Chevron and PDVSA hope to finance an ambitious new mega oil project in Venezuela. Under the right conditions, they may just succeed.
Category: Venezuela
Posted inDaily Brief
Venezuela Readies 2012 Debt Issuance
Venezuelan lawmakers have given the sovereign the go ahead to issue VEB71.2bn ($16.6bn) in debt this year, perhaps signaling a transaction is imminent. Already congress had approved a VEB86.9bn debt issuance ceiling for 2012, of which VEB25.8bn would go to service debt and VEB17.2bn to refinance debt outstanding, according to the congressional document. Venezuelan government officials expect an official announcement on the coming sovereign debt issue on Friday, according to a person familiar with the debt discussions. Government officials at the finance ministry could not immediately be reached for comment. As it is, the market is already anticipating that the sovereign will come out with a debt issuance almost immediately. Barclays Capital notes that the approval was earlier than expected and now expect Venezuela to issue a 2029 and/or 2032 with a size of at least $4bn and a coupon a touch below 12%. State oil company Petroleos de Venezuela, which does not require congressional approval to issue debt, is also expected to sell more bonds during a critical election year for President Hugo Chavez. On Wednesday, the sovereign’s benchmark 2027’s stood at 71.25, or 13.8% on a yield basis, and PDVSA’s 2017s traded for 64.5, yielding 14.8%.
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ICC Awards $907.6m to Exxon for Venezuelan Assets
An International Chamber of Commerce (ICC) arbitration panel has ruled that Venezuela owes ExxonMobil $907.6m for the assets it took from the oil major in a nationalization drive four years ago. The ruling orders state-owned PDVSA to compensate Exxon, but the Venezuelan oil company will end up paying roughly $255m after taking several deductions. PDVSA will first deduct $191m that Exxon owed in connection with outstanding debt of the nationalized Cerro Negro project, an additional $300m that Exxon managed to freeze in a PDVSA account in New York, and $160m that the tribunal credited to PDVSA, the Venezuelan company says. Exxon officials could not immediately comment. The ruling came far below the $7bn-$10bb that Exxon originally sought as compensation for its nationalized assets. The final outcome for the compensation fight is yet to be decided, however, as Exxon has a pending arbitration case against Venezuela at ICSID, the arbitration unit of the World Bank. Since it took over the assets of foreign oil companies along the Orinoco river belt, PDVSA has argued it would pay only the book value of those assets and not the fair market value that the aggrieved oil companies sought to receive. The ruling comes at a time when Venezuela has stepped up its settlement of pending nationalization compensation payments to affected companies, including Mexican cement maker Cemex and Colombia’s retail chain Exito.
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Rusoro, Venezuela Extend Compensation Talks
Venezuela has decided to extend a 90-day period for talks with gold miner Rusoro as it decides how much to pay the company for its nationalized assets. The size and form of compensation remain unclear at this stage, but a person familiar with the situation tells LatinFinance that depending on the gold price used, the company values its assets at roughly $1bn. Rusoro and Venezuelan officials could not immediately be reached for comment. The parties have agreed so far to extend the talks to March 14 to decide on a way forward. So far discussions have revolved around the possibility of Rusoro selling all of its assets to the state with a second option of keeping a 45% stake in a new venture controlled by the government. Negotiations hinge on Venezuela’s decision to pay compensation based on unamortized book value for assets that Rusoro acquired gradually at fair market prices. Venezuela’s government passed a law in September to keep gold extraction in the hands of the state. As such, all mining companies must transfer assets to a new entity and accept a minority interest of as much as 45% of the new business, with the government in control. Rusoro is a mining vehicle founded by Vladimir Agapov and his son Andre, two Russian businessmen who spent years acquiring mining properties in Venezuela under the administration of President Hugo Chavez. In recent weeks Venezuela has moved to finalize compensation agreements with a number of companies affected by the president’s nationalization campaign.
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Pequiven Gets Nearly All in Tender
Petroquimica de Venezuela (Pequiven) is set to repurchase $247.6m in outstanding 8.29% 2020 bonds following the close of a tender offer, it says, or 99% of the $250m original face value amount. Most of the bonds were tendered prior to the December 6 early tender date. The petrochemical producer paid accepting holders $1,049.70 per $1,000 principal if they accepted by December 6, and $1,000 if after. Due to scheduled amortization payments, as of the November 22 launch date, there was $952.00 in principal for each $1,000 original principal, meaning about $238m needs to be spent in the buyback.
