PETRÓLEOS MEXICANOS - PEMEX | Por el rescate de la [email protected] Avenida Marina Nacional No. 329 Torre Ejecutiva Piso 38 Colonia Petróleos Mexicanos 11311 México D.F., México

30/4/2015 Form 20F

http://www.sec.gov/Archives/edgar/data/932782/000119312515162672/d913051d20f.htm 1/367

20F 1 d913051d20f.htm FORM 20F

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSIONWASHINGTON, D.C. 20549

FORM 20F

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934for the fiscal year ended December 31, 2014

Commission File Number 099

PETRÓLEOS MEXICANOS(Exact name of registrant as specified in its charter)

Mexican Petroleum United Mexican States

(Translation of registrant’s name into English) (Jurisdiction of incorporation or organization)

Avenida Marina Nacional No. 329Colonia Petróleos Mexicanos11311 México D.F., México

(Address of principal executive offices)Rolando Galindo Gálvez

(5255) 1944 [email protected]

Avenida Marina Nacional No. 329Torre Ejecutiva Piso 38 Colonia Petróleos Mexicanos

11311 México D.F., México(Name, telephone, email and/or facsimile numbe

rand address of company contact person)

Securities registered or to be registered pursuant to Section 12(b) of the Act. NoneSecurities registered or to be registered pursuant to Section 12(g) of the Act. None

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act.Title of Each Class

9.50% Global Guaranteed Bonds due 20279 1∕4% Global Guaranteed Bonds due 2018

8.625% Bonds due 20225.75% Guaranteed Notes due 20189 1∕4% Guaranteed Bonds due 20188.625% Guaranteed Bonds due 20239.50% Guaranteed Bonds due 20276.625% Guaranteed Bonds due 20356.625% Guaranteed Bonds due 20388.00% Guaranteed Notes due 2019

6.000% Notes due 20205.50% Notes due 20216.500% Bonds due 20414.875% Notes due 20225.50% Bonds due 20443.500% Notes due 2018

Floating Rate Notes due 20183.500% Notes due 20234.875% Notes due 20243.125% Notes due 20196.375% Bonds due 2045

Indicate by check mark if the registrant is a wellknown seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes No If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934.Yes No

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 duringthe preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for

the past 90 days.Yes No

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Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required tobe submitted and posted pursuant to Rule 405 of Regulation ST (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the

registrant was required to submit and post such files).N/A

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a nonaccelerated filer. See definition of “accelerated filer andlarge accelerated filer” in Rule 12b2 of the Exchange Act. (Check one):

Large accelerated filer Accelerated filer Nonaccelerated filer Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:

U.S. GAAP IFRS as issued by the IASB Other If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow.

Item 17 Item 18 If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b2 of the Exchange Act).

Yes No

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TABLE OF CONTENTS Item 1. Identity of Directors, Senior Management and Advisers 5

Item 2. Offer Statistics and Expected Timetable 5

Item 3. Key Information 5

Item 4. Information on the Company 14

Item 4A. Unresolved Staff Comments 130

Item 5. Operating and Financial Review and Prospects 130

Item 6. Directors, Senior Management and Employees 160

Item 7. Major Shareholders and Related Party Transactions 190

Item 8. Financial Information 191

Item 9. The Offer and Listing 196

Item 10. Additional Information 196

Item 11. Quantitative and Qualitative Disclosures About Market Risk 204

Item 12. Description of Securities Other than Equity Securities 212

Item 13. Defaults, Dividend Arrearages and Delinquencies 213

Item 14. Material Modifications to the Rights of Security Holders and Use of Proceeds 213

Item 15. Controls and Procedures 213

Item 16A. Audit Committee Financial Expert 214

Item 16B. Code of Ethics 214

Item 16C. Principal Accountant Fees and Services 214

Item 16D. Exemptions from the Listing Standards for Audit Committees 215

Item 16E. Purchases of Equity Securities by the Issuer and Affiliated Purchasers 216

Item 16F. Change in Registrant’s Certifying Accountant 216

Item 16G. Corporate Governance 216

Item 16H. Mine Safety Disclosure 216

Item 17. Financial Statements 217

Item 18. Financial Statements 217

Item 19. Exhibits 217

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Petróleos Mexicanos and its four subsidiary entities, PemexExploración y Producción (PemexExploration and Production), PemexRefinación(PemexRefining), PemexGas y Petroquímica Básica (PemexGas and Basic Petrochemicals) and PemexPetroquímica (PemexPetrochemicals, and togetherwith PemexExploration and Production, PemexRefining and PemexGas and Basic Petrochemicals, collectively referred to as the existing subsidiaryentities), comprise the state oil and gas company of the United Mexican States, which we refer to as Mexico. Petróleos Mexicanos is a productive stateownedcompany of the Federal Government of Mexico, which we refer to as the Mexican Government, and each of the subsidiary entities is a decentralized publicentity of the Mexican Government. Each of Petróleos Mexicanos and the existing subsidiary entities is a legal entity empowered to own property and carry onbusiness in its own name. In addition, a number of subsidiary companies that are defined in Note 1 and listed in Note 3(a) to our consolidated financialstatements incorporated in Item 18 are incorporated into the consolidated financial statements; these subsidiary companies are also identified with theircorresponding ownership percentages in “––Consolidated Structure of PEMEX” on page 4. Petróleos Mexicanos, the subsidiary entities and the subsidiarycompanies are collectively referred to as “PEMEX” or “we.” As of the date of this report, we are in the process of reorganizing our corporate structure. See“Item 4—Information on the Company—History and Development—Energy Reform” for more details.

References herein to “U.S. $,” “$,” “U.S. dollars” or “dollars” are to United States dollars. References herein to “pesos” or “Ps.” are to the legalcurrency of Mexico. References herein to “euros” or “€” are to the legal currency of the European Economic and Monetary Union. References herein to“pounds” or “£” are to the legal currency of the United Kingdom. References herein to “Swiss francs” or “CHF” are to the legal currency of the SwissConfederation. References herein to “Japanese yen” or “¥” are to the legal currency of Japan. References herein to “Australian dollars” or “AUD” are to thelegal currency of Australia. The term “billion” as used herein means one thousand million.

Our consolidated financial statements included in this report were prepared in accordance with International Financial Reporting Standards asissued by the International Accounting Standards Board. We refer in this report to “International Financial Reporting Standards as issued by the InternationalAccounting Standards Board” as IFRS. In addition, these financial statements were audited in accordance with the International Standards on Auditing, asrequired by the Comisión Nacional Bancaria y de Valores (National Banking and Securities Commission, or the CNBV) for purposes of filing with the BolsaMexicana de Valores, S.A.B. de C.V. (Mexican Stock Exchange, or the BMV) and with the CNBV, and in accordance with the standards of the PublicCompany Accounting Oversight Board (United States), or PCAOB, for purposes of filings with the U.S. Securities and Exchange Commission, or SEC.

The regulations of the SEC do not require foreign private issuers that prepare their financial statements on the basis of IFRS to reconcile suchfinancial statements to United States Generally Accepted Accounting Principles, which we refer to as U.S. GAAP. Accordingly, while we have in the pastreconciled our consolidated financial statements prepared in accordance with Normas de Información Financiera Mexicanas (Mexican Financial ReportingStandards, or Mexican FRS) to U.S. GAAP, those reconciliations are no longer presented in our filings with the SEC. We do, however, continue to provide thedisclosure required under the U.S. Financial Accounting Standards Board Accounting Standards Codification (ASC) Topic 932 “Extractive Activities—Oiland Gas” (which we refer to as ASC Topic 932), as this is required regardless of the basis of accounting on which we prepare our financial statements.

