "downstream" side.
>------------------------------------------------------------------------------
>--------
>Now compare those results for Exxon/Mobil with data from the second quarter
>2005 regarding Pemex's performance:
>
>http://www.latinpetroleum.com/article_4444.shtml
>
>Mexican state oil monopoly Pemex posted a 14 percent rise in second-quarter
>sales as world crude oil prices hit new highs, though net profit slipped 
>from
>the first quarter, which marked the end of years of losses.
>
>Pemex, 100 percent state owned and the government's main cash cow, reported 
>a
>quarterly net profit of 1.9 billion pesos ($200 million) on Tuesday as 
>sales
>rose to 221.3 billion pesos ($20.5 million), up 14 percent on the year.
>------------------------------------------------------------------------------
>-----
>Exxon/Mobil had a second quarter 2005 profit of $7.64 billion, Pemex a 
>second
>quarter 2005 profit of $200 million (1.9 billion pesos).  However, this is
>very misleading, because Pemex is state owned and heavily taxed, resulting 
>in
>their potential "profit" being absorbed by the Mexican government, with a 
>61
>percent tax rate applied across Pemex's business.
>
>Still, Pemex's total sales in the second quarter 2005 were about $20.5
>billion dollars (221.3 billion pesos), compared to Exxon/Mobil's total 
>sales in the
>same period of $88.57 billion dollars.
>
>Exxon/Mobil's tax rate, as listed at the source below from Yahoo finance
>(form 10-Q for Exxon/Mobil), is around 41 percent, including income, excise 
>and
>all other taxes and duties.  Applying this rate to Pemex's operations for 
>the
>second quarter 2005 reveals a loss of potential "profit" because of the 
>Mexican
>government's high 61 percent tax rate, compared to Exxon/Mobil's 41 percent
>tax rate, of a little over $4 billion dollars, if I estimated correctly, 
>that
>would greatly boost Pemex's bottom line, but would still fall far short of
>Exxon/Mobil's profit for the same period, at $7.64 billion.
>
>http://biz.yahoo.com/e/050804/xom10-q.html
>
>This does suggest that Pemex minus the high taxes could generate more 
>profit
>as a percentage of total sales than Exxon/Mobil, as it takes advantage of 
>the
>crude oil price spike, but the huge size of Exxon/Mobil allows this
>multinational giant to generate substantially more profit as an absolute 
>figure.  Again,
>as I stated, "depending on how you measure," if you compare profits as a
>percentage of total sales, you will come up with a different ranking of 
>corporate
>performance, than if you just look at the bottom line of total profit
>generated.
>------------------------------------------------------------------------------
>-----
>I understand your point that primary suppliers of crude oil like Aramco and
>Pemex can make a killing off the current spike in crude oil prices, but
>consider the following data regarding Exxon/Mobil taken from the same 
>source quoted
>above:
>
>
>http://www.washingtonpost.com/wp-dyn/content/article/2005/07/28/AR2005072802085_pf.html
>
>"Profit from worldwide oil and natural gas exploration and production
>operations jumped 28 percent, to $4.91 billion. Production decreased 4.3 
>percent, to
>3.91 million barrels a day."
>------------------------------------------------------------------------------
>------
>Again I emphasize that a huge segment of Exxon/Mobils profits is from oil 
>and
>gas exploration and production.  Exxon/Mobil is not as much of a 
>"downstream"
>company as it seems you are suggesting.  In fact, the figure above reveals
>that over half of the second quarter 2005 profit Exxon/Mobil generated was 
>from
>"exploration and production," with Exxon/Mobil decreasing production while
>still increasing profit, revealing they are making increasing profits off 
>the
>crude oil price spike just as well as more "upstream" Aramco and Pemex.
>
>Again, I dispute that the "big losers are the USA..." in the global oil
>business, considering the second quarter 2005 performance of US based 
>Exxon/Mobil
>that suggests this company is not a "big loser" compared to Pemex, given 
>the
>"upstream" operations of Exxon/Mobil, coupled with their huge refining 
>capacity,
>that are important factors in the financial equations involved.
>
>Consider what the USA generates in economic performance from imported 
>fossil
>fuels.  No doubt if all these fuels were domestic, our economy might be 
>even
>larger and more successful than it is.  But the US economy's number one
>position in the world is fundamentally linked to our number one position in 
>the world
>in energy consumption.  We generate tremendous wealth off the imported 
>fossil
>fuel energy, and a significant amount of the wealth other countries make 
>off
>our purchases of fossil fuels comes back into the US economy in 
>investments.
>
>The Saudi's have invested 750 billion in the US economy, a significant 
>amount
>of this wealth no doubt generated from sales to the USA, enough to give 
>pause
>to anyone pondering the impact of disturbing the US/Saudi partnership.
>Consider that this relationship is under increasing strain recently, and 
>the fact
>that 15 of the 19 9/11 terrorists are believed to have been Saudi nationals 
>is
>part of the problem, with a major lawsuit pending against Saudi interests.
>
>Read the important story on this subject at this link below:
>
>http://news.bbc.co.uk/1/hi/business/2206522.stm
>
>"Saudis have reacted with anger to a lawsuit for damages filed last week by
>families of 11 September victims against Saudi banks and charities."
>------------------------------------------------------------------------------
>--
>Again, the data I gave earlier from PIW does not dispute the huge oil and 
>gas
>wealth Saudi Aramco has under its wings, when PIW ranked Saudi Aramco 
>number
>one ahead of Exxon/Mobil for 2002 operations.  But I think you are 
>incorrect
>to suggest that with the surge in crude oil prices that Exxon/Mobil is 
>slipping
>in its global standing compared to Pemex.
>
>Exxon/Mobil is also taking advantage of the spike in crude oil prices to
>generate increasing profit, assuming the information I provided above is 
>correct.
>
>We can perhaps review the 2005 oil corporation rankings and performance 
>next
>year to see if Pemex is really doing "one heck of a lot better" than
>Exxon/Mobil at that time.
>
>Ted Moffett

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