(Bloomberg) -- Citigroup Inc. and Deutsche Bank AG have provided financing to Pemex to help Mexico’s state oil company pay outstanding bills to oilfield services giant SLB, according to people familiar with the matter.
In return, SLB has effectively guaranteed against a Pemex default on the loan by issuing more than $1 billion of credit-default swaps to the two banks, said the people who asked not to be named discussing non-public information.
SLB, the world’s biggest oilfield services provider, disclosed the swaps in US federal filings — $550 million in July and $560 million in January — but did not name the banks. Citigroup and Deutsche Bank’s roles in the transactions have not been previously reported. Oilfield rivals Halliburton Co. and Baker Hughes Co. have disclosed similar swaps with unnamed financial institutions to cover loans to Pemex over the same period.
The financial arrangements mark the latest moves by major oilfield contractors to get paid for work already performed for Pemex. In October, SLB said unpaid bills owed by its largest customer in Mexico had jumped 20% in three months to $1.2 billion. SLB and its US peers historically haven’t identified the customer by name in public filings.
Oil explorers typically don’t own drilling rigs or seismic gear, so they rely on oilfield contractors to perform the manual work of finding and extracting crude. In the case of Pemex, the world’s most-indebted oil company, contractors have for years been faced with unpaid tabs that collectively swelled to as much as $15 billion just 18 months ago.
As of the end of July, Pemex owed suppliers about 126.4 billion pesos ($6.7 billion), inclusive of projects and materials pending invoice, according to the latest company figures.
Earlier this year, Pemex Chief Executive Officer Octavio Romero pledged to maintain a regular pace of payments through August to catch up on delayed invoices. Pemex’s overall debt burden stood at just under $100 billion at the end of the second quarter, when the company posted its worst loss in more than four years.
SLB, Pemex, Deutsche Bank and Citigroup declined to comment.
The amount of the swaps diminish monthly, SLB said in its filings. The first credit swap, made during the final three months of last year for $275 million and bumped to $560 million in January, was at $463 million at the end of June. The second swap was executed in July for $550 million. SLB, formerly named Schlumberger, said that historically it hasn’t written off unpaid bills in Mexico.
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