We maintain our consolidated financial statements and accounting records in pesos. Unless otherwise indicated, we have translated all pesoamounts to U.S. dollars in this Form 20F, including all convenience translations of our consolidated financial statements included herein, at an exchange rateof Ps. 14.7180 = U.S. $1.00, which is the exchange rate that the Secretaría de Hacienda y Crédito Público (Ministry of Finance and Public Credit, or theSHCP) instructed us to use on December 31, 2014. You should not construe these translations from pesos into dollars as actually representing such U.S. dollaramounts or meaning that you could convert such amounts into U.S. dollars at the rates indicated. Mexico has a free market for foreign exchange, and theMexican Government allows the peso to float freely against the U.S. dollar. There can be no assurance that the Mexican Government will maintain its currentpolicies with regard to the peso or that the peso will not depreciate or appreciate significantly in the future. Due to the volatility of the peso/U.S. dollarexchange rate, the exchange rate on any date subsequent to the date hereof could be materially different from the rate indicated above. See “Item 3—KeyInformation—Exchange Rates” for information regarding the rates of exchange between pesos and U.S. dollars.

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SPECIAL NOTE REGARDING MEXICAN ENERGY REFORM

On December 20, 2013, amendments to Articles 25, 27 and 28 of the Constitución Política de los Estados Unidos Mexicanos (PoliticalConstitution of the United Mexican States, or the Mexican Constitution) were published as the Decreto por el que se reforman y adicionan diversasdisposiciones de la Constitución Política de los Estados Unidos Mexicanos, en Materia de Energía (Decree that amends and supplements various provisionsof the Mexican Constitution relating to energy matters, which we refer to as the Energy Reform Decree) in the Diario Oficial de la Federación (OfficialGazette of the Federation) and took effect on December 21, 2013. The Energy Reform Decree includes artículos transitorios (transitional articles) that set forththe general framework for the implementing laws that are required to give effect to the Energy Reform Decree, which we refer to as the Secondary Legislation.On August 6, 2014, the Mexican Congress completed the process of approving the Secondary Legislation, which was signed into law by the President ofMexico, Mr. Enrique Peña Nieto, and published in the Official Gazette of the Federation on August 11, 2014. The Secondary Legislation includes nine newlaws, among others, the new Ley de Petróleos Mexicanos (Petróleos Mexicanos Law) and the Ley de Hidrocarburos (Hydrocarbons Law), as well asamendments to several existing laws. As of the date of this report, certain provisions of the Secondary Legislation, including some provisions of the PetróleosMexicanos Law, are not yet effective. See “Item 4—Information on the Company—History and Development—Energy Reform” for more details regarding theimplementation of the Secondary Legislation.

On November 18, 2014, pursuant to the Petróleos Mexicanos Law, the Board of Directors of Petróleos Mexicanos approved the DirectorGeneral’s proposal for our corporate reorganization, which provides for the future formation of the new productive stateowned subsidiaries, PemexExploración y Producción (Pemex Exploration and Production), Pemex Transformación Industrial (Pemex Industrial Transformation), Pemex Perforación yServicios (Pemex Drilling and Services), Pemex Logística (Pemex Logistics), Pemex Cogeneración y Servicios (Pemex Cogeneration and Services), PemexFertilizantes (Pemex Fertilizers) and Pemex Etileno (Pemex Ethylene and, together with Pemex Exploration and Production, Pemex Industrial Transformation,Pemex Drilling and Services, Pemex Logistics, Pemex Cogeneration and Services and Pemex Fertilizers, collectively referred to as the new subsidiary entities).See “Item 4—Information on the Company—History and Development—Energy Reform” for more information regarding our corporate reorganization,including the acuerdos de creación (creation resolutions) for each of the new subsidiary entities that were approved by the Board of Directors of PetróleosMexicanos on March 27, 2015 and published in the Official Gazette of the Federation on April 28, 2015.

PRESENTATION OF INFORMATION CONCERNING RESERVES

The proved hydrocarbon reserves included in this report for the year ended December 31, 2014 are those that we have the right to extract and sellbased on the Mexican Government’s assignments to us in August 2014 through the process commonly referred to as Round Zero. See “Item 4—Information onthe Company—History and Development—Energy Reform” for a description of the Round Zero process. The estimates of our proved reserves of crude oil andnatural gas for the five years ended December 31, 2014 included in this report have been calculated according to the technical definitions required by the SEC.DeGolyer and MacNaughton, Netherland, Sewell International, S. de R.L. de C.V. (which we refer to as Netherland Sewell) and Ryder Scott Company, L.P.(which we refer to as Ryder Scott) conducted reserves audits of our estimates of our proved hydrocarbon reserves as of December 31, 2014 or January 1, 2015,as applicable. All reserves estimates involve some degree of uncertainty. For a description of the risks relating to reserves and reserves estimates, see “Item 3—Key Information—Risk Factors—Risk Factors Related to our Relationship with the Mexican Government—Information on hydrocarbon reserves in this reportis based on estimates, which are uncertain and subject to revisions,” “—We must make significant capital expenditures to maintain our current productionlevels, and to maintain, as well as increase, our proved hydrocarbon reserves. Reductions in our income, adjustments to our capital expenditures budget andinability to obtain financing may limit our ability to make capital investments” and “—The Mexican nation, not us, owns the hydrocarbon reserves in Mexicolocated in the subsoil of Mexico and our right to continue to extract these reserves is subject to the approval of the Ministry of Energy.”

FORWARDLOOKING STATEMENTS

This Form 20F contains words, such as “believe,” “expect,” “anticipate” and similar expressions that identify forwardlooking statements, whichreflect our views about future events and financial performance. We have made forwardlooking statements that address, among other things, our:

• exploration and production activities, including drilling;

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• activities relating to import, export, refining, petrochemicals and transportation of petroleum, natural gas and oil products;

• projected and targeted capital expenditures and other costs, commitments and revenues; and

• liquidity and sources of funding.

Actual results could differ materially from those projected in such forwardlooking statements as a result of various factors that may be beyond ourcontrol. These factors include, but are not limited to:

• changes in international crude oil and natural gas prices;

• effects on us from competition, including on our ability to hire and retain skilled personnel;

• limitations on our access to sources of financing on competitive terms;

• our ability to find, acquire or gain access to additional reserves and to develop the reserves that we obtain successfully;

• uncertainties inherent in making estimates of oil and gas reserves, including recently discovered oil and gas reserves;

• technical difficulties;

• significant developments in the global economy;

• significant economic or political developments in Mexico, including developments relating to the implementation of the SecondaryLegislation;

• developments affecting the energy sector; and

• changes in our legal regime or regulatory environment, including tax and environmental regulations.

Accordingly, you should not place undue reliance on these forwardlooking statements. In any event, these statements speak only as of theirdates, and we undertake no obligation to update or revise any of them, whether as a result of new information, future events or otherwise.

For a discussion of important factors that could cause actual results to differ materially from those contained in any forwardlooking statement, see“Item 3—Key Information—Risk Factors.”

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PART I Item 1. Identity of Directors, Senior Management and Advisers

Not applicable.

Item 2. Offer Statistics and Expected Timetable

Not applicable.

