Attached files

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EX-31.2 - EX-31.2 - HARVEST NATURAL RESOURCES, INC.hnr-20150626xex312.htm
EX-32.2 - EX-32.2 - HARVEST NATURAL RESOURCES, INC.hnr-20150626xex322.htm
EX-32.1 - EX-32.1 - HARVEST NATURAL RESOURCES, INC.hnr-20150626xex321.htm
EX-31.1 - EX-31.1 - HARVEST NATURAL RESOURCES, INC.hnr-20150626xex311.htm
EX-23.5 - EX-23.5 - HARVEST NATURAL RESOURCES, INC.hnr-20150626ex235e3e889.htm

 

  

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

FORM 10-K/A 

 

(Mark One)

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2014 

or

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File No.: 1-10762

 

HARVEST NATURAL RESOURCES, INC.

(Exact name of registrant as specified in its charter)

 

 

 

 

 

 

Delaware

77-0196707

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification Number)

 

 

1177 Enclave Parkway, Suite 300

Houston, Texas

77077

(Address of principal executive offices)

(Zip Code)

Registrant’s telephone number, including area code: (281) 899-5700

Securities registered pursuant to Section 12(b) of the Act:

 

 

 

 

 

Title of each class

 

Name of each exchange on which registered

 

Common Stock, $.01 Par Value

NYSE

Securities registered pursuant to Section 12(g) of the Act: Preferred Share Purchase Rights

 

Indicate by check mark whether the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes      No    

Indicate by check mark whether the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.    Yes      No   

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes      No   

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes      No   

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.   

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 

 

 

 

 

 

 

 

 

Large Accelerated Filer

Accelerated Filer

 

 

 

 

Non-Accelerated Filer

Smaller Reporting Company

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).     Yes      No   

The aggregate market value of the registrant’s voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of June 30, 2014 was: $ 210,047,738.  

Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practical date. Class: Common Stock, par value $0.01 per share, on March 20, 2015, shares outstanding: 42,747,567.  

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the registrant’s definitive proxy statement relating to its 2015 annual meeting of shareholders, or information to be included in an amendment to the Form 10-K, in either case which the Registrant intends will be filed with the Securities and Exchange Commission not later than 120 days after the end of the Registrant’s fiscal year, are incorporated by reference under Part III of this Form 10-K where indicated.  

 

 

1


 

 

Explanatory Note

 

Harvest Natural Resources, Inc. (“Harvest”) is filing this Amendment No. 2 to its Annual Report on Form 10-K/A (this “Amendment”) solely for the purpose of adding as an exhibit the audited financial statements of its 40 percent owned foreign equity affiliate, Petrodelta, S.A. that were not available for inclusion with Harvest’s original Annual Report on Form 10-K for the year ended December 31, 2014, as filed with the Securities and Exchange Commission on March 27, 2015 (the “Original Filing”).

 

This Amendment does not change the results as reported in the Original Filing but is required to be filed as an Amendment within six months after Harvest’s calendar year ending on December 31, 2014 if the 50 percent or less owned person is a foreign person.

 

 

 

2


 

 

PART IV

Item  15.  Exhibits and Financial Statement Schedules

 

 

 

 

 

 

 

Page

(a)

1.

Index to Financial Statements:

 

 

 

Reports of Independent Registered Public Accounting Firms 

*

 

 

Consolidated Balance Sheets at December 31, 2014 and 2013 

*

 

 

Consolidated Statements of Operations and Comprehensive Loss for the Years Ended December 31, 2014, 2013 and 2012 

*

 

 

Consolidated Statements of Stockholders’ Equity for the Years Ended December 31, 2014, 2013 and 2012 

*

 

 

Consolidated Statements of Cash Flows for the Years Ended December 31, 2014, 2013 and 2012 

*

 

 

Notes to Consolidated Financial Statements 

*

 

2.

Consolidated Financial Statement Schedules and Other:

 

 

 

Schedule II – Financial Statements and Notes for Petrodelta, S.A.

 

All schedules are omitted because they are not applicable or the required information is shown in the financial statements or the notes thereto.

*  Previously filed.

(b)3. Exhibits:

 

 

3.1

Amended and Restated Certificate of Incorporation. (Incorporated by reference to Exhibit 3.1 to our Form 10-Q filed on November 9, 2010)

3.2

Restated Bylaws as of May 17, 2007. (Incorporated by reference to Exhibit 3.1 to our Form 8-K filed on May 23, 2007)

4.1

Form of Common Stock Certificate. (Incorporated by reference to Exhibit 4.1 to our Form 10-K filed on March 17, 2008)

4.2

Certificate of Designation, Rights and Preferences of the Series B Preferred Stock of Benton Oil and Gas Company, filed May 12, 1995. (Incorporated by reference to Exhibit 4.2 to our Form 10- Q filed on November 9, 2010)

4.3

Third Amended and Restated Rights Agreement, dated as of August 23, 2007, between Harvest Natural Resources, Inc. and Wells Fargo Bank, N.A. (Incorporated by reference to Exhibit 99.3 to our Form 8-A12G filed on October 23, 2007)

4.4

Amendment to Third Amended and Restated Rights Agreement, dated as of October 28, 2010, between Harvest Natural Resources, Inc. and Wells Fargo Bank, N.A. (Incorporated by reference to Exhibit 4.1 to our Form 8-K filed on October 29, 2010)

4.5

Warrant Purchase Agreement, dated as of October 28, 2010, between Harvest Natural Resources, Inc. and MSD Energy Investments Private II, LLC. (Incorporated by reference to Exhibit 4.2 to our Form 8-K filed on October 29, 2010)

4.9

Common Stock Purchase Warrant No. W-1, dated as of October 28, 2010, between Harvest Natural Resources, Inc. and MSD Energy Investments Private II, LLC. (Incorporated by reference to Exhibit 4.3 to our Form 8-K filed on October 29, 2010)

4.10

Common Stock Purchase Warrant No. W-2, dated as of October 28, 2010, between Harvest Natural Resources, Inc. and MSD Energy Investments Private II, LLC. (Incorporated by reference to Exhibit 4.4 to our Form 8-K filed on October 29, 2010)

4.11

Indenture, dated as of October 11, 2012, between the Company and U.S. Bank National Association, as Trustee. (Incorporated by reference to Exhibit 4.1 to our Form 8-K filed on October 15, 2012)

4.12

Form of Note. (Included as Exhibit 1 to the Indenture filed as Exhibit 4.1 to our Form 8-K filed on October 15, 2012)

4.13

Warrant Agreement, dated as of October 11, 2012, between the Company and U.S. Bank National Association, as Warrant Agent. (Incorporated by reference to Exhibit 4.3 to our Form 8-K filed on October 15, 2012)

4.14

Form of Warrant. (Included as Exhibit A to the Warrant Agreement filed as Exhibit 4.3 to our Form 8-K filed on October 15, 2012)

4.15

Second Amendment to Third Amended and Restated Rights Agreement, dated as of February 1, 2013, between Harvest Natural Resources, Inc. and Wells Fargo Bank, N.A., as Rights Agent. (Incorporated by reference to Exhibit 4.1 to our Form 8-K filed on February 4, 2013)

10.1†  

2001 Long Term Stock Incentive Plan. (Incorporated by reference to Exhibit 4.1 to our Registration Statement on Form S-8 filed on April 9, 2002 (Registration Statement No. 333- 85900)

10.2†  

Harvest Natural Resources 2004 Long Term Incentive Plan. (Incorporated by reference to Exhibit 4.5 to our Registration Statement on Form S-8 filed on May 25, 2004 (Registration Statement No. 333-115841)

10.3†  

Form of Indemnification Agreement between Harvest Natural Resources, Inc. and each Director and Executive Officer of the Company. (Incorporated by reference to Exhibit 10.19 to our Form 10-K filed on February 23, 2005)

3


 

 

10.4†  

Form of 2004 Long Term Stock Incentive Plan Stock Option Agreement. (Incorporated by reference to Exhibit 10.20 to our Form 10-K filed on February 23, 2005)

10.5†  

Form of 2004 Long Term Stock Incentive Plan Director Restricted Stock Agreement. (Incorporated by reference to Exhibit 10.21 to our Form 10-K filed on February 23, 2005)

10.6†  

Form of 2004 Long Term Stock Incentive Plan Employee Restricted Stock Agreement. (Incorporated by reference to Exhibit 10.22 to our Form 10-K filed on February 23, 2005)

10.7†  

Stock Option Agreement dated September 15, 2005, between Harvest Natural Resources, Inc. and James A. Edmiston. (Incorporated by reference to Exhibit 10.24 to our Form 10-K filed on February 27, 2006)

10.8†  

Stock Option Agreement dated September 15, 2005, between Harvest Natural Resources, Inc. and James A. Edmiston. (Incorporated by reference to Exhibit 10.25 to our Form 10-K filed on February 27, 2006)

10.9†  

Stock Option Agreement dated September 26, 2005, between Harvest Natural Resources, Inc. and Byron A. Dunn. (Incorporated by reference to Exhibit 10.26 to our Form 10-K filed on February 27, 2006)

10.10†  

Harvest Natural Resources 2006 Long Term Incentive Plan. (Incorporated by reference to Exhibit 4.5 to our Registration Statement on Form S-8 filed on June 1, 2006 [Registration Statement No. 333-134630].)

10.11†  

Form of 2006 Long Term Incentive Plan Stock Option Agreement. (Incorporated by reference to Exhibit 10.2 to our Form 10-Q filed on August 9, 2006)

10.12†  

Form of 2006 Long Term Incentive Plan Director Restricted Stock Agreement. (Incorporated by reference to Exhibit 10.3 to our Form 10-Q filed on August 9, 2006)

10.13

Form of 2006 Long Term Incentive Plan Employee Restricted Stock Agreement. (Incorporated by reference to Exhibit 10.4 to our Form 10-Q filed on August 9, 2006)

10.14†  

Stock Unit Award Agreement dated September 15, 2005 between Harvest Natural Resources, Inc. and James A. Edmiston. (Incorporated by reference to Exhibit 10.5 to our Form 10-Q filed on August 9, 2006)

10.15†  

Stock Unit Award Agreement dated March 2, 2006 between Harvest Natural Resources, Inc. and James A. Edmiston. (Incorporated by reference to Exhibit 10.6 to our Form 10-Q filed on August 9, 2006)

10.16†  

Form of 2006 Long Term Incentive Plan Stock Option Agreement – Five Year Vesting, Seven Year Term. (Incorporated by reference to Exhibit 10.33 to our Form 10-K filed on March 13, 2007)

10.17†  

Amendment to Harvest Natural Resources 2006 Long Term Incentive Plan adopted July 19, 2006. (Incorporated by reference to Exhibit 10.1 to our Form 10-Q filed on May 3, 2007)

10.18†  

Stock Option Agreement dated May 7, 2007 between Harvest Natural Resources, Inc. and Keith L. Head. (Incorporated by reference to Exhibit 10.2 to our Form 10-Q filed on July 25, 2007)

10.19

Contract for Conversion to a Mixed Company between Corporación Venezolana del Petróleo, S.A., Harvest-Vinccler, S.C.A. and HNR Finance B.V. (Incorporated by reference to Exhibit 10.1 to our Form 10-Q filed on November 1, 2007)

10.20†  

Stock Option Agreement dated May 19, 2008 between Harvest Natural Resources, Inc. and Stephen C. Haynes. (Incorporated by reference to Exhibit 10.2 to our Form 10-Q filed on August 7, 2008)

10.21†  

2010 Long Term Incentive Plan. (Incorporated by reference to Appendix A to the Company’s Definitive Proxy Statement on Schedule 14A filed with the Securities and Exchange Commission on April 9, 2010)

10.22†  

Form of 2010 Long Term Incentive Plan Employee Restricted Stock Award Agreement. (Incorporated by reference to Exhibit 10.2 to our Form 10-Q filed on August 9, 2010)

10.23†  

Form of 2010 Long Term Incentive Plan Stock Option Award Agreement. (Incorporated by reference to Exhibit 10.3 to our Form 10-Q filed on August 9, 2010)

10.24†  

Form of 2010 Long Term Incentive Plan Director Restricted Stock Award Agreement. (Incorporated by reference to Exhibit 10.30 to our Form 10-K filed on March 15, 2012)

10.25†  

Employment Agreement dated January 1, 2009 between Harvest Natural Resources, Inc. and Karl L. Nesselrode. (Incorporated by reference to Exhibit 10.30 to our Form 10-K filed on March 15, 2012)

10.26†  

Employment Agreement dated January 1, 2009 between Harvest Natural Resources, Inc. and James A. Edmiston. (Incorporated by reference to Exhibit 10.31 to our Form 10-K filed on March 15, 2012)

10.27†  

Employment Agreement dated January 1, 2009 between Harvest Natural Resources, Inc. and Keith L. Head. (Incorporated by reference to Exhibit 10.32 to our Form 10-K filed on March 15, 2012)

10.28†  

Employment Agreement dated January 1, 2009 between Harvest Natural Resources, Inc. and Stephen C. Haynes. (Incorporated by reference to Exhibit 10.33 to our Form 10-K filed on March 15, 2012)

10.29

Employment Agreement dated May 31, 2008 between Harvest Natural Resources, Inc. and Robert Speirs. (Incorporated by reference to Exhibit 10.34 to our Form 10-K filed on March 15, 2012)

10.30†  

Form of Stock Appreciation Right Award Agreement. (Incorporated by reference to Exhibit 10.1 to our Form 10-Q filed on August 4, 2009)

4


 

 

10.31†  

Form of Stock Unit Award Agreement. (Incorporated by reference to Exhibit 10.2 to our Form 10-Q filed on August 4, 2009)

10.32†  

Form of Director Stock Unit Award Agreement. (Incorporated by reference to Exhibit 10.3 to our Form 10-Q filed on August 9, 2012)

10.33†  

Form of Employee Stock Unit Award Agreement. (Incorporated by reference to Exhibit 10.4 to our Form 10-Q filed on August 9, 2012)

10.34†  

Form of Employee Stock Appreciation Right Award Agreement. (Incorporated by reference to Exhibit 10.5 to our Form 10-Q filed on August 9, 2012)

10.35

Equity Distribution Agreement, dated March 30, 2012 by and between the Company and Knight Capital Americas, L.P. (Incorporated by reference to Exhibit 1.1 to our Form 8-K filed on March 30, 2012)

10.36

Share Purchase Agreement dated June 21, 2012, by and among HNR Energia BV, Harvest Natural Resources, Inc. and PT Pertamina (Persero). (Incorporated by reference to Exhibit 2.1 to our Form 8-K filed on June 21, 2012)

10.37

Guarantee of Harvest Natural Resources, Inc. dated June 21, 2012. (Incorporated by reference to Exhibit 2.2 to our Form 8-K filed on June 21, 2012)

10.38

Securities Purchase Agreement, dated as of October 11, 2012, among Harvest Natural Resources, Inc. and the purchasers named therein. (Incorporated by reference to Exhibit 10.1 to our Form 8-K filed on October 15, 2012)

