VENEZUELA: PDVSA PAYMENTS PROVIDE TEMPORARY RESPITE

C O N F I D E N T I A L SECTION 01 OF 02 CARACAS 001129 SIPDIS ENERGY FOR ALOCKWOOD AND LEINSTEIN, DOE/EIA FOR MCLINE HQ SOUTHCOM ALSO FOR POLAD TREASURY FOR MKACZMAREK COMMERCE FOR 4332/MAC/WH/JLAO NSC FOR DRESTREPO AND LROSSELLO E.O. 12958: DECL: 08/26/2019 TAGS: EPET EINV ENRG ECON CU VE SUBJECT: VENEZUELA: PDVSA PAYMENTS PROVIDE TEMPORARY RESPITE REF: A. (A) CARACAS 852 ¶B. (B) CARACAS 827 Classified By: Economic Counselor Darnall Steuart, for reasons 1.4 (b) and (d). ¶1. (C) SUMMARY. Drawing on funds raised though its July bond issuance, PDVSA has made significant payments on its outstanding arrears. PDVSA appears to have paid domestic companies owed less than ten million dollars in full and to have made significant payments on larger debts. END SUMMARY. PDVSA Makes Bolivar Payments to Domestic Service Companies -------------- -------------- ¶2. (C) According to Alvaro Perez (strictly protect throughout),a board member and treasurer of the Petroleum Chamber, PDVSA used the approximately 12 billion Bolivars raised in its bond issuance to make significant Bolivar-denominated payments of outstanding arrears to its contractors (ref A). (NOTE: Post estimates that PDVSA should have pulled in approximately 12 billion Bs from the Petrobono (valued at 3 billion USD): Tranche 1: USD 1.4 billion face value x 180 percent price x 2.15 Bs/USD = Bs 5.5 billion; and Tranche 2: USD 1.6 billion face value x 190 percent price x 2.15 Bs/USD = Bs 6.5 billion) Since many international oil service company contracts are paid in a mixture of USD and Bolivars, Perez heard that PDVSA is investigating a USD-bond issuance to raise funds to pay off USD-denominated debt. ¶3. (C) Perez explained that PDVSA fully paid Petroleum Chamber members who were owed less than ten million dollars in arrears. PDVSA has made some increased payments to companies owed more than ten million dollars, but continues to demand that they first offer a discount on the outstanding balance due. He also claimed that any company that offered a ten percent "facilitation fee" received payment in full, even if it did not offer a discount on PDVSA's arrears. He also knows of companies that offered discounts without a facilitation fee and were paid nothing. Payments to International Service Companies -------------- ¶4. (C) Mauricio Moreno (strictly protect throughout) BakerHughes (BHI) Venezuela Sales Manager informed Petroleum Attache (PetAtt) about recent Bolivar-denominated PDVSA payments to major international services companies. According to Moreno, in the last week of July, PDVSA paid BHI the Bolivar equivalent of $32.4 million, representing 58% of its registered debt with PDVSA West, bringing the total received in July to $41.5 million. Moreno claimed that Halliburton received the Bolivar equivalent of $31 million in late July from PDVSA; Schlumberger received the Bolivar equivalent of $70 million (of a total debt of $880 million; $480 million invoiced and $400 million not yet accepted by PDVSA for payment); and Weatherford received the Bolivar equivalent of $42 million (of a pending $80 million in PDVSA arrears). Superior Energy's Mac McVay (strictly protect throughout) told PetAtt that his company had received Bolivar payment from PDVSA representing 40% of its total arrears. (NOTE: Based on past reporting, PDVSA's debt to Superior was roughly $20 million.) Moreno does not expect PDVSA to continue with this payment trend, but noted that PDVSA has told companies it is preparing to issue increased dollar payments as early as September. Moreno added that he had heard as well that PDVSA might be planning a new bond issuance to raise dollars. ¶5. (C) COMMENT: PDVSA relieved some of the pressure of outstanding arrears by making significant payments to contractors, but continues to carry large USD-denominated CARACAS 00001129 002 OF 002 arrears to international companies. The Bolivar-denominated payments to the large service companies will help them maintain operations in the short to medium term. Higher oil prices may help PDVSA pay dollar-denominated debts or it might issue new debt to raise USD, though it is not clear what the international appetite for new PDVSA debt would be. END COMMENT. DUDDY