PDVSA 1h11 financials: Any surprises?

PDVSA, Venezuela’s state oil company, released its first-half financials, in English, as part of a bond prospectus last week. They aren’t yet on the PDVSA website, so please, allow me to fill you in on what the bigwigs in the bond market already know. Click here to download the prospectus. (Yes, I do PDVSA’s job of informing the public of its financial condition. We heart PDVSA’s commitment to transparency.)

A friend sent in the document and asked me, very generally, what I found interesting. I gave it a skim and, down below, you can see what I came up with.

Now that I haven’t lived in Venezuela in over a year, my depth of knowledge and understanding of PDVSA is gradually fading. So if you think this list is dumb, just tell me so, either in comments or e-mail. I’m sure that many of you out there know more about some details of this company than I do. With that out of the way, here are my notes:

P. 33: They say domestic fuel consumption declined. That’s probably because Guri Dam is back in action, reducing the need for diesel and fuel oil for power generation. In any case, they sell 622,000 barrels a day of refined products in venezuela. They claim production of 2,986,000 bbl/d and exports of 2,519,000. Now, refining oil sometimes increases its volume, but still, add up exports and consumption, 2,519,000 + 622,000= 3,141,000, that’s 155,000 barrels a day difference. Some part of that is refining gain, but I’d guess that they are importing some refined products. That would be expensive.

P. 41: Capex is barely above last year’s anemic level. Up 5%. This matches Oil Minister Ramírez’s statement in Feb. that capex would be $12b this year

P. 92: Executive pay seems lower than I remember: For the year ending December 31, 2010 the aggregate amount paid by us as compensation to our directors and executive officers for services in all capacities was approximately $0.74 million (based on the 2010 average exchange rate of Bs.4.30 to $1).

P. 143: Cash position improved 50% between 31 dec and 30 june, to $9 billion from $6 billion.

P. 143: Accounts payable down by $800 million but still huge at $9.3 billion, almost a month’s worth of annual sales.

P. 145: Oh funny – i never noticed this before – the company’s Fonden contributions under the windfall “special contributions” grew a lot, of course. Under the law those contributions are tax-deductible, which is part of why the company’s income tax dropped 80% year over year. That starves state governments, which by law receive a portion of income tax receipts.

P. 148: For some reason, sales within Venezuela from the refining segment quadrupled in 2q11 year over year. I don’t understand! And yet the operating loss of the Venezuelan refining unit extended to $3.6 billion in the quarter from $1.7 billion a year earlier. I don’t understand that either.

P. 152: I just saw that the accts receivable under “energy agreements” went up by something like 60% y-o-y. I thought PDV didn’t have to finance those agreements, and that the central govt paid them for the oil under the deals. I guess not.

And also:

“As a result of agreements and contracts entered into by the Bolivarian Republic of Venezuela and foreign governments, accounts receivable from related entities and companies at June 30, 2011 and December 31, 2010, include $10,739 million and $7,471 million, respectively, receivable to the Republic from the sale of crude oil and products.”

Shouldn’t that say FROM the Republic, not TO? If so, it indicates that PDVSA has handed over $10.7 billion worth of oil and products without getting paid, as part of these special deals. That can’t be good for the cash flow.

P. 154: WTF with PDVSA taking out loans from Banco de Venezuela?

“On June 3, 2011, PDVSA executed with Banco de Venezuela, S.A. Banco Universal (wholly owned by the Bolivarian Republic of Venezuela) two loans denominated in bolivars amounting to $930 million, both due in 2018 with an annual interest rate of 9.5% for the first quarter, and a variable interest rate for the subsequent quarters, upon mutual agreement between the parties, without exceeding rates established by the BCV for loan portfolios of the agricultural and manufacturing sectors.”

(Noting that El Universal has now reported this one.)

P. 154: Accounts payable to contractors actually rose, to $5.22 bln from $4.63 bln.

P. 158: I hadn’t heard about this before, I don’t think: “To meet guidelines established by MENPET and PDVSA’s strategic plans, the Company temporarily continued to financially support the activities of PEQUIVEN. During the six-month period ended June 30, 2011, PDVSA provided PEQUIVEN with $465 million to be used as working capital, included under accounts receivable from noncurrent related parties.”

