Cablegate: Pdvsa Releases 2005 Financials
VZCZCXRO2910
RR RUEHDE
DE RUEHCV #3041/01 2792058
ZNR UUUUU ZZH
R 062058Z OCT 06
FM AMEMBASSY CARACAS
TO RUEHC/SECSTATE WASHDC 6592
INFO RUEHHH/OPEC COLLECTIVE
RUEHAC/AMEMBASSY ASUNCION 0696
RUEHBO/AMEMBASSY BOGOTA 7049
RUEHBR/AMEMBASSY BRASILIA 5779
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RUMIAAA/HQ USSOUTHCOM MIAMI FL
RHEHAAA/WHITEHOUSE WASHDC
RHEBAAA/DEPT OF ENERGY
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RUEATRS/DEPT OF TREASURY
RHEHNSC/NSC WASHDC
UNCLAS SECTION 01 OF 02 CARACAS 003041
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TAGS: ECON ENRG EPET EINV VE
SUBJECT: PDVSA RELEASES 2005 FINANCIALS
1. (U) SUMMARY: PDVSA released its 2005 financial results
on October 3. According to a presentation by PDVSA President
and Minister of Energy and Petroleum (MEP) Rafael Ramirez,
PDVSA had worldwide revenues of USD 85.73 billion in 2005 and
USD 6.483 billion in profits. These results shed a little
light on PDVSA activities, though most of the Venezuelan
state oil company's activities remain opaque. END SUMMARY.
2. (U) According to an October 3 presentation to the board
of directors of PDVSA and a PDVSA publication in El Universal
(leading Venezuelan daily), PDVSA had worldwide revenues of
USD 85.73 billion in 2005, during which time the average
price for the Venezuelan oil basket was USD 46.15. (Note:
For 2006, the average price has been USD 58.26. End note.)
USD 81.105 billion in revenues came from exports and
activities outside of Venezuela, USD 1.408 billion from
domestic sales, USD 2.040 billion from petrochemical sales
and USD 1.177 from PDVSA affiliates. Revenues were not
broken out by activity or subsidiary and PDVSA reported a net
profit of USD 6.483 billion. (Note: PDVSA's net margins
(revenues/profits) were 7.6 percent in 2005, a decrease from
8.3 percent in 2004. The average price for the Venezuelan
basket of oil increased USD 13.15 during this time period.
End note.)
3. (SBU) PDVSA reported spending USD 32.979 billion (38
percent of total revenue) to purchase petroleum and petroleum
products in 2005. (Comment: While PDVSA does need to import
some products to refine gasoline, the amount is nowhere near
USD 33 billion. PDVSA does not export enough oil to fulfill
demand by its foreign subsidiaries and it is probably
purchasing oil and gasoline to supply these subsidiaries,
including CITGO. PDVSA may also be buying oil and gasoline
to cover its production declines and refining problems, which
will be covered in septel. End Comment.) Operating costs
for 2005 were USD 14.645 billion, exploration costs were USD
118 million and depreciation and amortization accounted for
USD 3.334 billion.
4. (SBU) PDVSA reported contributing USD 17.738 billion to
BRV coffers in 2005, divided between income tax (USD 5.069
billion), royalties (USD 11.327 billion) and dividends (USD
1.342 billion). In addition, PDVSA contributed USD 3.762
billion for social programs, USD 2 billion to the Fund for
Economic and Social Development (FONDESPA) and USD 1.525
billion to the Fund for Economic Development (FONDEN). Total
funding for government programs (including taxes and social
contributions) from PDVSA was USD 25.025 billion in 2005.
(Comment: These numbers are "on the books" amounts and most
probably under-represent actual PDVSA support for the BRV.
In addition to supporting BRV missions and social programs,
handling aid and development projects around the world and
hiring tens of thousands of excess employees, PDVSA has been
accused of storing proceeds abroad. End Comment.)
5. (SBU) According to PDVSA, average oil production in 2005
was 3,274,000 barrels/day. Of this amount, 2,170,000
barrels/day were produced by PDVSA (this includes 61,000 of
orimulsion), 502,000 by the operating service agreements
(OSA) and 602,000 by strategic associations in the Orinoco
belt. (Note: According to the published statement, the
production from the OSAs and strategic associations could not
be independently verified by the auditors. End note.) PDVSA
invested USD 3.878 billion during 2005, of which USD 2.830
billion went to oil and gas production. (Comment: Most
analysts agree that PDVSA is not investing enough to maintain
current production levels, which we believe to be around 2.6
- 2.7 million barrels per day, let alone meet its ambitious
goal of producing 5,847,000 barrels/day in 2012. End
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Comment.)
6. (SBU) COMMENT: PDVSA only released its statements for
2004 in June of this year and it remains doubtful as to
whether the release of information foreshadows a fuller
release of financial documents (including long overdue
submissions to the SEC). Post compared the June release with
the one this week (which listed 2005 and 2004 data) and there
appears to be about a billion dollar discrepancy between the
two publications. There has been speculation in recent weeks
that PDVSA would issue USD 2.5 - 3.5 billion in
dollar-denominated bonds on the local market to help the BCV
soak up liquidity and reduce inflation. PDVSA bonds are now
trading at a discount to BRV bonds due to uncertainty as to
PDVSA's finances (the first time in recent history that this
is the case) and it is possible that PDVSA could not find
underwriters for the issue without first releasing its
financial results for the past few years.
7. (SBU) Ramirez ended his presentation noting that the
annual results were a product of the sustained efforts and
"high moral character of the workers of the petroleum
industry, society, and the armed forces to make the new PDVSA
a fundamental instrument for combating poverty and exclusion,
and an essential tool for the construction of socialism in a
free, just and unified nation." END COMMENT.
BROWNFIELD