Americas News
PDVSA Signs Deal With Halliburton/Weatherford Amidst New Reports of Debt Woes, Questionable Reserves
Following through on his assertion last month that steps will be taken to revive his country's oil production, Eulogio Del Pino, oil minister for Venezuela, announced that state oil company PDVSA has signed financing agreements with Halliburton and Weatherford.
Del Pino did not disclose details of the agreements other than to say "We are going to share the difficulties together, because [the services companies] can't always be on the easy side of things.
"That's the negotiation we're having with many companies."
However, it's anyone's guess whether the republic will be able to work its way back to an output recovery, as new data reveals just how debt ridden it has become: Bloomberg reports that PDVSA is facing $726 million in interest payments in August (accrued from the over $20 billion it owes service providers); the nation owes China $65 billion in loans; and the probability of it defaulting in the next five years is 93 percent, according to credit-default swaps.
On top of all this is a report from Robert Rapier, who writes in Forbes that Venezuela's reserves are likely vastly overstated, due to it not readjusting its widely-stated number of 300 billion barrels (calculated when oil prices were $100 per barrel): "Just how overstated is hard to say ... but the current price, as well as Venezuela's business climate, are unlikely to attract much in the way of new investment."
Rapier goes on to note that if oil remains at the $50 level for much longer, "Venezuela could have to write down their reserves to where they were a decade ago.
"That would imply removing 220 billion barrels from the books: that amount is equivalent to 68 percent of the global increase in proved reserves over the past decade."
Bloomberg suggests that one step in the right direction for the embattled nation would be to hold a referendum to recall president Nicolas Maduro, who has been widely criticized for adhering to former president Hugo Chavez's socialist blueprint instead of embracing free-market reforms.
Venezuela's attempt to boost production was inspired by new quotas set by the Organization of the Petroleum Exporting Countries, the details of which have not been revealed.
