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4/1/08

PdVSA earnings-media-bias-BS-watch update.....come on dudes, you can do better than this.....

We've had a couple of lukewarm potshots in Spanish, but up to now only the Chávez-hating "El Universal" has tried to slag off PdVSA's 2007 earnings report in English. I'll paste the Universal report at the end of this note, cos it's a minor masterpiece of obfuscation and it's worth a read for the giggle. Dudes, I do this numbers thing for a living but I've read this article 4 times now and I still don't have a clue as to what they're talking about. Well, I do really...I know what they're trying to say...they're trying to say debt is up at PdVSA and that's bad and all that. ..kinda ...like ....errr... dude.

Well, since last week's pre-emptive strike seemed to keep the BS journalism at bay, let's just explain about this debt thing before any innumerate LatAm commentators have a go at playing casio-god. Y'see, PdVSA's debt stood at a touch under U$3Bn at the end of 2006, and is now a smidgen over U$13Bn. "Whoa!" I hear you say, "debt is bad, isn't it, Otto?" Well put it this way, saltamontes; if you had a real crappy business and you went to the bank and said, "Hey bankdude, lend me some serious money so I can expand my biz", the bank dude would probably click the intercom on their desk and calmly say to secretary "Call security please". But when PdVSA goes to the debt market, people just swoon and say, "YEAH!...you guys are well cool and making serious money and want to expand operations and drill more and build more and produce close on double in four years' time....so yeah, here's a large wodge of moolah. Enjoy."

U$13Bn sounds like a lot of money....hell, it IS a lot of money. But when the debt is in long term bonds and only comes to about 12% of annual revenues anyway, there's not much to worry about......truly.......I'm not joshing you here, ok? If oil suddenly dropped under U$60/bbl, then there might well be some caca hitting ventiladores. But oil is over U$100/bbl, and for a bit of context just the other week the big bad futures market was trading contracts to sell oil at over U$100/bbl for delivery in the year 2015, so take a wild guess about the chances of seeing U$60 oil while the dollar continues to crap out under Bernanke's "gotta save growth" deathspiral.

Ok..enough already...I'm starting to get fuzzy. All you need to remember here is that the debt taken on by PdVSA is totally under control and they're going to use the money they've borrowed to produce more oil down the line. Trust your uncle Otto on this one, and if you get some mathwhizz spewing a hatful of numbers at you, send him over to me and I'll show him what I do with slide-rules when i'm really pissed off with people who tell fibs using numbers.

Here's that weird Universal note:
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Pdvsa's debt compromises 28.5 percent of assets

The sharpening indebtedness of Venezuelan state-run oil firm Pdvsa over the last 12 months has drastically changed the company's accounts to the extent that its debt to net worth ratio at the end of 2007 was 28.5 percent, the highest in the last decade.

Pdvsa's consolidated debt totaled USD 16 billion in 2007, comprising USD 13.12 billion in long-term debt and USD 2.87 billion in current debt. Most of the long-term debt -USD 11.84 billion- was contracted by the holding in Venezuela, where it issued USD 7.5 billion in debt bonds in April last year.

Following an oil strike in 2003, and particularly in 2006, Pdvsa implemented a strategy of debt buyback and amortization. This allowed reduction of the consolidated debt to USD 2.91 billion at the end of 2006, thus taking the firm's debt to net worth ratio to 5.4 percent in 2006.

However, in 2007, Pdvsa's indebtedness soared USD 13.09 billion, or 449 percent. Consequently, the corporation exceeded its debt to net worth ratio in 1999, when the consolidated debt was USD 8.51 billion versus a net worth at USD 32.89 billion.

Pdvsa CEO and Minister of Energy and Petroleum Rafael Ramírez dismissed the subject last March 28 in a news conference intended to disclose the corporation's audited financial statements. This is the first time Pdvsa delivers the audited financial statements on time over the last five years.

Ramírez underscored that Pdvsa's net worth jumped from USD 53.10 billion in 2006 to USD 56.06 billion last year. However, this 5.5 percent increase was significantly below the expansion of debt in the same period.