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Pemex Finalizing Sale of Assets to First Reserve Corp for US$500m

22 June 2016

Petroleos Mexicanos and private-equity firm First Reserve Corp. are finalizing terms on a sale and leaseback agreement intended to provide the beleaguered state-owned oil producer with much needed capital.

Pemex and First Reserve are set to sign an agreement valued at more than US$500m as soon as this week, according to one person familiar. As part of the agreement, First Reserve will buy midstream assets from Pemex and then lease them back to the Mexican producer, which will continue to operate the sites, according to the people, who asked not to be identified because they were not authorized to speak publicly.

The person also said Pemex has closed its similar US$1.2b sale-leaseback deal with KKR & Co. and that the funds entered Pemex’s accounts as of last week. Reuters had reported Thursday that the KKR deal was close but not yet finalized. The KKR deal was also mainly for midstream assets, as well as a non-drilling oil platform in Tabasco, the source said, declining to name other specific facilities included in either agreement.

The two deals come as Pemex looks to raise immediate capital to pare debt during a difficult period. Pemex has recorded 14 straight quarterly losses, seen oil production decline for 11 straight years and had US$93b in debt excluding pension liabilities as of the first quarter.

The company has said for several months it plans to sell assets and form joint ventures with private partners to generate cash and boost declining crude production. Pemex Chief Executive Officer Jose Antonio Gonzalez Anaya said in an April 19 interview at Bloomberg’s New York office that the company was looking at possible deals with KKR and First Reserve, saying at the time the potential sale and leaseback agreement with First Reserve would be worth “a bit more” than US$500m.

A spokesman for Pemex declined to comment on the status of the reported agreements. Greenwich, Connecticut-based First Reserve, which announced a US$1b agreement with Pemex in April to mutually invest in Mexico energy infrastructure, did not return phone calls or messages seeking comment. New York-based KKR also did not immediately respond to a request for comment.