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PDVSA Not Out Of The Woods Just Yet

Venezuela

Yet another of PDVSA’s bond is due on Thursday—this time in the amount of $1.169 billion. The bond is coming due just after another critical bond payment was received in the nick of time on Wednesday which was due last Friday—a bond that had no grace period—but other bondholders shouldn’t exhale just yet.

Last Friday’s critical bond payment may have been received, but where PDVSA found the cash to make the payment is yet unclear, and where they will find the cash to make today’s bond payment—if they find the cash for today’s bond payment and future installment payments—is an even bigger unknown.

After today’s bond due date, the next PDVSA bond to come due is, thankfully for PDVSA, not until December 1, 2018, although several installment payments for bonds maturing later are also due later this month—payments totaling over $500 million.

Most analysts feel a default is on the horizon for PDVSA, even if they manage to pull a $1.2 billion rabbit out of the hat today. Regardless, PDVSA’s troubles are far from over, as the graft probe continues to net its quarry, claiming yet another victory this week, according to Reuters sources, and its oil production continues on a steady decline.

The latest in a string of arrests of state-run PDVSA executives is the head of one of its subsidiaries, Francisco Jimenez. Jimenez was in charge of PDVSA subsidiary Bariven, which was responsible for PDVSA procurement, including foreign purchases of equipment for PDVSA.

Jimenez is just one of about two dozen arrests of PDVSA executives in recent weeks on charges of bribery, international corruption, and money laundering.

Related: Oil Prices Fly Higher On EIA Report

The too-little-probably-too-late arrests may indeed be the result of Venezuela’s efforts to clean its corrupted house that is PDVSA, although it has been suggested by Maduro opposition that the graft probe is merely “the result of infighting among rival government factions,” according to Reuters sources.

The graft probe and general instability has resulted in Venezuela’s oil production steadily declining throughout 2017, declining more than any other OPEC member in September, down 51,900 bpd to an average of 1.890 million bpd according to secondary sources.  Still, OPEC lifted production in September to 32.748 million bpd, with Libya and Nigeria more than offsetting the production grace that Venezuela unwittingly extended. Venezuela’s production is now nearly 500,000 bpd under its 2013 highs of 2.356 million bpd—a nearly 20% decrease.

 Sources “with deep knowledge of the country’s oil industry” told The Fuse that its production could decrease another 700,000 to 800,000 bpd amid the growing instability.

By Julianne Geiger for Oilprice.com

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