Item 3. Key Information

SELECTED FINANCIAL DATA

The selected statement of comprehensive income, statement of financial position and cash flows data set forth below as of and for the four yearsended December 31, 2014 have been derived from, and should be read in conjunction with, our consolidated financial statements as of December 31, 2013 and2014 and for the years ended December 31, 2012, 2013 and 2014, which are included in Item 18 of this report. Our consolidated financial statements for eachof the fiscal years ended December 31, 2011 and 2012 were audited by KPMG Cárdenas Dosal, S.C., an independent registered public accounting firm. Ourconsolidated financial statements for each of the fiscal years ended December 31, 2013 and 2014 were audited by Castillo Miranda y Compañía, S.C. (whichwe refer to as BDO Mexico), an independent registered public accounting firm. Certain amounts in the consolidated financial statements for the years endedDecember 31, 2012 and 2013 have been reclassified to conform the presentation of the amounts in the consolidated financial statements for the year endedDecember 31, 2014. These reclassifications are not significant to the consolidated financial statements and had no impact on our consolidated net income.

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Selected Financial Data of PEMEX Year ended December 31,(1)(2) 2011 2012 2013 2014 2014(3)

(in millions of pesos, except ratios) (in millions ofU.S. dollars)

Statement of Comprehensive Income DataNet sales Ps. 1,558,454 Ps. 1,646,912 Ps. 1,608,205 Ps. 1,586,728 U.S. $ 107,809 Operating income 861,311 905,339 727,622 615,480 41,818 Financing income 4,198 2,532 8,736 3,014 205 Financing cost (35,154) (46,011) (39,586) (51,559) (3,503) Derivative financial instruments (cost) income—Net (1,697) (6,258) 1,311 (9,439) (641) Exchange (loss) gain—Net (60,143) 44,846 (3,951) (76,999) (5,232) Net (loss) income for the period (106,942) 2,600 (170,058) (265,543) (18,042)

Statement of Financial Position Data (end of period)Cash and cash equivalents 114,977 119,235 80,746 117,989 8,017 Total assets 1,981,374 2,024,183 2,047,390 2,128,368 144,610 Longterm debt 672,657 672,618 750,563 997,384 67,766 Total longterm liabilities 1,624,752 2,059,445 1,973,446 2,561,930 174,068 Total equity (deficit) 103,177 (271,066) (185,247) (767,721) (52,162)

Statement of Cash FlowsDepreciation and amortization 127,380 140,538 148,492 143,075 9,721 Acquisition of wells, pipelines, properties, plant and equipment(4) 167,014 197,509 245,628 230,679 15,673

Other Financial DataRatio of earnings to fixed charges(5)(6) — 1.01 — — —

(1) We have not included selected consolidated financial data as of and for the year ended December 31, 2010, as we began presenting our financial statements in accordance with IFRS for the

fiscal year ending December 31, 2012, with an official IFRS “adoption date” of January 1, 2012 and a “transition date” to IFRS of January 1, 2011. Based on such adoption and transition dates,we were not required to prepare financial statements in accordance with IFRS as of and for the year ended December 31, 2010 and therefore are unable to present selected financial data inaccordance with IFRS for this period without unreasonable effort and expense.

(2) Includes Petróleos Mexicanos, the subsidiary entities and the subsidiary companies listed in Note 3(a) to our consolidated financial statements included herein.(3) Translations into U.S. dollars of amounts in pesos have been made at the exchange rate established by the SHCP for accounting purposes of Ps. 14.7180 = U.S. $1.00 at December 31, 2014.

Such translations should not be construed as a representation that the peso amounts have been or could be converted into U.S. dollar amounts at the foregoing or any other rate.(4) Includes capitalized financing cost. See Note 10 to our consolidated financial statements included herein and “Item 5—Operating and Financial Review and Prospects—Liquidity and Capital

Resources.”(5) Earnings, for this purpose, consist of pretax income (loss) from continuing operations before income from equity investees, plus fixed charges, minus interest capitalized during the period, plus

the amortization of capitalized interest during the period and plus dividends received on equity investments. Pretax income (loss) is calculated after the deduction of hydrocarbon duties, butbefore the deduction of the hydrocarbon income tax and other income taxes. Fixed charges for this purpose consist of the sum of interest expense plus interest capitalized during the period, plusamortization premiums related to indebtedness and plus the estimated interest within rental expense. Fixed charges do not take into account exchange gain or loss attributable to our indebtedness.

(6) Earnings for the years ended December 31, 2011, 2013 and 2014 were insufficient to cover fixed charges. The amount by which fixed charges exceeded earnings was Ps. 106,476 million,Ps. 165,217 million and Ps. 283,640 million for the years ended December 31, 2011, 2013 and 2014, respectively.

Source:PEMEX’s consolidated financial statements, prepared in accordance with IFRS, as it relates to the Selected Statements of Comprehensive Income, Statement of Financial Position andStatement of Cash Flows Data; and Petróleos Mexicanos, as it relates to Other Financial Data.

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EXCHANGE RATES

The following table sets forth, for the periods indicated, the high, low, average and periodend exchange rates for the purchase of U.S. dollars,expressed in pesos per U.S. dollar. These rates have not been restated in constant currency units.

Period Exchange Rate Year Ended December 31, High Low Average(1) Period End 2010 13.194 12.156 12.635 12.383 2011 14.254 11.505 12.464 13.951 2012 14.365 12.625 13.140 12.964 2013 13.433 11.976 12.857 13.098 2014 14.794 12.846 13.370 14.750

November 2014 13.921 13.536 13.615 13.921 December 2014 14.794 13.936 14.520 14.750

2015January 2015 15.005 14.564 14.700 15.005 February 2015 15.103 14.748 14.917 14.939 March 2015 15.582 14.933 15.237 15.245 April 2015(2) 15.428 14.803 15.177 15.383

(1) Average of monthend rates, except for 2014 and 2015 monthly exchange rates.(2) For the period from April 1, 2015 to April 24, 2015.Source: Noon buying rate for cable transfers in New York reported by the Federal Reserve.

The noon buying rate for cable transfers in New York reported by the Federal Reserve on April 24, 2015 was Ps. 15.383 = U.S. $1.00.

RISK FACTORS

Risk Factors Related to Our Operations

Crude oil and natural gas prices are volatile and low crude oil and natural gas prices adversely affect our income and cash flows and the amount ofhydrocarbon reserves that we have the right to extract and sell.

International crude oil and natural gas prices are subject to global supply and demand and fluctuate due to many factors beyond our control.These factors include competition within the oil and natural gas industry, the prices and availability of alternative sources of energy, international economictrends, exchange rate fluctuations, expectations of inflation, domestic and foreign government regulations or international laws, political and other events inmajor oil and natural gas producing and consuming nations and actions taken by oil exporting countries, trading activity in oil and natural gas andtransactions in derivative financial instruments (which we refer to as DFIs) related to oil and gas.

When international crude oil, petroleum product and/or natural gas prices are low, we earn less revenue and, therefore, generate lower cash flowsand earn less income before taxes and duties because our costs remain roughly constant. Conversely, when crude oil, petroleum product and natural gas pricesare high, we earn more revenue and our income before taxes and duties increases. During the first eight months of 2014, the Mexican crude oil export pricerose to more than U.S. $100.00 per barrel, and the weighted average price for the year was U.S. $86.00 per barrel. However, beginning in September 2014,crude oil prices experienced a sharp decline, and in December 2014, the weighted average Mexican crude oil export price fell to a low of U.S. $45.45 perbarrel. This sharp decline of crude oil prices had a direct effect on our results of operations for the year ended December 31, 2014 and our financial condition asof December 31, 2014, and the continuation of prices at or around these levels or future declines in international crude oil and natural gas prices will havesimilar effects. During the first month of 2015, the weighted average Mexican crude oil export price declined further to U.S. $37.36 per barrel. Thesefluctuations may also affect estimates of the amount of Mexico’s hydrocarbon reserves that we have the right to extract and sell. See “—Risk Factors Related toour Relationship with the Mexican Government—Information on hydrocarbon reserves in this report is based on estimates, which are uncertain and subject torevisions” below in this Item 3 and “Item 11—Quantitative and Qualitative Disclosures about Market Risk—Hydrocarbon Price Risk.”

