Industry Trend Analysis - Upstream Partners Won't Come To PdVSA's Rescue - SEPT 2017

BMI View: Venezuela ' s ongoing crisis will render new efforts to attract foreign capital futile . PdVSA will be unable to increase liquidity by farming out of existing joint ventures, heightening our concerns about the company ' s ability to meet its debt obligations in Q417 and sustain production over the longer term.

The Venezuelan upstream sector is going from bad to worse. Following five consecutive years of output declines, 2017 has proved to be an even more challenging year amid an intensifying political crisis, prolonged economic losses and sustained oil price weakness.

In light of our recent oil price downgrade, export revenues into state-owned PdVSA will be even lower than previously anticipated, increasing already heightened pressure on the firm to meet its substantial debt obligations ( see ' Brent: Surplus Shif ting To 2018 Blunts Price Growth ' , July 3). PdVSA will therefore ramp up efforts to raise funds in the lead up to its USD3.3bn repayment in Q417, a hurdle we believe it will struggle to cross in light of Venezuela's considerable financial shortfalls.

Reserves Falling Short
Venezuela - Foreign Reserves, USDbn
Source: BCV, BMI

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