Halliburton Writes Off Remaining $312 Million Invested in Venezuela
Posted April 23, 2018 7:57 p.m. EDT
HOUSTON — Halliburton, the global oil service company, announced Monday that it had written off its remaining investment of $312 million in Venezuela, as oil production in the politically polarized and virtually bankrupt country continues to plummet.
The move had long been expected because the state-owned oil company, Petróleos de Venezuela, known as PDVSA, had for years been falling behind on paying its bills from companies that maintain and operate its oil and gas wells.
“This is one step further into the collapse of the Venezuelan oil industry,” said Francisco J. Monaldi, a Venezuelan energy expert at Rice University, “because it means oil service contractors, which are absolutely essential to operations, are slowly giving up on the country.'’
Daily oil production in Venezuela, the country with the world’s largest reserves, has plummeted by 200,000 barrels since late last year, to its lowest level in 30 years. That drop has helped raise global oil prices in recent weeks to more than $70 a barrel and has pushed U.S. gasoline prices to their highest level for this time of the year in three years.
PDVSA has been purged of more than 80 executives in recent months, and its operations have been put under the command of a major general in Venezuela’s National Guard with no experience in the oil business. Tensions between the national company and foreign companies that operate in the country have increased as military officers have taken over more oil supervisory positions.
Two Venezuelan employees of Chevron, a major partner of PDVSA’s, were arrested last week after they refused to sign a contract.
Christopher Weber, Halliburton’s chief financial officer, attributed the decision to write down company business in Venezuela to a variety of reasons, including the collapse of the Venezuelan currency and the worsening political climate. He also mentioned U.S. sanctions, which prohibit U.S. investors or companies from buying or selling new PDVSA debt.
The Trump administration is expected to toughen those sanctions after Venezuela’s presidential election May 20, possibly prohibiting the export of U.S. light crude that Venezuela blends with its heavy crude to transport it through pipelines. The administration might even block imports of Venezuelan oil to the United States, which is still Venezuela’s biggest market.
The re-election of Venezuela’s president, Nicolás Maduro, is virtually certain. The opposition is boycotting the election because, it says, the process is fixed.
The Venezuelan government and PDVSA are already in default on more than $50 billion in bonds after failing to make interest payments since late last year.
Nevertheless, Halliburton said it would continue to operate in the country.
“The company is maintaining its presence in Venezuela and is carefully managing its go-forward exposure,” Halliburton said in a statement.
The company, based in Houston, wrote off $647 million in Venezuela last year. Schlumberger, Halliburton’s principal global competitor, took a pretax write-down of $938 million in Venezuela late last year.
Halliburton made the announcement as it reported a first-quarter profit of $46 million, up from a loss of $32 million for the same period last year.