Struggling to stay afloat as the Venezuelan economy crumbles and unrest becomes riotous, the country’s state-run oil company, PDVSA, is reportedly offering service providers a debt-swap deal in exchange for payments.
A subsidiary of PDVSA has reportedly offered service contractors a deal in which US$2.5 billion in debt would be swapped for dollar bonds, the Wall Street Journal reports, citing unnamed contractors who have been offered the deal.
Reuters has corroborated the report, citing industry sources and deal documents, noting that a Miami-based financial services firm, CP Capital, was hired by PDVSA to “structure 3-year notes with a one-year grace period that will have the same status as PDVSA’s global bonds”. Related: Key Pipeline Could Unleash Alberta’s Oil Sands
"PDVSA will issue unsecured debt with the same risk levels as PDVSA's other publicly traded notes and obligations," Reuters cited the document as reading. The document also reportedly noted that CP Capital would work with providers to help them get paid for outstanding bills.
PDVSA financial statements indicate it owes some US$21 billion to providers, but Reuters has cited industry sources as putting that amount closer to US$7 billion.
Many believe the company is closing in on default.
The question now is whether oilfield services providers will go for the deal. One provider, according to Reuters, has already agreed as a last ditch effort to recoup unpaid bills. But there are no other indications that service providers are on board with the deal, while the supermajors are not being targeted here. Related: Is OPEC A U.S. National Security Threat?
This all comes against the backdrop of an economic crisis that is leading to violence on the streets.
Less than two weeks ago, the president declared an extended state of emergency and ordered the seizure of factories.
The country’s hard currency cash reserves have fallen below US$190 million and oil revenues are sliding. Official forecasts are for a decline of over 200,000 barrels per day this year due to closures and investment cuts.
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By Charles Kennedy of Oilprice.com
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