Schlumberger Ltd. (SLB:US), the world’s largest oil-services company, is reducing work in Venezuela because of trouble getting paid by state-owned Petroleos de Venezuela SA.
“We are temporarily reducing activity due to our previously highlighted collection issues,” Chief Executive Officer Paal Kibsgaard said at the Howard Weil Energy Conference in New Orleans today. “We have decided to only recognize revenue in line with our collections in the first quarter.’
Kibsgaard said in January that there was a ‘‘significant slowdown in the rates of payment’’ during the Houston and Paris- based company’s fourth quarter. The state-owned company known as PDVSA may owe Schlumberger $565 million to $1.14 billion, said Kurt Hallead, an Austin, Texas-based analyst for RBC Capital Markets.
PDVSA has slowed payments off and on for years, depending on oil prices and the government’s use of company funds for other purposes. Its debt to service suppliers rose to $12.3 billion at the end of 2011, the latest year available. Venezuela accounted for 5 to 10 percent of Schlumberger’s outstanding invoices at the end of last year, the company said in a Jan. 31 regulatory filing.
Schlumberger’s decision to reduce its activity may hurt South America’s largest oil exporter’s plans to increase output. Venezuela has said it plans to raise production by 330,000 barrels a day this year.
‘‘This certainly could have a tangible effect on Venezuelan production - just as the 2007 pullout of several international operators damaged Venezuela’s oil industry as well,” Pavel Molchanov, an analyst at Raymond James & Associates Inc. said in an e-mail today. “Anything that reduces PDVSA’s access to international technology is ultimately negative.”
Exxon Mobil Inc. and ConocoPhillips (COP:US) left Venezuela in 2007 after refusing to transfer their assets to joint ventures controlled by Caracas-based PDVSA. Output declined 13 percent to 2.7 million barrels a day in 2011 from 1999 when President Hugo Chavez came to power, even as proven reserves almost quadrupled in the period, according to the BP Statistical Review of World Energy.
Schlumberger fell 3.9 percent to $76.34 at the close in New York, the biggest decline since Dec. 14. The yield on PDVSA’s benchmark 8.5 percent securities due in 2017 rose 17 basis points, or 0.17 percentage point, to 9.39 percent at 5:05 p.m. in New York, according to data compiled by Bloomberg. The bond’s price fell 0.61 cent to 96.72 cents on the dollar.
In 2010, Venezuela seized 11 rigs belonging to Helmerich & Payne Inc. (HP:US) after the Tulsa, Oklahoma-based oil-services company idled equipment because of payment dispute. H&P has been trying to receive compensation in court since.
PDVSA didn’t respond to phone and e-mail messages seeking comment. The company is studying different options to pay its providers, including paying them with bonds, PDVSA Vice President Eulogio Del Pino said in September.
The nation, holder of the world’s largest oil reserves, is holding elections on April 14 after Chavez died this month after 14 years in office.
“Most service companies have been dealing with payment issues in Venezuela ever since Hugo Chavez came to power,” Hallead said in a phone interview today. “Now you have a situation of uncertainty, which drove Schlumberger to make this comment.”
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