Monthly Archives: April 2012

Latin America reality check: You too may be the 1%

I’m in the “model” Latin American country, Chile. Yesterday, I had to run some errands in Vitacura, which is part of the prosperous “favoured quarter“* of Santiago. It was a classic edge city day. Much of it could as easily have happened in San Ramon, California, as Santiago, Chile. I dropped off my MacBook Pro at a certified Apple dealer next door to a vendor of fine leathers. Walked on a tree-lined sidewalk past an Audi dealer. In the distance, the Marriott, a towering executive desk ornament, windows shut against the smog.

To keep all this prosperity running, you need a critical mass of people with money, right? Which is why an article in the Sunday print edition of generally elite-oriented newspaper La Tercera was so surprising. Here’s what Yale/UChile economics professor Eduardo Engel writes:

Slightly more than 6 million Chileans received a salary in 2010. How many received a monthly wage of more than 6 million pesos (US$144,000 a year)? Please, wait a second. Don’t keep reading, just answer. It’ll be worth the trouble. You have an answer? Second question: how many earned at least 2 million pesos a month (US$48,000 a year)? And third, how many earned at least 1.2 million a month (US$29,000)? Continue reading

Meanwhile, over there: Sudans at risk of oil war

Those of us fixated on Latin America sometimes forget just how stable and calm things are in our neck of the world. I found fascinating this Platt’s report on the possibility of an oil war between Sudan and South Sudan.

A bloody battle over a disputed oil field heads for full-blown conflict between Sudan and South Sudan, just nine months after the former civil foes split … disputed Heglig oilfield … mobilized their populations for war … South Sudan seized the oilfield … estimated production capacity of 60,000 b/d, around half of Sudan’s remaining 115,000 b/d production, making them vital to Sudan’s economy … increased financial crisis due to takeover of Heglig … headlong mobilization …

Enjoy, inasmuch as you can enjoy another war.

Argentina’s shale: More than gas (YPF Repsol more)

Every oil analyst is suddenly a bit more focused on Argentina than they were a week or two ago. I just want to correct a couple little mis-impressions about Argentina’s shales in these two generally quite good pieces.

One, expressed by the FT’s John Gapper, is that it’s all the Vaca Muerta shale. There are a bunch of shale areas. Indeed, below the Vaca Muerta you can find the Los Molles formation, which is much thicker. Argentina’s shales, combined, have the world’s third-biggest likely unproved reserves, according to US Geological Survey methodology, but Vaca Muerta alone is not even half of that.

Second, in Raul Gallegos’s piece on the same page says that the shale could offer “four centuries of the country’s consumption.” This reminds me that most people see the shales as primarily a source of natural gas. Yes, shales offer gas, but what’s exciting about Repsol’s discoveries in Argentina is that these rocks also yield oil. In the Argentine context, that makes these rocks more valuable, as gas prices are generally controlled at a low level, and exports are strictly controlled. I understand that pumping oil is more profitable, as the sales price is higher with respect to production costs.

PDVSA investment surged in 2011, missed goal (and other annual report stuff)

PDVSA, Venezuela’s state oil company, spent $17.5 billion on capital investment last year, 32% more than it spent in 2010. The spending was lower than the goal of $18.4 billion it announced in July 2011, and much lower than the $31 billion it projected a year before that. Still, investment is investment — and it’s something that actually matters for a state oil company, unlike net income. Continue reading

Alange-cum-Petromagdalena (PMD.v) 2011 results: all ok now? (UPDATED)

Back in the dark ages of 2011, I wrote about PetroMagdalena Energy (PMD.v), at the time known as Alange Energy. Short version: Management boosted shareholder expectations. When the disappointment came, the stock fell. I pointed out the company CEO touting on TV. The CEO quit. People got annoyed. Shareholders sued the company. The company threatened to sue me. A year later, what do we see in the 2011 results?

The company gives play to its increase in reserves and steadily rising production. Production is still way below where it should have been according to the BS spouted by the prior management team, but increased production is increased production. Good news. With these oil prices, that should make for a profitable company.

Instead, we see a $111 million annual net loss at a company with only $349 million in assets and $86 million in sales. Ouch. Where did the money go? Continue reading

YPF in Argentina: We’ve seen this movie

Yesterday Argentine President Cristina Fernandez de Kirchner sent a bill to the legislature to take majority control of YPF, Argentina’s biggest oil company. If you care about these things, you already know that, and if not, here’s a place to catch up. Noel Maurer and Boz have decent analysis. I wasn’t going to write about this but for once, I actually do have something to offer, as I lived through the same type of process in Venezuela, and I suspect that the Argentine nationalization will play out similarly, at least in broad strokes.

I’m no Argentina expert, and I bet I say things that piss people off for my ignorance, still, here’s a guess, likely to be wrong but what the heck: Continue reading