Pemex, as the Mexico City company is known, had a loss of 6.9 billion pesos ($635 million) compared with a loss of 76 billion pesos a year earlier, according to a Mexican stock exchange report. Sales fell 11 percent to 236 billion pesos. Average daily output slid 6 percent to 3.1 million barrels.

Exports fell 12 percent to 1.66 million barrels a day. The U.S. buys about 80 percent of Pemex's crude exports. The Mexican government this year will likely cut spending from 2006 as oil tax revenue, accounting for more than a third of its budget, drops because of lower output and oil prices.

Pemex ``will face the challenge of maintaining production levels, making it a priority to attend the growing investment needs that are required for exploration and extraction of oil and gas,'' the company said in an e-mailed statement.

On Feb. 7, Chief Executive Officer Jesus Reyes Heroles said Pemex's largest oil field, Cantarell, will decline about 15 percent this year following a 12 percent drop in 2006. Cantarell last year accounted for 55 percent of Pemex's production.