Pdvsa's net profits plunge 68 percent (Tio Hugo's oil company)

Pdvsa's net profits plunge 68 percent

El Universal (Caracas)

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Venezuela's state-run oil holding Pdvsa recorded a 23.8 percent increase in production costs per barrel at USD 4.05
MARIANNA P�?RRAGA
EL UNIVERSAL

The interim balance sheet updated up to June 30, 2007, Venezuelan state-owned oil conglomerate Pdvsa disclosed recently, leaves nothing to the imagination.

According to the balance -which was reviewed, yet not audited by Alcaraz, Cabrera & Vázquez (an affiliate of KPMG)- Pdvsa's consolidated net profits declined 68 percent from USD 2.84 billion in the first half of 2006 to USD 896 million in the same period last year.

The fall came as a result of reduced exports of crude oil and byproducts, from USD 49.61 billion to 41.58 billion. Sales in the domestic market, however, soared slightly from USD 1.03 billion to USD 1.09 billion.

There are two reasons behind Pdvsa's declining oil export revenues. First, in January-July last year, the Venezuelan oil basket price fell 4.5 percent compared to the same period on 2006, while crude oil and byproducts exports (including shipments from strategic partnerships) decreased by 107,000 bpd (4 percent), from 2.66 million bpd to 2.55 million bpd.

Second, Pdvsa's disbursements to fund social programs went up 7.8 percent, from USD 6.71 billion to USD 7.24 billion.

The 2007 interim balance sheet is the second consecutive such balance showing a decrease in Pdvsa's consolidated net profits. In 2006, auditors reported on a 15.9 percent in the holding's consolidated net profits, from USD 6.48 billion to USD 5.45.

Inadequate adjustment in cost

The half-yearly balance sheet reviewed by KPMG is the first statement reflecting a significant reduction in Pdvsa's costs and expenditures over the last five years.

Costs were cut from USD 39.94 billion to 34.59 billion in the first half of 2007, or a 13.4 percent decrease. The largest cut was in crude oil and byproducts sales, from USD 20.33 billion to USD 16.64 billion.

Operational expenses were also trimmed from USD 7.4 billion to USD 4.87 billion. However, funding expenses jumped from USD 93 million to USD 103 million.

Pdvsa's debt standing is better shown in the general balance sheet, which reports long-term floating debt at USD 1.98 million up to June 30, 2007, compared to USD 652 million at the end of 2006. Long-term debt was USD 11.59 billion, significantly higher than USD 2.26 billion in 2006.

Based on the interim balance sheet, Pdvsa's total liabilities skyrocketed from USD 27.42 billion up to December 31, 2006 to USD 39.03 billion up to June 2007, or 42.3 percent. Liabilities grew more than assets, which went up from USD 80.52 billion to USD 92.67 billion, an increase of 15 percent.

Operational costs also jumped. Overall production costs per oil barrel -including the extinct operational agreements that migrated to joint ventures- grew from USD 3.54 to USD 4.01. Meanwhile, production costs per oil barrel grew from USD 3.27 to USD 4.05 -excluding the operational agreements. This suggests Pdvsa was less cost-effective than the joint ventures where it owns a majority stake. Pdvsa's own production costs soared 23.8 percent in the first half 2007, while overall production costs -including third parties- climbed 13 percent.

Poor production

The English version of the half-yearly financial statement reviewed by KPMG comprises an operational balance of Pdvsa as of June 2007.

Based on the document, the holding's crude oil production declined from 3.27 million bpd to 3.13 million bpd, a decrease of 142,000 bpd (4.3 percent). Total oil exports -including strategic partnerships) went down from 3.03 million bpd to 2.87 million bpd, thus dropping 164,000 bpd. This reduction is also the result of increased fuel sales in the domestic market, which climbed from 533,000 bpd to 563,000 bpd.

Oil refining in domestic refineries decreased by 46,000 bpd, averaging 1.12 million bpd. In the Venezuela-owned refineries based in the United States, oil refining dropped 328,000 bpd to 1.07 million bpd. Isla refinery in Curacao and Pdvsa's refining plants in Europe recorded increases at 20,000 bpd and 35,000 bpd, respectively.

Venezuelan oil sales to the United and Canada -which concentrate most Venezuelan oil exports- fell 93,000 bpd of crude oil and byproducts. Meanwhile, sales of crude oil and byproducts to South America, Central America, and the Caribbean soared from 835,000 bpd to 853,000 bpd. Oil shipments to Europe fell 62,000 bpd, with exports to Asia climbing 30,000 bpd to 292,000 bpd.

Translated by Maryflor Suárez R.
msuarez at eluniversal.com

By sloopskipper on Feb 21, 2008, 13:46 in Friendly Talkzone.

sloopskipper says on Feb 21, 2008, 13:46:

bump

durito says on Feb 21, 2008, 13:49:

That's a rather impressive accomplishment given the price of oil.

sloopskipper says on Feb 21, 2008, 14:48:

No kidding! The guy is a real wizard, he could turn a silk purse into a sow's ear.

podborski says on Feb 21, 2008, 15:16:

the silver lining in all this for colombia is that they will see close up just how totally chavez will destroy the venezuelan economy, and I would think the lesson won't be lost.

less likely a socialist gov't will be elected in colombia.

fecherklyn says on Feb 21, 2008, 17:15:

Agreed Podborski, and an even closer scrutiny of PDVSA's accounts would show the situation is worse than imagined.

But these disclosures will only confirm a picture to those who are already convinced. Colombia's middle-class and business sectors will not be surprised by these figures.

Unfortunately, the working (& non-working) classes, a majority of the potential electorate, are unlikely to see, or take note, of this news. Colombia will not be "free" of the fear of Chavez style "socialism" until some of the cake comes their way IMO.