10.39

Form of Subscription Agreement between Harvest Natural Resources, Inc. and certain purchasers of Harvest’s common stock in private placements in October and November 2013. (Incorporated by reference to Exhibit 10.39 to our Form 10-K filed on March 17, 2014)

10.40

Subscription Agreement, dated November 25, 2013, between Harvest Natural Resources, Inc. and MSD Credit Opportunity Master Fund, L.P.  (Incorporated by reference to Exhibit 10.40 to our Form 10-K filed on March 17, 2014)

10.41

Share Purchase Agreement dated December 16, 2013, by and among HNR Energia B.V., Harvest Natural Resources, Inc., Petroandina Resources Corporation N.V. and Pluspetrol Resources Corporation B.V. (Incorporated by reference to Exhibit 2.1 to our Form 8-K filed on December 20, 2013)

10.42

Shareholders’ Agreement dated as of December 16, 2013, by and among HNR Energia B.V. and Petroandina Resources Corporation N.V. (Incorporated by reference to Exhibit 10.42 to our Form 10-K filed on March 17, 2014)

16.1

Letter from UHY LLP, dated December 4, 2014, addressed to the Securities and Exchange Commission. (Incorporated by reference to Exhibit 16.1 to our Form 8-K filed on December 5, 2014)

21.1

List of subsidiaries.  (Incorporated by reference to Exhibit 21.1 to our Form 10-K filed on March 17, 2014)

23.1

Consent of UHY LLP

23.2

Consent of PricewaterhouseCoopers LLP

23.3

Consent of Ryder Scott Company, LP

23.4

Consent of BDO USA, LLP

23.5

Consent of PGFA Perales, Pistone & Asociados

31.1

Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 executed by James A. Edmiston, President and Chief Executive Officer

31.2

Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 executed by Stephen C. Haynes, Vice President, Chief Financial Officer and Treasurer

32.1

Certification accompanying Annual Report on Form 10-K pursuant to Rule 13a-14(b) or Rule 15d-14(b) and 18 U.S.C. Section 1350 executed by James A. Edmiston, President and Chief Executive Officer

32.2

Certification accompanying Annual Report on Form 10-K pursuant to Rule 13a-14(b) or Rule 15d-14(b) and 18 U.S.C. Section 1350 executed by Stephen C. Haynes, Vice President, Chief Financial Officer and Treasurer

99.1

Reserve report dated February 26, 2014 prepared by Ryder Scott Company for HNR Finance B.V.

 

†   Identifies management contracts or compensating plans or arrangements required to be filed as an exhibit hereto pursuant to Item 15(a) and (b) of Form 10-K.

 

 

5


 

 

SIGNATURES

 

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

HARVEST NATURAL RESOURCES, INC.

(Registrant)

 

Date:June 26, 2015By:/s/ Keith L. Head

Keith L. Head

Vice President and General Counsel

 

 

 

6


 

 

 

SCHEDULE II

 

Financial Statements and Notes

for Petrodelta, S.A.

7


 

 

 

 

 

 

PETRODELTA, S.A.

 

(A SUBSIDIARY OWNED 56% BY CORPORACIÓN

 VENEZOLANA DEL PETRÓLEO, S.A - CVP)

 

FINANCIAL STATEMENTS

FOR THE YEARS ENDED

DECEMBER 31, 2014, 2013 AND 2012

AND

INDEPENDENT AUDITOR’S REPORT

 

 

 

 

 

 

 

8


 

 

PETRODELTA, S.A.

(Subsidiary of Corporación Venezolana del Petróleo, S.A. - CVP)

 

 

 

 

Index

 

 

Pages

Independent Auditor´s Report

1011

Statements of financial position

12

Statements of comprehensive income

13

Statements of changes in equity

14 - 15

Statements of cash flow

16

Notes to the financial statements

 

 

 

 

(1)

Reporting entity

17

(2)

Basis of preparation

19

(3)

Summary of significant accounting policies

21

(4)

Exchange agreement with the Central Bank of Venezuela (BCV)

32

(5)

Determination of fair values

34

(6)

Financial risk management

35

(7)

Taxes and Royalties

36

(8)

Property, plant and equipment, net

42

(9)

Prepaid expenses and other assets

44

(10)

Inventories

44

(11)

Accounts receivable

45

(12)

Cash and cash equivalents

46

(13)

Equity

46

(14)

Provisions

48

(15)

Accruals and other Liabilities

52

(16)

Accounts payable

52

(17)

Operational expenses

52

(18)

Financial income and expenses

53

(19)

Financial instruments

53

(20)

Commitments and contingencies

56

(21)

Related party transactions

57

(22)

Collective labor agreement

60

(23)

Laws, resolutions and legal contributions

60

(24)

Subsequent events

65

(25)

Supplementary Information on Oil and Gas Exploration and Production Activities (unaudited)

67

 

 

 

 

 

9


 

 

LOGO PGFA

 

 

 

INDEPENDENT AUDITOR’S REPORT

 

 

To the Stockholders and Board of Director of

 

Petrodelta, S.A.

 

Report on the Financial Statements

 

We have audited the accompanying financial statements of Petrodelta, S.A.  (a subsidiary 56% owned by Corporación Venezolana del Petróleo, S.A. CVP), which comprise the statements of financial position as at December 31, 2014, 2013, and 2012, and the statements of comprehensive income, statements of changes in equity, and statements of cash flows for the years then ended, and a summary of significant accounting policies and other explanatory information.

 

Management’s Responsibility for the Financial Statements

 

Management is responsible for the preparation and fair presentation of these financial statements in accordance with International Financial Reporting Standards, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

 

Auditor’s Responsibility

Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

 

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. 

 

Opinion

In our opinion, the financial statements present fairly, in all material respects, the financial position of Petrodelta, S.A. as at December 31, 2014, 2013, and 2012, and its financial performance and its cash flows for the year then ended in accordance with International Financial Reporting Standards.

 

 

10


 

 

Emphasis of matter

Without qualifying our opinion as indicated in Note 21 to the financial statements, the Company belongs to a group of related companies and conducts transactions and maintains balances for significant amounts with other members of the group, with significant effects on the results of its operations and financial position, especially in recording of transactions and accounting estimates instructed by PDVSA to the Company. Because of those relationships, these transactions may have taken place on terms other than those that would characterize transactions between unrelated companies.

 

Without qualifying our opinion, as indicated in Notes 4 and 24-c), the National Executive has been making changes in the laws and the Exchange Agreements signed with the Central Bank of Venezuela to adapt to its plans the Venezuelan exchange rate regime, which have an effect on the operations of Petróleos de Venezuela, S.A. (PDVSA) and its subsidiaries. As indicated in Note 19 to the accompanying financial statements at December 31, 2014 the Company had a net monetary liability position in foreign currency Bs.1,915,906 (thousands), equivalent to US$ 304,112 (thousands). At the date of this report, it is not possible to know what changes will make the National Executive on the current foreign exchange regulations in 2015 that may have an effect on the financial results of the Company.

 

Picture 3

 

 

 

11


 

PETRODELTA, S.A.

(Subsidiary owned 56% by Corporación Venezolana del Petróleo, S.A.)

Statements of Financial Position

(Expressed in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31,

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Note

 

2014

 

2013

 

2012

 

2014

 

2013

 

2012

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(U.S. dollars)

 

(Bolivars)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Property, plant and equipment, net

 

8

 

1,044,797 

 

717,449 

 

538,351 

 

6,582,223 

 

4,519,929 

 

2,314,912 

Deferred income tax

 

7 - f

 

125,974 

 

134,238 

 

138,492 

 

793,629 

 

845,693 

 

595,516 

Recoverable tax credits

 

7 - k

 

115,503 

 

46.878 

 

29,721 

 

727,669 

 

295,331 

 

127,801 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total non-current assets

 

 

 

1,286,274 

 

898,565 

 

706,564 

 

8,103,521 

 

5,660,953 

 

3,038,229 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Prepaid expenses and other assets

 

9

 

1,019 

 

869 

 

1,161 

 

6,420 

 

5,475 

 

4,993 

Inventories

 

10

 

62,854 

 

103,996 

 

77,637 

 

395,980 

 

655,175 

 

333,839 

Accounts receivable

 

11

 

1,392,962 

 

1,795,770 

 

1,313,302 

 

8,775,661 

 

11,313,351 

 

5,647,202 

Cash and cash equivalents

 

12

 

2,841 

 

5,960 

 

3,335 

 

17,898 

 

37,548 

 

14,336 

Total current assets

 

 

 

1,459,676 

 

1,906,595 

 

1,395,435 

 

9,195,959 

 

12,011,549 

 

6,000,370 

Total assets

 

 

 

2,745,950 

 

2,805,160 

 

2,101,999 

 

17,299,480 

 

17,672,502 

 

9,038,599 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total equity

 

13

 

1,160,781 

 

1,016,056 

 

760,274 

 

7,312,914 

 

6,401,146 

 

3,269,176 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Provision for asset retirement costs

 

14

 

44,918 

 

65,616 

 

70,425 

 

282,984 

 

413.381 

 

302,828 

Provision for retirement and other benefits

 

14

 

97,054 

 

24,533 

 

22,671 

 

611,440 

 

154,558 

 

97,486 

Deferred income tax

 

7 - f

 

5.268 

 

46,149 

 

68,066 

 

33,188 

 

290,739 

 

292,684 

Total non-current liabilities

 

 

 

147,240 

 

136,298 

 

161,162 

 

927,612 

 

858,678 

 

692,998 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dividends payable

 

13

 

30.550 

 

30,550 

 

30,550 

 

192,465 

 

192,465 

 

131,365 

Provisions

 

14

 

1,042 

 

1,499 

 

1,569 

 

6,566 

 

9,444 

 

6,744 

Accruals and other liabilities

 

15

 

642,332 

 

493,912 

 

510,548 

 

4,046,692 

 

3,111,646 

 

2,195,363 

Accounts payable

 

16

 

660,431 

 

912,147 

 

544,931 

 

4,160,716 

 

5,746,526 

 

2,343,203 

Income tax payable

 

7

 

103,574 

 

214,698 

 

92,965 

 

652,515 

 

1,352,597 

 

399,750 

Total current liabilities

 

 

 

1,437,929 

 

1,652,806 

 

1,180,563 

 

9,058,954 

 

10,412,678 

 

5,076,425 

Total liabilities

 

 

 

1,585,169 

 

1,789,104 

 

1,341,725 

 

9,986,566 

 

11,271,356 

 

5,769,423 

Total equity and liabilities

 

 

 

2,745,950 

 

2,805,160 

 

2,101,999 

 

17,299,480 

 

17,672,502 

 

9,038,599 

 

 

The accompanying notes (1 to 25) are an integral part of these financial statements.

 

 

12


 

PETRODELTA, S.A.

(Subsidiary owned 56% by Corporación Venezolana del Petróleo, S.A.)

Statements of Comprehensive Income

(Expressed in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Years ended December 31,

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Note

 

2014

 

2013

 

2012

 

2014

 

2013

 

2012

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(U.S. dollars)

 

(Bolivars)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income

 

 

 

 

 

 

 

 

 

 

 

 

 

Sale of crude oil

 

 

1,305,151 

 

1,271,596 

 

1,157,293 

 

8,222,451 

 

8,011,055 

 

4,976,360 

Sale of natural gas

 

 

4,583 

 

4,005 

 

3,360 

 

28,873 

 

25,232 

 

14,448 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

21

 

1,309,734 

 

1,275,601 

 

1,160,653 

 

8,251,324 

 

8,036,287 

 

4,990,808 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Costs and expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

Operational expenses

17

 

(331,561)

 

(169,666)

 

(138,605)

 

(2,088,834)

 

(1,068,896)

 

(596,002)

Depletion, depreciation and amortization

8

 

(129,409)

 

(87,203)

 

(86,005)

 

(815,276)

 

(549,379)

 

(369,821)

Sales, general and administrative expenses

 

 

(25,185)

 

(17,645)

 

(20,282)

 

(158,665)

 

(111,164)

 

(87,213)

Royalties and other taxes

7

 

(594,822)

 

(566,197)

 

(604,003)

 

(3,747,379)

 

(3,567,042)

 

(2,597,213)

Contributions and fundings for social
  development

 

 

(16,226)

 

(17,127)

 

(14,889)

 

(102,224)

 

(107,900)

 

(64,023)

Financial income

18

 

13,109 

 

147,224 

 

-

 

82,586 

 

927,511 

 

-

Financial expenses

18

 

(12,980)

 

(21,734)

 

(7,023)

 

(81,774)

 

(136,924)

 

(30,199)

 Other income (expenses), net

 

 

3,067 

 

(2,274)

 

(743)

 

19,323 

 

(14,326)

 

(3,195)

    Total costs and expenses

 

 

(1,094,007)

 

(734,622)

 

(871,550)

 

(6,892,243)

 

(4,628,120)

 

(3,747,666)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income before tax

 

 

215,727 

 

540,979 

 

289,103 

 

1,359,081 

 

3,408,167 

 

1,243,142 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income tax

7 - a

 

(71,002)

 

(285,197)

 

(203,110)

 

(447,313)

 

(1,796,741)

 

(873,373)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 Net income

 

 

144,725 

 

255,782 

 

85,993 

 

911,768 

 

1,611,426 

 

369,769 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other comprehensive income

13

 

-

 

-

 

-

 

-

 

1,520,544 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

   Total comprehensive income for the year

 

 

144,725 

 

255,782 

 

85,993 

 

911,768 

 

3,131,970 

 

369,769 

 

 

The accompanying notes (1 to 25) are an integral part of these financial statements.

 

 

13


 

PETRODELTA, S.A.

(Subsidiary owned 56% by Corporación Venezolana del Petróleo, S.A.)

Statements of changes in equity

Years ended December 31, 2014, 2013 and 2012

(Expressed in thousands of U.S. dollars)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Retained earnings

 

 

 

 

Note

 

Capital Stock

 

Share premium

 

Legal Reserve and Other Reserves

 

Undistributed

 

Total equity

 

 

 

 

 

 

 

 

 

 

 

 

 

Balances at December 31, 2011

 

 

 

6,977 

 

212,451 

 

147,154 

 

307,699 

 

674,281 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total comprehensive income for the year

 

 

 

-

 

-

 

-

 

85,993 

 

85,993 

Release from other reserves

 

13

 

-

 

-

 

(76,030)

 

76,030 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

Balances at December 31, 2012

 

 

 

6,977 

 

212,451 

 

71,124 

 

469,722 

 

760,274 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total comprehensive income for the year

 

 

 

-

 

-

 

-

 

255,782 

 

255,782 

Appropriation to other reserves

 

13

 

-

 

-

 

17,663 

 

(17,663)

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

Balances at December 31, 2013

 

 

 

6,977 

 

212,451 

 

88,787 

 

707,841 

 

1,016,056 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total comprehensive income for the year

 

 

 

-

 

-

 

-

 

144,725 

 

144,725 

Appropriation to other reserves

 

13

 

-

 

-

 

32,617 

 

(32,617)

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

Balances at December 31, 2014

 

 

 

6,977 

 

212,451 

 

121,404 

 

819,949 

 

1,160,781 

 

The accompanying notes (1 to 25) are an integral part of these financial statements.

