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15/5/2014 Form 20-F

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20-F 1 d715090d20f.htm FORM 20-F

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSIONWASHINGTON, D.C. 20549

FORM 20-F

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

for the fiscal year ended December 31, 2013 Commission File Number 0-99

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. 329

Colonia 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, e-mail and/or facsimile number

and address of company contact person)

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

Securities 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.

T itle of Each Class

9.50% Global Guaranteed Bonds due 2027

9 1⁄4% Global Guaranteed Bonds due 2018

8.625% Bonds due 2022

7.375% Notes due 2014

5.75% Notes due 2015

5.75% Guaranteed Notes due 2018

9 1⁄4% Guaranteed Bonds due 2018

8.625% Guaranteed Bonds due 2023




8.00% Guaranteed Notes due 2019

4.875% Notes due 2015

6.000% Notes due 2020

5.50% Notes due 2021

6.500% Bonds due 2041

4.875% Notes due 2022

5.50% Bonds due 2044

3.500% Notes due 2018

Floating Rate Notes due 2018

3.500% Notes due 2023

4.875% Notes due 2024

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

Yes ¨ No x

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 x

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 during the 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 x No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted

pursuant to Rule 405 of Regulation S-T (§ 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 non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule

12b-2 of the Exchange Act. (Check one):

Large accelerated filer ¨ Accelerated filer ¨ Non-accelerated filer x

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 x O ther ¨

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 12b-2 of the Exchange Act).

Yes ¨ No x

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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 125

Item 5. Operating and Financial Review and Prospects 125

Item 6. Directors, Senior Management and Employees 154

Item 7. Major Shareholders and Related Party Transactions 184

Item 8. Financial Information 186

Item 9. The Offer and Listing 190

Item 10. Additional Information 190

Item 11. Quantitative and Qualitative Disclosures About Market Risk 199

Item 12. Description of Securities Other than Equity Securities 208

Item 13. Defaults, Dividend Arrearages and Delinquencies 209

Item 14. Material Modifications to the Rights of Security Holders and Use of Proceeds 209

Item 15. Controls and Procedures 209

Item 16A. Audit Committee Financial Expert 210

Item 16B. Code of Ethics 210

Item 16C. Principal Accountant Fees and Services 210

Item 16D. Exemptions from the Listing Standards for Audit Committees 212

Item 16E. Purchases of Equity Securities by the Issuer and Affiliated Purchasers 212

Item 16F. Change in Registrant’s Certifying Accountant 212

Item 16G. Corporate Governance 213

Item 16H. Mine Safety Disclosure 213

Item 17. Financial Statements 214

Item 18. Financial Statements 214

Item 19. Exhibits 214

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Petróleos Mexicanos and its four subsidiary entities, Pemex-Exploración y Producción (Pemex-Exploration and Production), Pemex-Refinación (Pemex-Refining),Pemex-Gas y Petroquímica Básica (Pemex-Gas and Basic Petrochemicals) and Pemex-Petroquímica (Pemex-Petrochemicals and together with Pemex-Exploration andProduction, Pemex-Refining and Pemex-Gas and Basic Petrochemicals, collectively referred to as the subsidiary entities), comprise the state oil and gas company of theUnited Mexican States, which we refer to as Mexico. Each of Petróleos Mexicanos and the subsidiary entities is a decentralized public entity of the Federal Government ofMexico, which we refer to as the Mexican Government, and is a legal entity empowered to own property and carry on business in its own name. In addition, a number ofsubsidiary companies that are defined in Note 1 and listed in Note 3(a) to our consolidated financial statements incorporated in Item 18, including the Pemex ProjectFunding Master Trust (which we refer to as the Master Trust) and Fideicomiso Irrevocable de Administración No. F/163 (which we refer to as Fideicomiso F/163) (whichare described below under “Item 5—Operating and Financial Review and Prospects—Liquidity and Capital Resources—Commitments for Capital Expenditures andSources of Funding”), are incorporated into the consolidated financial statements; these subsidiary companies are also identified with the corresponding ownershippercentages in “—Consolidated Structure of PEMEX” on page 4. Petróleos Mexicanos, the subsidiary entities and the subsidiary companies are collectively referred to as“PEMEX” or “we.”

References herein to “U.S. $,” “$,” “U.S. dollars” or “dollars” are to United States dollars. References herein to “pesos” or “Ps.” are to the legal currency 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 legalcurrency of the United Kingdom. References herein to “Swiss francs” or “CHF” are to the legal currency of the Swiss Confederation. References herein to “Japanese yen”or “¥” are to the legal currency of Japan. References herein to “Australian dollars” or “AUD” are to the legal currency of Australia. The term “billion” as used hereinmeans one thousand million.

Our consolidated financial statements included in this report were prepared in accordance with International Financial Reporting Standards as issued by theInternational Accounting Standards Board. We refer in this report to “International Financial Reporting Standards as issued by the International Accounting StandardsBoard” as IFRS. In addition, these financial statements were audited in accordance with the International Standards on Auditing, as required by the Comisión NacionalBancaria y de Valores (National Banking and Securities Commission, which we refer to as the CNBV) for purposes of filing with the Bolsa Mexicana de Valores (whichwe refer to as BMV or the Mexican Stock Exchange) and with the CNBV, and in accordance with the standards of the Public Company Accounting Oversight Board(United States) 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 such financial statementsto United States Generally Accepted Accounting Principles (which we refer to as U.S. GAAP). Accordingly, while we have in the past reconciled our consolidatedfinancial statements prepared in accordance with Normas de Información Financiera Mexicanas (Mexican Financial Reporting Standards, 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 the disclosure required under the U.S. FinancialAccounting Standards Board Accounting Standards Codification (ASC) Topic 932 “Extractive Activities—Oil and Gas” (which we refer to as ASC Topic 932), as this isrequired 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 peso amounts to U.S.dollars in this Form 20-F, including all convenience translations of our consolidated financial statements included herein, at an exchange rate of Ps. 13.0765 = U.S. $1.00,which is the exchange rate that Secretaría de Hacienda y Crédito Público (Ministry of Finance and Public Credit, or the SHCP) instructed us to use onDecember 31, 2013. You should not construe these translations from pesos into dollars as actually representing such U.S. dollar amounts or meaning that you couldconvert such amounts into U.S. dollars at the rates indicated. Mexico has a free market for foreign exchange, and

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the Mexican Government allows the peso to float freely against the U.S. dollar. There can be no assurance that the Mexican Government will maintain its current policieswith 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. dollar exchange rate, the exchangerate on any date subsequent to the date hereof could be materially different from the rate indicated above. See “Item 3—Key Information—Exchange Rates” forinformation regarding the rates of exchange between pesos and U.S. dollars.

SPECIAL NOTE REGARDING MEXICAN ENERGY REFORM

On December 12, 2013, the Permanent Commission of the Mexican Congress approved amendments to Articles 25, 27 and 28 of the Constitución Política de losEstados Unidos Mexicanos (Political Constitution of the United Mexican States, or the Mexican Constitution), which were subsequently approved by a majority ofMexico’s state legislatures and signed into law by the President of Mexico, Enrique Peña Nieto. On December 20, 2013, these amendments were published as the Decretopor el que se reforman y adicionan diversas disposiciones de la Constitución Política de los Estados Unidos Mexicanos, en Materia de Energía (Decree that amendsand supplements various provisions of the Mexican Constitution relating to energy matters, which we refer to as the Energy Reform Decree) in the Diario Oficial de laFederación (Official Gazette of the Federation) and took effect on December 21, 2013.

