PDVSA Earnings – any surprises?

PDVSA workers on rig

PDVSA workers on drill rig in Orinoco Belt, August 29, 2008. Click for full size. The sign says, "THINK. TO NOT BE CAREFUL IS DANGEROUS."

PDVSA posted its annual financial and operational report on line today. This 523-page document is a classic bit of Venezuelan duality: on the one hand, a demonstration of extreme transparency, above and beyond what’s required by law or normal among OPEC’s state oil companies. On the other hand, a bizarre mess of obfuscation and unexplained phenomena. (Yes, pro- and anti-Chavistas, you are both welcome to quote me out of context.)

It’s a bit tricky to apply normal analytic processes to a state company like PDVSA. The “bottom line” of profit is sort of irrelevant when the sole shareholder is also the recipient of taxes, royalties, and special donations. Not to mention that the operations of the company include activities like paving roads, operating subsidized food markets and building schools, tasks which would normally be considered governmental. So I ignore “net income” and will keep doing so until the company moves again toward an Ecopetrol/Petrobras type structure of offering shares to the public. That is a long way off.

I haven’t had time to read the whole report but allow me to point you at a few lines of my favorite table. Starting on page 508 of the PDF, aka page 81 of the appendix, you’ll find the breakdown of PDVSA’s operating costs and income by business segment — exploration and production under Eulogio del Pino, refining, commercialization and supply under Asdrubal Chavez, and the international sector, the biggest component of which is Citgo.

A few of the weird, and as far as I’ve seen so far unexplained, gaps in here are:

Refining, commercialization and supply sales within Venezuela fell to $2.1 billion in 2009 from $19.8 billion in 2008. But then there are the “eliminations,” which shrank to $11.5 billion from $34.4 billion, and the other eliminations which shrank to $6.666 billion (antichrist alert, hence my not rounding this one) from $8.654 billion, so I have no idea what’s going on.

Exploration and production operating costs rose to $12.1 billion from $9.8 billion in a year where the company cut back on every possible cost, to the point of just refusing to pay debts.

Under “accounts payable to suppliers,” the company is sticking with its line that it reduced accounts payable in 2009 from $7.56 billion to $7.02 billion. This goes against everything that suppliers were saying. Also seems to go against what PDVSA President Rafael Ramirez said today, according to a statement on the company’s website. “PDVSA has been maintaining a normal debt level with providers, between $3 and $4 billion, which is a continuing process,” Ramirez said. “We contract services, debt is taken on, and at the same time we pay off others. It’s our way of working with the privates and there’s no conflict in it.”

Under “international arbitration,” it says the multi-billion-dollar Exxon arbitration “won’t have a significant effect on its operations and financial situation.” There’s also no mention of Conoco’s big arbitration claim — has this thing been quietly settled or did the lawyers just forget to mention it? Anyway enough for now…back to work.

2 thoughts on “PDVSA Earnings – any surprises?

  1. ow

    Couldn’t follow your comments on this – I think you’d have to list the specific tables and pages where you saw the numbers.

    Regardless, to me the key number is the government take was over $50 billion in 2008 and in 2009 it was down to $27 billion. Ouch. That will definitely throw you into a recession and make you run up plenty of debt – as they have done.

    And that includes the good luck (for them) of Obama and Bernanke partially reflating the commodity bubbles.

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