 

 

14


 

PETRODELTA, S.A.

(Subsidiary owned 56% by Corporación Venezolana del Petróleo, S.A.)

Statements of changes in equity

Years ended December 31, 2014, 2013 and 2012

(Expressed in thousands of bolivars)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Retained earnings

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Note

 

Capital Stock

 

Share
premium

 

Legal Reserve and
Other Reserves

 

Undistributed

 

Accumulated
translation adjustment

 

Total
Equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balances at December 31, 2011

 

 

 

30,000 

 

913,540 

 

632,760 

 

1,323,107 

 

-

 

2,899,407 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total comprehensive income for the year

 

13

 

-

 

-

 

-

 

369,769 

 

-

 

369,769 

Release from other reserves

 

13

 

-

 

-

 

(326,928)

 

326,928 

 

-

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balances at December 31, 2012

 

 

 

30,000 

 

913,540 

 

305,832 

 

2,019,804 

 

-

 

3,269,176 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total comprehensive income for the year

 

 

 

-

 

-

 

-

 

1,611,426 

 

1,520,544 

 

3,131,970 

Appropriation to other reserves

 

13

 

-

 

-

 

111,271 

 

(111,271)

 

-

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balances at December 31, 2013

 

 

 

30,000 

 

913,540 

 

417,103 

 

3,519,959 

 

1,520,544 

 

6,401,146 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total comprehensive income for the year

 

 

 

-

 

-

 

-

 

911,768 

 

-

 

911,768 

Distribution of the translation adjustment to
  the equity accounts

 

13

 

13,953 

 

424,902 

 

142,251 

 

939,438 

 

(1,520,544)

 

-

Appropriation to other reserves

 

13

 

-

 

-

 

205,487 

 

(205,487)

 

-

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balances at December 31, 2014

 

 

 

43,953 

 

1,338,442 

 

764,841 

 

5,165,678 

 

-

 

7,312,914 

 

The accompanying notes (1 to 25) are an integral part of these financial statements.

 

15


 

PETRODELTA, S.A

(Subsidiary owned 56% by Corporación Venezolana del Petróleo, S.A.)

Statements of Cash Flow

(Expressed in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Years ended December 31,

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2014

 

2013

 

2012

 

2014

 

2013

 

2012

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(U.S. dollars)

 

(Bolivars)

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash flow from operating activities:

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

144,725 

 

255,782 

 

85,993 

 

911,768 

 

1,611,426 

 

369,769 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjustments to reconcile net income to net cash (used in)
provided by operating activities -

 

 

 

 

 

 

 

 

 

 

 

 

          Depletion, depreciation and amortization

 

129,409 

 

87,203 

 

86,005 

 

815,277 

 

549,379 

 

369,821 

          Change in estimation of provision for asset
retirement costs

 

7,590 

 

8,823 

 

(23,229)

 

47,817 

 

55,585 

 

(99,886)

          Asset retirement profit, net

 

-

 

1,380 

 

-

 

-

 

8,694 

 

-

          Provision for income tax

 

103,619 

 

325,217 

 

127,080 

 

652,800 

 

2,048,867 

 

546,444 

          Deferred income tax provision

 

(32,617)

 

(40,020)

 

76,030 

 

(205,487)

 

(252,126)

 

326,929 

          Financial cost on provision for asset retirement

             obligation

 

(13,109)

 

5,046 

 

5,678 

 

(82,586)

 

31,790 

 

24,415 

          Financial income from variation in the exchange rate

 

-

 

(147,224)

 

-

 

-

 

(927,511)

 

-

          Tax credit financial cost

 

12,971 

 

20,748 

 

1,339 

 

81,717 

 

130,712 

 

5,759 

 

 

 

 

 

 

 

 

 

 

 

 

 

          Changes in operating assets  - 

 

 

 

 

 

 

 

 

 

 

 

 

              Prepaid expenses and other assets

 

(150)

 

(48)

 

(638)

 

(945)

 

(302)

 

(2,745)

              Material and supplies inventories

 

(6,464)

 

(33,877)

 

(47,585)

 

(40,723)

 

(213,425)

 

(204,616)

              Accounts receivable

 

321,214 

 

(540,132)

 

(404,335)

 

2,023,646 

 

(3,402,832)

 

(1,738,642)

 

 

 

 

 

 

 

 

 

 

 

 

 

          Changes in operating liabilities -

 

 

 

 

 

 

 

 

 

 

 

 

              Provisions

 

64,474 

 

4,187 

 

39,792 

 

406,188 

 

26,378 

 

171,104 

              Accruals and other liabilities

 

148,420 

 

102,327 

 

241,899 

 

935,046 

 

644,660 

 

1,040,172 

              Accounts payable

 

(251,716)

 

397,840 

 

204,178 

 

(1,585,810)

 

2,506,392 

 

877,962 

              Income tax paid during the year

 

(214,744)

 

(173,971)

 

(206,994)

 

(1,352,889)

 

(1,096,016)

 

(890,074)

 

 

 

 

 

 

 

 

 

 

 

 

 

Total adjustments

 

268,897 

 

17,499 

 

99,220 

 

1,694,051 

 

110,245 

 

426,643 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net cash provided by operating activities

 

413,622 

 

273,281 

 

185,213 

 

2,605,819 

 

1,721,671 

 

796,412 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash flow (used in) provided by investing activities:

 

 

 

 

 

 

 

 

 

 

 

 

Acquisition of property, plant, and equipment, net

 

(430,629)

 

(269,236)

 

(184,220)

 

(2,712,963)

 

(1,696,187)

 

(792,147)

Retirement of property, plant, and equipment, net

 

13,888 

 

250 

 

-

 

87,494 

 

1,575 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash used in investing activities

 

(416,741)

 

(268,986)

 

(184,220)

 

(2,625,469)

 

(1,694,612)

 

(792,147)

 

 

 

 

 

 

 

 

 

 

 

 

 

Effect for variation in the exchange rate in cash and cash equivalents

 

-

 

(1,670)

 

-

 

-

 

(10,521)

 

-

Effect for variation in the exchange rate in the foreign currency

 

-

 

-

 

-

 

-

 

6,674 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

Net cash (decrease) increase

 

(3,119)

 

2,625 

 

993 

 

(19,650)

 

23,212 

 

4,265 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents at the beginning of the year

 

5,960 

 

3,335 

 

2,342 

 

37,548 

 

14,336 

 

10,071 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents at the end of the year

 

2,841 

 

5,960 

 

3,335 

 

17,898 

 

37,548 

 

14,336 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The accompanying notes (1 to 25) are an integral part of these financial statements.

 

 

16


 

PETRODELTA, S.A

(Subsidiary owned 56% by Corporación Venezolana del Petróleo, S.A.)

Notes to the financial statements

 

December 31, 2014, 2013 and 2012

 

(1)     Reporting Entity

 

Petrodelta, S.A. was incorporated and is domiciled in the Bolivarian Republic of Venezuela (Venezuela) and its main offices are located at Avenida Alirio Ugarte Pelayo, Edificio Petrodelta, Ala Norte, Planta Baja in Maturín, Monagas State. Its legal address is: Avenida Veracruz con Calle Cali, Urbanización Las Mercedes, Edificio Pawa, Piso 5, Caracas, Distrito Capital.

 

Petrodelta, S.A. (the Company) was incorporated in October 2007, as published in Official Gazette Nº 38,786.  Its business objective is primary exploration to discover oil reserves, extraction of oil in its natural state, and its subsequent collection, transportation and storage pursuant to Article Nº 9 of the Venezuelan Hydrocarbon Law (LOH).  The Company operates within an area of approximately 1,000 square kilometers in the Uracoa, Bombal, and Tucupita fields (formerly the Monagas Sur Unit) and in the El Salto, El Isleño, and Temblador fields in the Monagas and Delta Amacuro states in Venezuela (the assigned operating area).

 

The Company was created as a result of the process for conversion into a mixed-capital company of the Operating Agreement signed on July, 1992 between PDVSA Petróleo, S.A. (PDVSA Petróleo) (formerly Lagoven, S.A.), Harvest Natural Resources, Inc. (Harvest) (formerly Benton Oil and Gas Company) and Venezolana de Inversiones y Construcciones Clérico, C.A. (Vinccler). As part of this process, on March 31, 2006, PDVSA Petróleo, S.A., Corporación Venezolana del Petróleo, S.A. (CVP), both wholly owned subsidiaries of Petróleos de Venezuela, S.A. (PDVSA) and Harvest Vinccler, S.C.A. (HVSCA), the agreement operator and a related company of Harvest and Vinccler, signed a memorandum of understanding for conversion into a mixed company.  In June 2007, the National Assembly of the Bolivarian Republic of Venezuela approved the incorporation of the mixed company Petrodelta, S.A.  In August 2006, the National Assembly approved the inclusion of the Temblador, El Isleño and El Salto areas into the Monagas Sur Unit for further development of the Company’s primary activities.  An agreement for conversion into a mixed company was signed between CVP and HNR Finance B.V. (HNR Finance) in September 2007.  The Company will operate for 20 years as from October 2007 when the decree for transfer of field operations was published in the Official Gazette. 

 

On May 4, 2012, the National Executive of the Bolivarian Republic of Venezuela published in the Official Gazette Nº 39,915, by means of a decree-law Nº 8,896 created PDVSA Social, S.A. (PDVSA Social), an affiliate of Petróleos de Venezuela, S.A. (PDVSA) and ordered CVP to transfer 4% of its capital stock in mix companies of the oil industry to PDVSA Social. In August 14, 2012, shareholders of the Company approved the transfer of CVP´s 4% capital stock in Petrodelta, S.A. to PDVSA Social. Therefore, the capital stock of the Company is 56%-owned by Corporación Venezolana del Petróleo (CVP) and 4% owned by PDVSA Social, S.A. and 40%-owned by HNR Finance.

 

Company management considers that it operates in a single business segment (hydrocarbons) and in one country, the Bolivarian Republic of Venezuela, in conformity with its social statutes.

 

At December 31, 2014, 2013 and 2012 the Company had not received information regarding production from the Temblador field for the period starting October 23, 2007, official date of the decree of transferring field operations to the Company, and ending February 1, 2008. Because production was handled during this period by PDVSA as well as related operational expenses, investments, taxes and contributions by law associated, the Company started discussions to obtain information and evaluate if merits exists for an eventual reconciliation of actual crude produced during the period mentioned.

 

17


 

PETRODELTA, S.A

(Subsidiary owned 56% by Corporación Venezolana del Petróleo, S.A.)

Notes to the financial statements

 

December 31, 2014, 2013 and 2012

 

During the years ended December 31, 2014, 2013 and 2012, the Company has operated with employees assigned by its shareholders or their related companies since it has no direct employees. At December 31, 2014, 2013 and 2012, the Company has 644, 638 and 635 employees, respectively, assigned by its shareholders or their related companies. 

 

During the year ended December 31, the Company drilled 13 (2014), 13 (2013) and 12 (2012) development wells, produced and sold approximately 15.6 (2014), 14.5 (2013) and 13.2 (2012) million barrels of oil and sold approximately 3.0 (2014), 2.6 (2013) and 2.1 (2012) billion cubic feet of natural gas.

 

Regulations

 

The Company’s main activities are regulated by the Venezuelan Hydrocarbon Law (LOH), effective from January 2002 and its partial reform of May 2006.  Gas-related operations are regulated by the Venezuelan Gaseous Hydrocarbon Law effective since September 1999 and its Regulation of June 2000, by the provisions of the bylaws and common rights norms applicable.

 

Below are the main regulations included in the LOH:

 

a)A 30% royalty on volumes of hydrocarbon extracted (see Note 7-g).

 

b)A Partial Reform of the Extraction Tax was enacted and published in Official Gazette Nº 38,443 of May 24, 2006, establishing a rate equivalent to one-third of the value of all liquid hydrocarbons extracted from any reservoir, calculated on the same basis set out in the Law for royalty calculation.  The taxpayer has the right to deduct from the extraction tax any sum payable as royalties (30%), including the additional royalty paid for special advantages (3.33%). 

 

c)A surface tax equivalent to 100 tax units for each square kilometer or fraction thereof per year for licensed areas that are not under production.  This tax will increase by 2% during the first five years, and by 5% during all subsequent years. 

 

d)An internal consumption tax equivalent to 10% of the value of each cubic meter of hydrocarbon derivatives produced and consumed as fuel in internal operations, calculated on the final selling price.  Company management considers that, other than associated gas, no hydrocarbon derivatives are consumed (see Note 7-j).

 

Hydrocarbon Purchase Sale Agreement

 

On January 17, 2008, the Company signed a hydrocarbon purchase sale agreement with PDVSA Petróleo, whereby the Company undertakes to sell to the latter all hydrocarbons produced within the delimited operating area that are not being used in its operations.  The Company may assign or transfer this agreement, or any rights and obligations thereunder, to another company in accordance with Article Nº 27 of the LOH.  This agreement is for 20 years.

 

From October 2011, the Company began to deliver production from El Salto field to the COMOR transfer point, EPM-1 storage facility at PDVSA Morichal which serves as a reception and dispatch of crude for its proximity to El Salto field. Since that date, MPPPM determined that Petrodelta’s production flowing through the COMOR transfer point was of lower quality and higher sulphur content, and instructed the Company that invoicing of crude from El Salto field from October 2011 must be made in reference to a similar gravity crude and not using the crude currently in the purchase sale contract. On December 17, 2012 the Company received from PDVSA Marketing and Supply a proposal to amend the purchase sale agreement with PDVSA

18


 

PETRODELTA, S.A

(Subsidiary owned 56% by Corporación Venezolana del Petróleo, S.A.)

Notes to the financial statements

 

December 31, 2014, 2013 and 2012

 

Petróleo to invoice the production from El Salto field. This amendment incorporates a new  pricing formula in addition to the one currently using Merey 16 as a reference to bill the volumes produced by the Company and include Boscán crude as a reference adjusting the transportation and commercialization costs to invoice that production with lower quality and higher sulphur content coming from El Salto field. The Company agreed to amend the purchase sale agreement which will permit it to bill the production delivered from El Salto field that since October 2011 has not been able to be invoiced.

 

On January 31, 2013, the Board of the Company endorsed the incorporation of the oil price formula with reference to Boscan in the hydrocarbons purchase sale agreement and instructed to submit the formula to the corresponding National Executive administrative and financial authority level, and for the approval of the Petrodelta, S.A. Shareholders, which will allow the billing of the production of crude from El Salto field.

