Halliburton to take $30 million loss from Venezuelan devaluation
BY ALISON SIDER
HOUSTON -- Oilfield services companies are bracing for potentially significant write-downs in the face of Venezuela's devaluation of its currency.
On Monday, Halliburton said it will incur a $30 million foreign currency loss in the first quarter related to the devaluation of the local currency, known as bolivar fuerte, or strong bolivar. Last Friday Venezuela announced it would slash the value of the currency to VEF6.3 per dollar from VEF4.3 per dollar, a 32% cut.
The company added that it has a $328 million net investment in Venezuela, some $74 million of which is in monetary assets denominated in local currency. Halliburton shares were down 0.90% at $40.89.
Devaluation in the Organization of the Petroleum Exporting Countries nation is not a new phenomenon, and many oilfield service providers are paid in a combination of U.S. dollars and local currency, giving them some measure of protection. But the move adds to the challenges oilfield services providers face in collecting payments owed to them by PdVSA. Both Schlumberger, the largest oilfield services company in the world, and Halliburton, the second-largest, report continuing payment delays by the national oil company in securities filings.
"Venezuelan exposure for the large cap service industry has been and continues to be a recurring threat" with respect to foreign-exchange considerations and timely receipt of payments, said analysts with Simmons & Co.
The analysts said Weatherford International faces "a charge of some magnitude" with respect to the devaluation. The company said in a securities filing issued in December that at the end of the third quarter, it had $298 million denominated in Venezuelan currency, mostly in cash and receivables. In the filing the company said that if the currency's value was slashed by 10%, it would have to record a charge of about $30 million. A 32% devaluation could triple that figure, an amount that's significant for a company that earned $77 million in the third quarter of 2012. The company didn't immediately respond to a request for comment. Its shares were down 2.41% at $12.98.
Joao Felix, a spokesman for Schlumberger, said currency devaluations are just part of doing business in Venezuela. "We're ready for these things," he said. "We think long term in Venezuela."
Schlumberger receives payments both in local currency and dollars, but Mr. Felix declined to give more details. He also said he could not say how much, if anything, might be written off due to the most recent devaluation. Schlumberger shares are down 1.20% at $78.12.
Simmons analysts estimate that the company has between $650 million and $1 billion in receivables in Venezuela. Rival Halliburton has some $491 million in outstanding receivables, about 9% of its total world-wide.
Dow Jones Newswires