Pdvsa at stake amidst growing social expenditure

Oil prices recovery from the 2008, 2009 and 2010 recession did not imply a positive outcome for Venezuelan state-run company Pdvsa. Meanwhile, the company is very likely to incur in higher social expenditure.

A report compiled by BancTrust & Co shows that Pdvsa so far has met its obligations; therefore, it highlights that the outlook of the company is nothing to worry about regarding its debts. However, the report outlines that both credit worthiness and leverage of the company worsened particularly in 2011. 

Moreover, BancTrust states that proper precaution shall be taken regarding all the implications of Pdvsa affording the burden of social expenditure. The firm outlined that considering previous statements issued by Pdvsa authorities with respect to social expenditure and the management of the company, "it is quite clear that Pdvsa will be requested to incur in more social expenditure." 

The report adds that further bilateral agreements (entered either by the State or Pdvsa) are likely to be paid with oil, therefore affecting the capacity of the company to generate income."

For their part, in 2011 oil sales dropped 30% compared to 2008, from 1.4 million bpd to 940,000 bpd.

"By 2011 as the profit margin dropped from 7.6% to 3.6%, costs and expenditure increased, creating, therefore, a loss in efficiency," reports BancTrust & Co. 

Translated by Jhean Cabrera