 

On May 2, 2013, shareholders of the Company and on April 30, 2013 the board of directors of CVP resolved to endorse the proposal of the Company to amend the hydrocarbon purchase sale agreement with PDVSA Petróleo, S.A. to include the Price Formula with crude Reference Boscan, before the Ministry of People Power of Oil and Mining so it can sign the amended agreement for Petrodelta, S.A. to start invoicing production from El Salto field. Subsequently, on November 15, 2014 PDVSA Petróleo and the Company subscribed an amendment in the hydrocarbon purchase sale agreement to include the Price Formula with crude Reference Boscan in order to allow the Company invoice volumes of crude delivered referenced to Boscan price which is currently in process. The amendment subscribed modified estimated and recorded revenues at December 31, 2013 under the price formula initially proposed which modify marketing and transportation variables. During the year 2014 additional revenues were recorded for approximately US$.53,806 thousands (Bs.338,978 miles) due to a change in marketing and transportation variables as stipulated in the Merey 16 price formula (see Notes 11, 21 and 24-a). 

 

 

(2)     Basis of Preparation

 

(a)  Statement of Compliance

 

The financial statements as of December 31, 2014, 2013 and 2012 are prepared in accordance with International Financial Reporting Standards (IFRS) adopted by the International Accounting Standards Board (IASB) and their interpretations, issued by the International Financial Reporting Interpretations Committee (IFRIC) of the IASB.

 

On March 12, 2014 the Board of Directors of the Company approved the issuance of the financial statements as of December 31, 2013, in accordance with International Financial Reporting Standards (IFRS) and resolved to submit these financial statements to the Shareholders of the Company and it is expected its approval with no modifications.

 

On September 3, 2014 the financial statements of the Company presented in bolivars, the presentation currency, and approved by the Board of Directors of the Company on March 12, 2014, have been modified by decision of the Board of Directors of the Company to recognize the approval by the Shareholders of the Company on October 8, 2014 the correction of the translation adjustment in the amount of Bs. 913,578 thousands; on October 9, 2014 the approval of the translation adjustment of Bs.1.520.544 thousands and for distribution among the various equity accounts the translation adjustment recorded as of December 31, 2010 and 2013, respectively. 

 

On February 28, 2013 the Shareholders of the Company resolved to approve the financial statements for the year ended December 31, 2012. The corresponding minutes for these assemblies have been issued and are expected to be signed by the Company representatives.

 

(b)  Basis of Measurement

 

The financial statements have been prepared on the historical cost basis, except for certain assets and liabilities measured at fair value.  Assets measured and presented at fair value are: recoverable tax credits, accounts receivable and cash and cash equivalents.

 

The methods used for measuring fair value are discussed in more detail in Note 5.

19


 

PETRODELTA, S.A

(Subsidiary owned 56% by Corporación Venezolana del Petróleo, S.A.)

Notes to the financial statements

 

December 31, 2014, 2013 and 2012

 

(c)    Functional and Presentation Currency

 

The financial statements are presented in U.S. dollar (dollar or US$.) and bolivars (bolivars or Bs.). The Company’s functional currency is the dollar, since the main economic environment in which Petrodelta, S.A. operates is the international market for crude oil and its products.  In addition, a significant portion of its revenues, as well as most costs, expenses and investments are denominated in dollars.

 

The financial statements in bolivars are presented for statutory purposes.

 

All financial information presented in U.S. dollars and bolivars has been rounded in thousands.

 

(d)    Use of estimates and judgments

 

The preparation of financial statements in conformity with IFRS requires management to make estimates, judgments and assumptions that affect the application of accounting policies and the amounts of assets, liabilities, income and expense.  The Company applies its best estimates and judgments; however, actual results may differ from initial estimates.

 

Estimates and assumptions are reviewed periodically, and the effects of the revisions, if any, to accounting estimates are recognized in the period in which the estimate is revised and in any future periods affected.

 

Significant areas of critical judgment in the application of accounting policies, which significantly affect financial statement amounts, are described in the following notes:

 

-Note 3-g and 8 – Evaluation of assumptions on impairment of properties, plant and equipment, depletion, depreciation and amortization

-Note 3-h and 14 – Provision for asset retirement costs

-Note 3-f and 19Valuation of financial instruments

 

Information on areas of uncertainty affecting management’s estimates which significantly affect financial statement amounts in future periods are described in the following notes:

 

-Notes 3-r and 14 – Measurement of contract-based retirement benefit obligations and other post-retirement benefits other than pensions, which is a PDVSA obligation with the employees assigned to the Company for subsequent billing once the employee is considered eligible for pension.

20


 

PETRODELTA, S.A

(Subsidiary owned 56% by Corporación Venezolana del Petróleo, S.A.)

Notes to the financial statements

 

December 31, 2014, 2013 and 2012

 

-Notes 3-d and 7-f – Calculation and evaluation of deferred income tax recoverability

-Notes 3-m and  20  –  Commitments, contingencies and provisions for lawsuits and claims and for environmental issues

-Note 7- k Calculation of tax credits fair value

 

The Company’s operations may be affected by the political, legislative, regulatory and legal environment, both at the national and international level.  In addition, significant changes in prices or availability of crude oil and its products may have an impact on the Company’s results of operations in any given year.

 

 

(3)     Significant Accounting Policies

 

The accounting policies used for the preparation of these financial statements have been applied consistently for all periods presented and are summarized as follows:

 

(a)    Foreign Currency

 

Transactions in Foreign Currency

 

Transactions in foreign currency (any currency different than the functional currency) are translated into the Company’s functional currency using the exchange rate in effect at the transaction date. Monetary assets and liabilities denominated in foreign currency are translated into U.S. dollars using the exchange rate prevailing at the date of the statement of financial position. Exchange gains or losses on monetary assets and liabilities resulting from this translation are presented as financial income or expenses in the statements of comprehensive income. Nonmonetary assets and liabilities in foreign currency are stated at fair value and translated to the functional currency using the exchange rate prevailing at the date fair value was determined.  All other nonmonetary items denominated in foreign currency measured at historical cost are converted at the exchange rate at the date of the transaction.

 

All transactions occurred in the year ended December 31, 2014 have been recorded by the Company at the exchange rate of 6.30 for each U.S. dollar (see Note 4), taking into consideration the following:

 

a)    Transactions related to the sale of foreign currency generated from exports and/or sales of hydrocarbons to the Central Bank of Venezuela by Petróleos de Venezuela, S.A. (PDVSA) have been recorded by the Company using the exchange rate in conformity with article 6 of Exchange Agreement Nº1 published on February 5, 2003.

 

b)  For the year ended December 31, 2014 neither the Company nor PDVSA as intermediary engaged in the sale of foreign currency to the Central Bank of Venezuela derived from financing, financial instruments, capital contributions in cash, sale of assets, received dividends, collection of debts, service rendered, and any other source different from the hydrocarbon export and/or sale. In the event that the Company had done any of these transactions, the exchange rate to be used to record them would be the exchange rate indicated in the Foreign Currency Alternative Exchange System for (SICAD II) in accordance with the provisions of the Exchange Agreement Nº28 published on April 4, 2014.

 

Translation to the Presentation Currency

 

The Company’s financial statements were translated from dollars into bolivars, a currency other than the functional currency, in accordance with International Accounting Standard Nº 21 the Effects of Changes in Foreign Exchange Rates.  This standard requires each entity to determine its functional currency based on an analysis of the primary economic environment in which the entity operates, which is normally the one in which it primarily generates and expends cash.

21


 

PETRODELTA, S.A

(Subsidiary owned 56% by Corporación Venezolana del Petróleo, S.A.)

Notes to the financial statements

 

December 31, 2014, 2013 and 2012

 

The financial statements were translated into bolivars using the following procedures:

 

-Assets and liabilities in each statement of financial position at the exchange rates in effect at the date of such statement.

 

-Income and expenses in the statements of comprehensive income at the exchange rate at the date of transaction.

 

-All exchange gain and losses generated as a result of the above, are recognized in the statement of comprehensive income as other comprehensive income and accumulated as a separate component of equity.

 

-Equity accounts are translated at the exchange rate in effect at the date of each related transaction, except for retained earnings which are translated at the weighted-average rate for the relevant year.

 

(b)    Revenue Recognition

 

Income from sales of crude oil and gas, is measured at fair value of the cash receipts or amounts to be received, net of commercial discounts, and is recorded in the statements of comprehensive income when risks and significant rights of ownership are transferred to PDVSA Petróleo and MPPPM as stipulated in the hydrocarbon purchase sale agreement.  Income is recognized when it can be reasonably measured and it is probable that future economic benefits will flow to the Company.  Income from activities other than the Company’s main business is recognized when realized.  Income is not recognized when there is significant uncertainty as to the recoverability of the obligation acquired by the buyer. All of the Company results are from continuing operations. The Company records revenue from the sale of crude by i) 70% of volumes it transfers and invoices to PDVSA Petróleo and ii) royalty paid in kind equivalent to 30% of production delivered (See Notes 3-n, 7-g and 21).

 

(c)    Financial Income and Expenses

 

Financial income included in the statements of comprehensive income represents mainly the effects originated by modifications and dispositions in relation to exchange rate agreements (see Note 18).

 

Financial expenses included in the statements of comprehensive income represents changes (losses) in the fair value of financial assets (see Note 7-k) and the asset retirement obligation (See Notes 3-g and 3-m).

 

Income and losses in foreign currencies are recognized on a net basis, either as financial income or financial expense, depending on the effect of foreign currency fluctuations resulting from a net asset or liability position. 

 

 

(d)    Income Tax

 

Income tax expense comprises current and deferred income tax. Income tax expense is recognized in the results for each year, except to the extent that it relates to items that should be directly recognized in other comprehensive income.

 

Current income tax is the expected tax payable based on the taxable income for the year, using the methodology established by current laws and tax rates at the reporting date and any adjustment to taxes payable from previous years. Current income tax payable also includes tax responsibility derived from dividends declared.

 

Deferred income tax is recognized using the balance sheet liability method.  Deferred tax assets and liabilities are recognized by the timing differences that exist between assets and liabilities values presented in the statement of financial position and their corresponding tax value, as well as operating losses and tax credit carry-forwards.  The value of deferred tax assets and liabilities is determined based on tax rates expected to be applicable to taxable income for the year in which temporary differences will be recovered or settled pursuant to law.  The effect on deferred tax assets and liabilities of changes in tax rates is recorded in the results for the year in which such changes become effective.

22


 

PETRODELTA, S.A

(Subsidiary owned 56% by Corporación Venezolana del Petróleo, S.A.)

Notes to the financial statements

 

December 31, 2014, 2013 and 2012

 

In the determination of deferred tax, the Company takes into consideration the impact on decisions about fiscal uncertainties and the possibility that a tax and interest liability can occur. The Company considers that provisions for tax payable are adequate for all taxable years, according to own evaluations of diverse factors including interpretations of legal regulations and prior experiences. These evaluations are made from assessments and premises and may include own judgments over future events. 

 

A deferred tax asset is recognized only to the extent that future taxable income will be available for offsetting.  Deferred tax assets are reviewed at each reporting date and reduced to the extent that it is no longer probable that the related tax benefit will be realized.

 

(e)  Contributions and Funding for Social Development

 

Corresponds to contributions and funding the Company is obliged by law to carry out and are paid and recovered by PDVSA. These contributions are funding for endogenous projects, programs related to science, technology and innovation and funding of national programs in relation to antidrug activities and Sports Organic Law.

 

(f)  Financial Instruments

 

Non-derivative financial instruments consist of recoverable tax credits, accounts receivable, cash and cash equivalents, accounts payable to suppliers, and other liabilities (see Note 5).

 

Non-derivate financial instruments classified as at fair value through profit or loss are initially recognized at fair value, plus any direct transaction costs.

 

Recoverable tax credits are accounted for at fair value after its initial recognition (see Note 7-k). All other non-derivative financial assets and liabilities are maintained at its original recognized value.

 

A financial instrument is recorded when the Company engages or commits to the contractual clauses thereof.  Financial assets are reversed if the Company’s contractual rights over the asset’s cash flows expire or if the Company transfers the financial asset to another entity without retaining control or a significant portion of the asset’s risks and rewards.  Regular purchases and sales of financial assets are accounted for at trade date, which is generally the date on which the Company commits to purchase or sell the asset. Financial liabilities are derecognized when the Company’s specific contractual obligation expires or is paid.

 

During the years ended December 31, 2014, 2013 and 2012, the Company conducted no transactions with derivative instruments.

 

The balance of financial assets and liabilities are offset and the net amount shown in the statement of financial position when and only when, the Company has a legal right to offset amounts and intends to settle on a net basis or to realize the asset and settle the liability simultaneously.

 

(g)  Property, Plant and Equipment

 

Recognition and measurement

 

Property, plant and equipment are stated at cost, net of accumulated depreciation and impairment losses (see Note 3-l). The successful efforts accounting method is used for exploration and production activities of crude oil and natural gas, taking into consideration what is established under IFRS 6 Exploration For and Evaluation of Mineral Resources in relation to accounting for exploration and evaluation expenditures, including the recognition of exploration and evaluation assets. All costs for development wells, related plant and equipment, and property used for oil recovery are recorded as part of the cost of the assets. Costs of exploratory and development wells are capitalized until it is determined whether they are commercially feasible; otherwise, such costs are charged to operating expenses.  Other exploratory expenditures, including geological and geophysical costs, are expensed as incurred.

 

The cost of property, plant, and equipment includes disbursements that are directly attributable to the acquisition of such assets and the amounts associated with asset retirement costs (See Note 3-h).

23


 

PETRODELTA, S.A

(Subsidiary owned 56% by Corporación Venezolana del Petróleo, S.A.)

Notes to the financial statements

 

December 31, 2014, 2013 and 2012

 

 

Finance costs of projects requiring major investments, and costs incurred for specific financing of projects, are recognized as part of property, plant, and equipment, when they can be directly related to the construction or acquisition of a qualifying asset. Capitalization of such costs is suspended during periods when the development of construction activity is interrupted, and capitalization ends when necessary activities are substantially complete for the utilization of a qualifying asset. An asset is considered qualified, when it requires a period of substantially time necessary before is ready for use.

 

The cost of assets built by the Company includes materials and direct labor, as well as any other direct cost attributable to bringing the asset to working condition.  Costs for dismantling and removal from the construction site are also included.

 

All disbursements relating to construction or purchase of property, plant and equipment in the stage prior to implementation are stated at cost as work in progress.  Once the assets are ready for use, they are transferred to the respective component of property, plant, and equipment and depreciation or amortization commences.

 

Gain or loss generated by the sale, retirement or disposal of an asset from property, plant, and equipment, is determined by the difference between the amount received from sale, retirement or disposal, if any, and the net carrying value in the books of the Company, and is recognized as other income or expense, net in the statements of comprehensive income.

 

Materials and supplies accounted for as inventory and considered strategic since they will be used as spare parts for two years operation in the production facilities and in specific investment projects are reported under property, plant, and equipment.