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We are an integrated oil and gas company and are exposed to production, equipment and transportation risks, criminal acts and deliberate acts of terror.

We are subject to several risks that are common among oil and gas companies. These risks include production risks (fluctuations in productiondue to operational hazards, natural disasters or weather, accidents, etc.), equipment risks (relating to the adequacy and condition of our facilities andequipment) and transportation risks (relating to the condition and vulnerability of pipelines and other modes of transportation). More specifically, our businessis subject to the risks of explosions in pipelines, refineries, plants, drilling wells and other facilities, oil spills, hurricanes in the Gulf of Mexico and othernatural or geological disasters and accidents, fires and mechanical failures. Criminal attempts to divert our crude oil, natural gas or refined products from ourpipeline network and facilities for illegal sale have resulted in explosions, property and environmental damage, injuries and loss of life.

Our facilities are also subject to the risk of sabotage, terrorism and cyber attacks. In July 2007, two of our pipelines were attacked. InSeptember 2007, six different sites were attacked and 12 of our pipelines were affected. The occurrence of these incidents related to the production, processingand transportation of oil and oil products could result in personal injuries, loss of life, environmental damage from the subsequent containment, cleanup andrepair expenses, equipment damage and damage to our facilities. A shutdown of the affected facilities could disrupt our production and increase ourproduction costs. As of the date of this report, there have been no similar occurrences since 2007. Although we have established an information securityprogram, which includes cybersecurity systems and procedures to protect our information technology, and have not yet suffered a cyber attack, if the integrityof our information technology were ever compromised due to a cyber attack, our business operations could be disrupted and our proprietary information couldbe lost or stolen.

We purchase comprehensive insurance policies covering most of these risks; however, these policies may not cover all liabilities, and insurancemay not be available for some of the consequential risks. There can be no assurance that accidents or acts of terror will not occur in the future, that insurancewill adequately cover the entire scope or extent of our losses or that we may not be found directly liable in connection with claims arising from these or otherevents. See “Item 4—Information on the Company—Business Overview—PEMEX Corporate Matters—Insurance.”

We have a substantial amount of liabilities that could adversely affect our financial condition and results of operations.

We have a substantial amount of debt. As of December 31, 2014, our total indebtedness, including accrued interest, was approximatelyU.S. $77.7 billion, in nominal terms, which is a 20.8% increase as compared to our total indebtedness, including accrued interest, of approximatelyU.S. $64.3 billion at December 31, 2013. Our level of debt may increase further in the short or medium term and may have an adverse effect on our financialcondition and results of operations. To service our debt, we have relied and may continue to rely on a combination of cash flows provided by operations,drawdowns under our available credit facilities and the incurrence of additional indebtedness.

Certain rating agencies have expressed concerns regarding the total amount of our debt, our increase in indebtedness over the last several yearsand our substantial unfunded reserve for retirement pensions and seniority premiums, which as of December 31, 2014 was equal to approximatelyU.S. $100.2 billion. Though the Secondary Legislation enables the Mexican Government to assume a portion of the pension liabilities of Petróleos Mexicanosand the subsidiary entities, the amount that this portion will represent is dependent on our ability to meet the conditions set forth in the applicable decree, andwe cannot provide assurances that we will be able to meet these conditions within the specified time frame. Moreover, we cannot provide assurances that theMexican Government’s potential assumption of any portion of our unfunded reserve in the future will eliminate the concerns of rating agencies.

Due to our heavy tax burden, we have resorted to debt financing to carry out our capital investment projects. Any lowering of our credit ratingsmay have adverse consequences on our ability to access the financial markets and/or our cost of financing. If we were unable to obtain financing on favorableterms, this could hamper our ability to obtain further financing as well as hamper investment in projects financed through debt. As a result, we may not be ableto make the capital expenditures needed to maintain our current production levels and to maintain, as well as increase, proved hydrocarbon reserves, whichmay adversely affect our financial condition and results of operations. See “—Risk Factors Related to our Relationship with the Mexican Government—Wemust make significant capital expenditures to maintain our current production levels, and to maintain, as well as increase, our proved hydrocarbon reserves.Reductions in our income, adjustments to our capital expenditures budget and inability to obtain financing may limit our ability to make capital investments”below in this Item 3.

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We are subject to Mexican and international anticorruption, antibribery and antimoney laundering laws. Our failure to comply with these laws couldresult in penalties, which could harm our reputation and have an adverse effect on our business, results of operations and financial condition.

We are subject to Mexican and international anticorruption, antibribery and antimoney laundering laws. See “Item 4—Information on theCompany—General Regulatory Framework.” Although we maintain policies and processes intended to comply with these laws, including the review of ourinternal control over financial reporting, we cannot ensure that these compliance policies and processes will prevent intentional, reckless or negligent actscommitted by our officers or employees.

If we fail to comply with any applicable anticorruption, antibribery or antimoney laundering laws, we and our officers and employees may besubject to criminal, administrative or civil penalties and other remedial measures, which could have material adverse effects on our business, financialcondition and results of operations. Any investigation of potential violations of anticorruption, antibribery or antimoney laundering laws by governmentalauthorities in Mexico or other jurisdictions could result in an inability to prepare our consolidated financial statements in a timely manner. This couldadversely impact our reputation, ability to access the financial markets and ability to obtain contracts, assignments, permits and other governmentauthorizations necessary to participate in our industry, which, in turn, could have adverse effects on our business, results of operations and financial condition.

Our compliance with environmental regulations in Mexico could result in material adverse effects on our results of operations.

A wide range of general and industryspecific Mexican federal and state environmental laws and regulations apply to our operations; these lawsand regulations are often difficult and costly to comply with and carry substantial penalties for noncompliance. This regulatory burden increases our costsbecause it requires us to make significant capital expenditures and limits our ability to extract hydrocarbons, resulting in lower revenues. For an estimate of ouraccrued environmental liabilities, see “Item 4—Information on the Company—Environmental Regulation—Environmental Liabilities.” In addition, we haveagreed with other companies to make investments to reduce our carbon dioxide emissions. See “Item 4—Information on the Company—EnvironmentalRegulation—Global Climate Change and Carbon Dioxide Emissions Reduction.”

Risk Factors Related to Mexico

The effects of the implementation of the new legal framework applicable to the energy sector in Mexico are uncertain but likely to be material, and mayhave a negative impact on us in the short and medium term.

The enactment of the Secondary Legislation implementing the reforms to the Mexican energy sector that were contemplated in the Energy ReformDecree has had a significant effect on us, and these effects could be adverse to our interests in the short and medium term, as further described below.

