Mexican Pemex to trim debt in 2006

MEXICO CITY (Reuters) - Mexican state oil monopoly Pemex could trim its huge debt by up to $1 billion in 2006 thanks to a lighter tax bill, Chief Financial Officer Juan Jose Suarez said on Friday.

Pemex -- the world's most indebted oil company due to its reliance on bond markets to finance investments -- ended 2005 with total debt of $49.9 billion and net debt of $39.3 billion.

This year, a long-awaited change to its tax regime will save Pemex roughly $2 billion in taxes.

"Our documented debt will be practically flat or it could fall a little bit, this depends on crude prices. It could fall by close to, around, a billion dollars," Suarez told the Reuters Latin America Investment Summit.

Suarez said the tax regime change, the only major energy sector reform passed under President Vicente Fox, means Pemex can maintain its investment levels with lower external financing needs.

"Looking toward the future, we expect to be able to maintain higher investment levels as well as keeping these debt levels or starting to be able to reduce them," he added.

Pemex has set a capital expenditure budget of $13.1 billion for 2006, up from around $11 billion in 2005, most of which it hopes to fund through cashflow.

It will seek up to $2 billion in external financing.

Debt analysts say they are not unduly worried about Pemex's high debt levels because of the company's large oil and gas reserves and because there is an implicit understanding the government would back the debt of its main cash cow.