 

Subsequent Costs

 

Costs for major maintenance or general repairs, as well as replacement of significant parts of property, plant and equipment are capitalized when identified as a separate component of the asset to which such maintenance, repair and replacement corresponds and are depreciated between one maintenance period and the other.  Disbursements for minor maintenance, repairs and renewals incurred to maintain facilities in operating conditions are expensed.

 

Depletion, Depreciation and Amortization

 

Depletion, depreciation, and amortization of capitalized costs related to wells and facilities for the production of crude oil and gas are determined by the units of production method by field, based on proved developed reserves, which include quantities of oil and gas that can be recovered from existing wells, with equipment and methods currently in use.  The rates used are reviewed annually based on an analysis of reserves and are applied retroactively at the beginning of the year.  Capitalized costs of other property, plant and equipment are depreciated over their estimated useful lives, mainly using the straight-line method with an average useful life of 15 years for administrative buildings and between 3 and 5 years for the remaining assets

 

When parts of a property, plant, and equipment asset have different useful lives, they are recorded separately as a significant component of that asset.

 

Depreciation methods and average useful lives of property, plant, and equipment are reviewed annually. Land is not depreciated.

 

(h)  Costs associated with Asset Retirement Costs

 

The Company capitalizes the fair value of costs associated with obligations from retirement of assets used for exploration and crude oil and natural gas production activities, based on the future retirement plan for those assets.  Cost is capitalized as part of the related long-lived asset and is amortized over its useful life with a charge to operating costs (see Note   3-m).

24


 

PETRODELTA, S.A

(Subsidiary owned 56% by Corporación Venezolana del Petróleo, S.A.)

Notes to the financial statements

 

December 31, 2014, 2013 and 2012

 

(i)  Inventories

 

Inventories are stated at the lower of cost and net realizable value. Net realizable value is the estimated selling price in the normal course of business, less costs to complete and estimated selling costs.

 

The cost of inventories of crude oil and its products is determined using the average cost method.

 

Materials and supplies are valued mainly at average cost, less an allowance for possible losses, and are classified into two groups: current assets and non-current assets.The inventory obsolescence provision is calculated from analysis of stock behavior and aging reports that will eventually determine its use type and mobility in order to apply the corresponding obsolescence percentage.

 

(j)  Accounts Receivable

 

Accounts receivable are accounted for according to price formulas established in the Hydrocarbon Purchase Sale Agreement between the Petrodelta, S.A. and PDVSA Petróleo, S.A. whereby the former undertake to sell and PDVSA Petróleo, S.A. undertakes to buy all hydrocarbons produced that are not being used in their operations within the delimited operating areas.  At December 31, 2014, 2013 and 2012, the Company does not expect to incur losses on uncollectible accounts and, therefore, has not set aside a provision in this connection other than those described in the hydrocarbon purchase sale agreement with PDVSA Petróleo, S.A (see Notes 11 and 21).

 

(k)  Cash and Cash Equivalent

 

Petrodelta, S.A. considers as cash and cash equivalents the cash in hands and banks. At December 31, 2014, 2013 and 2012 this amounted to approximately US$.2,841 thousands, US$.5,960 thousands and US$.3,335 thousands (Bs.17,898 thousands, Bs.37,548 thousands and Bs.14,336 thousands), respectively (See Note 12).

 

(l)  Impairment in the Value of Assets

 

Non-derivative Financial Assets

 

Financial assets are assessed by the Company at the date of the financial statements to determine whether there is any objective evidence of impairment. A financial asset is impaired if there is objective evidence that one or more events have had a negative effect on the estimated future cash flows of the asset (see Note 6).

 

Objective evidence that financial assets are impaired can include default or lack of compliance from debtors, restructuring a balance due to the Company in terms that may not be considered in other circumstances, signs that a debtor or issuer declares bankrupt or the instrument no longer has a market.

 

Significant financial assets are reviewed individually to determine their impairment. The remaining financial assets with similar credit risk characteristics are evaluated as a group.

 

In evaluating impairment, the Company uses historical trends of the probability of defaults, timing of recoveries and the amount of loss incurred, adjusted for management’s judgment as to whether current economic and credit conditions are such that the actual losses are likely to be greater or less than the suggested by historical trends.

 

An impairment loss related to a financial asset is calculated as the difference between its carrying amount and the present value of the estimated future cash flows, discounted at the effective interest rate. Impairment losses are recognized in the statements of comprehensive income. An impairment loss is reversed if the amount can be related objectively to an event occurring after the impairment loss was recognized (See Note 19).

 

25


 

PETRODELTA, S.A

(Subsidiary owned 56% by Corporación Venezolana del Petróleo, S.A.)

Notes to the financial statements

 

December 31, 2014, 2013 and 2012

 

Non-Financial Assets

 

The carrying amounts of non-financial assets, excluding inventory and deferred tax, are reviewed at each reporting date of the statement of financial position to determine whether evidence of impairment exists. If any such indication exists, then the recoverable value of the asset is estimated.

 

The recoverable value of an asset or cash-generating unit is the greater of its carrying value and its fair value, less direct selling expenses. When determining the carrying value, expected future net cash flows are discounted using present value techniques, using a discount rate before tax that reflects current market conditions over the time value of money and specific risks that the asset may bear. Impairment is determined by the Company based on cash-generating units, in accordance with its business segments, geographical locations and the final use of the production generated by each unit.  A cash-generating unit is the assets grouped at the lowest levels for which there are separately identifiable cash flows. When evaluating impairment, goodwill acquired during business combinations is allocated among cash-generating units that are expected to benefit from combination synergies.

 

An impairment loss is recognized when the carrying amount of an asset or its cash-generating unit exceeds its recoverable amount. Impairment loss is recognized in the statements of comprehensive income for the year and the asset cost is shown net of this impairment charge.

 

Impairment losses can be reversed only if the reversion is related to a change in the estimates used after the impairment loss was recognized. This reversion shall not exceed the book value of assets net of depreciation or amortization as if the impairment had never been recognized. Impairment losses associated to goodwill are not reversed.

 

(m)  Provisions

 

A provision is recognized if, as a result of a past event, the Company has a present legal or constructive obligation that can be reliably estimated, and it is probable that an outflow of economic benefits will be required to settle the obligation. When the effect of the time value of money is significant, the provision is determined by applying a discount rate associated with the estimated payment terms, if the terms can be estimated reliably as well as the risk associated with those obligations.

 

Environmental Issues

 

In conformity with the environmental policy established by the Company and following instructions from PDVSA and applicable current legislation, a liability is recognized when costs are likely and can be reasonably estimated.  Environmental expenditures that relate to current or future revenues are expensed or capitalized as appropriate. Expenditures for past operations that do not contribute to generating current or future income are charged to expense. Recognition of these provisions coincides with the identification of an obligation for environmental remediation where Petrodelta, S.A. has sufficient information to determine a fair estimate of the respective cost.  Subsequent adjustments to estimates, if necessary, are made upon obtaining additional information. The Company as of December 31, 2014, 2013 and 2012 does not maintain a provision for environmental issues (See Note 20).

 

Asset Retirement

 

Obligations associated with the retirement of long-lived assets are recognized at fair value on the date on which such obligation is incurred, based on future discounted cash flows. The fair values are determined based on current regulations and technologies.

 

Changes in fair values of obligations are added to or deducted from the cost of the respective asset. The adjusted depreciation amount of the asset is depreciated over its remaining useful life. Therefore, once its useful life has ended all subsequent changes in the fair value of the obligation are recognized in the statements of comprehensive income. The increase in the obligation for each year is recognized in the results of operations as financial expenses (See Notes 14 and 20).

26


 

PETRODELTA, S.A

(Subsidiary owned 56% by Corporación Venezolana del Petróleo, S.A.)

Notes to the financial statements

 

December 31, 2014, 2013 and 2012

 

Litigation and Other Claims

 

Provision for litigations and claims are recognized in the event that legal action has been lodged, government investigations have been initiated and other legal actions are outstanding or subject to be filed in the future against the Company, as a result of past events, which may result in a probable outflow of economic benefits to pay for that obligation which may be reliably estimated (See Notes 14 and 20).

 

Damages to Land

 

Liabilities for damage to land is recorded as a result of the regular activities carried out by the Company to access the different existing areas or new, for which third-party property or economic activity can be or are affected causing the need to compensate the economic effects caused.

 

As a result of the expansion of the activities during the years 2012 to 2014, the Company caused damages to third parties and currently is in negotiation process with different owners. Management estimated potential liabilities as of December 31, 2014, 2013 and 2012 (See Notes 14 and 20).

 

(n)  Royalties, extraction tax and other taxes

 

Royalties, extraction tax, and other related taxes are calculated according to the provisions of the Hydrocarbons Law and other laws regulating the oil industry (see Notes 1 and 7) and are recognized in the statements of comprehensive income when caused. Royalty for the sale of crude is paid in kind (see Note 3-b) and is calculated and recorded by the amount caused up to the capped price established in the decree law that created a Special Contribution on Extraordinary Prices and Exorbitant Prices in the International Hydrocarbons Market and subsequent amendments (See Note 7-g and 23-g) and not at the price oil is sold.

 

(o)  Equity

 

Capital Stock

 

Common shares are classified as equity.  For the years ended December 31, 2014, 2013 and 2012, the Company has no preferred shares (See Note 13). 

 

Share Premium

 

The Company recognizes as share premium any excess in the value of contributions made by shareholders for Company incorporation over the par value at the incorporation date (see Note 13).

 

Legal Reserve

 

The Venezuelan Code of Commerce requires companies to set aside 5% of their net income each year to a legal reserve until it reaches an amount equivalent to at least 10% of their capital stock in bolivars (See Note 13).

 

Other Equity Reserves

 

The Company has the policy of transferring from retained earnings to other equity reserves the net balance of the deferred tax asset. This reserve is recognized in retained earnings to the extent that such asset gets realized when the temporary differences that gave rise to it are deducted for tax purposes and consequently would be available for dividend payments (See Note 13).

 

Dividend Distribution

 

Dividend distribution to the Company’s shareholders is recognized as a liability in the financial statements in the period in which the dividends are approved by the shareholders of the Company (See Note 13).

27


 

PETRODELTA, S.A

(Subsidiary owned 56% by Corporación Venezolana del Petróleo, S.A.)

Notes to the financial statements

 

December 31, 2014, 2013 and 2012

 

(p)  Accounting estimates requiring a high degree of Judgment

 

The Company continually evaluates judgments used to record its accounting estimates, which are recorded based on historical experience and other factors, including expectation of future events that are believed to be reasonable under the circumstances.  Significant future changes to assumptions established by management may significantly affect the carrying value of assets and liabilities. 

 

Below is a summary of the most significant accounting estimates made by the Company:

 

Estimates of oil and gas Reserves

 

Oil and gas reserves are key elements in the Company’s decision-making process.  They are also important in evaluating impairment in the carrying amount of long-lived assets.  Calculation of depreciation, amortization and depletion of property, plant and equipment accounts related to hydrocarbon production requires quantification of proved developed hydrocarbon reserves expected to be recovered by the Company in the future. Reserve estimates are only approximate amounts due to the high degree of judgment and specialization required to develop the information.  Reserves are calculated by the support of specialized technical departments at Petróleos de Venezuela, S.A. (PDVSA) (related company that owns the Company’s main shareholder) and results are submitted for approval by Ministry of Popular Power for Oil and Mining (MPPPM) in order to guarantee the reasonableness of the information.  Additionally, reserve studies are regularly updated to guarantee that any change in estimates is timely recorded in the Company’s financial statements.

 

Reserves studies of crude oil and gas assigned to the Company are updated once a year by the superintendence of reservoir of the Company who possesses adequate technological elements necessary to determine reserves, and its impact in the statements of comprehensive income is reflected under depletion for the years ended  December 31, 2014, 2013, and 2012 (See Note 25).

 

Assessment of impairment in the value of Property, Plant, and Equipment

 

Management annually assesses impairment in the value of property, plant, and equipment.  The main key assumptions considered by management to determine the recoverable amount of property, plant and equipment were income projections, oil prices, royalties, operating costs and the discount rate.  Projections include proved developed reserves to be produced during the development period of production activities in the assigned fields.  At December 31, 2014, 2013 and 2012, the Company has not identified impairment in the carrying value of property, plant, and equipment as a result of these estimates.

 

Abandonment Cost Calculation

 

The Company’s financial statements include an asset and a provision for property, plant, and equipment used in hydrocarbon production that is expected to be abandoned in the future and in relation to which the Company will make future disbursements.  Assumptions considered for the calculation of this asset and the provision for abandonment (asset abandonment costs, date of abandonment, and inflation and discount rates) may vary depending on factors such as performance in the field, changes in technology and legal requirements.  Assumptions made by the Company are recorded based on technical studies and management’s experience and are regularly reviewed (see Note 14).

 

(q)  Related Party Transactions

 

The Company does not disclose, as part of balances and transactions with related companies (see Note 21), transactions with government entities conducted in the normal course of business, the terms and conditions of which are consistently applied to other public and private entities and for which there are no other suppliers, i.e., supplies, electricity services, taxes, among others.

28


 

PETRODELTA, S.A

(Subsidiary owned 56% by Corporación Venezolana del Petróleo, S.A.)

Notes to the financial statements

 

December 31, 2014, 2013 and 2012

 

(r)  Accrual for Employee Benefits

 

Following corporate instructions, the related company PDVSA Petróleo, S.A. assumed the employer role for employees who accepted the transfer, and are working as assigned employees to Petrodelta, S.A. operations. According to this, PDVSA Petróleo, S.A. administer, prepare and pay those employees’ payroll and labor benefits and invoice direct payroll and benefits to the Company, which recognize those costs against a liability to PDVSA Petróleo, S.A. The direct payroll and benefits costs are determined by PDVSA according to the following policies:

 

Termination Benefits

 

The Company accrues for its liability in respect of employee termination benefits based on the provisions of the Venezuelan Labor Law and the prevailing oil-sector Collective Labor Agreement (see Note 22).  Most of this accrual for indemnification has been deposited in trust accounts in the name of each employee. Amounts calculated for termination benefits according to the Labor Organic Law and Workers for personnel assigned by PDVSA Petróleo to the Company are calculated and recorded based on actuarial reports.

 

Profit Sharing and Bonuses

 

Liabilities in respect of labor benefits and bonuses for staff, vacation leaves, and other benefits are accounted for as incurred along with the staff’s provision of services.

 

During the years ended December 31, 2014, 2013 and 2012, the Company has not had direct employees and, therefore, has not recorded liabilities derived from these labor-related benefits except for the payroll related cost monthly billed to the Company by PDVSA Petróleos S.A.

 

Retirement Plan

 

The amount to be provision for retirement benefits is received from PDVSA based on actuarial studies. Net liabilities in respect of the retirement plan as defined in the contract are accounted for separately per each participant in said plan, by estimating the amount of future benefits to be acquired by staff versus their length of service during current and prior periods; said benefits are discounted in order to determine their current value, then it is deducted the fair market value of those assets associated to the plan. The discount rate reflects the yield rate that, as of the date of the financial statements, is reported through financial instruments issued by credit institutions with high ratings and maturity dates that are in line with those due dates applicable to said liabilities. This calculation is made by an actuary by using the projected unit credit method.