As part of the implementation of the Energy Reform Decree, the Mexican Government announced the results of Round Zero in August 2014,through which we were assigned oil and gas exploration and extraction rights in certain areas in Mexico. We are required to comply with the explorationplans and development plans for the extraction of hydrocarbons that we submitted to the Secretaría de Energía (Ministry of Energy) in connection with ourassignments. If we fail to comply with our exploration and development for extraction plans within the specified time period authorized by Ministry ofEnergy, our rights to continue exploring and developing the underlying areas may be revoked, which may adversely affect our operating results and financialcondition. See “—Risk Factors Related to our Relationship with the Mexican Government—We must make significant capital expenditures to maintain ourcurrent production levels, and to maintain, as well as increase, our proved hydrocarbon reserves. Reductions in our income, adjustments to our capitalexpenditures budget and inability to obtain financing may limit our ability to make capital investments” below in this Item 3.

Although, as of the date of this report, we remain the only entity that conducts exploration and extraction activities in Mexico, the SecondaryLegislation allows the Mexican Government to enter into agreements with other oil and gas companies to conduct these activities. As a result, we expect toface competition for the right to explore and develop new oil and gas reserves in Mexico. See “—Risk Factors Related to our Relationship with the MexicanGovernment—Increased competition in the Mexican energy sector may have a negative impact on our results of operations and financial conditions” below inthis Item 3. While the participation of other oil and gas companies in the Mexican energy sector is intended to provide a new source of revenues for theMexican Government and thereby reduce its reliance on our revenues, we cannot provide assurances that the amount of our payments to the MexicanGovernment will significantly decrease in the near future. See “—Risk Factors Related to our Relationship with the Mexican Government—We makesignificant payments to the Mexican Government, which may limit our capacity to expand our investment program” below in this Item 3.

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As of the date of this report, certain provisions of the Secondary Legislation, including some provisions of the Petróleos Mexicanos Law, are notyet effective. Accordingly, the effects of the implementation remain uncertain, although these effects are likely to be material and may have a negative effecton our financial condition, results of operation and prospects in the short and medium term. Moreover, as a result of longstanding restrictions included incertain of our financing agreements that were based on the legal framework in effect before the Energy Reform Decree and the Secondary Legislation wereenacted, these effects may cause us to default on these agreements in the event that we are unable to amend them or obtain waivers from our lenders, as may berequired in connection with the ongoing implementation of the Secondary Legislation. See “Item 5—Operating and Financial Review and Prospects—Liquidity and Capital Resources—Amendments to Certain Financing Agreements” for more information regarding the waivers and amendments that we haveobtained as of the date of this report.

Economic conditions and government policies in Mexico and elsewhere may have a material impact on our operations.

A deterioration in Mexico’s economic condition, social instability, political unrest or other adverse social developments in Mexico couldadversely affect our business and financial condition. These events could also lead to increased volatility in the financial markets, thereby affecting our abilityto obtain new financing and service our debt. Additionally, the Mexican Government recently cut spending in response to a downward trend in internationalcrude oil prices, and it may cut spending in the future. See “—Risk Factors Related to our Relationship with the Mexican Government—The MexicanGovernment controls us and it could limit our ability to satisfy our external debt obligations or could reorganize or transfer us or our assets” below in thisItem 3. These cuts could adversely affect the Mexican economy and, consequently, our business, financial condition, operating results and prospects.

In the past, Mexico has experienced several periods of slow or negative economic growth, high inflation, high interest rates, currency devaluationand other economic problems. These problems may worsen or reemerge, as applicable, in the future and could adversely affect our business and ability toservice our debt. A worsening of international financial or economic conditions, such as a slowdown in growth or recessionary conditions in Mexico’s tradingpartners, including the United States, or the emergence of a new financial crisis, could have adverse effects on the Mexican economy, our financial conditionand our ability to service our debt.

Changes in Mexico’s exchange control laws may hamper our ability to service our foreign currency debt.

The Mexican Government does not currently restrict the ability of Mexican companies or individuals to convert pesos into other currencies.However, we cannot provide assurances that the Mexican Government will maintain its current policies with regard to the peso. In the future, the MexicanGovernment could impose a restrictive exchange control policy, as it has done in the past. Mexican Government policies preventing us from exchanging pesosinto U.S. dollars could hamper our ability to service our foreign currency obligations, including our debt, the majority of which is denominated in currenciesother than pesos.

Political conditions in Mexico could materially and adversely affect Mexican economic policy and, in turn, our operations.

Political events in Mexico may significantly affect Mexican economic policy and, consequently, our operations. On December 1, 2012,Mr. Enrique Peña Nieto, a member of the Partido Revolucionario Institucional (Institutional Revolutionary Party, or PRI), formally assumed office for a sixyear term as the President of Mexico. As of the date of this report, no political party holds a simple majority in either house of the Mexican Congress. OnJune 7, 2015, federal elections will take place in Mexico to elect 500 federal deputies of the Mexican Congress.

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Mexico has experienced a period of increasing criminal activity, which could affect our operations.

In recent years, Mexico has experienced a period of increasing criminal activity, primarily due to the activities of drug cartels and related criminalorganizations. In addition, the development of the illicit market in fuels in Mexico has led to increases in theft and illegal trade in the fuels that we produce. Inresponse, the Mexican Government has implemented various security measures and strengthened its military and police forces, and we have also establishedvarious strategic measures aimed at decreasing incidents of theft and other criminal activity directed at our facilities and products. See “Item 8—FinancialInformation—Legal Proceedings—Actions Against the Illicit Market in Fuels.” Despite these efforts, criminal activity continues to exist in Mexico, some ofwhich may target our facilities and products. These activities, their possible escalation and the violence associated with them may have a negative impact onour financial condition and results of operations.

Risk Factors Related to our Relationship with the Mexican Government

The Mexican Government controls us and it could limit our ability to satisfy our external debt obligations or could reorganize or transfer us or our assets.

We are controlled by the Mexican Government and our annual budget, which is approved by the Cámara de Diputados (Chamber of Deputies),can be adjusted by the Mexican Government, as described below. Pursuant to the Petróleos Mexicanos Law, Petróleos Mexicanos was transformed from adecentralized public entity to a productive stateowned company on October 7, 2014. The Petróleos Mexicanos Law establishes a special regime governing,among other things, our budget, debt levels and administrative liabilities, which took effect on December 2, 2014, with the exception of certain provisions.This special regime provides Petróleos Mexicanos with additional technical and managerial autonomy, as well as discretion with respect to certain elements ofour budget. Notwithstanding this increased autonomy, the Mexican Government still controls us and has the power to adjust our financial balance goal, whichrepresents our targeted net cash flow for the fiscal year based on our projected revenues and expenses, and the ceiling on our annual wage and salaryexpenditures. The Mexican Government’s authority to adjust our annual budget may compromise our ability to develop our reserves and to successfullycompete with other oil and gas companies that enter the Mexican energy sector. See “Item 4—Information on the Company—History and Development—Capital Expenditures and Investments—Capital Expenditures Budget” for more information about our February 2015 budget adjustment and “—GeneralRegulatory Framework” for more information about the Mexican Government’s authority with respect to our budget. In addition, the Mexican Government’scontrol over us could adversely affect our ability to make payments under any securities issued by Petróleos Mexicanos. Although Petróleos Mexicanos iswholly owned by the Mexican Government, our financing obligations do not constitute obligations of and are not guaranteed by the Mexican Government.

The Mexican Government’s agreements with international creditors may affect our external debt obligations. In certain past debt restructurings ofthe Mexican Government, Petróleos Mexicanos’ external indebtedness was treated on the same terms as the debt of the Mexican Government and other publicsector entities, and it may be treated on similar terms in any future debt restructuring. In addition, Mexico has entered into agreements with official bilateralcreditors to reschedule public sector external debt. Mexico has not requested restructuring of bonds or debt owed to multilateral agencies.