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PDVSA and Rosneft Ink Heavy Oil JV
PDVSA has signed a memorandum of understanding with Russia’s Rosneft on a deal to develop the Carabobo 2 oil project, one of three heavy oil projects planned by President Hugo Chavez. Rosneft will take a 40% stake in the joint venture and 60% will remain in the hands of PDVSA, in line with the 2 other ventures signed with foreign oil companies, Rosneft said in a statement. Company officials at Rosneft and PDVSA could not immediately be reached for comment. The deal would give Rosneft a stake in the development of the Carabobo 2 North and Carabobo 4 West blocks, estimated to hold 40bn barrels of crude and a hand in the creation of a crude upgrading plant to turn heavy oil into a more marketable crude. Once online, the fields are expected to produce up to 400,000 barrels of crude a day and the oil upgrading plants should offer a 200,000 barrel a day processing capacity. As agreed, Rosneft will pay $440m upon congressional approval of the deal, and $660m more once the final investment decision is made with PDVSA. The Russian oil company will also make available to PDVSA a $1.5bn credit facility, with disbursements capped at $300m a year. The two companies also signed additional agreements for joint ventures that will offer drilling and construction services to the heavy oil ventures. Global oil players such as the US’s Chevron, Spain’s Repsol and Malaysia’s Petronas have secured spots in the Orinoco oil ventures hoping to gain a place at the table in one of the richest pieces of oil real estate in the world. Venezuela holds one of the world’s largest reserves of heavy oil.
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Colombia’s Exito Expects Full Payment from Venezuela
Colombia’s retailer Exito has received $72.4m out of a $90.5m payment it is owed from the sale of Venezuela’s Cativen retailer to the Venezuelan government. Exito expects to receive the last installment of $18.1m in November 2012 which would finalize the transaction. Exito officials could not immediately be reached for comment. The payments to Exito stem from French retailer Casino’s decision in November 2010 to sell an 80.1% stake in Cativen to the Venezuelan government for $690m. The sale included Exito’s 28.6% holding in the company. As part of the deal with the government, Casino retained 19.9% to provide operational support. The deal involved a 60% upfront payment to Casino upon the closing of the deal, with 20% paid in cash and 40% in two dollar denominated promissory notes maturing in Nov 30 2010 and Nov 30 2011.
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PDVSA Turns to Chinese Credit to Guarantee Brazil JV
Venezuela’s PDVSA has announced that a $1.5bn credit line will serve as a guarantee for its 30% participation in a joint refinery with Petrobras. This came just a day after the Brazilian oil company agreed to give PDVSA more time to finalize the transaction. Cash and a credit line by the China Development Bank will insure the project’s advance, says PDVSA. A spokesman for the company declined to offer more details. On Thursday, Petrobras announced it had given PDVSA 60 more days to settle its affairs on needed loan guarantees with Brazil’s BNDES to finalize its participation in the $13.36bn project for the Abreu e Lima refinery. The PDVSA statement quotes the company’s president, Rafael Ramirez, saying that it has made the needed money available and “all that is left is for BNDES to do the logistical work” necessary to move forward. Under the terms of the Pernambuco-based refinery, first signed in March 2008, PDVSA would take a 40% stake in the plant and become a main heavy crude supplier for the refinery. The total investment in the plant was originally expected to reach $4bn but now it is estimated at $13.36bn.
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Petrobras Gives PDVSA More Time on $13bn JV
Brazilian oil company Petrobras has agreed to extend its deadline for Venezuela’s state oil company PDVSA to finalize its 40% participation in the Abreu e Lima refinery in Pernambuco. The $13bn energy joint venture has often served as a gauge of the strength of relations between the two countries. PDVSA has 60 days starting from December 1 to obtain the required loan guarantees for its share of the project from Brazil’s BNDES, a Petrobras spokesman tells LatinFinance. Under the terms of the deal signed in March 2008, PDVSA would take 40% stake and become a main crude supplier for the plant. The total investment was originally estimated at $4bn but this figure is now estimated at $13.36bn, the spokesman says. The refinery is expected to process Venezuelan heavy crude and to begin processing 230,000 barrels a day in December 2012, based on Petrobras’ estimates. The deal has often become fodder for political controversy on both sides of the deal. President Hugo Chavez has often publicly complained about the slow pace of the transaction, blaming Petrobras executives and at one point denouncing the loan guarantees as unnecessary.
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Venezuela to Pay Cemex Cash Compensation
Venezuela’s government plans to pay $600 million to Mexico’s Cemex as compensation for the assets it lost to a nationalization campaign in 2008, with a large portion to be settled using debt issued by state-owned oil company PDVSA. The deal also contemplates paying the company an additional $154m for accounts payable that Cemex subsidiaries owed to its parent at the time, the Mexican cement company says in a statement. As agreed, Venezuela will make an initial payment of $240m in cash and $360m in “various negotiable securities issued by PDVSA,” Cemex adds. Cemex officials could not immediately be reached for comment. It remains unclear what PDVSA instruments the company accepted as payment, what their face value is and what kind of discount the company calculated in accepting the paper. Some analysts that follow the situation believe the company may be receiving shorter maturity paper and may not get the full $360m if it chose to sell that paper immediately. PDVSA’s 2013 bonds, its shortest paper, currently trades at 95, yielding 11.2% as of Thursday. The PDVSA 2014s trade at 78 or at 14.9% on a yield basis. It remains to be seen if Cemex must hold on to the bonds until maturity to get the $360m owed or if it can monetize that amount by selling the instruments sooner. Cemex lost its Venezuelan cement assets in April 2008, when President Hugo Chavez decided to force foreign cement makers into minority partnerships with the government. Lafarge and Holcim went along, but Cemex rejected an original $650m purchase price as too low and took Venezuela to international arbitration through ICSID.