 

Improvements made to the plan’s benefits, in connection with past service cost, are charged to the Company by PDVSA and expensed in the statements of comprehensive income over the estimated period that, on average, will last until the time that said benefits will be paid in full. As said benefits fall under irrevocable acquired rights after approval, said expense which is charged to the Company by PDVSA is recorded, immediately, in the statements of comprehensive income.

 

The amount accounted for as income or expense is the share corresponding to the total of unrecorded actuarial earnings or loss in excess of 10% of the greater of these sums: a) the current value of liabilities in respect of those benefits defined as of that date; and b) the reasonable value of the plan’s assets as of that date. Said caps are computed and apply separately per each plan’s benefit so defined.

29


 

PETRODELTA, S.A

(Subsidiary owned 56% by Corporación Venezolana del Petróleo, S.A.)

Notes to the financial statements

 

December 31, 2014, 2013 and 2012

 

Post-retirement Benefits other than Retirement

 

Net liabilities in respect of post-retirement benefits other than retirement, as defined in the contract, equal the total of future benefits earned by PDVSA employees assigned to the Company along with their length of service during current and prior periods. Said benefits include mainly: health and dental plans, burial and funeral insurance, and food electronic card. Said liabilities are computed by using the projected unit credit method; then they are deducted to reflect their current value and, if applicable, the fair market value of related assets is deducted as well. The discount rate reflects the yield rate that, as of the date of the financial statements, is reported through financial instruments issued by credit institutions with high ratings and maturity dates that are in line with those due dates applicable to said liabilities.

 

Past service cost and the actuarial income or loss are recorded by using the method set out in the retirement plan per the contract. 

 

The provision for this concept is provided by PDVSA which is based on actuarial studies.

 

(s)  New accounting Standards not yet Adopted

 

Several new standards, amendments and interpretations to existing standards are not effective yet for the year ended December 31, 2014 and have not been applied in the preparation of the Company’s financial statements. The most important for the Company are the following:

 

-   On September 25, 2014 the IASB issue Annual Improvements to IFRSs 2012-2014 Cycle. The improvements include amendments to IFRS 5 “Non-current Assets Held for Sale and Discontinued Operations” related to accounting treatments when there is a change of disposition of the asset or group of assets; IFRS 7 “Financial Instruments; Disclosures” which clarifies the applicability of the amendments on offsetting disclosures to condensed interim financial statements; IFRS 19 “Employee Benefits” which clarifies the high quality corporate bonds used in estimating the discount rate for post-employment benefits should be denominated in the same currency as the benefits to be paid and IAS 34 “Interim Financial Reporting” which clarifies the meaning of disclosing financial information and the introduction of cross-references to the locate them. These amendments are effective for annual periods beginning on or after January 1, 2016 with earlier application being permitted.

 

-   On September 11, 2014 the IASB published amendments to IFRS 10 “Consolidated Financial Statements” and IAS 28 “Investments in Associates and Joint Ventures”. The amendments seek, among other things, address inconsistencies between these two standards in relation to recognition of gains or losses in the treatment of the sale and supply of goods that do not constitute a business between an investor and its associated. The amendments are effective for annual periods beginning on or after 1 January 2016, with earlier application being permitted.

 

Subsequently, on December 18, 2014, the IASB published amendments to these standards as well as the standard IFRS 12 "Disclosure of Interests in Other Entities", which clarifies exemptions in preparing consolidated financial statements, subsidiaries providing services relating to the activities of its parent company and necessary disclosures among other things. The date of application of these amendments will be from January 1, 2016, early adoption is permitted.

 

-   On August 12, 2014 the IASB published amendments to IAS 27 “Separate Financial Statements” which reinstate the equity method as an accounting option for investments in subsidiaries, joint ventures and associated in an entity´s separate financial statements. Its purpose is to allow the application of this method in jurisdictions where this method is required and reduce costs in preparing single financial statements. The amendment is effective for annual periods beginning on or after January 1, 2016, with earlier application being permitted.

30


 

PETRODELTA, S.A

(Subsidiary owned 56% by Corporación Venezolana del Petróleo, S.A.)

Notes to the financial statements

 

December 31, 2014, 2013 and 2012

 

-   On May 28, 2014 the IASB issued the standard IFRS 15 “Revenue from contracts with customers”.  This new standard is applicable to all contracts with customers except leases, financial instruments and insurance contracts. The standard seeks to eliminate differences in the recognition of income between International Financial Reporting Standards (IFRS) and Generally Accepted Accounting Principles in the United States. The rule also seeks to improve the inconsistencies and weaknesses of the standard IAS 18 "Income from ordinary activities" as well as provide a model to facilitate the comparability of companies from different industries and regions. The date of application will be from January 1, 2017; early adoption is permitted.

 

-   On May 12, 2014 the IASB published amendments to IAS 16 “Property, Plant and Equipment” and IAS 38 “Intangible Assets” clarifying acceptable methods of depreciation and amortization by providing guidance on how the depreciation and amortization of property, plant and equipment and intangible assets should be calculated. The amendments are effective for annual periods beginning on or after January 1, 2016, with earlier application being permitted.

 

-   On May 6, 2014 the IASB issued amendments to IFRS 11 “Joint Arrangements” clarifying the accounting for acquisitions of an interest in a joint operation when the operation constitutes a business. The amendments are effective for annual periods beginning on or after January 1, 2016, with earlier application being permitted.

 

-   On November 19, 2013 the IASB issued amendments to IFRS 7 Financial Instruments: Disclosures. IFRS 9 Financial Instruments and to IAS 39 Financial Instruments: Recognition and Measurement. The main changes have been introducing a chapter in the standard IFRS 9 Hedge Accounting, aspects of liabilities at fair value. The IASB has tentatively decided at its February 2014 meetings to select January 1, 2018 as the effective date for mandatory application of IFRS 9.

 

-   On December 16, 2011, the IASB published 2 amendments to IFRS 7 Financial Instruments: Disclosures. The first amendment seeks to improve disclosures related to offsetting of financial assets and financial liabilities and will be effective for fiscal periods starting January 1, 2013. The second amendment deals about disclosure in relation to first time application of IFRS 9 Financial Instruments and will be effective for fiscal periods starting January 1, 2015.

 

The Company completed the analysis of these standards and determined no significant effects on its financial statements. 

 

(t)    Recently Adopted Accounting Pronouncements

 

During 2014, certain standards and interpretations came into effect. The most important for Petrodelta S.A. are the following:

 

-   On December 12, 2013, the IASB concluded annual improvements projects to IFRSs 2010-2012 and 2011-2013 cycles amending several standards, all effective on or after July 1, 2014. Standards amended are: IFRS 2 Share-based Payment amends the definitions of vesting condition; IFRS 3 Business Combinations clarifies contingencies measurement and scope and excludes joint arrangement in the financial statements; IFRS 8 Operating Segments on disclosures in aggregation criteria and reconciliation of reportable segments regularly; IFRS 13 Fair Value Measurements clarifies that issuing IFRS 13 and amending IFRS 9 and IAS 39 did not remove the ability to measure short-term receivables and payables with no stated interest rate at their invoice amounts without discounting if the effect of not discounting is immaterial, and also, clarifies that the scope of the portfolio exception defined in IFRS 13 includes all contracts accounted for within the scope of IAS 39 Financial Instruments: Recognition and Measurement or IFRS  9 Financial Instruments, regardless of whether they meet the definition of financial assets or financial liabilities as defined in IAS 32 Financial Instruments: Presentation; IAS 16 Property, Plant and Equipment clarifies that when an item of property, plant and equipment is revalued the gross carrying amount is adjusted in a manner that is consistent with the revaluation of the carrying amount; IAS 24 Related Party Disclosures 

31


 

PETRODELTA, S.A

(Subsidiary owned 56% by Corporación Venezolana del Petróleo, S.A.)

Notes to the financial statements

 

December 31, 2014, 2013 and 2012

 

clarifies that an entity providing key management personnel services to the reporting entity or to the parent of the reporting entity is a related party of the reporting entity; IAS 38 Intangible Assets clarifies that when an intangible asset is revalued the gross carrying amount is adjusted in a manner that is consistent with the revaluation of the carrying amount, and IAS 40 Investment Property clarifies that determining whether a specific transaction meets the definition of both a business combination as defined in IFRS 3 Business Combinations and investment property as defined in IAS 40 Investment Property requires the separate application of both standards independently of each other.

 

-   On 21 November 2013, the IASB published amendments to the scope of IAS 19 Employee Benefits. Changes in scope apply to contributions from employees or third parties in defined benefit plans. The purpose of the amendments is to simplify accounting of contributions that are independent of the number of years of service of the employee, such employee contributions are calculated according to a fixed percentage of salary. These scope changes apply for annual periods beginning on or after July 1, 2014.

 

-   On May 29, 2013, the IASB published amendments to IAS 36 Impairment of Assets. These amendments relate to the disclosure of the recoverable amount of impaired assets, if that amount is based on fair value less costs of disposal. The amendments are to be applied retrospectively for annual periods beginning on or after January 1, 2014 but earlier application is permitted for periods when the entity has already applied IFRS 13 Fair Value Measurement.

 

-   On October 31, 2012, the IASB published amendments to IFRS 10 Consolidated Financial Statements,  IFRS 12 Disclosure of Interests in Other Entities and IAS 27 Separate Financial Statements in relation to Investments entities. The amendments apply to a particular class of business that qualifies as investment entities whose business purpose is to invest funds solely for returns from capital appreciation, investment income or both. Also, the amendments provide an exception to the consolidation requirements in IFRS 10 and require investment entities to measure particular subsidiaries at fair value through profit or loss, rather than consolidate them.  Under IFRS 12 the amendments also set out disclosure requirements for investment entities. These amendments are effective from January 1, 2014 with early adoption permitted.

 

-   On December 16, 2011, the IASB published amendments to IAS 32 Financial Instruments: Presentation. These amendments provide guidance when offsetting financial assets and financial liabilities. These amendments will be effective for fiscal periods starting January 1, 2014.

 

The Company’s accounting policies have been revised and modified, when necessary, to adopt the requirements established in these new standards or interpretations. Adoption of these standards and interpretations did not significantly affect the Company’s financial statements.

 

 

(4)     Exchange Agreement with the Central Bank of Venezuela (BCV)

 

On November 21, 2005, the Exchange Agreement Nº 9 was published in the Official Gazette   Nº 38,318, later revised on March 22, 2007 and published in the Official Gazette Nº 38,650, which establishes that foreign currency obtained from hydrocarbon exports, must be sold to the Central Bank of Venezuela (BCV), except for foreign currency earmarked for activities conducted by PDVSA who will sold them to the BCV only necessary amounts to fund operational expenses and tax contributions obliged by current laws and up to the amount estimated in the National Budget law. Under this agreement, PDVSA and its subsidiaries may not maintain foreign currency funds in Venezuela for more than 48 hours, and establishes how these funds will be used by PDVSA.

 

On March 22, 2007, amendment to Exchange agreement Nº 9 was published in the Official Gazette Nº 38,650 which permit it PDVSA acquire funds in a currency other than the local currency directly before the BCV to replenish up to the amount authorized for funds to be invested abroad according to provisions set forth in Article Nº 113 of the BCV bylaws.

 

On December 30, 2010, Foreign Exchange Agreement Nº 14, effective as of January 1, 2011, was published in Official Gazette Nº 39,584. This Agreement sets the exchange rate at Bs.4.29 per U.S. dollar for purchases and Bs.4.30 per U.S. dollar for sales. This resolution supersedes Foreign Exchange Agreement Nº 14, dated January 8, 2010, published in Official Gazette of the Bolivarian Republic of Venezuela Nº 39,342, dated January 8, 2010; as well as Foreign Exchange Agreements Nº 15, Nº 16, Nº 17, and any other provision that may come into conflict with

32


 

PETRODELTA, S.A

(Subsidiary owned 56% by Corporación Venezolana del Petróleo, S.A.)

Notes to the financial statements

 

December 31, 2014, 2013 and 2012

 

this Foreign Exchange Agreement. The pronouncement of the Exchange Agreement Nº 14 did not have an effect on the Company’s right to maintain foreign currency funds at financial institutions outside the country on revenues proceeds from sale of crude in order to make payments and disbursements that correspond to carry out the Bolivarian Republic of Venezuela (see Note 23-d).

 

On February 8, 2013, Exchange Agreement Nº 14 was amended and published in the Official Gazette Nº 40,108, presidential decree Nº 9,381 the creation of a higher rank agency to optimize the exchange rate system in order to design, plan, and execute monetary strategies by the government, to reach higher efficiency and transparency providing foreign currency to the country economic sector. Decisions from this agency will be adopted by the Ministry of People Power for Planning and Finance as well as the Central Bank of Venezuela (BCV). Furthermore, this agreement establishes the new official rate for the purchase and sale of the U.S. dollar at Bs.6.28 and Bs.6.30, respectively.

 

On March 22, 2013 Exchange Agreement Nº 21 was published in the Venezuelan Official Gazette Nº 40,134, establishing that the Superior Body for Optimization of the Exchange Rate System shall rule all the terms and conditions of the special bids for foreign currency, which shall be aimed at covering the import needs of the real local economy. The bids will be coordinated by the Superior Body for Optimization of the Exchange Rate System through a new system created for that purpose, called the Complementary System for Administration of Foreign Currency (SICAD), which is to be managed by BCV in accordance with the invitations to bid issued for such purposes.

 

On December 30, 2013, Foreign Exchange Agreement Nº 24 was published in the Official Gazette Nº 40,324. This Exchange Agreement between the Ministry of the People´s Power for Economy, Finance and Banking Post and the Central Bank of Venezuela (BCV) established among other things that the buying exchange rate applicable to Petróleos de Venezuela, S.A. (PDVSA) and its subsidiaries including mix companies created in accordance within the provision of the Organic Hydrocarbons Law, for the sale of foreign currency originated from activities different from export and or sale of hydrocarbons operations, will be equal to the exchange rate resulting from the latest foreign exchange allocation through the Complementary System for Administration of Foreign Currency (SICAD), which will be published in the website of the BCV, reduced by 0.25%. The same buying rate will apply to the sale of foreign currency transactions generated by services companies that are part of the so-called Petroleum Industrial National Conglomerate, and those who derived from mineral exports. This Foreign Exchange Agreement Nº 24 was derogated by Foreign Exchange Agreement Nº 28 published on April 4, 2014 in the Official Gazette Nº 40,387.

