PDVSA Profit Plunged 53% Last Year on OPEC Quotas Cut

http://www.businessweek.com/news/2010-08-03/pdvsa-profit-plunged-53-last-year-on-opec-quotas-cut.html

(Bloomberg) -- Petroleos de Venezuela SA said 2009 profit fell 53 percent after oil prices plunged and the state crude producer slashed output to meet OPEC quotas.

Net income fell to $4.39 billion, from $9.49 billion in 2008, the company said today in a statement published in Caracas-based newspaper Ultimas Noticias. Revenue fell 40 percent to $75 billion.

Venezuela, a founding member of the Organization for Petroleum Exporting Countries, cut production by more than 300,000 barrels a day last year as part of plans by OPEC to bolster oil prices. Crude futures in New York averaged 38 percent less last year than in 2008.

“We need to present these numbers to the world to show the strength of our company and the strength of our financial situation despite 2009 being a very difficult year,” PDVSA President Rafael Ramirez said today during a press conference at the company’s headquarters in Caracas.

Crude exports fell 7.4 percent to 2.68 million barrels a day last year, while output dropped 8 percent to 3.01 million barrels, said PDVSA. Total debt surged 38 percent to $18.5 billion.

PDVSA’s debt is “manageable” and the company can take on additional debt to fund development projects, Victor Aular, PDVSA’s finance director, said at the conference.

PDVSA, the fourth-largest oil company in the world, increased borrowing last year to pay debts to service suppliers. Debt to suppliers fell to $7 billion at the end of 2009 from $7.5 billion a year earlier. PDVSA currently owes suppliers $3.4 billion, Ramirez said today.

‘No Change’

Baker Hughes Inc., a Houston, Texas-based oil services and drilling company, said today that the payment situation in Venezuela hasn’t improved.

“Not much has changed in Venezuela, which remains difficult because of the payment issues,” Baker Hughes Chief Executive Officer Martin S. Craighead said today on a conference call.

The company also increased its workforce by 9,812 and took on new assets as part of President Hugo Chavez’s drive to nationalize the energy sector.

Chavez seized assets of more than 70 services companies that managed maritime transport and oil, gas and water injection into wells to boost output, including Williams Cos. and Exterran Holdings Inc.

The participation of private companies in Venezuela’s oil industry has dropped to 48 percent from 85 percent in 2004, Ramirez said today.

Development Fund

Disagreements with service providers over operating costs led to the nationalization of 11 drilling rigs owned by Tulsa, Oklahoma-based Helmerich & Payne Inc. earlier this year.

PDVSA, the source of almost all U.S. dollars in the Venezuelan economy, slashed contributions to the off-budget development fund, known as Fonden.

The Caracas-based company transferred $577 million to Fonden in 2009, down from the $12.4 billion in 2008. Contributions to Chavez’s social programs rose to $2.9 billion last year from $2.3 billion a year earlier.

PDVSA is in the process of certifying crude deposits in the Orinoco Belt, which may make Venezuela owner of the world’s largest oil reserves ahead of Saudi Arabia. The company is seeking to make foreign oil companies minority partners to help develop untapped heavy crude reserves and boost waning output.

Production Boost

Companies including Chevron Corp., Repsol YPF SA, Gazprom OAO and Eni SpA are expected to help boost production by about 2 million barrels a day by 2015. The projects will probably require investments of about $80 billion from foreign companies and PDVSA, Ramirez said earlier this year.

The company has transferred $10 billion in royalties from oil producing projects to the government in the first half of 2010, after transferring $14 billion during all of 2009, Ramirez said today.

“The situation in 2009 was truly complicated but now we can say with confidence that oil prices are rising and the situation is manageable,” Ramirez said.

Crude oil for September delivery climbed 87 cents, or 1.1 percent, to $82.21 a barrel at 12:15 p.m. on the New York Mercantile Exchange. Futures touched $82.59, the highest level since May 5.

--With assistance from Charlie Devereux in Sao Paulo and Mark Shenk in New York. Editors: Carlos Caminada, Robin Saponar.

To contact the reporter on this story: Daniel Cancel in Caracas at dcancel@bloomberg.net; Corina Rodriguez Pons in Caracas at crpons@bloomberg.net

To contact the editor responsible for this story: Dale Crofts at dcrofts@bloomberg.net