Company Trend Analysis - Latam NOCs Work To Strengthen Their Core - NOV 2017

BMI View: A heightened focus on upstream efficiency gains will remain the strategic priority of Latin American state-run companies. High debt loads, weaker local cur rencies and lower capex budgets will ultimately undermine development and limit output gains, particularly at Ecopetrol , ENAP and PdVSA .

After a challenging three years, the dust is finally settling at Latin America's (Latam) largest state owned oil companies. Past efforts to scale back expenses and ramp up efficiencies have begun to bear fruit, fortifying operations amid prolonged oil price weakness. As prices begin to strengthen and cost reductions deepen, we expect national oil companies (NOCs) will net stronger profits, supporting a higher output level over the next five years.

Assessing a basket of the region's top NOCs, net income was much improved over H117. At USD6.8bn, the companies nearly reversed the region's USD7.1bn loss reported over H116. This was largely a result of improved downstream margins and a higher realised price for domestic sales at Mexican NOC Pemex.

Improving, But Slowly
NOCs - Net Income, USDmn
Note: PdVSA data excluded. Source: Company data

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