The Energy Reform Decree includes transitional articles (or artículos transitorios) that set forth the general framework for the secondary legislation orimplementing laws, which have not been enacted as of the date of this report. See “Item 4—Information on the Company—History and Development—Energy Reform” formore details regarding the Energy Reform Decree, transitional articles and secondary legislation.

The transitional articles of the Energy Reform Decree outline a process, commonly referred to as Round Zero, for the determination of our initial allocation of rightsto continue to carry out exploration and production activities in Mexico. Round Zero is being administered by the Secretaría de Energía (the Ministry of Energy), withtechnical assistance from the Comisión Nacional de Hidrocarburos (National Hydrocarbons Commission, which we refer to as the NHC). In connection with Round Zero,we have submitted to the Ministry of Energy a request that we be assigned the right to explore and develop areas in which we currently operate based on our technical,financial and operational capabilities. As of the date of this report, the Round Zero process has not yet been completed. See “Item 4—Information on the Company—History and Development—Energy Reform—Round Zero” for more details regarding the Round Zero process and our submission.

PRESENTATION OF INFORMATION CONCERNING RESERVES

The estimates of Mexico’s proved reserves of crude oil and natural gas for the five years ended December 31, 2013 included in this report have been calculatedaccording to the technical definitions required by the SEC. Although DeGolyer and MacNaughton, Netherland, Sewell International, S. de R.L. de C.V. (which we refer toas Netherland Sewell) and Ryder Scott Company, L.P. (which we refer to as Ryder Scott) conducted reserves audits of our estimates of the proved hydrocarbon reservesof Mexico as of December 31, 2013 or January 1, 2014, as applicable, all reserves estimates involve some degree of uncertainty. See “Item 3—Key Information—RiskFactors—Risk Factors Related to Our Relationship with the Mexican Government—Information on Mexico’s hydrocarbon reserves in this report is based on estimates,which are uncertain and subject to revision” and “—Our ability to maintain and increase our oil production levels depends on our ability to successfully develop provedhydrocarbon reserves, and failure to do so may limit our ability to maintain and increase our production” for a description of the risks relating to reserves and reservesestimates.

We include these estimates of Mexico’s proved reserves in this report and describe the reserves replacement rate by reference to these proved reserves because,as of December 31, 2013, Pemex-Exploration and Production

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had the right to extract, but not own, these reserves, and to sell the resulting production under the Ley de Petróleos Mexicanos (Petróleos Mexicanos Law). Following theadoption of the Energy Reform Decree, our ability in the future to extract these reserves, and to sell the resulting production, will be determined by Round Zero, asdescribed above. See “Item 3—Key Information—Risk Factors—Risk Factors Related to Our Relationship with the Mexican Government—The Mexican nation, not us,owns the hydrocarbon reserves located in the subsoil of Mexico and our right to continue to exploit these reserves is subject to the approval of the Ministry of Energy.”

FORWARD-LOOKING STATEMENTS

This Form 20-F contains words, such as “believe,” “expect,” “anticipate” and similar expressions that identify forward-looking statements, which reflect our viewsabout future events and financial performance. We have made forward-looking statements that address, among other things, our:

• exploration and production activities, including drilling;

• 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 forward-looking statements as a result of various factors that may be beyond our control. Thesefactors include, but are not limited to:

• changes in international crude oil and natural gas prices;

• effects on us from competition;

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

• the outcome of Round Zero and 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 Energy Reform Decree;

• 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 forward-looking statements. In any event, these statements speak only as of their dates, and weundertake 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 forward-looking statement, you should 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 three years endedDecember 31, 2013 have been derived from, and should be read in conjunction with, our consolidated financial statements as of December 31, 2012 and 2013 and for theyears ended December 31, 2011, 2012 and 2013, which are included in Item 18 of this report. Our consolidated financial statements for each of the two fiscal years endedDecember 31, 2012 were audited by KPMG Cárdenas Dosal, S.C., an independent registered public accounting firm. Our consolidated financial statements for the fiscalyear ended December 31, 2013 were audited by Castillo Miranda y Compañía, S.C. (which we refer to as BDO Mexico), an independent registered public accounting firm.

Selected Financial Data of PEMEX

Year ended December 31,(1)(2)

2011 2012 2013 2013(3)

(in millions of pesos, except ratios)

(in millions of

U.S. dollars)

Statement of Comprehensive Income Data Net sales Ps. 1,558,454 Ps. 1,646,912 Ps. 1,608,205 U.S. $122,984 Operating income 861,311 905,339 727,622 55,644 Financing income 30,584 23,215 24,527 1,876 Financing cost (63,236) (72,951) (54,067) (4,135) Exchange (loss) gain—Net (60,143) 44,846 (3,951) (302) Net (loss) income for the period (106,942) 2,600 (170,058) (13,005)

Statement of Financial Position Data (end of period) Cash and cash equivalents 114,977 119,235 80,746 6,175 Total assets 1,981,374 2,024,183 2,047,390 156,570 Long-term debt 672,657 672,618 750,563 57,398 Total long-term liabilities 1,624,752 2,059,445 1,973,446 150,915 Total equity (deficit) 103,177 (271,066) (185,247) (14,166)

Statement of Cash Flows Depreciation and amortization 127,380 140,538 148,492 11,356 Acquisition of wells, pipelines, properties, plant and equipment(4) 167,014 197,509 245,628 18,784

Other Financial Data Ratio of earnings to fixed charges(5)(6) — 1.14 — —

(1) We have not included selected consolidated financial data as of and for the years ended December 31, 2009 and 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 financialstatements in accordance with IFRS as of and for the years ended December 31, 2009 and 2010 and therefore are unable to present selected financial data in accordance with IFRS for this period without unreasonable effortand expense.

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(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. 13.0765 = U.S. $1.00 at December 31, 2013. 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 pre-tax 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. Pre-tax income (loss) is calculated after the deduction of hydrocarbon duties, but before the deduction of the hydrocarbon incometax and other income taxes. Fixed charges for this purpose consist of the sum of interest expense plus interest capitalized during the period. Fixed charges do not take into account exchange gain or loss attributable toour indebtedness.

(6) Earnings for the years ended December 31, 2011 and 2013 were insufficient to cover fixed charges. The amount by which fixed charges exceeded earnings was Ps. 108,098 million and Ps. 163,803 million for the yearsended December 31, 2011 and 2013, 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 and Statement of Cash FlowsData; and Petróleos Mexicanos, as it relates to Other Financial Data.

EXCHANGE RATES

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

Period Exchange Rate

High Low Average(1) Period End

Year Ended December 31, 2009 15.406 12.632 13.578 13.058 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

November 2013 13.243 12.871 13.060 13.111 December 2013 13.217 12.851 13.010 13.098

2014 January 2014 13.456 12.997 13.222 13.359 February 2014 13.509 13.204 13.293 13.226 March 2014 13.332 13.056 13.193 13.056 April 2014 13.143 12.950 13.067 13.084 May 2014(2) 13.053 12.946 12.996 12.986

(1) Average of month-end rates, except for 2013 and 2014 monthly exchange rates.(2) For the period from May 1, 2014 to May 9, 2014.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 May 9, 2014 was Ps. 12.986 = U.S. $1.00.

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RISK FACTORS

Considerations Related to Mexico

The effects of the Energy Reform Decree and its implementation are uncertain but likely to be material.

