Venezuela's IOUs Pile Up, Keeping US Oil Servicers in Tow
http://www.rigzone.com/news/oil_gas/a/151501/Venezuelas_IOUs_Pile_Up_Keeping_US_Oil_Servicers_in_TowAugust 23, 2017
For Schlumberger Ltd. and Halliburton Co. the road to payment for services in Venezuela is increasingly long and winding.
The latest twist is Petroleos de Venezuela’s decision to give some contractors -- including the two oilfield service companies -- promissory notes that are essentially IOUs. It’s the second straight year that oilfield contractors have agreed to take the notes, representing some $2 billion owed.
The decision has opened new debate on how best to deal with a country carrying $19.8 billion in unpaid bills beyond the notes, according to a financial report earlier this month. In October and November, Venezuela and PDVSA must make $3.53 billion in debt payments to keep from getting cut off from global bond markets. The promissory notes help Venezuela preserve a key link with service companies needed to keep the oil and money flowing, said Tom Curran, an analyst at FBR Capital Markets in New York.
Although PDVSA has been chronically late on its bills since the global financial crisis, the company “has nevertheless steadily chipped away at them, however erratically and unpredictably," Curran said in an interview. More importantly, PDVSA has repeatedly signaled its intention to pay, he said.
Both sides get some benefit from the promissory notes. Venezuela stays connected to the servicers. The companies get to collect interest off their unpaid bills and, at the same time, they’ve established a stronger legal claim to the money they’re owed, according to Brian Youngberg, an analyst at Edward Jones in St. Louis....