Thursday, November 7, 2013

Venezuela: Maduro Government Increasing Becoming a Rogue Nation, Entities Urged to Be Cautious

According to The Latin American Tribune, Venezuela has seized two oil rig units from Houston, TX-based Superior Energy Services, Inc. rather than pay for their services. 

Superior Energy Services, Inc. confirmed today (November 6) that the government of Venezuela had seized two of the Company's million dollar hydraulic snubbing units from its facility in Anaco (Venezuela).

COMMENT: Superior Energy is hopeful that in the coming weeks we can reach an agreement with our customer, Petroleos de Venezuela S.A. (PDVSA), to receive payments owed to us for work performed and to secure the return of our equipment,” said Dave Dunlap, Superior's President and CEO. 

“We are extremely proud of our dedicated local workforce in Venezuela who have provided a safe and efficient service to PDVSA for more than 15 years.”

Superior suspended further work in Venezuela in July 2013 after $9 million of invoices from the previous year continued to go unpaid and negotiations failed to resolve the issue.

A local judge from the state of Anzoategui, accompanied by police and the Venezuela National Guard, had entered Superior’s depot and ordered them to hand over two specialized rigs, according to Joshua Goodman, the Associated Press bureau chief in Caracas. The court order justified the seizure by claiming that expropriation was essential to Venezuela’s development and welfare.

Superior Energy Services, Inc., with 14,000 employees and $4.5 billion in revenues, performs drilling, completion and production for oil and gas companies around the world.

After Venezuela’s oil basket crashed to $28 a barrel in 2009, leaving the country unable to pay mounting debts, then-President Hugo Chávez expropriated and nationalized drillers and oil service providers.

Superior did not lose any of its rigs in the process, although it was forced to write-off $4.6 million of its Venezuela accounts receivable the following year, SEC records show. In 2010, Venezuela did seize eleven rigs belonging to Helmerich and Payne, Inc. after the Tulsa, OK-based oil services company idled equipment because the entity had not been paid millions of dollars. 

Helmerich and Payne, Inc. has been trying to receive payment for its rigs after a US Federal court in Washington, DC over-ruled Venezuela's motions to dismiss on Sovereign Immunity grounds and ordered that the suit continue.

In March 2013, Schlumberger Ltd., the world's largest oil services company announced it was reducing work in Venezuela unless the millions owed it--analysts estimated between $500 million and $1 billion--were brought up-to-date. PDVSA head Rafáel Ramírez met with the head of Schlumberger and the problem was resolved.

Last month, CH Offshore, Ltd., a Singapore shipowner who leases two ships to PDVSA, was forced to get a Mareva injunction in a London court to arrest two Venezuelan ships because PDVSA had not paid $70 million on two years of unpaid invoices. 

In July, Venezuela defaulted on $100 million in bond payments for steel company Sidetur, which it had expropriated in 2010.

In a related development, a court in the northeastern Venezuelan city of Maturín on Tuesday (November 5) ordered fourteen Monagas state police held without bail on charges of attacking federal government buildings.

The arrested officers, eleven men and three women, attacked the regional facilities of the Attorney General’s Office and the interior ministry, prosecutors reported.

The incident occurred last Friday (November 2) during the funeral of a state police officer allegedly murdered over his personal links to federal officials.

The attack in Maturín came a week after the headquarters of the investigative police in the neighboring city of Carúpano was attacked by a group of people who tried to lynch an inspector and two detectives for their alleged responsibility in the wrongful deaths of four fishermen.

For at least a dozen years, Caracas, Venezuela has been designated a "critical" threat post for violent crime by the US Department of State. This is the Department's highest level of threat on the basis of "critical, high, medium and low."

For those of us who have followed the political career of the late Hugo Chávez and the continuance of public policies under incumbent President Nicolás Maduro, who was hand-picked to replace him after Chávez' death, little has changed in Venezuela since the passing of Chávez.

Sadly, expropriation of foreign assets, unprecedented crime, police corruption, autocratic decisions, food shortages and a cash-strapped nation demonstrate that the policies of Chavez' Socialistic experiment have been a total failure.

It is my belief that the political and economic forecast in Venezuela is only going to worsen, which is why I urge all foreign companies to liquidate their assets in Venezuela and relocate their operations to Perú or Colombia, both of whom are doing well economically and offer a pleasant business environment for foreign companies.