Moody's rates Pemex notes Baa1

Moody's Investors Service said it assigned a Baa1 foreign-currency bond rating to the series C medium-term notes program of Petróleos Mexicanos SAB de CV and to $2 billion of 8% global notes issued under the program.

The outlook is stable.

The agency said Pemex's Baa1 foreign-currency bond rating reflects the company's position as Mexico's largest company and its monopoly status as the country's sole producer of crude oil, natural gas and refined products. Although its debt obligations are not guaranteed by the government of Mexico, Moody's ratings reflect implicit government support given the company's strategic importance.

Pemex faces numerous operational and financial challenges, Moody's said: it has not fully replaced production for many years, production from the giant Cantarell oil field declined by almost 25% in 2008 from 2007 levels and despite ample pre-tax cash flows, a high tax burden has stymied capital retention and investment in reserves and key infrastructure and has resulted in a heavy debt burden.

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