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

Pricing power, Colombia-Venezuela edition

There are many ways to translate “pricing power” into Spanish. But the easiest way to explain what it means is here (PDF), on page 7.

Ecopetrol’s export price for “gases” — which as far as I can tell is natural gas* — in the fourth quarter went up to US$5.80 per million BTU, from $4 in 4q2010. The average price for the year rose to $5 from $3.90. As long-time readers may recall, Colombian gas exports are basically to Venezuela, via a pipeline built (ostensibly) to export Venezuelan gas to Colombia. Because Venezuela’s natural gas situation remains grim, Colombian producers including Chevron Corp. sell to Colombian national oil company Ecopetrol, which in turn sells to PDVSA, the state oil company in Venezuela, which then sells the gas to power generators and chemical plants.

I’ll leave it to the Venezuela howling squad to worry about the fact that PDVSA’s retail prices for natural gas remain the same year after year. For me, the interesting thing here is that Ecopetrol has Venezuela over such a barrel that it seems able to pretty much raise prices. I mean, where else is Venezuela going to go? Volumes exported also rose 47 percent year-over-year because of “higher demand in Venezuela” and more gas available for export.

At some point, the shoe will be on the other foot, as Venezuela has a nearly bottomless pit of gas if it can ever figure out how to get it out of the ground, and Colombian gas — well, see the last entry for more on that. Gas sales in Colombia are at a 2-year low.

*It’s Friday night so I’m not going to bother Ecopetrol flaks about this, but this whole entry is off-base if the word “gases” includes butane. Sorry for the ambiguity, but this is the journalism you get for free. On Friday night.

Colombia turbulence continues

While some prefer to use partial figures from press releases, here at Setty’s Notebook we don’t let speed beat out completeness. Heck, we don’t let speed beat out anything — the next post is about figures released two months ago.

Anyway, the numbers published today by Colombia’s Agencia Nacional de Hidrocarburos shows that the high volatility in that country’s oil production continued in March. This time, it was a lurch to the upside in oil output, while natural gas sales fell to a 2-year low. Hard to know what that’s all about without looking at individual field data — gas sales can fall because the gas is being reinjected, or because fields are producing more oil per cubic meter of gas, or because production is falling. And the higher ratio of oil:gas is generally a good thing, as oil is selling for much more money than gas these days.

Colombia oil output hits turbulence

Colombia oil, gas 2007 to 2012

Colombia’s oil output (the blue line on the chart above) was rising steadily for years. Maybe too steadily. There were rumours that the pressure was on to make the mark of 1 million barrels a day, and that some companies were extracting oil too quickly, reducing the overall recoverability of oil in some fields. I don’t know if those rumours were true. I know what this chart shows. One is a very smooth, exponential rise in output that suddenly stopped last June. Did something happen last June?

There is also a strange lack of synchrony between oil & gas. The most obvious thing is that gas sales have been volatile, while oil output has risen steadily. Gas sales peaked at the beginning of 2010, while oil production kept rising. And in the past year, gas sales rose for several months without any corresponding increase in oil.

And then there’s the really obvious point: The blue line has yet to broach that million-barrels-a-day mark. I suppose this should have been predictable when Jim Cramer and everyone else started talking up Colombia a little over a year ago.

UPDATE: I knew I had seen someone else comment on Colombia’s failure to make 1 million barrels a day, and it turns out it was regular reader, commenter, linker, and all-around site pal Otto. A month ago. And my memory is failing me in my old age. Actually I can’t blame age. His page had a handy chart of the derivative, too, which is pretty cool, so go check it out.