By Vanessa Dezem in Sao Paulo
& Michelle F. Davis in Mexico City
Profit at state oil giant Petroleos de Venezuela SA plummeted almost 90 percent last year amid declining output and a drop in oil prices, a new blow for a country rocked by political and economic chaos.
Net income declined 88.7 percent to $828 million in 2016 as production fell 10 percent to 2.57 million barrels per day, according to PDVSA’s annual financial statement published on its website. Average oil prices in Venezuela declined to $35.15 per barrel from about $45 per barrel in 2015.
Venezuela and PDVSA are under intense scrutiny from investors as U.S. sanctions against key government officials and a power grab by President Nicolas Maduro threaten to disrupt financial flows. Prices for government and PDVSA bonds have tumbled in recent weeks amid concerns that Maduro’s actions will trigger more severe measures against the oil-producing nation that may choke off its ability to repay debt.
The profit slump was "quite a dramatic fall," said Russ Dallen, managing partner at Caracas Capital Markets. “PDVSA was the golden goose of Venezuela and what these financials tell us is that these guys are killing it."
Petroleos de Venezuela SA’s $1.1 billion of dollar-denominated bonds that mature in November of this year fell 1.1 percent to 86.8 cents on the dollar Friday, according to data compiled by Bloomberg.
Press representatives for PDVSA didn’t immediately respond to a phone call and email seeking comment outside of normal business hours.Oil Prices
PDVSA was obligated under rules for its bonds due in 2020 to provide audited financial reports for last year by the end of June, but asked bond investors for a temporary waiver from the requirements until Aug. 11.
PDVSA’s exports slumped 9.7 percent to 2.2 million barrels per day. Maduro’s regime has set a $3.2 billion plan to boost output by 250,000 barrels a day within 30 months.
Faced with persistently low oil prices, Venezuela -- which has the world’s largest reserves and depends on crude sales for 95 percent of its export revenue -- has been plagued with shortages of everything from toilet paper to antibiotics and food. With the government running out of money to pay for imports and interest payments on foreign debt, it has turned, in part, to asset sales to raise whatever cash it can.
The nation is also dealing with increasing tensions with the U.S, which has imposed a series of sanctions on people associated with Maduro, freezing their assets in the U.S. and blocking anyone in the U.S. from doing business with them. On Friday, Trump said he’s considering a military option in response to the political and economic crisis in Venezuela.
The latest numbers give bondholders more clarity on the gravity of the state oil company’s financial situation. PDVSA has $3.2 billion in bond principal and interest payments due for the rest of the year, according to data compiled by Bloomberg.
PDVSA may struggle to cover that, Dallen said. “They’re going to have to either borrow more money from the Russians or the Chinese or sell assets." Bloomberg
PDVSA Financials 2016 by Latin American Herald Tribune on Scribd