The Hydrocarbons Law that was adopted as part of the Secondary Legislation contemplates the transfer of certain of our assets to Centro Nacionalde Control del Gas Natural (National Center of Natural Gas Control, or CENAGAS) in the future. The Mexican Government has the power, if the MexicanConstitution and federal law were further amended, to further reorganize our corporate structure, including a transfer of all or a portion of our assets to an entitynot controlled, directly or indirectly, by the Mexican Government. The reorganization and transfer of assets contemplated by the Energy Reform Decree andthe Secondary Legislation, or any other reorganization or transfer that the Mexican Government may effect, could adversely affect our production, disrupt ourworkforce and operations and cause us to default on certain obligations. See “—Risk Factors Related to Mexico” above in this Item 3.

We make significant payments to the Mexican Government, which may limit our capacity to expand our investment program.

We are required to make significant payments to the Mexican Government, including in the form of taxes and duties, which may limit our abilityto make capital investments. In 2014, approximately 47.0% of our sales revenues was used for payments to the Mexican Government in the form of taxes andduties, which constituted a substantial portion of the Mexican Government’s revenues.

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The Secondary Legislation includes changes to the fiscal regime applicable to us, particularly with respect to the exploration and productionactivities that we carry out in Mexico. Beginning in 2016, we will begin paying a state dividend in lieu of certain of the payments that we currently may berequired to pay at the discretion of the Mexican Government. This state dividend will be calculated by the SHCP as a percentage of the revenues, after taxes,that we generate through activities subject to the Ley de Ingresos sobre Hidrocarburos (Hydrocarbons Revenue Law) on an annual basis and approved by theMexican Congress in accordance with the terms of the Petróleos Mexicanos Law. See “Item 8—Financial Information—Dividends” for more information. TheSecondary Legislation also contemplates a new framework for taxation under which the Mexican Government is to collect revenues from other companiesparticipating in the Mexican energy sector. Although this new framework is designed in part to reduce the Mexican Government’s reliance on payments madeby us, we cannot provide assurances that we will not be required to continue to pay a large proportion of our sales revenue to the Mexican Government. See“Item 4—Taxes, Duties and Other Payments to the Mexican Government—New Fiscal Regime.” As of the date of this report, we are assessing the impact thatthese changes may have on us. See “—Risk Factors Related to Mexico—The effects of the implementation of the new legal framework applicable to theenergy sector in Mexico are uncertain but likely to be material, and may have a negative impact on us in the short and medium term” above in this Item 3.

The Mexican Government has imposed price controls in the domestic market on our products.

The Mexican Government has from time to time imposed price controls on the sales of natural gas, liquefied petroleum gas (which we refer to asLPG), gasoline, diesel, gas oil intended for domestic use, fuel oil and other products. When these price controls have been implemented in the past, we havenot been able to pass on all of the increases in the prices of our product purchases to our customers in the domestic market. We do not control the MexicanGovernment’s domestic policies and the Mexican Government could impose additional price controls on the domestic market in the future. The imposition ofsuch price controls would adversely affect our results of operations. For more information, see “Item 4—Information on the Company—Business Overview—Refining—Pricing Decrees” and “Item 4—Information on the Company—Business Overview—Gas and Basic Petrochemicals—Pricing Decrees.”

The Mexican nation, not us, owns the hydrocarbon reserves in Mexico located in the subsoil of Mexico and our right to continue to extract these reserves issubject to the approval of the Ministry of Energy.

The Mexican Constitution provides that the Mexican nation, not us, owns all petroleum and other hydrocarbon reserves located in the subsoil ofMexico.

Following the adoption of the Energy Reform Decree, Article 27 of the Mexican Constitution provides that the Mexican Government will carryout exploration and extraction activities through assignments to and agreements with us, as well as through agreements with other companies. Pursuant to theSecondary Legislation, the rights of oil and gas companies, including us, to explore and extract the petroleum and other hydrocarbon reserves located in thesubsoil of Mexico is subject to the assignment of rights by the Ministry of Energy and entry into agreements pursuant to a competitive bidding process.

Access to crude oil and natural gas reserves is essential to an oil and gas company’s sustained production and generation of income, and ourability to generate income would be materially and adversely affected if the Mexican Government were to restrict or prevent us from exploring or extractingany of the crude oil and natural gas reserves that it has assigned to us or if we are unable to compete effectively with other oil and gas companies in futurebidding rounds for additional exploration and extraction rights in Mexico. For more information, see “—We must make significant capital expenditures tomaintain our current production levels, and to maintain, as well as increase, our proved hydrocarbon reserves. Reductions in our income, adjustments to ourcapital expenditures budget and inability to obtain financing may limit our ability to make capital investments” below in this Item 3.

Information on hydrocarbon reserves in this report is based on estimates, which are uncertain and subject to revisions.

The information on oil, gas and other reserves set forth in this report is based on estimates. Reserves valuation is a subjective process of estimatingunderground accumulations of crude oil and natural gas that cannot be measured in an exact manner; the accuracy of any reserves estimate depends on thequality and reliability of available data, engineering and geological interpretation and subjective judgment. Additionally, estimates may be revised based onsubsequent results of drilling, testing and production. These estimates are also subject to certain adjustments based on changes in variables, including crude oilprices. Therefore, proved reserves estimates may differ materially from the ultimately recoverable quantities of crude oil and natural gas. See “—Risk FactorsRelated to Our Operations—Crude oil and natural gas prices are volatile and low crude oil and natural gas prices adversely affect our income and cash flowsand the amount of hydrocarbon reserves that we have the right to extract and sell” above in this Item 3. PemexExploration and Production revises annually itsestimates of hydrocarbon reserves that it is entitled to extract and sell, which may result in material revisions to these estimates. Our ability to maintain ourlongterm growth objectives for oil production depends on our ability to successfully develop our reserves, and failure to do so could prevent us fromachieving our longterm goals for growth in production.

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We must make significant capital expenditures to maintain our current production levels, and to maintain, as well as increase, our proved hydrocarbonreserves. Reductions in our income, adjustments to our capital expenditures budget and inability to obtain financing may limit our ability to make capitalinvestments.

Because our ability to maintain, as well as increase, our oil production levels is highly dependent upon our ability to successfully developexisting hydrocarbon reserves and, in the long term, upon our ability to obtain the right to develop additional reserves, we continually invest capital toenhance our hydrocarbon recovery ratio and improve the reliability and productivity of our infrastructure.

Despite these investments, the replacement rate for proved hydrocarbon reserves decreased to 18.0% in 2014, representing a decline in provedhydrocarbon reserves. See “Item 4—Information on the Company—Business Overview––Exploration and Production––Reserves” for more information aboutthe factors leading to this decline, including the results of Round Zero. PemexExploration and Production’s crude oil production decreased by 0.2% from2011 to 2012, by 1.0% from 2012 to 2013 and by 3.7% from 2013 to 2014, primarily as a result of the decline of production in the Cantarell, ATG, Delta delGrijalva, Crudo Ligero Marino and IxtalManik projects.