 

On March 10, 2014, Foreign Exchange Agreement Nº 27 was published in the Official Gazette Nº 40,368 emanated from Central Bank of Venezuela (BCV) jointly with the Ministry of Popular Power for Economy and Finance.  In this Agreement, the transactions conducted through the Foreign Currency Alternative Exchange System (SICAD II) might be performed with positions held by individuals and legal persons from the private sector from legitimate sources wishing to bid, by Petróleos de Venezuela, SA (PDVSA) and the Central Bank of Venezuela (BCV) and any other expressly public entity authorized by the People's Ministry of Finance. Also it establishes for individuals and private entities in export activities retain and manage up to 60% of revenue in foreign currency obtained, to cover expenses related to such activities.

 

On April 4, 2014, Foreign Exchange Agreement Nº 28 was published in the Official Gazette Nº 40,387. This Exchange Agreement establishes that transactions involving the sale of foreign currency by Petróleos de Venezuela, S.A. (PDVSA) and its subsidiaries, as well as mixed companies created in accordance with provisions set forth in the Organic Hydrocarbons Law, generated by operations or activities derived from financing, financial instruments, capital contributions in cash, sale of assets, received dividends, collection of debts, rendered services, and any other source different from the hydrocarbon export and/or sale, the applicable exchange rate will be that determined by the Foreign Currency Alternative Exchange System (SICAD II).  

 

On July 10, 2014 an Official Notice was published in the Official Gazette Nº 40,108 which informs the applicable exchange rate according to Foreign Exchange Agreement Nº 14 published on February 8, 2013 in the Official Gazette Nº 40,108 for tax liabilities arising from customs transactions by PDVSA and its subsidiaries with their vendors. According to this notice, PDVSA and its subsidiaries along with its exclusive vendors of special goods operating in Venezuela shall use the exchange rate of Bs.6.30 per U.S. dollar when dealing with their own operations and related to oil activities.

 

33


 

PETRODELTA, S.A

(Subsidiary owned 56% by Corporación Venezolana del Petróleo, S.A.)

Notes to the financial statements

 

December 31, 2014, 2013 and 2012

 

On September 24, 2014, Foreign Exchange Agreement Nº 30 was published in the Official Gazette Nº 40,504. This Exchange Agreement establishes that the sale of foreign currency by Petróleos de Venezuela, S.A. (PDVSA) to the Central Bank of Venezuela (BCV) to provide bolivars to the National Development Fund (FONDEN) for special contributions referred-to in the Amended Decree-Law Nº 8,807 setting forth the Special Contribution for Extraordinary and Exorbitant Prices in the International Oil Market published on February 20, 2013 in the Official Gazette Nº 40,114 shall be settled at any of the official exchange rates referred to in current Exchange Agreements.

 

On December 30, 2014, Foreign Exchange Agreement Nº 32 was published in the Extraordinary Official Gazette Nº 6,167. This agreement allows for the sale of foreign currency by Petróleos de Venezuela, S.A. (PDVSA) or its affiliates to the Central Bank of Venezuela (BCV), obtained from financing, financial instruments and debts collection, originated from export and/or sale of hydrocarbons activities or operations performed within the Energy Cooperation Agreements shall be performed at any of the official exchange rates provided in the Exchange Agreements currently in force.

 

 

(5)     Determination of Fair Values

 

Certain of the Company’s accounting policies and disclosures require the determination of fair values for financial and non-financial assets and liabilities.  Fair values have been estimated for purposes of valuation and disclosure using available market information and appropriate valuation methods.  When applicable, additional information on fair value estimates of assets and liabilities is disclosed in the specific notes to the statements of financial position.

 

Non-Derivative Current Financial Assets and Liabilities

 

The carrying amounts of financial assets and liabilities included in prepaid expenses and other assets, accounts receivable, cash and cash equivalents and accounts payable to suppliers approximate their fair value because of the short-term maturities of these instruments.

 

The fair value of recoverable tax credits and other liabilities has been determined by discounting their carrying value based on estimation of future collections and payments, using interest rates calculated according to the inherent risk of the assessed instrument such as credit quality, liquidity, currency and other factors (see Note 7-k).

 

The net carrying value of the account payable to PDVSA approximates the estimated fair value since its payment depends on the volume and nature of transactions conducted by the Company with the parent Company and its subsidiaries.

 

Derivative Financial Assets and Liabilities

 

The fair value of derivative financial instruments is based on the amount that the Company will receive or pay to terminate the agreements, taking into account current commodity prices, interest rate and the current creditworthiness of the parties involved. During the years ended December 31, 2014, 2013 and 2012, Petrodelta, S.A. did not engage in operations involving derivative financial instruments.

 

Non-Derivative Financial Obligations

 

The fair value of non-derivative financial obligations, which is determined for disclosure purposes, is calculated based on information provided by financial institutions and the present value of future principal and interest cash flows, discounted at the market interest rate at the reporting date, based on the inherent risk of those obligations. During the years ended December 31, 2014, 2013 and 2012, the Company did not engage in operations involving non derivative financial debt instruments.

 

Accounts Payable with Related Parties

 

The value of accounts payable to related parties approximate their fair value and are settle upon decisions adopted by PDVSA.

 

34


 

PETRODELTA, S.A

(Subsidiary owned 56% by Corporación Venezolana del Petróleo, S.A.)

Notes to the financial statements

 

December 31, 2014, 2013 and 2012

 

(6)     Financial Risk Management

 

Local and international conditions, such as recession periods, inflation, interest rates, devaluation, and hydrocarbon price volatility may have a significant effect on the Company’s financial position. The Company is exposed to a variety of financial risks: market risk (including exchange rate fluctuation risk, interest rate risk and price risk), liquidity risk and capital risk.  Financial instruments exposed to concentration of credit risk consist primarily of cash and trade accounts receivable.

 

At December 31, 2014, 2013 and 2012, the Company’s cash is placed with local and foreign financial institutions. In addition, there is some concentration of credit risk in trade accounts receivable since all crude oil and gas produced is sold to PDVSA Petróleo, S.A.

 

Market Risk

 

Market risk is the risk that changes in market prices, including foreign exchange rates, interest rates or sales prices, will affect the Company’s income or the value of its financial instruments. The Company’s general risk management focuses on the uncertainty surrounding financial markets and seeks to minimize the potential adverse effects on the Company’s financial performance.

 

The Company is exposed to risks stemming from changes in the sale price of hydrocarbons, which depend on external market factors.  At December 31, 2014, 2013 and 2012, hydrocarbon sales prices are calculated based on predetermined formulas that consider the price of hydrocarbons in different international markets.  Price fluctuations may have a significant impact on the Company’s income.  At December 31, 2014, 2013 and 2012, the Company has no mechanisms in place to protect against exposure to hydrocarbon sales price fluctuations.

 

In addition, the Company operates in Venezuela and is exposed to foreign exchange risk from variations in the exchange rate of the Bolívar relative to the U.S. dollar.  Foreign exchange risk is mainly derived from future commercial operations and assets and liabilities recognized in bolivars.

 

The Company has accounts receivable to PDVSA which earn interest on arrears 45 days after bills are due and is, therefore, exposed to interest rate fluctuation.

 

Liquidity Risk

 

It is the risk that the Company will not be able to comply with its financial liabilities through their maturity. The approach the Company maintains to manage this risk implies having enough cash and temporary investments as well as the availability of funds provided by its main shareholder, who supplies funds according to the Company needs. The Company permanently evaluates its future cash flows through short and long term projections from estimated sales and cash requirements which correspond mainly to operation and maintenance of production facilities.

 

Capital Risk

 

The Company is focused on safeguarding its ability to continue as a going concern, so that it can be strength and motor development of the region in which the Company operates, it allows to provide returns shareholders and to maintain an optimal capital structure to reduce the cost of capital. Capital consists of share capital, share premium, and retained earnings.

 

The Company's strategy has been progressively strengthening its equity situation through adjustments in light of changes in economic conditions and the risk characteristics of the operations. To strengthen the capital structure, the Company may decide on the strategy paid dividends, the creation or transfer of reserves and the sale of assets.

 

35


 

PETRODELTA, S.A

(Subsidiary owned 56% by Corporación Venezolana del Petróleo, S.A.)

Notes to the financial statements

 

December 31, 2014, 2013 and 2012

 

(7)     Taxes and Royalties

 

Below is a summary of taxes affecting the Company’s operations, stated (in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Years ended December 31,

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2014

 

2013

 

2012

 

2014

 

2013

 

2012

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. dollars

 

Bolivars

 

 

 

 

 

 

 

 

 

 

 

 

 

Income tax expense (benefit):

 

 

 

 

 

 

 

 

 

 

 

 

Current income tax expense

 

103,619 

 

325,217 

 

127,080 

 

652,800 

 

2,048,867 

 

546,444 

Deferred income tax (benefit) expense

 

(32,617)

 

(40,020)

 

76,030 

 

(205,487)

 

(252,126)

 

326,929 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total income tax expense

 

71,002 

 

285,197 

 

203,110 

 

447,313 

 

1,796,741 

 

873,373 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Years ended December 31,

 

 

2014

 

2013

 

2012

 

2014

 

2013

 

2012

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. dollars

 

Bolivars

 

 

 

 

 

 

 

 

 

 

 

 

 

Royalties and other taxes:

 

 

 

 

 

 

 

 

 

 

 

 

  Royalty on oil production (See Note 21)

 

353,245 

 

343,331 

 

276,620 

 

2,225,444 

 

2,162,985 

 

1,189,466 

  Royalty on gas production (See Note 21)

 

5,327 

 

4,492 

 

4,289 

 

33,560 

 

28,300 

 

18,443 

  Royalty for the municipalities

 

13,208 

 

12,870 

 

10,394 

 

83,210 

 

81,081 

 

44,694 

  Royalty for endogenous development projects

 

26,416 

 

25,739 

 

20,787 

 

166,421 

 

162,156 

 

89,384 

Surface tax

 

642 

 

480 

 

558 

 

4,045 

 

3,024 

 

2,399 

Windfall tax  (see Note 7-l)

 

195,984 

 

179,285 

 

291,355 

 

1,234,699 

 

1,129,496 

 

1,252,827 

 

 

 

 

 

 

 

 

 

 

 

 

 

Royalty and other taxes 

 

594,822 

 

566,197 

 

604,003 

 

3,747,379 

 

3,567,042 

 

2,597,213 

 

On March 4, 2013 Petróleos de Venezuela, S.A. (PDVSA) requested to the Ministry of Popular for Oil and Mining (MPPPM) the approval of the exemption to the contribution as established in the Decree with Rank and Force of Law creating the Special Contribution for Extraordinary Prices and Exorbitant Prices in the International Oil market for the incremental production obtained during the year, in order to record and distribute this benefit among its mix companies and affiliates. That same month, CVP sent instructions to the Company to apply the estimated benefit amount of the exemption from the contribution of US$.55,168 thousands (Bs.347,558 thousands). For the year ending December 31, 2013 this benefit is being shown as windfall tax in the statements of comprehensive income under royalties and other taxes. On July 8, 2014, the Company reversed the estimated amount of the exemption from the contribution recorded during the year ended December 31, 2013, according to instructions received from its main shareholder CVP, due to the fact that it has not received approval requested to the MPPPM for investments incurred in 2013. This transaction is being reflected as an increase of windfall tax under royalties and other taxes in the statements of comprehensive income for the year ended December 31, 2014.

 

36


 

PETRODELTA, S.A

(Subsidiary owned 56% by Corporación Venezolana del Petróleo, S.A.)

Notes to the financial statements

 

December 31, 2014, 2013 and 2012

 

(a)  Income Tax

 

Reconciliation between the nominal and the effective income tax rates for each year is shown below (in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Years ended December 31,

 

 

 

 

 

 

 

 

 

2014

 

2013

 

2012

 

 

 

 

 

 

 

 

%

U.S. dollars

Bolivars

%

U.S. dollars

Bolivars

%

U.S. dollars

Bolivars

Profit before income tax:

 

 

 

 

 

 

 

 

 

Net profit

 

144,725 
911,768 

 

255,782 
1,611,426 

 

85,993 
369,769 

Income tax expense

 

71,002 
447,313 

 

285,197 
1,796,741 

 

203,110 
873,373 

 

 

 

 

 

 

 

 

 

 

Profit before income tax

 

215,727 
1,359,081 

 

540,979 
3,408,167 

 

289,103 
1,243,142 

 

 

 

 

 

 

 

 

 

 

Oil-sector nominal income tax rate

50

107,864 
679,541 

50

270,490 
1,704,084 

50

144,552 
621,571 

Tax inflation adjustment

(25)

(53,924)
(339,721)

(6)

(30,182)
(190,147)

(10)

(27,971)
(120,275)

Deferred income tax

(15)

(32,617)
(205,487)

(7)

(40,020)
(252,126)

26

76,030 
326,929 

Non-deductible provisions and other

23

49,679 
312,980 

16

84,909 
534,930 

4

10,499 
45,148 

 

 

 

 

 

 

 

 

 

 

Effective rate

33

71,002 
447,313 
53 
285,197 
1,796,741 
70 
203,110 
873,373 

 

The decrease in the effective tax rate for the year ended December 31, 2014 is mainly attributable to the following:

 

-    Higher inflation adjustment to Shareholders equity due to a higher inflation rate.

-   Decrease in deferred tax over the previous year. For the year ended December 31, 2014, the Company adjusted the value of deferred tax asset originated by the non-monetary items subject to the inflation adjustment based on the exchange rate expected to recover the tax benefit in subsequent periods, resulting in a lower tax base when compared with the financial amounts and, consequently, reversing the amount of deferred tax asset of December 31, 2013.

 

The decrease in the effective tax rate for the year ended December 31, 2013 is mainly attributable to the following:

 

-   Lower inflation adjustment in determining income tax payable offset with a higher taxable income from an increase in non-deductible expenses.

 

-    Reduction in the deferred tax expense in relation to the year before. For the year ended December 31, 2012, the Company adjusted the deferred tax asset from non-monetary assets subject to inflation such as work in progress, fixed assets placed in service and inventories, at an exchange rate it estimated the tax benefit will be realized resulting in a reduction of the deferred tax asset recognized at the end of December 31, 2011.

 

As of December 31, 2014, 2013, and 2012 the Company presents a balance of income tax payable, expressed in thousands, of US$.103,574 (Bs.652,515), US$.214,698 (Bs.1,352,597) and US$.92,965 (Bs.399,750), respectively.

 

(b)  Tax Loss Carry forwards

 

The current Income Tax Law allows tax losses to be carried forward for three years to offset future taxable income, except losses resulting from the application of the fiscal inflation adjustment, which can be carried forward one year. At December 31, 2014, 2013 and 2012 the Company had no tax loss carry forward.

 

(c)  Tax Inflation Adjustment

 

Venezuelan Income Tax Law requires an initial inflation adjustment to compute taxable income.  The Law provides that the initially adjusted values of property, plant and equipment should be depreciated or amortized for tax purposes over the remaining useful lives of such assets.  The Law also requires that an annual inflation adjustment be included in income tax reconciliation as a taxable or deductible item.

37


 

PETRODELTA, S.A

(Subsidiary owned 56% by Corporación Venezolana del Petróleo, S.A.)