Well, that’s enough for now. I’m sure there are more odd tidbits in there.

But to answer the question in the headline: No, no surprises. PDVSA is weird and provides money for all sorts of Venezuelan presidential priorities and is run outside of usual corporate methods. Anyone still surprised by that is probably also surprised by the sun rising in the east.

8 thoughts on “PDVSA 1h11 financials: Any surprises?

  1. J

    Refining sales to Venezuela are probably a currency play – sell at the official rate to someone inside Venezuela, who then resells the oil (illegally?) to international markets at the unofficial rate and pocket the difference.

    1. sapitosetty Post author

      And you think there are individuals in Venezuela with space to receive, store and dispatch 50,000 barrels a day of products? Nope. We know Venezuela imported 25,000 barrels a day of MBTE for its gasoline (cause hey, clean groundwater is for pussies) because that’s in US statistics. Mexico and Cuba may also sell refined products to Venezuela.

      1. J

        I see your point, but if the local buyer purchased it FOB and resold it FOB, they wouldn’t have to receive, store and dispatch any oil. The final buyer would be responsible for arranging for the ship to arrive.

    1. sapitosetty Post author

      Oliver Campbell is confused. Claims against PDVSA are nothing like $30 billion. The big artbitration complaints are all against the Republic.

      Also, comparing 1h11 to full-year 2010 is no more meaningful than comparing to 1h10. Things change constantly. If you want to do a meaningful analysis of whether PDVSA is operating competently, compare to other vertically integrated oil companies. Have profits increased faster or slower at PDVSA? How are refining margins? How are lifting costs?

      I didn’t include this, but lifting costs soared year-over-year. I am guessing that this is a reflection of PDVSA’s new commitment to production, at the expense of cost control.

  2. Elio Ohep

    Technically the claims are against the Republic but read the notes to PDVSA’S accounts and you will see reference to the arbitration claims—an extract is given below:

    Mobil Cerro Negro Ltd.
    On January 27, 2008, a subsidiary of ExxonMobil, Mobil Cerro Negro Ltd. (“Mobil Cerro Negro”) filed an arbitration request before the International Court of Arbitration of the International Chamber of Commerce against PDVSA and PDVSA Cerro Negro, S.A. (“PDVSA Cerro Negro”), claiming an entitlement to indemnity from PDVSA Cerro Negro under the association agreement relating to the Cerro Negro Project (the “Cerro Negro Association Agreement”) and from PDVSA under the terms of a guaranty granted by PDVSA of PDVSA Cerro Negro’s obligations under the Cerro Negro Association Agreement.

    ConocoPhillips Petrozuata and Phillips Petroleum Company On December 30, 2009, ConocoPhillips Petrozuata B.V. (“CPZ”) and Phillips Petroleum Company Venezuela Limited (“Phillips Venezuela”) filed requests for arbitration before the International Court of Arbitration of the International Chamber of Commerce in New York, against PDVSA based upon guaranties of the obligations of its subsidiaries, Maraven, S.A and Corpoguanipa, S.A. under the association agreement relating to the Petrozuata Project and the association agreement relating to the Hamaca Project, respectively. CPZ and Phillips Venezuela claim that the PDVSA subsidiaries breached obligations in respect of certain production and export cutbacks ordered by the government of Venezuela.

    In practice, money to pay the claims will come from PDVSA and its oil income.

    I believe multiplying Jan/Jun mentally by two and then comparing it with 2010 gives a much better idea of the improvement that will occur in the whole year 2011. My whole emphasis is to show how 2011 will provide the highest national take the country has ever had. Perhaps your correspondent would like to provide his own analysis for our benefit comparing Jan/Jun with whatever period he favours.

    Production costs in Jan/Jun increased by 14% over the year 2010.
    Average including service agreements $6.23 versus $5.53
    Average excluding service agreements $5.96 versus $5.23

    This is not surprising because wage costs went up substantially. I would not say the costs “soard” since the increase is considerably less than general inflation.

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