Latin American national oil firms face rising credit risks as they rely on mounting debt to finance upstream expansion, according to Moody's Investors Service.

Moody's warned that Mexico's Pemex and Brazil's Petrobras would encounter deteriorating credit metrics until at least 2016, when production growth is expected to boost cash flow.

"Pemex's fortunes depend on the proper execution of Mexico's new energy law, while Brazil's Petrobras will focus on deepwater offshore plays, which will translate to high production costs and operational risk," Moody's said in a report.

The credit rating agency added that Argentina's YPF and Venezuela's PDVSA posed the region's highest sovereign risks.

Government intervention has prompted a dearth of foreign investment in Venezuela while PDVSA has been hit by high transfer payments, according to the report. Meanwhile, dwindling currency reserves and a dependence on volatile oil export revenue "heightened bondholders' risks."

Moody's added that, in addition to political interference, YPF had been affected by Argentina's plummeting exchange rate and high inflation.

"YPF and PDVSA both have good assets and historically have prioritized payments to bond and noteholders, but political and regulatory concerns at home mean volatile cash flow for both companies, which is a risk for creditors," Moody's said.

According to the report Petrobras, YPF and Colombia's Ecopetrol will experience the fastest growth over the next four years, driven by rising output from mature and new fields.

The Colombian major was singled out as an attractive option for investors.

"Ecopetrol benefits from Colombia's stable regulatory regime, good fiscal terms and consistent growth in oil production," Moody's added.