In the medium term, Moody’s does not expect any material reduction in Pemex’s tax burden and its debt amount is likely to rise to fund higher capital expenditures. However, its managerial and budgetary autonomy will increase, improving its efficiency.

Pemex’s underlying baseline credit assessment (BCA) at ba1 is based on prospects of relatively stable production and reserves over the medium term, as well as Moody’s outlook that continued high government taxation in conjunction with the company’s increasing capital spending in the medium to long term will lead to higher debt levels and financial leverage.

For these conditions to materially improve, the government will have to increase other sources of revenues and reduce the call on Pemex’s earnings, and the company will have to increase production and earnings from new investments and joint ventures with new industry entrants. This process will be a gradual one, Moody’s said.

In addition, the lack of a clear financial policy with regard to maximum debt leverage constrains Pemex’s ratings.

The stable outlook is based on Moody’s expectation that Pemex will be able to sustain production at about current levels and its financial leverage will not materially increase over the next three years.

Meanwhile, Pemex had issued add-on notes to its senior unsecured certificados bursatiles (local notes) and the add-on has no effect on the existing A3/Aaa.mx ratings. The add-on is to the existing set of notes and no new assignment is being made.

The proposed certificados bursatiles will be issued under Pemex’s five-year tenor and amount up to 200 billion Mexican Pesos. The certificados bursatiles program registered in June 2014 with Mexico’s Comision Nacional Bancaria y de Valores (CNBV).