The Energy Reform Decree, which was enacted in December 2013, included transitional articles that set forth the framework for the implementation of secondarylegislation and provided for certain transitional steps, including the Round Zero process described below. We expect that the effects of these developments on ourbusiness and operations will be material. Among the features of the Energy Reform Decree that could have an effect on our operations are the following:

• the Mexican Government will carry out the exploration and extraction of hydrocarbons in Mexico through assignments to us, as a productive state-owned

company, as well as through agreements with us and with private sector;

• the Comisión Reguladora de Energía (Energy Regulatory Commission) will have the authority to grant permits to us and private sector companies to

engage in natural gas processing, oil refining and transport, storage, distribution and selling of hydrocarbons and petrochemicals and their derivatives inMexico;

• the transfer of certain of Pemex Gas and Basic Petrochemicals’ assets related to the national gas pipeline system to a separate decentralized public entity that

will be created in the future; and

• the grant of additional technical and administrative authority to the Ministry of Energy, the NHC and the Energy Regulatory Commission.

As of the date of this report and until the secondary legislation related to the Energy Reform Decree becomes effective and private sector companies enter into contractualagreements to operate in the Mexican energy sector, we are the only entity that conducts the petroleum industry in Mexico on behalf of Mexico.

As of the date of this report, one key aspect of the Energy Reform Decree—our initial allocation of oil and gas exploration and extraction rights—is beingimplemented pursuant to a process outlined in the transitional articles and referred to as Round Zero. As part of Round Zero, we have submitted a request that theMinistry of Energy assign to us certain oil and gas exploration and extraction rights. The Ministry of Energy has a deadline of September 17, 2014 to respond to ourrequest. See “—Risk Factors Related to Our Relationship with the Mexican Government—The Mexican nation, not us, owns the hydrocarbon reserves located in thesubsoil of Mexico and our right to continue to exploit these reserves is subject to the approval of the Ministry of Energy” below in this Item 3.

The secondary legislation implementing the Energy Reform Decree is expected to include, among other things, additional details regarding the contractual andfiscal regime that will be applicable to us and changes to our corporate structure as part of Petróleos Mexicanos’ conversion from a decentralized public entity to a“productive state-owned company” by December 2015. As of the date of this report, this secondary legislation has not been adopted. The impact of the Energy ReformDecree on us will largely depend on how it is implemented by the secondary legislation and on the outcome of Round Zero. It would therefore be premature to predict thelong-term effects of the Energy Reform Decree and the new framework it contemplates, but these effects could be adverse to our interests in significant respects. Inaddition, as a result of longstanding restrictions included in certain of our financing agreements that were based on the legal framework in effect before the Energy ReformDecree was enacted, these effects may cause us to default on these agreements in the event that we are unable to obtain waivers from our lenders or bondholders, asapplicable. For more information, see “Item 4—Information on the Company—History and Development—Energy Reform.”

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 could adversely affect ourbusiness and financial condition. Those events could also

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lead to increased volatility in the foreign exchange and financial markets, thereby affecting our ability to obtain new financing and service our debt. Additionally, theMexican Government may cut spending in the future. These cuts could adversely affect our business, financial condition and prospects. In the past, Mexico hasexperienced several periods of slow or negative economic growth, high inflation, high interest rates, currency devaluation and other economic problems. These problemsmay worsen or reemerge, as applicable, in the future, and could adversely affect our business and our ability to service our debt. A worsening of international financial oreconomic conditions, including a slowdown in growth or recessionary conditions in Mexico’s trading partners, including the United States, or the emergence of a newfinancial crisis, could have adverse effects on the Mexican economy, our financial condition and our ability to service our debt.

Changes in exchange rates or 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 U.S. dollars or other currencies, andMexico has not had a fixed exchange rate control policy since 1982. However, in the future, the Mexican Government could impose a restrictive exchange control policy, asit has done in the past. We cannot provide assurances that the Mexican Government will maintain its current policies with regard to the peso or that the peso’s value willnot fluctuate significantly in the future. The peso has been subject to significant devaluations against the U.S. dollar in the past and may be subject to significantfluctuations in the future. Mexican Government policies affecting the value of the peso or preventing us from exchanging pesos into U.S. dollars could prevent us frompaying our foreign currency obligations.

Most of our debt is denominated in U.S. dollars. In the future, we may incur additional indebtedness denominated in U.S. dollars or other currencies. Declines in thevalue of the peso relative to the U.S. dollar or other currencies may increase our interest costs in pesos and result in foreign exchange losses to the extent that we havenot hedged our exposure with derivative financial instruments, which we refer to as DFIs.

For information on historical peso/U.S. dollar exchange rates, see “—Key Information—Exchange Rates” in this Item 3.

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, Enrique Peña Nieto, a memberof the Partido Revolucionario Institucional (Institutional Revolutionary Party, or PRI), formally assumed office for a six-year term as the President of Mexico. As of thedate of this report, no political party holds a simple majority in either house of the Mexican Congress.

Mexico has experienced a period of increasing criminal violence and such activities could affect our operations.

Recently, Mexico has experienced a period of increasing criminal violence, primarily due to the activities of drug cartels and related criminal organizations. Inresponse, the Mexican Government has implemented various security measures and has strengthened its military and police forces. Despite these efforts, drug-relatedcrime continues to exist in Mexico. These activities, their possible escalation and the violence associated with them, in an extreme case, may have a negative impact on ourfinancial 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.

Each of Petróleos Mexicanos and the subsidiary entities is a decentralized public entity of the Mexican Government, and therefore the Mexican Governmentcontrols us, as well as, as of the date of this report, our

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annual budget, which is approved by the Cámara de Diputados (Chamber of Deputies). The Energy Reform Decree provides that by December 2015, Petróleos Mexicanoswill be converted from a decentralized public entity to a productive state-owned company. Moreover, the proposed secondary legislation implementing the Energy ReformDecree provides us with, among other things, additional technical, managerial and budgetary autonomy designed to increase our production and allow us to competeeffectively with other oil and gas companies that enter the Mexican energy sector. See “Item 4—Information on the Company—History and Development—EnergyReform.” Notwithstanding this increased autonomy and our conversion to a productive state-owned company, Petróleos Mexicanos will continue to remain under theMexican Government’s control, as the Mexican Government has (and, following the implementation of the Energy Reform Decree and related proposed secondarylegislation, will continue to have, albeit to a lesser extent) the power to intervene directly or indirectly in our commercial and operational affairs. Intervention by theMexican Government could adversely affect our ability to make payments under any securities issued by us. Although Petróleos Mexicanos is (and following itsconversion to a productive state-owned company will remain) under the Mexican Government’s control, its financing obligations do not constitute obligations of and arenot guaranteed by the Mexican Government.

The Mexican Government’s agreements with international creditors may affect our external debt obligations. In certain past debt restructurings of the MexicanGovernment, Petróleos Mexicanos’ external indebtedness was treated on the same terms as the debt of the Mexican Government and other public sector entities. Inaddition, Mexico has entered into agreements with official bilateral creditors to reschedule public sector external debt. Mexico has not requested restructuring of bonds ordebt owed to multilateral agencies.