Upon the completion of Round Zero in August 2014, the Ministry of Energy granted us the right to continue to explore and develop areas thattogether contain 95.9% of the estimated proved reserves that we requested. The development of the reserves that were assigned to us, particularly the reservesin the deep waters of the Gulf of Mexico and in shale oil and gas fields in the Burgos basin, will demand significant capital investments and will posesignificant operational challenges. Our right to develop the reserves assigned to us through Round Zero is conditioned on our ability to develop such reservesin accordance with our development plans, which were based on our technical, financial and operational capabilities at the time. See “Item 4––History andDevelopment––Energy Reform—Assignment of Exploration and Production Rights.” We cannot provide assurances that we will have or will be able toobtain, in the time frame that we expect, sufficient resources or the technical capacity necessary to explore and extract the reserves that the MexicanGovernment assigned to us as part of Round Zero, or that it may grant to us in the future. We may also lose the right to continue to extract these reserves if wefail to develop them in accordance with our development plans, which could adversely affect our operating results and financial condition. In addition,increased competition in the oil and gas sector in Mexico may increase the costs of obtaining additional acreage in bidding rounds for the rights to newreserves.

Our ability to make capital expenditures is limited by the substantial payments that we make to the Mexican Government, the ability of theMexican Government to adjust our annual budget and cyclical decreases in our revenues primarily related to lower oil prices. The availability of financingmay limit our ability to make capital investments that are necessary to maintain current production levels and increase our proved hydrocarbon reserves. Formore information, see “Item 4—Information on the Company—History and Development—Capital Expenditures and Investments” and “—Energy Reform.”

Increased competition in the Mexican energy sector may have a negative impact on our results of operations and financial conditions.

Pursuant to the Hydrocarbons Law that was adopted as part of the Secondary Legislation, the Mexican Government will carry out exploration andextraction activities through assignments to, or agreements with, us and through agreements with other oil and gas companies. The oil and gas fields that wedid not request or were not assigned to us pursuant to Round Zero (including the areas assigned to us on a temporary basis) are subject to competitive biddingprocesses open to participation by other oil and gas companies. We will not have a preferential right in any such bidding process and therefore must competeon equal terms with other oil and gas companies for the exploration and production blocks subject to bidding. We will also likely face competition inconnection with certain refining, transportation and processing activities. In addition, increased competition could make it more difficult for us to hire andretain skilled personnel. For more information, see “Item 4—Information on the Company—History and Development—Energy Reform.” If we are unable tocompete successfully with other oil and gas companies in the energy sector in Mexico, our results of operations and financial condition may be adverselyaffected.

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We may claim some immunities under the Foreign Sovereign Immunities Act and Mexican law, and your ability to sue or recover may be limited.

We are public sector entities of the Mexican Government. Accordingly, you may not be able to obtain a judgment in a U.S. court against usunless the U.S. court determines that we are not entitled to sovereign immunity with respect to that action. Under certain circumstances, Mexican law maylimit your ability to enforce judgments against us in the courts of Mexico. We also do not know whether Mexican courts would enforce judgments of U.S.courts based on the civil liability provisions of the U.S. federal securities laws. Therefore, even if you were able to obtain a U.S. judgment against us, youmight not be able to obtain a judgment in Mexico that is based on that U.S. judgment. Moreover, you may not be able to enforce a judgment against ourproperty in the United States except under the limited circumstances specified in the Foreign Sovereign Immunities Act of 1976, as amended. Finally, if youwere to bring an action in Mexico seeking to enforce our obligations under any securities issued by Petróleos Mexicanos, satisfaction of those obligations maybe made in pesos, pursuant to the laws of Mexico.

Our directors and officers, as well as some of the experts named in this report, reside outside the United States. Substantially all of our assets andthose of most of our directors, officers and experts are located outside the United States. As a result, investors may not be able to effect service of process on ourdirectors or officers or those experts within the United States.

Item 4. Information on the Company

HISTORY AND DEVELOPMENT

We are the largest company in Mexico according to the June 2014 special edition of Expansión magazine, and according to the November 24,2014 issue of Petroleum Intelligence Weekly, we were the eighth largest crude oil producer and the thirteenth largest oil and gas company in the world basedon data from the year 2013.

Our executive offices are located at Avenida Marina Nacional No. 329, Colonia Petróleos Mexicanos, México, D.F. 11311, México. Ourtelephone number is (5255) 19442500.

In March 1938, President Lázaro Cárdenas del Río nationalized the foreignowned oil companies that were then operating in Mexico, and theMexican Congress established Petróleos Mexicanos through the Decreto que crea la Institución Petróleos Mexicanos (Decree that creates the entity PetróleosMexicanos), which was published in the Official Gazette of the Federation and took effect on July 20, 1938.

In July 1992, the Ley Orgánica de Petróleos Mexicanos y Organismos Subsidiarios (Organic Law of Petróleos Mexicanos and SubsidiaryEntities) took effect and, among other things, created PemexExploration and Production, PemexRefining, PemexGas and Basic Petrochemicals and PemexPetrochemicals as decentralized public entities of the Mexican Government with the legal authority to own property and conduct business in their own names.Each of the subsidiary entities has the characteristics of a subsidiary of Petróleos Mexicanos and together, they carry out the operations that had previouslybeen managed directly by Petróleos Mexicanos. Effective March 22, 2012, following its publication in the Official Gazette of the Federation, the Decreto quetiene por objeto establecer la estructura, el funcionamiento y el control de los organismos subsidiarios de Petróleos Mexicanos (Decree to establish thestructure, operation and control of the subsidiary entities of Petróleos Mexicanos) sets forth the structure and scope of the activities of these subsidiary entities,unless otherwise stated in the Petróleos Mexicanos Law. The principal lines of business of the existing subsidiary entities are as follows:

• PemexExploration and Production explores for and exploits crude oil and natural gas and transports, stores and markets thesehydrocarbons;

• PemexRefining refines petroleum products and derivatives that may be used as basic industrial raw materials and stores, transports,distributes and markets these products and derivatives;

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• PemexGas and Basic Petrochemicals processes natural gas, natural gas liquids, artificial gas and derivatives that may be used as basicindustrial raw materials and stores, transports, distributes and markets these products and derivatives and produces, stores, transports,distributes and markets petrochemicals that were classified as “basic” (ethane, propane, butane, pentanes, hexane, heptane, carbon blackfeedstocks, natural gasoline and methane, when used as raw materials and intended for use in petrochemical industrial processes) prior tothe enactment of the Hydrocarbons Law in August 2014; and

• PemexPetrochemicals engages in industrial petrochemical processes and stores, distributes and markets other petrochemicals.

As of the date of this report, the activities of Petróleos Mexicanos and its subsidiary entities are regulated primarily by:

• the Petróleos Mexicanos Law, which took effect, with the exception of certain provisions, on October 7, 2014—the day on which

Petróleos Mexicanos was transformed into a productive stateowned company—and repeals the Petróleos Mexicanos Law that becameeffective as of November 29, 2008, which we refer to as the 2008 Petróleos Mexicanos Law; and

• the Hydrocarbons Law, which took effect on August 12, 2014 and repeals the Ley Reglamentaria del Artículo 27 Constitucional en el

Ramo del Petróleo (Regulatory Law to Article 27 of the Mexican Constitution Concerning Petroleum Affairs, which we refer to as theRegulatory Law).

Energy Reform

Energy Reform Decree

On December 20, 2013, amendments to Articles 25, 27 and 28 of the Mexican Constitution were signed into law by President Enrique Peña Nietoand published in the Official Gazette of the Federation as the Energy Reform Decree. The Energy Reform Decree, which includes transitional articles settingforth the general framework and timeline for the Secondary Legislation, took effect on December 21, 2013.

The key features of the Energy Reform Decree are:

• Ownership by Mexican Nation: Solid, liquid and gaseous hydrocarbons located in the subsoil of Mexico remain the property of theMexican nation.

