PDVSA financials: pena ajena (updated)

There was a time when I took some pleasure in finding concealed admissions of weakness hidden within the rosy financial results of Venezuela’s state oil company. Today, I read them and I am just embarrassed. Writing about these numbers is like watching the end of bullfight. The once mighty beast is crippled, bleeding and it seems in bad taste to stare.

You can find plenty of articles about sales, production volumes, and “net income,” whatever that means for a company like this. Let me just point out a couple tables that show what’s going on:

PDVSA Accounts payable 2013

Accounts payable

Yes that’s $21 billion with a B-sting in accounts payable to suppliers.

PDVSA Dividends 2013

Dividends

Let’s be nice and ignore the incompetent translation. (Let’s not fall into a recursive spiral of passive-aggressive apophasis, either.) Almost every paragraph brings a new groan.

The first: the ongoing fiction that Petrocaribe and other cheap oil deals are liabilities of the Republic, and not of PDVSA, appears to be well-dead. “Dividends were declared for $10,000 million, paid by offsetting with account receivables from the Republic” means that the national state simply eliminated $10 billion worth of debt to the state oil company. That that came from “the sale of crude oil and oil products in the framework of contracts and agreements subscribed with the governments of other countries.” (If you follow the reference to note 8-b, it is just a description of Petrocaribe. It says oil supply under that framework has dropped to 377,000 bbl/day in 2013 from 463,000 in 2011.) This could set up some uncomfortable political situations in coming years. Some Caribbean countries, like Jamaica, have built up big debts to this program. PDVSA managers are going to be stuck playing the heavy, collecting debts from impoverished nations. It means that Venezuela as a state will avoid being in such an embarrassing position.

Under “Non-controlling interests,” we get:

On December 30, 2013, PDVSA sold to BCV 40% of the nominal value of its equity interest in Empresa Nacional Aurífera, S.A. (ENA) for $12,000 million, recording an account receivable from BCV.

BCV is the country’s central bank.

This was the second-biggest mining M&A transaction in the world last year, after the $37 billion merger of Glencore and Xstrata. Freeport McMoRan bought Plains Exploration for $6 billion. BCV bought 40% of ENA for $12 billion. Yup, sounds like a true arm’s-length transaction.

stinky-socks-300x200

And there is a bunch of blah blah blah about “mixed companies” and their dividends. Translated into human talk, this is referring to joint ventures in which private companies, and state companies from other countries, are able to invest in oilfields in Venezuela. The bottom line is later in the report:

PDVSA Accruals 2013

Debt to joint-venture partners is up 220 percent in 24 months. Good news, the rate of increase has slowed. I’m sure that will keep the nice people at Chevron HQ all happy.

Finally, just one odd item. Despite devaluations of the bolivar currency in Venezuela, at 31 December PDVSA had over $1.3 billion in accounts payable to employees. Worker’s paradise indeed.

Updated to make the link to the results a bit more obvious now that I have permission from my source to post the doc. In my source’s words, “Put it up. I don’t care. The goddamn thing is by fucking law a publicly available document.” And as one editor asked me this morning, “Why the hell are public entity debt prospectuses treated like state secrets?” Good question. Anyway, the document. Enjoy. <a href="” target=”_blank”>Here you go.

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18 thoughts on “PDVSA financials: pena ajena (updated)

  1. Gustavo Coronel

    In Accounts payable I see there is a sum of $644 for legal matters. This is not, as far as I can see, the contingency reserved for possible payments to Exxon an Conoco and others, Where would these be? nd how much has been reserved?
    What is the real debt of PDVSA? Bonds + accounts payable + loans received from foreign sources + money received from the Central Bank + other domestic loans + contingencies = ??????
    Is the Chinese loan in head of PDVSA? It should be. They are the ones that have to pay for it.

    I have not been able to be sure of what the debt figure really is. What do you think?

    1. Steven/Setty Post author

      See http://www.bloomberg.com/news/2014-06-20/pdvsa-profit-surges-as-lower-spending-counters-oil-slide.html: “PDVSA lost a $644 million arbitration case in November 2013 against Sharjah, UAE-based Gulmar Offshore Middle East LLC and Maple Shade, New Jersey-based Kaplan Industry Inc. related to the early termination of a contract. The amount was listed on PDVSA’s balance sheet as part of accruals and other liabilities at the end of 2013, according to the report.”

