Miguel Octavio: PDVSA financials:
A magical mystery tour

For the last three days I have been staring at PDVSA's financial statements. There are 161 pages of them. Supposedly audited by the same firm that has been doing that job since a while back. I like stuff like that. It may seem like boring reading to some, but numbers about Venezuela have become like a detective story. You keep tabs on Fonden, so that you can keep tabs on PDVSA, so you can check what the Central Bank says.

But it no longer works.

Assume for the sakes of argument, that PDVSA's financials are right, audited after all by the local partners of a well known international accounting firm. Let's say that is written in stone. I believe it. You too.

Then we are in trouble. Real trouble. Because in February the Venezuelan Central Bank (BCV) told us (and I believed them) that PDVSA had paid US$ 36 billion in taxes and royalties.

So, now that PDVSA reports that this number is US 8.3 billion lower at US$ 27.7 billion, who do I believe?

I have no clue.

And I look further…

In one of the many press releases (can't link to them, but they are all in PDVSA.com) except that somehow they use non-standard links. But one of them shows us the ever controversial export table.

Let's assume we are a bunch of stupid radical morons who don't know how to count oil barrels. Ramirez is right, PDVSA is exporting 3 million plus barrels a day.

Except, that in the line item about the heavy crude operations, the table says PDVSA is exporting 785,000 barrels a day.

Wait! If the Faja only has an installed capacity of 600,000 barrels a day. And if some of the heavy crude upgraders were shut down for maintenance, how can you be producing 185,000 barrels a day more than the maximum, well above the installed capacity?

I have no clue. (Unless they add the crude used to upgrade, but true output is lower, exports are lower, so the table is misleading)

And Hugo Chavez exaggerated (Noooo!) when he said that people said PDVSA is bankrupt. Nobody has said that. PDVSA is not bankrupt, what it “owns” underground is worth a lot more than what it owes. But PDVSA is in trouble.

In trouble, because according to fourth quarter figures not published (derived from what was published) PDVSA lost money in the fourth quarter of 2008. And the average price of the Venezuelan oil basket in the fourth quarter of 2008 was US$ 52.87 per barrel, way above the average price so far in 2009, so we should see losses again in 2009. Not pretty.

Take any line item. Say assets. In June 2008, PDVSA said it had assets of US$ 135.7 billion. Then in December 2008, in the unaudited financials, PDVSA said it had assets of US 144 billion. But then surprise, surprise, assets went down to US$ 131 billion, that's US$ 13 billion drop. I wonder, I know accounting can be an art, but losing 9% of your assets when you consolidate is certainly strange. What did you double count?

But it gets even worse with liabilities. In the unaudited financials, they reached US$ 144 billion, in the final audited version they are only US$ 106 billion. Incredible, no? That's a 26% difference. Do these guys have a clue? Or are we being screwed?

Even profits changed drastically.

In December we were told in the “Memoir” that PDVSA made US$ 12.1 billion, but the auditors somehow turned that down to only US$ 9.4 billion.

While Chavez will have you believe PDVSA is one of the strongest companies in the world. Except that, for example, Petrobras made more money. Twenty years ago, Petrobras was a tiny company. And PDVSA was a monster. Petrobras seems to be the monster these days.

It's sort of downhill from there. PDVSA said that accounts payable was US$ 16.4 billion in December, it is now only 10.8, despite Pdvsa not announcing any major payments.

And you can also dig out that despite record oil revenues in 2008, social contributions went down. So much for the revolution…

Anyway, I will try to understand it better and if I have anything believable, will post. I seriously doubt I will, I am giving up in understanding these now very obscure subjects.

It is a Magical Mystery Tour

Miguel Octavio is a Caracas-based financial analyst who writes a political and economic blog The Devils's Excrement . Petroleumworld not necessarily share these views.

Editor's Note: This commentary was originally published by The Devils's Excrement on 06/11/2009. Petroleumworld reprint this article in the interest of our readers .

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Petroleumworld News 06/12/09

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Miguel Octavio: PDVSA financials: A magical mystery tour

Miguel Octavio: PDVSA financials:
A magical mystery tour