Former Petroleos de Venezuela (PDVSA) Finance Coordinator Oliver L Campbell writes: PDVSA has just published its financial results for the first semester of 2010. In its report, the company follows accounting convention and compares the figures with the first semester of the preceding year. However, I have preferred below to make the comparison with the full year 2009 so the reader can follow the trend in the two consecutive periods. It is easy enough to multiply January/June by two and compare it with the previous year.
Notes:
1) These items reflect an increase of 25% in the average export price, a reduction of 3% reduction in oil production and of 9% in export sales in 2010.
2) Companies in the agricultural and food sector have been transferred to other government entities.
3) The cause of the reduction in 2010 is not shown but it may be arise from reduced costs incurred by CITGO, where product demand has fallen, and to the translation of bolivar costs at the new exchange rate..
4) The reason for the significant fall in these costs is not given but again the new exchange rate applicable to bolivar costs will have had an influence. .
5) 2009 includes a profit made on the sale of dollar denominated bonds in the swap market. The first semester 2010 benefits from an exchange gain when translating a net liability in bolivars into dollars at the new exchange rate.
6) The figure is not available but will be insignificant since CITGO at present is not making much, if any, profit.
7) The increase in gross income arising from higher oil prices has made it possible to increase these contributions.
8) The substantial increase arises because the new exchange rate of Bs 4.30 instead of Bs 2.15 to the dollar has inflated taxable income which is calculated on the bolivar figures.
9) Several authorities believe the true production figure is lower than that reported by PDVSA.
10) The Venezuelan basket of crude and products is at present $75 per barrel, If this price continues, and the export level does not slip, then the government take in 2010 could reach $40 billion.
11) This figure includes a reduction of $1,243 million arising from the translation at the new exchange rate of investments in subsidiaries whose functional currency is the bolivar..
12 The commercial receivables increased from $9,178 million to $13,836 million at the end of June 2010. No explanation has been given.
13)The long-term debt to equity ratio of 29% at the end of June is acceptable.
14) There are reductions in various items: royalties payable, accounts payable to contractors, and compensation payable for aquatic assets expropriated.
I disagree with the external auditors as regards the provision for litigation. The amount has been surprisingly reduced from $2,094 million at the end of 2009 to $1,494 at the end of June 2010 without any explanation. It takes an act of faith to believe what is stated in note 22, "although it is not possible to predict the outcome of these matters, management, based in part on advice of its legal counsel, does not believe that it is probable that losses associated with the proceedings discussed above, that exceed amounts already recognized, will be incurred in amounts that would be material to the Company's financial position or results of operations."
I do not know what management consider "material" but it is quite probable the compensation payable to ConocoPhillips, ExxonMobil and other claimants will exceed $10 billion.
On June 30, 2010, PDVSA transferred its agricultural and food companies to other government bodies. Although " the Company will continue to provide financial support to the activities of PDVAL throughout 2010," it is hoped PDVSA can now concentrate on increasing crude oil production potential rather than on food purchase and distribution which is best left to companies specialized in that area.
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