The Energy Reform Decree contemplates the transfer of certain of Pemex-Gas and Basic Petrochemicals’ assets to another decentralized public entity of theMexican Government that will be created in the future. The Mexican Government has the power, in connection with the implementation of the secondary legislationrelating to the Energy Reform Decree or if the Mexican Constitution and federal law were further amended, to reorganize us, including a transfer of all or a portion ofPetróleos Mexicanos and the subsidiary entities or their assets to an entity not controlled by the Mexican Government. The reorganization and transfer of assetscontemplated by the Energy Reform Decree or any other reorganization or transfer that the Mexican Government may effect, could adversely affect our production, causea disruption in our workforce and our operations and cause us to default on certain obligations. See “—Considerations Related to Mexico” above in this Item 3.

Petróleos Mexicanos and the subsidiary entities pay special taxes and duties to the Mexican Government, which may limit our capacity to expand our investment

program.

We pay a substantial amount of taxes and duties to the Mexican Government, particularly on the revenues of Pemex-Exploration and Production, which may limitour ability to make capital investments. In 2013, approximately 53.8% of our sales revenues was used to pay taxes and duties to the Mexican Government. These specialtaxes and duties constitute a substantial portion of the Mexican Government’s revenues. For further information, see “Item 4—Information on the Company—Taxes andDuties” and “Item 5—Operating and Financial Review and Prospects—IEPS Tax, Hydrocarbon Duties and Other Taxes.” The Energy Reform Decree contemplates that thesecondary legislation implementing it will include a new fiscal regime applicable to us. See “—Considerations Related to Mexico—The effects of the Energy ReformDecree and its implementation are uncertain but likely to be material” 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 (LPG), gasoline, diesel, gas oil intendedfor domestic use, fuel oil and other products. As a result of these price controls, we have not been able to pass on all of the increases in the prices of our productpurchases to our customers in the domestic market. We do not control the Mexican Government’s domestic policies and the Mexican Government could impose additionalprice controls on the domestic market in the future. The imposition of such price controls would adversely affect our results of operations. For more information, see

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“Item 4—Information on the Company—Business Overview—Refining—Pricing Decrees” and “Item 4—Information on the Company—Business Overview—Gas andBasic Petrochemicals—Pricing Decrees.”

The Mexican nation, not us, owns the hydrocarbon reserves located in the subsoil of Mexico and our right to continue to exploit these reserves is subject 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 of Mexico.

Following the adoption of the Energy Reform Decree, Article 27 of the Mexican Constitution provides that the Mexican Government will carry out exploration andextraction activities through agreements with private sector companies and through assignments to and agreements with us. Once the secondary legislation related to theEnergy Reform Decree is fully implemented, we and other oil and gas companies will have the right to exploit the petroleum and other hydrocarbon reserves located in thesubsoil of Mexico, subject to assignment of these rights by the Ministry of Energy and entry into agreements pursuant to a competitive bidding process.

On March 21, 2014, as part of Round Zero, we submitted to the Ministry of Energy a request that we be assigned the right to continue to explore and develop areasthat together contain 96% of Mexico’s estimated proved reserves of crude oil and natural gas as of December 31, 2013. The transitional articles of the Energy ReformDecree provide that the Ministry of Energy will take the following factors into consideration when determining whether to grant us an assignment:

• with respect to areas that we were actively exploring in which we had made commercial discoveries or investments as of December 21, 2013, our investment

capacity and evidence of a detailed plan for exploration; and

• with respect to areas that we already had under production as of December 21, 2013, our development plan for producing fields, including evidence of proper

development of such fields and our ability to efficiently and competitively carry out production activities.

The Ministry of Energy has a deadline of September 17, 2014 to respond to our request. The Ministry of Energy may not approve the assignment of certain of theproved oil and gas reserves we requested.

Access to crude oil and natural gas reserves is essential to an oil and gas company’s sustained production and generation of income, and our ability to generateincome would be materially and adversely affected if we do not receive a significant percentage of the proved oil and gas reserves that we have requested pursuant toRound Zero or if the Mexican Government were to restrict or prevent us from exploiting any crude oil and natural gas reserves that it assigns to us. For more information,see “Item 4—Information on the Company—History and Development—Energy Reform—Round Zero.”

Information on Mexico’s 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 estimating undergroundaccumulations of crude oil and natural gas that cannot be measured in an exact manner; the accuracy of any reserves estimate depends on the quality and reliability ofavailable data, engineering and geological interpretation and subjective judgment. Additionally, estimates may be revised based on subsequent results of drilling, testingand production. These estimates are also subject to certain adjustments based on changes in variables, including crude oil prices. Therefore, proved reserves estimatesmay differ materially from the ultimately recoverable quantities of crude oil and natural gas. See “—Risk Factors Related to Our Operations—Crude oil and natural gasprices are volatile and low crude oil and natural gas prices adversely affect our income and cash flows and the amount of Mexico’s hydrocarbon reserves that we have theright to extract and sell.” Pemex-Exploration and Production revises its estimates of Mexico’s hydrocarbon reserves that it is entitled to extract and sell annually, whichmay result in material

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revisions to our estimates of Mexico’s hydrocarbon reserves it is entitled to extract and sell. Our ability to maintain our long-term growth objectives for oil productiondepends on our ability to successfully develop our reserves, and failure to do so could prevent us from achieving our long-term goals for growth in production.

We must make significant capital expenditures to maintain our current production levels, and to maintain, as well as increase, any proved hydrocarbon reserves that

may be assigned to us pursuant to Round Zero. Mexican Government budget cuts, reductions in our income and inability to obtain financing may limit our ability to

make capital investments.

Our ability to maintain, as well as increase, our oil production levels is highly dependent upon our ability to successfully develop existing hydrocarbon reservesand, in the long term, upon our ability to obtain the right to develop additional reserves.

We continually invest capital to enhance our hydrocarbon recovery ratio and improve the reliability and productivity of our infrastructure. Despite theseinvestments, the replacement rate for proved hydrocarbon reserves decreased to 67.8% in 2013, representing a significant decline in proved hydrocarbon reserves. Pemex-Exploration and Production’s crude oil production decreased by 1.0% from 2010 to 2011, by 0.2% from 2011 to 2012 and by 1.0% from 2012 to 2013, primarily as a result ofthe decline of production in the Cantarell and Delta del Grijalva projects.

The development of the reserves that are assigned to us pursuant to Round Zero, particularly any reserves in the deep waters of the Gulf of Mexico and in shale oiland gas fields in the Burgos basin, will demand significant capital investments and will pose significant operational challenges. We cannot guarantee that we will have orwill be able to obtain, in the time frame that we expect, sufficient resources necessary to exploit the reserves that the Mexican Government assigns to us as part of RoundZero, or that it may grant to us in the future. In addition, increased competition in the oil and gas sector in Mexico may increase the costs of obtaining additional acreagein bidding rounds for the rights to new reserves.

Our ability to make capital expenditures is limited by the substantial taxes and duties that we pay to the Mexican Government and cyclical decreases in ourrevenues primarily related to lower oil prices. Budget cuts imposed by the Mexican Government and the availability of financing may limit our ability to make capitalinvestments that are necessary to maintain current production levels and increase the proved hydrocarbon reserves we are entitled to exploit. For more 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.

Once the secondary legislation related to the Energy Reform Decree is fully implemented, we and other oil and gas companies will have the right to carry out certainactivities related to the energy sector in Mexico, including exploration and extraction activities. The Mexican Government will carry out exploration and extraction activitiesthrough agreements with private sector companies and through allocations to or agreements with us. Any oil and gas fields that we do not request or are not assigned tous pursuant to Round Zero will be subject to a competitive bidding process open to participation by private sector companies in which we will not have a preferentialright. We will also likely face competition for the right to develop new oil and gas fields in Mexico, as well as in connection with certain refining, transportation andprocessing activities. For more information, see “Item 4—Information on the Company—History and Development—Energy Reform.” If we are unable to competesuccessfully with private sector companies in the energy sector in Mexico, our results of operations and financial condition may be adversely affected.