• Initial Assignments through Round Zero: The Ministry of Energy, with technical assistance from the Comisión Nacional deHidrocarburos (National Hydrocarbons Commission, or NHC) determined our initial allocation of rights to continue to carry outexploration and production activities in Mexico based on our technical, financial and operational capabilities to explore for and extracthydrocarbons in an efficient and competitive manner. On March 21, 2014, we submitted to the Ministry of Energy a request that we retainrights that we believed would allow us to maintain our production and provide sufficient exploration opportunities to increase ourproduction in the future. On August 13, 2014, the Ministry of Energy published the results of Round Zero, through which we wereassigned rights to 95.9% of the proved reserves that we requested. The Ministry of Energy may assign, on an exceptional basis, additionalexploration and production areas to us or other productive stateowned companies created in the future in accordance with the terms setforth in the Hydrocarbons Law. See “—Assignment of Exploration and Production Rights” below in this Item 4.

• Booking of Reserves: Productive stateowned companies and other companies participating in the Mexican hydrocarbons industry will be

allowed to report assignments or contracts and the corresponding expected benefits for accounting and financial purposes, with theunderstanding that any solid, liquid or gaseous hydrocarbons that are in the subsoil will remain the property of the Mexican nation.

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Secondary Legislation

On August 6, 2014, the Mexican Congress completed the process of approving the Secondary Legislation, which was signed into law byPresident Enrique Peña Nieto and published in the Official Gazette of the Federation on August 11, 2014. The Secondary Legislation includes nine new laws,of which the following are most relevant to our operations:

• Petróleos Mexicanos Law;

• Hydrocarbons Law;

• Hydrocarbons Revenue Law;

• Ley de los Órganos Reguladores Coordinados en Materia Energética (Coordinated Energy Regulatory Bodies Law);

• Ley de la Agencia Nacional de Seguridad Industrial y de Protección al Medio Ambiente del Sector Hidrocarburos (National Agency ofIndustrial Safety and Environmental Protection for the Hydrocarbons Sector Law); and

• Ley del Fondo Mexicano del Petróleo para la Estabilización y el Desarrollo (Mexican Petroleum Fund for Stabilization andDevelopment Law).

The Secondary Legislation also includes amendments to several laws, including the following:

• Ley Federal de las Entidades Paraestatales (Federal Law of Public Sector Entities);

• Ley Federal de Presupuesto y Responsabilidad Hacendaria (Federal Law of Budget and Fiscal Accountability);

• Ley General de Deuda Pública (General Law of Public Debt);

• Ley Federal de Derechos (Federal Duties Law);

• Ley Orgánica de la Administración Pública Federal (Federal Public Administration Organic Law);

• Ley de Obras Públicas y Servicios Relacionados con las Mismas (Law of Public Works and Related Services); and

• Ley de Adquisiciones, Arrendamientos y Servicios del Sector Público (Law of Acquisitions, Leases and Services of the Public Sector).

On October 31, 2014, the regulations relating to the Secondary Legislation, including the Reglamento de la Ley de Petróleos Mexicanos (Regulations to thePetróleos Mexicanos Law), were published in the Official Gazette of the Federation. Subsequent modifications to the Regulations to the Petróleos MexicanosLaw took effect on February 9, 2015.

We describe below the key features of the Secondary Legislation that relate to the hydrocarbons sector in Mexico and our corporate structure andoperations.

• Transformation: Petróleos Mexicanos was transformed into a productive stateowned company on October 7, 2014—the day on whichthe Petróleos Mexicanos Law took effect, with the exception of certain provisions. As a productive stateowned company, PetróleosMexicanos remains wholly owned by the Mexican Government and has the corporate purpose of generating economic value andincreasing the income of the Mexican nation while adhering to principles of equity, as well as a social and environmental responsibility.

• Special Regime: On December 2, 2014, upon its determination that the new Board of Directors of Petróleos Mexicanos was performing itsduties and the mechanisms for our oversight, transparency and accountability had been implemented, the Ministry of Energy formallyannounced in the Official Gazette of the Federation that the special regime provided for in the Petróleos Mexicanos Law, which governsPetróleos Mexicanos’ activities relating to productive stateowned subsidiaries, affiliates, compensation, assets, administrative liabilities,budget, debt levels and the state dividend, had taken effect. As of the date of this report, the provisions relating to acquisitions, leases,services and public works have not yet become effective.

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• Corporate Reorganization: In accordance with the transitional articles of the Petróleos Mexicanos Law, on November 18, 2014, the Boardof Directors of Petróleos Mexicanos approved the Director General’s proposal for our corporate reorganization.

Pursuant to this reorganization plan, the four existing subsidiary entities of Petróleos Mexicanos are to be transformed into two newproductive stateowned subsidiaries. The first of these productive stateowned subsidiaries, Pemex Exploration and Production, willsubsume the existing subsidiary entity, PemexExploration and Production. The second of these productive stateowned subsidiaries,Pemex Industrial Transformation, will comprise the following existing subsidiary entities: PemexRefining, PemexGas and BasicPetrochemicals and PemexPetrochemicals.

As part of this reorganization plan, the Board of Directors of Petróleos Mexicanos also approved the creation of the five new subsidiaryentities described below, each of which may become an affiliate of Petróleos Mexicanos if certain conditions set forth in the PetróleosMexicanos Law are met.

• Pemex Drilling and Services: This entity is expected to subsume certain assets of the existing PemexExploration and Productionand will perform drilling services.

• Pemex Logistics: This entity will provide land, maritime and pipeline transportation to us and other companies.

• Pemex Cogeneration and Services: This entity will aim to maximize energy use in our operations by utilizing the heat and steamgenerated in our industrial processes.

• Pemex Fertilizers: This entity is expected to subsume certain assets of PemexPetrochemicals and will integrate the ammoniaproduction chain up to the point of sale of fertilizers.

• Pemex Ethylene: This entity will separate the ethylene business from PemexPetrochemicals in order to take advantage of theintegration of the ethylene production chain.

On March 27, 2015, the Board of Directors of Petróleos Mexicanos adopted creation resolutions for each of the new subsidiary entities,which will replace the existing subsidiary entities and assume all of their rights and obligations. The creation resolutions weresubsequently published in the Official Gazette of the Federation on April 28, 2015, and they are to take effect within 180 days ofpublication in accordance with the transitional articles included in the creation resolutions. As of the date of this report, none of the newsubsidiary entities has yet been formed. Once created, the seven new subsidiary entities will assume the rights and obligations of theexisting subsidiary entities.

• ThirdParty Participation and Contractual Regime: Together, the Hydrocarbons Law and the Hydrocarbons Revenue Law establish anew legal framework for the exploration and extraction of hydrocarbons through assignments and contracts, as well as the new fiscalregime through which the Mexican Government will collect revenues from participants in the Mexican hydrocarbons industry. TheHydrocarbons Law empowers the Ministry of Energy to determine the appropriate contract model for each area that is subject to acompetitive bidding process, while the SHCP is responsible for determining the economic and fiscal terms of each contract. The followingarrangements comprise the new contractual regime established by the Secondary Legislation for upstream activities:

• licenses, pursuant to which a license holder is entitled to the hydrocarbons that are extracted from the subsoil;

• productionsharing contracts, pursuant to which a contractor is entitled to receive a percentage of production;

• profitsharing contracts, pursuant to which a contractor is entitled to receive a percentage of the profit from the sale of the extractedhydrocarbons; and

Documents

PETRÓLEOS MEXICANOS - PEMEX | Por el rescate de la [email protected] Avenida Marina Nacional No. 329 Torre Ejecutiva Piso 38 Colonia Petróleos Mexicanos 11311 México D.F., México