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Gustavo Coronel : PDVSA'S 2017 Bond
with vague and/or inaccurate information
PDVSA's 2017 Bond Offering contains vague and/or inaccurate information.
Some of the statements contained in PDVSA's recent 2017 bond offering would require a much better explanation and/or corrections as they seem vague or, even, inaccurate. Items:
PDVSA. We intend to use the net proceeds from this [$3 billion] offering for general corporate purposes, including financing of capital expenditures and social development expenses.
Comment: PDVSA admits getting into further debt in order to attend ‘general corporate purposes… and social development expenses”. We find it criminal that the company keeps borrowing money for unspecified “general corporate and social expenses”.
PDVSA. The 5-year development plan 2010-2015 totals $252 billion in Venezuela, the Caribbean and Latin America.
Comment: First of all, a $252 billion five-year investment plan ($50 billion per year) sounds totally beyond the technical, managerial and financial capabilities of the company. PDVSA simply lacks what it takes to execute such a plan. Second, the plan is so vague that no one knows what it includes. Third, in the context of such a gigantic investment, the current $3 billion bond offering sounds really ridiculous. If they need money for the small needs where will the big money come from?
PDVSA. During the three-year period ended December 31, 2009, we invested approximately $44.9 billion in development projects in such regions through
cash on-hand and issuance of debt. During the six-month period ended June 30, 2010, we invested approximately $4.9 billion in such projects.
Comment: What were some of these investments? Looking back on the past three years and on the first half of this year we see no signs of capital projects done that can explain the amount of money given by PDVSA.
PDVSA. We are also engaged in the exploration and production of gas from off-shore sources with a production of 655 thousand barrels per day (or mbpd) barrel of oil equivalent (or boe), in 2009.
Comment. Where did this off-shore natural gas production take place in 2009? Really, this must be a mistake. 655.000 barrels of oil equivalent per day is an enormous number.
PDVSA. We “estimate that approximately 272,000 million barrels are recoverable [from the orinoco area], based on a total recovery factor of 20 percent”.
Comment. In PDVSA's annual report for 2009 and its submission to the U.S. Security Exchange Commision they talk about this volume as the amount of proven reserves they have officially validated in the area.
They cannot have it both ways. It is either reserves or an “estimate”. Which is it?
Gustavo Coronel is a 28 years oil industry veteran, a member of the first board of directors (1975-1979) of Petroleos de Venezuela (PDVSA), author of several books. At the present Coronel is Petroleumworld associate editor and advisor on the opinion and editorial content of the site. All his articles can be read in Gustavo's blog. Las Armas de Coronel . Petroleumworld does not necessarily share these views.
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Petroleumworld News 10/25/2010
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