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

Petróleos Mexicanos and the subsidiary entities are decentralized public entities of the Mexican Government. Accordingly, you may not be able to obtain ajudgment in a U.S. court against us unless the U.S.

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court determines that we are not entitled to sovereign immunity with respect to that action. In addition, Mexican law does not allow attachment prior to judgment orattachment in aid of execution upon a judgment by Mexican courts upon the assets of Petróleos Mexicanos or the subsidiary entities. As a result, your ability to enforcejudgments against us in the courts of Mexico may be limited. We also do not know whether Mexican courts would enforce judgments of U.S. courts based on the civilliability provisions of the U.S. federal securities laws. Therefore, even if you were able to obtain a U.S. judgment against us, you might not be able to obtain a judgment inMexico that is based on that U.S. judgment. Moreover, you may not be able to enforce a judgment against our property in the United States except under the limitedcircumstances specified in the Foreign Sovereign Immunities Act of 1976, as amended. Finally, if you were to bring an action in Mexico seeking to enforce our obligationsunder any of our securities, satisfaction of those obligations may be made in pesos, pursuant to the laws of Mexico.

Our directors and officers, as well as some of the experts named in this Form 20-F, reside outside the United States. Substantially all of our assets and those of mostof our directors, officers and experts are located outside the United States. As a result, you may not be able to effect service of process on our directors or officers orthose experts within the United States.

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 of Mexico’s

hydrocarbon reserves.

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 includecompetition within the oil and natural gas industry, the prices and availability of alternative sources of energy, international economic trends, exchange rate fluctuations,expectations of inflation, domestic and foreign government regulations or international laws, political and other events in major oil and natural gas producing andconsuming nations and actions taken by Organization of the Petroleum Exporting Countries (OPEC) members and other oil exporting countries, trading activity in oil andnatural gas and transactions in DFIs related to oil and gas.

When international crude oil and natural gas prices are low, we earn less export sales revenue and, therefore, generate lower cash flows and earn less income,because our costs remain roughly constant. Conversely, when crude oil and natural gas prices are high, we earn more export sales revenue and our income before taxesand duties increases. As a result, future fluctuations in international crude oil and natural gas prices will have a direct effect on our results of operations and financialcondition, and may affect Mexico’s hydrocarbon reserves estimates. See “—Risk Factors Related to Our Relationship with the Mexican Government—Information onMexico’s hydrocarbon reserves in this report is based on estimates, which are uncertain and subject to revisions” above in this Item 3 and “Item 11—Quantitative andQualitative Disclosures about Market Risk—Hydrocarbon Price Risk.”

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 production due to operationalhazards, natural disasters or weather, accidents, etc.), equipment risks (relating to the adequacy and condition of our facilities and equipment) and transportation risks(relating to the condition and vulnerability of pipelines and other modes of transportation). More specifically, our business is subject to the risks of explosions inpipelines, refineries, plants, drilling wells and other facilities, hurricanes in the Gulf of Mexico and other natural or geological disasters and accidents, fires and mechanicalfailures. Criminal attempts to divert our crude oil, natural gas or refined products from our pipeline network and facilities for illegal sale have resulted in explosions,property and environmental damage, injuries and loss of life.

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Our facilities are also subject to the risk of sabotage, terrorism and cyber attacks. In July 2007, two of our pipelines were attacked. In September 2007, six differentsites were attacked and 12 of our pipelines were affected. The occurrence of any of these events or of accidents connected with production, processing and transportingoil and oil products could result in personal injuries, loss of life, environmental damage with resulting containment, clean-up and repair expenses, equipment damage anddamage to our facilities. A shutdown of the affected facilities could disrupt our production and increase our production costs. As of the date of this report, there havebeen no similar occurrences since 2007. Although we have established cybersecurity systems and procedures to protect our information technology and have not yetsuffered a cyber attack, if the integrity of our information technology were ever compromised due to a cyber attack, our business operations could be disrupted and ourproprietary information could be lost or stolen.

We purchase comprehensive insurance policies covering most of these risks; however, these policies may not cover all liabilities, and insurance may not beavailable for some of the consequential risks. There can be no assurance that accidents or acts of terror will not occur in the future, that insurance will adequately coverthe entire scope or extent of our losses or that we may not be found directly liable in connection with claims arising from these or other events. See “Item 4—Informationon 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, 2013, our total indebtedness, excluding accrued interest, was approximately U.S. $63.6 billion, in nominalterms, which is a 6.4% increase as compared to our total indebtedness, excluding accrued interest, of approximately U.S. $59.8 billion at December 31, 2012. Our level ofdebt may increase further in the near or medium term and may have an adverse effect on our financial condition 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 creditfacilities and the incurrence of additional indebtedness. Certain rating agencies have expressed concerns regarding the total amount of our debt, our increase inindebtedness over the last several years and our substantial unfunded reserve for retirement pensions and seniority premiums, which as of December 31, 2013 was equalto approximately U.S. $85.6 billion. Due to our heavy tax burden, we have resorted to financings to fund 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 favorable terms, thiscould hamper our ability to obtain further financing as well as hamper investment in projects financed through debt. As a result, we may not be able to make the capitalexpenditures needed to maintain our current production levels and to maintain, as well as increase, Mexico’s proved hydrocarbon reserves, which may adversely affectour financial condition and results of operations. See “—Risk Factors Related to Our Relationship with the Mexican Government—We must make significant capitalexpenditures to maintain our current production levels, and to maintain, as well as increase, any proved hydrocarbon reserves that may be assigned to us pursuant toRound Zero. Mexican Government budget cuts, reductions in our income and inability to obtain financing may limit our ability to make capital investments.”

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

A wide range of general and industry-specific Mexican federal and state environmental laws and regulations apply to our operations; these laws and regulationsare often difficult and costly to comply with and carry substantial penalties for non-compliance. This regulatory burden increases our costs because it requires us to makesignificant capital expenditures and limits our ability to extract hydrocarbons, resulting in lower revenues. For an estimate of our accrued environmental liabilities, see“Item 4—Information on the Company—Environmental Regulation—Environmental Liabilities.” In addition, we have agreed with third parties to make investments toreduce our carbon dioxide emissions. See “Item 4—Information on the Company—Environmental Regulation—Global Climate Change and Carbon Dioxide EmissionsReduction.”

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Item 4. Information on the Company

HISTORY AND DEVELOPMENT

We are the largest company in Mexico, and according to the November 18, 2013 issue of Petroleum Intelligence Weekly, we were the seventh largest crude oilproducer and the eleventh largest oil and gas company in the world based on data from the year 2012. In 1938, President Lázaro Cárdenas del Río nationalized the foreign-owned oil companies which were then operating in Mexico, and the Mexican Congress established Petróleos Mexicanos by a decree effective on July 20, 1938. Since 1938,Mexican federal laws and regulations have entrusted Petróleos Mexicanos with a central role in the planning and management of Mexico’s petroleum industry. On July 17,1992, the Mexican Congress created the subsidiary entities out of operations that had previously been directly managed by Petróleos Mexicanos. Petróleos Mexicanosand its four subsidiary entities, Pemex-Exploration and Production, Pemex-Refining, Pemex-Gas and Basic Petrochemicals and Pemex-Petrochemicals, are decentralizedpublic entities of the Mexican Government, and each is a legal entity empowered to own property and carry on business in its own name.