  2. Gustavo Coronel

    Thank you Steven. My main doubt is the most precise amount of PDVS’s debt. There are so many diverging figures that I don’t really know which we should use.

    1. Steven/Setty Post author

      The whole point of this post is that but numbers don’t really matter. They can suddenly take on $10 billion of Petrocaribe receivables from the state as a “dividend,” or suddenly sell a worthless asset for $12 billion to the central bank. The numbers are a mess. “Debt” is $36 billion. Liabilities are less than assets. But do you believe in the assets? Do you think the value of property, plant, and equipment have increased by more than $30 billion in the last two years, despite continuing deferred maintenance?

  3. Kepler

    Thanks for this research, Setty. I wished at least Colombian journous could read this…and publish some. Only then will Venezuelan journalists say ·”Colombians are saying something is fishy with PDVSA”.

  4. Darius Wilkins

    There seems to be a lot of state oil company news of recent. Perhaps some sort of analysis continent-wide might be of interest? Not that I wasn’t interested in what you reported about the PDVSA

  5. Juan Cristobal Nagel

    Setty, gonna post the document on CC a little bit later. I think it deserves a closer read, let’s hope my readers bite.

  6. @Econ_Vzla

    Setty,
    Thanks for sharing, this is fucked up beyond imaginable.

    First fact:
    As December 31st 2013, according to the official financials statements of the Central Bank, the PDVSA promissory note was Bs. 407.800 million, or US$64.300 million at official exchange rate of 6,3 Bs/$.

    Second Fact:
    PDVSA sold to BCV 40% of Empresa Nacional Aurífera, S.A. (ENA) for $12.000 million, as referred previously by you.

    Third fact:
    The PDVSA financial statements also say (page 62) that in December 2013, PDVSA offset promissory notes for $21.524 million by way of payment method of the sale to BCV of 40% of the PDVSA’s interest in Empresa Nacional Aurífera, S.A. (see notes 10-a and 12). They also say (page 81) that the whole ENA selling to BCV was for Bs.135,600 million equivalents to $12.000 million.
    —Note that PDVSA does not appear to have clear notion of what is the proper exchange rate to value that transaction, either is Cencoex rate of 6,3 Bs/$ (US$21.524 million) or some sort of SICAD I rate of 11,3 Bs/$ (US$12.000 million)—

    Fourth Fact:
    The offset of the BCV liability mentioned by PDVSA is nowhere to be found in the official BCV financial statements, as a matter of fact, according to BCV the PDVSA “pagaré” is untouched and growing since PDVSA “paid” it. Maybe PDVSA really paid it, sent the check and the motorizado got lost in his way to Carmelitas, maybe.

    Well, don´t let me start with the monetary implications of PDVSA paying its debt with the Central Bank with shares of phantom enterprises…

    1. Steven/Setty Post author

      Oh come on, dude. You are actually going to cross-check these numbers with other financial reports, are you? That’s not even playing fair. It’s hard enough for these guys to make the numbers add up correctly within their own report. If you are going to start bringing in outside documents, I don’t even know how to describe that. It just seems unsporting.

  7. Super

    Setty,

    the ENA Transaction is the most ridiculous thing I have ever heard!! Basically, PDVSA and the BCV are saying that ENA IS WORTH AS MUCH AS Barrick and Newmont COMBINED!! – And these companies produced 12 million ounces of gold last year (2013). ENA’s production is more that of a junior miner – if that. Who audited these valuations I want to know!

    If they go and value this deal in such a preposterous fashion, it should be clear to anyone following the company, that obviously no other information is beyond the management’s fantasy world, staring with the production numbers all the way to the supposed profits PDVSA earns…

    And the farce goes on…

      1. Super

        KPMG real competent. I had missed this little gem in the AVN press release:

        “Esta empresa es muy importante porque Pdvsa, a través de la Corporación Venezolana de Minería, tiene adjudicado el derecho de protección de más de 92 mil millones de onzas de oro”, explicó.

        Well let me explain to him something, 92 billion ounces of gold?? If anything 92 million. 92 bn oz equals 2.86 million tonnes, and that is more than has ever been mined since time immemorial. According to the world gold council, “At [t]he end of 2013, there were 177,200 tonnes of stocks [of gold] in existence above ground.” http://www.gold.org/supply-and-demand/supply

        Alls good in fantasy land…

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