UPDATE 2-Moody's expects Pemex to increase production by 1% in 2020

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By Ana Isabel Martinez and Stefanie Eschenbacher

MEXICO CITY, Feb 28 (Reuters) – Moody’s Investors Service said on Friday it expects Mexican state oil company Petroleos Mexicanos to increase production by 1% in 2020, replacing about 50% of its proved reserves, and that it demonstrated “good progress” last year.

Pemex, as the company is known, has been on the brink of a downgrade to speculative grade, or junk, since June when Fitch Ratings changed its rating and it sank deeper into the red last year.

All three major ratings agencies have the ailing company on a negative outlook. A second downgrade could trigger billions of dollars of forced selling by investors whose mandates stipulate they must hold bonds of investment-grade quality.

President Andres Manuel Lopez Obrador threw the company several lifelines last year, providing billions of dollars’ worth of support in the form of capital injections, tax breaks and debt refinancing.

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