carib
rerum cognoscere causas
JP Morgan:
- As for the short-term payment obligations to the ‘20s and Conoco, our base case assumption is that PDVSA is willing and able to pay. OPEC data shows Venezuela output down roughly 26% through August compared to full-2017 (Figure 1). However, domestic consumption, which we estimate around 450kbd in 2017, may now be as much as 75-100kbd lower, in theory freeing some barrels for export. More importantly, Venezuela’s oil basket has averaged $63.9/bbl ytd ($73/bbl last), some 37% higher than the full-2017 average. While there are uncertainties about how many 2018 barrels are spoken for in terms of debt service to China, which up until last year had established a grace period for principal collection, all things equal the price/volume equation suggests Venezuela’s oil revenue should be flattish, if not slightly above the 2017 levels. It’s true that imports appear to have stabilized and could finish 2018 some $1-2bn higher than the estimated $12.5bn of 2017 (Figure 2). However, since Venezuela stopped servicing all but the PDVSA 2020 bonds in 4Q17, we note that default-related savings on full year bonded debt service (assuming ‘20s are paid) would be $7.4bn in 2018. This compares to $8.3bn of debt service paid out to Republic and PDVSA bonds (prior to default) in 2017. Thus, even if more barrels are going to China, Venezuela should have wherewithal to reserve for the PDVSA ’20s and Conoco payments, considering no other bonds are being paid.
