Business Essentials for Professionals


Earnings Of U.S. Oilfield Service Firms Will Be Hit By Venezuela’s Economic Troubles

Earnings Of U.S. Oilfield Service Firms Will Be Hit By Venezuela’s Economic Troubles
The sanctions posed by the United States on Venezuela and on the state-run oil company PDVSA coupled with the economic debacle that the South American nation is going through has resulted in the country the U.S. oilfield service companies that are exposed to the country facing hits to earnings.
The crude oil production in Venezuela has dwindled by 13 per cent in 2017 due to sanctions by the Trump administration, the lack of new investments and the payment delays to suppliers. The oil industry of the country – the mainstay of the economy of the country, had been very badly hit by these factors. 
Political and economic debacles in Venezuela were quite dot be the reason for a $938 million write-down on its Venezuelan assets and receivables by Schlumberger, the company said on Friday. It is amongst the larger oil firms to report fourth quarter results.
In recent years, in order to manage the debts from PDVSA, companies like Schlumberger and others have been accepting promissory notes or reclassified Venezuelan receivables. However, experts see trouble on the outstanding bills after the charge taken by Schlumberger on Friday.
But oilfield activity has been boosted by enhanced business outlooks elsewhere which has the effect of offsetting the write offs on Venezuela.
Money for their Venezuela operations are also owed by Halliburton and Weatherford International, according to their SEC filling in 2017, and the two companies are slated to present their reports within the next two weeks.
The primary customer of Halliburton was delaying making payments to the company, the company said in October. On the other hand, net trade receivables from the Venezuelan operations for the company was at $429 million.
At the same time, Weatherford planned to reidentify about $158 million in receivables that it owed from its biggest client in Venezuela as non-current assets so that its balance sheet reflected the amount as payment delays, the company said in November. 
“The sanctions could affect our ability to collect payment on our receivables,” Weatherford said at the time.
There were no immediate comments made by a representative for Halliburton while Weatherford did not comment at all.
Schlumberger stressed its intention stay in Venezuela and linger on to get the payment ithat are owed to it.
“It’s likely they’ll maintain a presence but only work if they are paid up front,” James West, senior managing director and a partner at investment bank Evercore ISI, said of the suppliers.
There has been large political turmoil in the South American oil producing country after its socialist President Nicolas Maduro allegedly used unfair means to consolidate power and this was heh trigger that the Trump administration used to slapped sanctions on Venezuela in August in an effort to punish the acts of Maduro. According to the U.S. sanctions, there can be no dealings in new debt with the Venezuelan government and PDVSA.

Christopher J. Mitchell

Markets | Companies | M&A | Innovation | People | Management | Lifestyle | World | Misc