((This July 25 story corrects to indicate majority of the impairment charged was related to PdVSA’s promissory notes, not all of the charge, in second paragraph))
By Liz Hampton
HOUSTON (Reuters) - Venezuela was unable to pay its biggest oilfield suppliers in cash in the second quarter, and top service companies Halliburton and Schlumberger accepted promissory notes that they immediately wrote down by hundreds of millions of dollars, their second-quarter reports showed.
Schlumberger, the world’s largest oilfield service firm by revenue, took a $510 million impairment charge, the vast majority of which was on promissory notes received from Petroleos de Venezuela SA [PDVSAC.UL] in lieu of $700 million in outstanding fees.
Halliburton similarly recorded a pre-tax charge of $262 million on promissory notes from its main customer in Venezuela in exchange for $375 million in fees, according to its financial filing.
Neither company identified PDVSA by name, and both described the oil company as their “primary customer” in Venezuela. A PDVSA source confirmed it issued the notes.
Foreign oil companies operating in Venezuela have become increasingly exposed to that country’s economic woes, which have worsened under socialist President Nicolas Maduro. A brutal recession and persistent low oil prices have the cash-strapped nation delaying payments or using government-issued notes to pay suppliers.
Last month, Weatherford International plc said it would amend its financial statements to reclassify $31 million that was previously booked as revenue as interest payment and a reduction in accounts receivable because of PDVSA’s lengthy delay in payment.
Representatives from Halliburton and Weatherford did not immediately respond to requests for comments. Schlumberger referred questions on the impairment charge to its coming financial filings.
Such problems have not stopped smaller firms for signing up for work in the country. Oklahoma-based Horizontal Well Drillers on Tuesday said it signed a memorandum of understanding to explore new drilling jobs for PDVSA in Venezuela.
Last year, the company, Schlumberger and Venezuelan contractor Y&V agreed to drill a combined 480 wells for projects operated by PDVSA and its foreign partners, but that project has not yet started.
The United States has been weighing financial sanctions against Venezuela that could halt dollar payments for its oil, Reuters reported last week, a move to pressure Maduro into halting plans for a new Constituent Assembly that would give him unchecked power.
If sanctions were to pass, payments to oilfield service firms could become even more challenging.
Additional reporting by Corina Rodriguez Pons in Caracas; Editing by Cynthia Osterman and Dan Grebler