Our executive offices are located at Avenida Marina Nacional No. 329, Colonia Petróleos Mexicanos, México, D.F. 11311, México. Our telephone number is (52-55)1944-2500.

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

• the Ley Reglamentaria del Artículo 27 Constitucional en el Ramo del Petróleo (Regulatory Law to Article 27 of the Political Constitution of the United

Mexican States Concerning Petroleum Affairs, which we refer to as the Regulatory Law); and

• the Petróleos Mexicanos Law.

We anticipate that the regulatory regime applicable to the activities of Petróleos Mexicanos and its subsidiary entities will be modified significantly pursuant to thechanges contemplated by the Energy Reform Decree. See “—Information on the Company—History and Development—Energy Reform” below in this Item 4.

The Regulatory Law and the Petróleos Mexicanos Law grant Petróleos Mexicanos and certain of its subsidiary entities the right to:

• explore, exploit, refine, transport, store, distribute and sell (first-hand) crude oil;

• explore, exploit, produce and sell (first-hand) natural gas and transport and store natural gas, to the extent the transportation and storage activities are

inextricably linked with such exploitation and production; and

• produce, store, transport, distribute and sell (first-hand) the derivatives of petroleum (including petroleum products) and natural gas used as basic industrialraw materials that constitute basic petrochemicals, which include ethane, propane, butanes, pentanes, hexanes, heptanes, naphthas, carbon black feedstocksand methane, but, in the case of methane, only if obtained from hydrocarbons used as basic raw materials by the petrochemical industry and obtained fromdeposits located in Mexico.

The operating activities of Petróleos Mexicanos are allocated among the four subsidiary entities, each of which has the characteristics of a subsidiary of PetróleosMexicanos. The principal business lines of the subsidiary entities are as follows:

• Pemex-Exploration and Production explores for and exploits crude oil and natural gas and transports, stores and markets these hydrocarbons;

• Pemex-Refining 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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• Pemex-Gas and Basic Petrochemicals processes natural gas, natural gas liquids and derivatives that may be used as basic industrial raw materials and stores,

transports, distributes and markets these products and derivatives and produces, stores, transports, distributes and markets basic petrochemicals; and

• Pemex-Petrochemicals engages in industrial petrochemical processes and stores, distributes and markets petrochemicals other than basic petrochemicals.

Under the Petróleos Mexicanos Law, which replaced the Ley Orgánica de Petróleos Mexicanos y Organismos Subsidiarios (Organic Law of Petróleos Mexicanosand the Subsidiary Entities), the subsidiary entities were to continue to conduct business in accordance with their mandates under existing law until the President ofMexico issued a reorganization decree, based on a proposal by the Board of Directors of Petróleos Mexicanos. The Board of Directors of Petróleos Mexicanos submitted aproposal to the President of Mexico providing that the existing structure of the subsidiary entities be maintained, and on March 21, 2012, the President of Mexico issuedthe Decreto que tiene por objeto establecer la estructura, el funcionamiento y el control de los organismos subsidiarios de Petróleos Mexicanos (Decree to establishthe structure, operation and control of the subsidiary entities of Petróleos Mexicanos), which was published in the Official Gazette of the Federation and became effectiveas of the following day. This decree consistent with the recommendation of the Board of Directors of Petróleos Mexicanos, maintains the existence of the four subsidiaryentities.

In 1995, the Mexican Congress amended the Regulatory Law to allow private and social sector companies, which include labor-controlled organizations andindustries, to participate, with the Mexican Government’s approval, in the storage, distribution and transportation of natural gas. Pursuant to the Regulatory Law, asamended, these types of companies may construct, own and operate pipelines, installations and equipment. Since 1997, the Mexican Government has required that wedivest our existing natural gas distribution assets, retaining authority over the exploration, exploitation, production and first-hand sale of natural gas, as well as thetransportation and storage inextricably linked with this type of exploitation and production. See “Item 4—Information on the Company—Business Overview—Gas andBasic Petrochemicals—Private Sector Participation in Natural Gas Distribution.”

The Regulatory Law and the Petróleos Mexicanos Law have allowed us to co-generate electric energy and to enter into agreements with the Comisión Federal deElectricidad (Federal Electricity Commission) to sell our excess production to this entity. The funds and the public investment projects required to carry out these co-generation works and the acquisition of any excess production by the Federal Electricity Commission must be included in the annual Presupuesto de Egresos de laFederación (Federal Expenditure Budget), which is subject to discussion by and approval of the Chamber of Deputies.

On November 13, 2008, amendments to the Ley Federal de Presupuesto y Responsabilidad Hacendaria (Federal Law of Budget and Fiscal Accountability) werepublished in the Official Gazette of the Federation, which became effective on November 14, 2008. Under these amendments:

• As of January 30, 2009, our debt related to Proyectos de Infraestructura Productiva de Largo Plazo (long-term productive infrastructure projects, which werefer to as PIDIREGAS) was included in our balance sheet prepared under Normas Específicas de Información Financiera Gubernamental para el SectorParaestatal (Mexican Specific Standards for Governmental Financial Information for Public Sector Entities) and is now recognized as public sector debt. ForMexican FRS purposes, which was the method by which we prepared our consolidated financial statements at that time, all of our PIDIREGAS-relatedfinancing and assets were already included in our consolidated balance sheet and, therefore, these amendments did not have a material effect on ourconsolidated balance sheet or income statement for any period.

• During the second half of 2009, Petróleos Mexicanos assumed, as primary obligor, all payment obligations under PIDIREGAS financing entered into by the

Master Trust and Fideicomiso F/163, our principal PIDIREGAS financing vehicles.

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In November 2008, the Petróleos Mexicanos Law was adopted by the Mexican Congress and several other laws were adopted or amended, as part of what we referto as the 2008 Energy Reform. None of these laws included any amendment to the Mexican Constitution.

As a result of the 2008 Energy Reform, we are authorized to offer cash incentives to contractors that provide us with access to new technologies, faster executionor greater profits, subject to the requirements that our payment obligations under construction and services contracts must always be satisfied in cash and that in no casemay we grant ownership rights over hydrocarbons to our contractors. See “Item 4—Information on the Company—Business Overview—Exploration and Production—Integrated Exploration and Production Contracts.”

Energy Reform

On December 12, 2013, the Permanent Commission of the Mexican Congress approved amendments to Articles 25, 27 and 28 of the Mexican Constitution, whichwere subsequently approved by a majority of Mexico’s state legislatures and signed into law by President Peña Nieto. On December 20, 2013, the Energy Reform Decreewas published in the Official Gazette of the Federation and took effect on December 21, 2013. The Energy Reform Decree includes transitional articles that set forth thegeneral framework for the secondary legislation or implementing laws, which have not been enacted as of the date of this report.

