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Editorial / Commentary / Opinion

 

 

Oliver L Campbell :
PDVSA'S Financial Results for 2010

 

PDVSA has just published its Annual Report and Financial Statements for 2010. The net profit of $3,202 million is as announced by the Oil Minister some three weeks ago. However, t he important figure is the total national take which, in addition, includes royalties, contributions for social development, and Venezuelan income tax. The national take in 2010 was some $24.6 billion as against $22.9 billion in 2009. Financial costs in 2010 were $8.8 billion and this largely due to a strange operation with the Central Bank. I call it strange only because I cannot understand what its purpose was.

The Annual Report contains a huge amount of information. However, I have limited my comments to a few financial aspects which I hope will help the reader understand the accounts.

Petróleos de Venezuela S.A.
Statement of Net Income
(Figures in millions of US$)

Year

2010

Year

2009

Note

Sales abroad

92,744

70,636

1

Sales in Venezuela

1,400

2,646

2

Income from services

785

537

3

Sub-total

94,929

73,819

Less purchases of oil

(36,849)

(25,932)

1

Sales less purchases of oil

58,080

47,887

Equity in earnings of associated companies (loss)

(184)

(139)

4

Discontinued operation (loss)

(549)

(1.272)

5

Other expenses

(1,950)

(1,088)

Total income

55,397

45,388

Operating costs

11,892

15,235

6

Exploration costs

147

247

Selling, administrative and general costs

3,729

4,985

6

Financial income

(419)

(5,873)

7

Financial costs

8,810

835

8

Depreciation, depletion and asset impairment

 

6,037

 

5,751

Income taxes abroad

(223)

(153)

Total costs

29,973

21,027

 

Income before royalties, contributions for social development and income taxes

25,424

24,361

 

Royalties*

11,218

12,884

9

Contribution for social development*

6,923

3,514

10

Income before income tax

7,283

7,963

Venezuelan income tax*

4,081

3,465

11

Net income

3,202

4,498

Less minority interests

(855)

(1,474)

Net income belonging to the shareholder*

2,347

3,024

National take*

24,569

22,887

12

 

 

National crude oil production b/d

2,975,000

3,012,000

13

Volume of oil exported b/d

2,415,000

2,682,000

14

Crude

1,911,000

2,019,000

Products

504,000

663,000

Average export price per barrel

$72.18

$57.01

15

Investment (million $)

10,961

13,538

Oil

8,902

Non oil

2,059

Long term debt

24,950

21.897

16

Notes:

1) The average price of oil was higher in 2010.

2) The new exchange rate of Bs4.30/$1 in 2010 instead of Bs2.15 /$1 reduced the dollar value of sales in the local market. .

3) On 30 June 2010, Lácteos Los Andes y PDVAL were transferred to other government bodies.

4) Some refinery affiliates are producing losses at the present.

5) The loss in 2010 emanates from Lácteos Los Andes and PDVAL

6) The new exchange rate of Bs4.30/$1 reduced the US dollar value of costs incurred in bolivars.

7) The large amount in 2009 arose principally from the sale of dollar denominated bonds in the swap market.

8) The obligatory sale of US dollars to the Central Bank at a rate of Bs3.63 gave rise to a considerable loss for PDVSA in 2010.

9) As per instructions from MENPET, 50% of the volume delivered under the Agreement for Energy Cooperation counts as a royalty payment..

10) The higher contribution in 2010 reduced net income.

11) The new exchange rate of Bs4.30/$1 produced a higher taxable income in bolivars in 2010..

12) It is disturbing that an increase of $23,100 million in sales abroad should only produce an increase of $1,700 million in the national take..

13) The external auditors have reported the figures on this occasion in their notes to the accounts.

14) Part of the reduction in 2010 is due to an increased demand in the local market. .

15) It is disconcerting that a price increase of $15 a barrel should not have produced a much larger national take in 2010 than in 2009.

16) The long-term debt to equity ratio of 33% at the end of 2010 is acceptable though now on the high side.

On 30 June 2010, PDVSA transferred its agricultural and food companies to other government bodies. It is hoped PDVSA can now concentrate on the oil business and leave the purchase and distribution of food to companies specialized in that area.

There is no mention in the notes to the accounts of the embezzlement of some $400 million in the pension fund. PDVSA has made no provision for the restitution of this amount even though the fraud arose from the incompetence of its employees who entrusted the funds to companies that were not authorised to carry out such operations.

It is incredible that PDVSA has made a provision for litigation and claims of only $1,458 million at the end of 2010 when the total of claims under arbitration exceeds $30,000 million. It is certain the amounts awarded to claimants will not reach this figure, but a provision of some $10,000 million would have been commercially prudent. It is most surprising the external auditors have not insisted on a higher provision being made.

28.07.11



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Oliver L Campbell , MBA, DipM, FCCA, ACMA, MCIM was born in El Callao in 1931 where his father worked in the gold mining industry. He spent the WWII years in England, returning to Venezuela in 1953 to work with Shell de Venezuela (CSV), later as Finance Coordinator at Petroleos de Venezuela (PDVSA). In 1982 he returned to the UK with his family and retired early in 2002. Petroleumworld does not necessarily share these views.

Editor's Note: All comments posted and published on Petroleumworld, do not reflect either for or against the opinion expressed in the comment as an endorsement of Petroleumworld. All comments expressed are private comments and do not necessary reflect the view of this website. All comments are posted and published without liability to Petroleumworld.

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Petroleumworld News 07/29/2011

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