We describe below the key features of the Energy Reform Decree that relate to the hydrocarbons sector in Mexico and our operations:

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

• Private Sector Participation: The Mexican Government will carry out the exploration and extraction of hydrocarbons in Mexico through assignments toproductive state-owned companies (as described below) or through agreements with these productive state-owned companies or with private sectorcompanies. As part of the secondary legislation to be adopted, the Mexican Congress must make the necessary adjustments to the legal frameworkregulating the contractual regime for exploration and extraction activities, which may include the following contractual arrangements:

• licenses, pursuant to which a license holder would be entitled to the hydrocarbons once these are extracted from the subsoil;

• production-sharing contracts, pursuant to which a contractor would be entitled to receive a percentage of production;

• profit-sharing contracts, pursuant to which a contractor would be entitled to receive a percentage of the profit from the sale of the extracted

hydrocarbons; and

• service contracts, pursuant to which a contractor would receive cash payments for services performed.

The Mexican Government will have the flexibility to combine elements of these contractual frameworks in order to maximize the income attributable to theMexican nation and thereby help ensure its long-term development. In addition, the Energy Reform Decree specifies the process by which the MexicanGovernment grants any such contract will be governed by rules that ensure its transparency, and information about payments made or taxes paid under anysuch contract will be made publicly available.

• Conversion: The Energy Reform Decree provides that Petróleos Mexicanos is to be converted from a decentralized public entity to a productive state-owned

company within two years from the enactment of the Energy Reform Decree, or by December 21, 2015. During the two-year transition period, we will beentitled to be awarded the assignments and contracts mentioned above. The Energy Reform Decree

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provides that the corporate purpose of a productive state-owned company will be to create economic value and increase the income of the Mexican nationwhile adhering to principles of equity as well as social and environmental responsibility, and we will be granted technical, managerial and budgetaryautonomy, subject to certain controls. The Mexican Government will continue to control Petróleos Mexicanos once it is converted to a productive state-owned company. As a productive state-owned company, Petróleos Mexicanos’ Chief Executive Officer will be appointed by the President of Mexico and itsBoard of Directors will consist of five representatives of the Mexican Government, including the Secretary of Energy (who will serve as Chairperson of theBoard), and five independent members.

• Initial Assignments and Subsequent Bidding Process: The transitional articles of the Energy Reform Decree outline a process, commonly referred to asRound Zero, for the determination of the initial allocation of rights to carry out exploration and production activities in Mexico. Round Zero is beingadministered by the Ministry of Energy, with technical assistance from the NHC. Pursuant to Round Zero, we have requested that the Ministry of Energyassign to us certain exploration and extraction areas in which we currently explore, operate or have an interest in developing based on our operationalcapabilities, as described below. Any such areas that we do not request or are not assigned to us will be subject to a competitive bidding process open toparticipation by private sector companies.

• Booking of Reserves: Productive state-owned companies and private companies will be allowed to report assignments or contracts and the corresponding

expected benefits for accounting and financial purposes, with the understanding that any solid, liquid or gaseous hydrocarbons that are in the subsoil willremain the property of the Mexican nation.

• Pipeline System: The Centro Nacional de Control del Gas Natural (National Center of Natural Gas Control), a decentralized public entity of the MexicanGovernment, will be created to own and operate the national gas pipeline system and storage infrastructure. Pursuant to the applicable secondary legislation,Pemex-Gas and Basic Petrochemicals will transfer and assign to the National Center of Natural Gas Control the assets and contracts necessary for it tomanage this system and infrastructure.

• Regulatory Oversight and Authority: The Ministry of Energy, the NHC and the Energy Regulatory Commission will be granted additional technical and

administrative authority over certain of our operations and the energy sector generally, as described below.

• The Ministry of Energy, with the technical assistance of the NHC, will have the authority to grant assignments pursuant to Round Zero, select the

areas that will be subject to public bidding, establish the technical guidelines for the bidding process, as well as for the contracts themselves, andissue permits for oil refining and natural gas processing.

• The NHC will be responsible for conducting the public bidding process and executing the corresponding contracts, as well as supervising oil and

gas production activities.

• The Energy Regulatory Commission will regulate and grant permits for the storage, transportation and distribution through pipelines of oil, gas,

petroleum products and petrochemicals; regulate third-party access to transportation pipelines, as well as to the storage of hydrocarbons and theirderivatives; and regulate the first-hand sale of the aforementioned products.

• The NHC and the Energy Regulatory Commission will be vested with their own legal status and technical and administrative autonomy. In addition,

the SHCP, as well as other government entities, will be entrusted with establishing the economic terms for contracts assigned pursuant to the publicbidding process.

• Safety and the Environment: The Agencia Nacional de Seguridad Industrial y de Protección al Medio Ambiente del Sector Hidrocarburos (NationalAgency of Industrial Safety and Environmental Protection for the Hydrocarbon Sector) will be created to regulate and supervise activities and facilitiesrelated to the hydrocarbons industry with respect to industrial safety and environmental protection. This new entity will operate as an administrative bodyof the Secretaría de Medio Ambiente y Recursos Naturales (Ministry of the Environment and Natural Resources) and will, among other things,

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supervise the decommissioning and abandonment of facilities. Relatedly, companies participating in the hydrocarbons sector will be subject to regulationsintended to reduce greenhouse gas emissions and help ensure that energy and natural resources are used efficiently.

• Mexican Oil Fund: The Fondo Mexicano del Petróleo para la Estabilización y el Desarrollo (Mexican Petroleum Fund for Stabilization and Development)will be created and entrusted with receiving, administering and distributing the income that the Mexican Government derives from exploration and extractionactivities carried out under assignments or agreements, excluding any tax revenues generated as a result of such activities. This public trust will first use theincome to make the payments required pursuant to the various assignments or agreements; it will then transfer part of the income to various funds thatfinance public expenses and will allocate the remaining funds to long-term savings, including investments in financial assets. The Banco de México (theMexican central bank) will act as trustee, and the allocation of the fund’s assets will be supervised by a technical committee composed of the Secretary ofEnergy, the Secretary of Finance and Public Credit, the Governor of Banco de México and four independent members.

• Anticorruption: Modifications to the current legal framework will be made to allow for the supervision, and, if necessary, investigation and prosecution, of

entities, individuals and public officials participating in the Mexican energy sector.

The impact of the Energy Reform Decree on us will largely depend on how it is implemented by the secondary legislation. On April 30, 2014, President Enrique PeñaNieto submitted to the Mexican Congress bills proposing secondary legislation intended to implement certain provisions of the Energy Reform Decree. Among otherthings, these proposed bills provide us with additional technical, managerial and budgetary autonomy designed to increase our production and allow us to competeeffectively with other oil and gas companies that enter the Mexican energy sector.

As of the date of this report, the proposed bills are subject to review, debate and revision by the Mexican Congress, and therefore we do not know what the finalscope and terms of any approved bill will be. Accordingly, we cannot currently predict the effects of the Energy Reform Decree and the new framework it contemplates,although such effects are likely to be material and impact our structure, results of operations and financial position.

Round Zero

Transitional article six of the Energy Reform Decree, which outlines the Round Zero process, required us to submit a proposal to the Ministry of Energy requestingthat we be assigned the right to explore and develop areas in which we currently operate based on our technical, financial and operational capabilities. Accordingly, onMarch 21, 2014, we submitted to the Ministry of Energy a request that we retain rights that we believe will allow us to maintain our current production and providesufficient exploration opportunities to increase our production in the future. Together, the areas that we requested contain 96% of Mexico’s estimated proved reserves ofcrude oil and natural gas as of December 31, 2013.

Exploration Areas. With respect to our exploration activities, we requested rights that we believe will allow our oil and gas production to continue to grow. Oursubmission sought to ensure that we maintain a number of areas that would allow us to continue our investment program in exploratory activities. Specifically, werequested to retain the right to explore offshore and onshore areas in the Southeastern basins in which we have identified opportunities that would allow us to increaseproduction in the short-term. We also requested the right to continue to explore certain deepwater areas and areas containing unconventional deposits that we believe willallow us to increase production in the medium and long-term. The primary consideration used to determine which exploration areas to request was the continuity of ourexploration strategy. Other factors that we considered included the potential hydrocarbons content and expected monetary value of the area, as well as the risks (bothtechnical and geological) involved.

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Our proposal grouped the exploration areas that we requested according to the following criteria:

• Conventional onshore areas: We requested oil opportunities in which discoveries could be developed within a short amount of time (ideally less than 12

months) and gas areas that are expected to be profitable in the medium-term. We intend to pursue partnerships with the private sector in these areas onlywhere necessary to mitigate risks and increase our operational capacity.

• Shallow waters: We requested areas with oil opportunities and existing infrastructure that would allow for discoveries to be developed quickly. Given our

experience in shallow waters, we do not expect to involve partners from the private sector in connection with these areas.

• Deep waters: We requested areas with potential commercial opportunities in which we expect to be able to enter into partnerships with private sector

companies. These partnerships would help us bear the risks and costs associated with deepwater operations and facilitate the transfer of technology andexpertise.

• Unconventional areas: We requested areas with potential commercial opportunities in order to be able to enter into partnerships with the private sector that

will help us develop the technological capacity to exploit shale and other unconventional deposits in the future.

Production Fields. With respect to our production activities, we requested the right to continue operating our most profitable fields in order to help ensure themaintenance of our production. We also requested the right to continue developing complex and capital-intensive areas, such as deepwater fields, that we believe we cansuccessfully operate by entering into strategic partnerships with the private sector. Altogether, we requested the right to continue operating all of the fields that arecurrently in production, as well as many of the fields that are being developed or are close to being developed.

Our proposal grouped the production fields that we requested according to the following criteria:

• Conventional onshore fields: We primarily requested profitable fields for which we have the expertise and technology necessary to develop, as well as

certain less profitable fields for strategic reasons.

• Chicontepec: We requested fields that, despite their complexity, are strategically valuable due to the volume of oil and gas deposits. We also requested

fields that are subject to existing contractual arrangements, including Integrated Exploration and Production Contracts (which we refer to as the IntegratedE&P Contracts).

• Shallow waters: We primarily requested profitable fields containing heavy, light and extra-light crude oil deposits that were already in production or under

development. We also requested certain fields containing extra-heavy crude oil deposits that we are developing or will develop in the near future.

• Deep waters: We requested fields that are currently under development, including fields in Área Perdido.

Initial Assignments. The Ministry of Energy will take the following factors into consideration when determining whether to grant us an assignment:

• with respect to areas that we were actively exploring in which we had made commercial discoveries or investments as of December 21, 2013, our investment

capacity and evidence of a detailed plan for exploration; and

• with respect to areas that we already had under production as of December 21, 2013, our development plan for producing fields, including evidence of proper

development of such fields and our ability to efficiently and competitively carry out production activities.

Although the Ministry of Energy has, in accordance with the transitional articles of the Energy Reform Decree, until September 17, 2014 to respond to our requests,the Ministry of Energy has publicly announced that

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it is possible that its responses may be issued in multiple stages, beginning with areas in which we currently operate. Any areas that we do not request or are notassigned to us will be subject to a competitive bidding process. The transitional articles of the Energy Reform Decree provide that we will be entitled to receivecompensation in accordance with a valuation established by the Ministry of Energy in the event that areas that we are currently operating are not assigned to us.

Once a particular area is assigned to us, we may request that the Ministry of Energy permit us to convert the assignment into one of the contractual frameworksdescribed above. If, in connection with the conversion of an assignment, we decide to enter into an agreement with a private sector company, the NHC will conduct apublic tender in a manner similar to the bidding process described above to determine who will be our partner.

Capital Expenditures and Investments

The following table shows our capital expenditures, excluding maintenance, for each of the five years ended December 31, 2013, and the budget for suchexpenditures for 2014 and 2015. Capital expenditure amounts are derived from our budgetary records, which record such amounts on a cash basis. Accordingly, thesecapital expenditure amounts do not correspond to capital expenditure amounts included in our consolidated financial statements prepared in accordance with IFRS.

Capital Expenditures

Year ended December 31,(1) Budget

2014

Budget

2015 2009 2010 2011 2012 2013

(in millions of pesos)(2)

Pemex-Exploration and Production Ps. 180,507 Ps. 194,838 Ps. 177,059 Ps. 193,801 Ps. 212,556 Ps. 230,879 Ps. 229,982

Pemex-Refining 18,526 22,636 25,157 28,944 29,794 40,699 77,744

Pemex-Gas and Basic Petrochemicals 3,941 3,887 3,019 4,468 5,405 7,548 8,234

Pemex-Petrochemicals 2,053 2,462 2,426 2,892 4,003 5,396 6,109

Petróleos Mexicanos 560 206 717 943 1,707 2,189 5,554

Total capital expenditures Ps. 205,587 Ps. 224,029 Ps. 208,378 Ps. 231,048 Ps. 253,465 Ps. 286,711 Ps. 327,623

Note: Numbers may not total due to rounding.(1) Includes capitalized interest during construction period for the year 2009. Does not include capitalized interest for the years 2010, 2011, 2012, 2013, 2014 and 2015.(2) Figures for 2009, 2010, 2011, 2012 and 2013 are stated in nominal pesos. Figures for 2014 and 2015 are stated in constant 2014 pesos.Source: Petróleos Mexicanos.

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Total Capital Expenditures

The following table sets forth our total capital expenditures by project, excluding maintenance, for the five years ended December 31, 2013, as well as the budget forsuch expenditures for 2014.

Capital Expenditures

Year ended December 31,(1)(2) Budget

2014(3) 2009 2010 2011 2012 2013

(in millions of pesos)(4)

Pemex-Exploration and Production

Ku-Maloob-Zaap Ps. 20,894 Ps. 18,350 Ps. 21,554 Ps. 22,720 Ps. 29,738 Ps. 34,292

Cantarell(5) 41,002 38,437 36,303 42,139 28,171 24,375

Aceite Terciario del Golfo 20,607 28,262 21,919 20,864 20,049 5,242

Tsimin-Xux(6) — — — — 13,312 20,179

Antonio J. Bermúdez(5)(7) 10,442 9,853 11,218 13,126 11,489 10,751

Burgos 19,410 29,704 19,564 17,324 10,316 9,935

Crudo Ligero Marino(6)(8) — — — — 10,000 13,402

Chuc(9) 3,469 2,619 3,730 7,870 9,897 12,245

Ogarrio-Magallanes(7) — — — — 6,693 5,229

Delta del Grijalva 4,571 5,904 6,501 5,671 6,169 6,934

Cactus-Sitio Grande(6)(10) 1,127 1,384 1,995 2,544 4,208 3,526

Integral Yaxché 4,552 3,963 1,986 2,485 3,858 8,173

El Golpe-Puerto Ceiba 1,706 847 1,274 2,691 3,708 1,438

Veracruz Basin(6) — — — — 3,703 5,102

Bellota-Chinchorro(11) 4,496 5,518 4,912 3,101 3,607 3,356

Jujo-Tecominoacán(5) 5,419 6,584 3,658 3,555 3,336 2,576

Tamaulipas-Constituciones 987 1,967

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