Notes to the financial statements

 

December 31, 2014, 2013 and 2012

 

(d)  Transfer Pricing

 

According to the Income Tax Law, taxpayers subject to this tax that conduct import, export and loan transactions with related parties abroad are required to calculate income, costs and deductions applying the methodology set out in the Law.

 

(e)  Income Tax Rate

 

Official Gazette Nº 38,529 of the Bolivarian Republic of Venezuela, published on September 25, 2006, modifies Article Nº 11 of the Law regarding the rate applicable to companies engaged in hydrocarbon production and related activities, establishing a 50% general rate.  However, only companies that conduct integrated or non-integrated activities related to exploration and production of non-associated gas, and processing, transportation, distribution, storage, marketing and export of gas and its components, or those exclusively engaged in refining of hydrocarbons or enhancement of heavy and extra-heavy crude oil are subject to a 34% tax rate.  Therefore, application of the 34% rate for companies incorporated under the joint venture agreements executed under the superseded Law Reserving Hydrocarbon Trade and Industry to the State is eliminated.

 

(f)    Deferred income Tax

 

The movements of deferred income tax asset (liability) shown in the results of each year are as follows (in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2014:

 

2013

Asset (Liability)

 

Income (Loss)

recognized in Statements of Comprehensive Income

 

 

2014 
Asset (Liability)

 

Net deferred tax at December 31, 2014 (see Note 13)

U.S. dollars-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accounts receivable

 

21,805 

 

(35,097)

 

34,273 

 

-

 

20,981 

 

-

 

20,981 

Property, plant and equipment

 

-

 

(11,052)

 

5,784 

 

-

 

-

 

(5,268)

 

(5,268)

Inventories

 

618 

 

-

 

423 

 

-

 

1,041 

 

-

 

1,041 

Accruals and other liabilities

 

111,815 

 

-

 

-

 

(7,863)

 

103,952 

 

-

 

103,952 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

134,238 

 

(46,149)

 

40,480 

 

(7,863)

 

125,974 

 

(5,268)

 

120,706 

Bolivars-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accounts receivable

 

137,372 

 

(221,111)

 

215,912 

 

-

 

132,173 

 

-

 

132,173 

Property, plant and equipment

 

-

 

(69,628)

 

36,440 

 

-

 

-

 

(33,188)

 

(33,188)

Inventories

 

3,893 

 

-

 

2,665 

 

-

 

6,558 

 

-

 

6,558 

Accruals and other liabilities

 

704,428 

 

-

 

-

 

(49,530)

 

654,898 

 

-

 

654,898 

 

 

845,693 

 

(290,739)

 

255,017 

 

(49,530)

 

793,629 

 

(33,188)

 

760,441 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2013:

 

2012

Asset (Liability)

 

Income (Loss)
recognized in Statements of Comprehensive Income

 

Effect For variation in the exchange rate

 

2013 
Asset (Liability)

 

Net deferred tax at December 31, 2013 (see Note 13)

U.S. dollars-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accounts receivable

 

10,995 

 

(32,428)

 

45,190 

 

(35,096)

 

(1,953)

 

21,805 

 

(35,097)

 

(13,292)

Property, plant and equipment

 

5,082 

 

(27,985)

 

30,759 

 

(26,179)

 

7,271 

 

-

 

(11,052)

 

(11,052)

Inventories

 

21 

 

(7,653)

 

5,827 

 

-

 

2,423 

 

618 

 

-

 

618 

Accruals and other liabilities

 

122,394 

 

-

 

58,119 

 

(38,600)

 

(30,098)

 

111,815 

 

-

 

111,815 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

138,492 

 

(68,066)

 

139,895 

 

(99,875)

 

(22,357)

 

134,238 

 

(46,149)

 

88,089 

Bolivars-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accounts receivable

 

47,279 

 

(139,440)

 

284,700 

 

(221,110)

 

(55,168)

 

137,372 

 

(221,111)

 

(83,739)

Property, plant and equipment

 

21,853 

 

(120,336)

 

193,784 

 

(164,929)

 

-

 

-

 

(69,628)

 

(69,628)

Inventories

 

90 

 

(32,908)

 

36,711 

 

-

 

-

 

3,893 

 

-

 

3,893 

Accruals and other liabilities

 

526,294 

 

-

 

122,966 

 

-

 

55,168 

 

704,428 

 

-

 

704,428 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

595,516 

 

(292,684)

 

638,161 

 

(386,039)

 

-

 

845,693 

 

(290,739)

 

554,954 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

38


 

PETRODELTA, S.A

(Subsidiary owned 56% by Corporación Venezolana del Petróleo, S.A.)

Notes to the financial statements

 

December 31, 2014, 2013 and 2012

 

2012:

 

2011
Asset (Liability)

 

Income (Loss) recognized in Statements of Comprehensive Income

 

2012
Asset (Liability)

 

Net deferred tax
at December 31,
2012 (see Note 13)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. dollars-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accounts receivable and other assets

 

9,656 

 

-

 

1,339 

 

(32,428)

 

10,995 

 

(32,428)

 

(21,433)

Property, plant, and equipment

 

62,520 

 

(8,214)

 

(57,438)

 

(19,771)

 

5,082 

 

(27,985)

 

(22,903)

Inventories

 

4,182 

 

-

 

(4,161)

 

(7,653)

 

21 

 

(7,653)

 

(7,632)

Accruals and other liabilities

 

78,704 

 

(392)

 

43,690 

 

392 

 

122,394 

 

-

 

122,394 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

155,062 

 

(8,606)

 

(16,570)

 

(59,460)

 

138,492 

 

(68,066)

 

70,426 

Bolivars-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accounts receivable and other assets

 

41,521 

 

-

 

5,758 

 

(139,440)

 

47,279 

 

(139,440)

 

(92,161)

Property, plant, and equipment

 

268,836 

 

(35,320)

 

(246,983)

 

(85,016)

 

21,853 

 

(120,336)

 

(98,483)

Inventories

 

17,983 

 

-  

 

(17,893)

 

(32,908)

 

90 

 

(32,908)

 

(32,818)

Accruals and other liabilities

 

338,427 

 

(1,686)

 

187,867 

 

1,686 

 

526,294 

 

-

 

526,294 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

666,767 

 

(37,006)

 

(71,251)

 

(255,678)

 

595,516 

 

(292,684)

 

302,832 

 

(g)    Royalties

 

According with the Venezuelan Hydrocarbon Law (LOH), royalties are paid based on crude oil produced and associated natural gas processed in Venezuela.  Volumes of hydrocarbons produced in traditional areas are taxed with a 30% rate.

 

The partial reform of the Hydrocarbon Law was approved in May 2006, whereby operators should pay 33.33% of the wellhead value of each barrel to the Venezuelan government by means of royalties and additional taxes.

 

On November 14, 2006, a new calculation of royalties was established for companies that conduct primary oil activities in the country requiring that contents of sulphur and API gravity of liquid hydrocarbons extracted be measured on a monthly basis and be reported together with taxed production.  This information will be part of the royalty payment price and will be used for calculation of any special advantage.  This information will result in adjustments for gravity and sulphur, which will be published by Ministry of Popular Power for Energy and Mining (MPPPM).

 

On April 18, 2011, the Venezuelan government published in the Extraordinary Official Gazette Nº 6,022, by means of decree-law Nº 8,163 of same date, the Law Creating a Special Contribution on Extraordinary Prices and Exorbitant Prices in the International Hydrocarbons Market. This Law and among other things, caps royalty, extraction tax, and export register tax at US$.70 per barrel until it was amended on February 20, 2013 and published in the Official Gazette Nº 40,114 which raises the cap price for royalties, extraction tax and export registry tax according to the provision in the LOH to US$.80 per barrel (See Note 23-g). Royalty under prior Law and current Law for the years ended December 31, 2014, 2013 and 2012 amounted to US$.358,572 thousands, US$.347,823 thousands and US$.280,909 thousands (Bs.2,259,004 thousands, Bs.2,191,285 thousands and Bs.1,207,909 thousands), respectively, included in the statements of comprehensive income under royalties and other taxes (See Note 21).

 

(h)  Extraction Tax

 

The Venezuelan Hydrocarbon Law Reform establishes a rate equivalent to 33.33% of the value of all liquid hydrocarbons extracted from any reservoir, calculated on the same basis as for royalties. In determining this tax, the taxpayer may deduct the amount that would have been paid for royalty, including the additional royalty paid as special advantage. Petrodelta, S.A. incurred no tax in this connection for 2014, 2013 and 2012.

 

(i)  Surface Tax

 

The Venezuelan Hydrocarbon Law establishes a surface tax equivalent to 100 tax units for each square kilometer or fraction thereof per year for licensed areas that are not under production.  This tax will increase by 2% during the first five years, and by 5% during all subsequent years. Petrodelta, S.A. incurred in this tax during 2014, 2013 and 2012 for US$.189 thousands, US$.200 thousands and US$.485 thousands (Bs.1,192

39


 

PETRODELTA, S.A

(Subsidiary owned 56% by Corporación Venezolana del Petróleo, S.A.)

Notes to the financial statements

 

December 31, 2014, 2013 and 2012

 

thousands, Bs.1,261 thousands and Bs.2,087 thousands), respectively, included in the statements of comprehensive income under royalties and other taxes.

 

(j)  General Consumption Tax

 

The Venezuelan Hydrocarbon Law Reform establishes an internal consumption tax equivalent to 10% of the value of each cubic meter of hydrocarbon derivatives produced and consumed as fuel in internal operations, calculated on the final selling price. For the year ended December 31, 2014, 2013 and 2012 the Company recorded in the statement of comprehensive income the amount of US$.453 thousands, US$.280 thousands and US$.73 thousands (Bs.2,853 thousands, Bs.1,763 thousands and Bs.312 thousands), respectively for general consumption tax.

 

(k)  Value Added Tax (VAT)

 

On March 26, 2009, was published in the Official Gazette Nº 39,147 the modification of applicable tax rate for value added tax to 12%, having effect from April 1, 2009 to the report date.

 

The VAT Law establishes an exemption on trading of certain hydrocarbon-derived fuels and also has authority to recover from the government certain tax credits originated from sales.  Recoverable amounts bear no interest.

 

Below is a summary of the movement of recoverable tax credits (in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31,

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2014

 

2013

 

2012

 

2014

 

2013

 

2012

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. dollars

 

Bolivars

 

 

 

 

 

 

 

 

 

 

 

 

 

Recoverable amounts at the beginning of the year 

 

46,878 

 

44,581 

 

25,858 

 

295,331 

 

191,702 

 

111,193 

Generated during the year

 

81,596 

 

32,963 

 

20,062 

 

514,055 

 

207,666 

 

86,268 

Adjustment to fair value

 

(12,971)

 

(16,513)

 

(1,339)

 

(81,717)

 

(104,037)

 

(5,759)

Effect for variation in the exchange rate

 

-

 

(14,153)

 

-

 

-

 

-

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

Recoverable amounts at the end of the year

 

115,503 

 

46,878 

 

44,581 

 

727,669 

 

295,331 

 

191,702 

Non-current portion of recoverable tax credits

 

(115,503)

 

(46,878)

 

(29,721)

 

(727,669)

 

(295,331)

 

(127,801)

 

 

 

 

 

 

 

 

 

 

 

 

 

Current portion of recoverable tax credits  (See Note 11)

 

-

 

-

 

14,860 

 

-

 

-

 

63,901 

 

The Company management considers that the efforts made and agreements reached with the Government will not permit it to recover part of the tax credits during the year 2015.

 

At December 31, 2014 the Company received from its main Shareholder a new guideline in relation to calculating the fair value adjustment for the present value of value added tax credits outstanding as of this date, modifying the discount rate as well as the expected duration it estimates to recover from the National Treasury.

 

The adjustment for fair value is the difference between the face value of the credits and its present value of future discounted cash flow. The discount rate varies from 6.39% to 9.74% and the period expected to recover from 2 to 4 years. The estimated recovery time was decreased as a result of conversations that PDVSA and the Integrated Customs and Tax National Service Administration (SENIAT) have had on the expected recovery of these credits. The fair value of these credits as of December 31, 2014 represent in average 75% of their face value.

 

At December 31, 2013 and 2012, the Company estimated the fair value of the tax credits to recover using the discount rate of 8.783%. These discount rates are calculated yearly by its main shareholder with the financial statements of the prior year and using outside parameters updated each year. Furthermore, at December 31, 2013 and to calculate the fair value as of this date, Management modified the years estimated to recover the tax credits from 3 to 4 years. At December 31, 2014, 2013 and 2012, the adjustment for US$.12,971 thousands, US$.16,513 thousands and US$.1,339 thousands (Bs.81,717 thousands, Bs. 104,037 thousands and Bs.5,759 thousands), respectively, is included in the statements of comprehensive income under the category of financial expenses (See Note 18).

40


 

PETRODELTA, S.A

(Subsidiary owned 56% by Corporación Venezolana del Petróleo, S.A.)

Notes to the financial statements

 

December 31, 2014, 2013 and 2012

 

(l)  Amendment to the Law Creating a Special Contribution on Extraordinary Prices and Exorbitant Prices in the International Hydrocarbons Market

 

On February 20, 2013, was published in the Official Gazette Nº 40,114, an amendment to the Law Creating a Special Contribution on Extraordinary Prices and Exorbitant Prices in the International Hydrocarbons Market, published on April 18, 2011 in the Extraordinary Official Gazette Nº 6,022, by means of decree-law Nº 8,163 of same date. The amendments changes the intervals for calculating the special contribution and raise the base price to US$80 per barrel from US$70 per barrel (see Note 23-g). From the date this law came into effect, April 19, 2011, the Company incurred a special contribution from extraordinary prices and special contribution from exorbitant prices and recorded it in the statement of comprehensive income under royalties and other taxes for the year ended December 31, 2014, 2013 and 2012 the amounts of US$.195,984 thousands, US$.234,453 thousands and US$.291,355 thousands (Bs.1,234,699 thousands, Bs.1,477,054 thousands and Bs.1,252,827 thousands), respectively.

 

(m)  Other taxes

 

The Company is subject to special advantage taxes, which are determined based on:  a) an interest as additional royalty of 3.33% on volumes of hydrocarbons extracted in the delimited areas assigned to Petrodelta S.A., and b) an amount equivalent to the difference, if any, between (i) 50% of the value of the hydrocarbons extracted in the delimited areas assigned to Petrodelta S.A. in each calendar year and (ii) the sum of payments made by the mixed companies to the Bolivarian Republic of Venezuela, for activities developed during the calendar year, for royalties on hydrocarbons and investments in endogenous development projects, equivalent to 1% of pre-tax income.  Taxes for special advantages must be paid before April 20 of each year, pursuant to Exhibit F of the Agreement for Conversion into a Mixed Company.  In relation to a) above, and the law that came into effect, published on April 18, 2011 creating a special contribution on extraordinary prices and exorbitant prices in the international hydrocarbons market and its amendments (see Note 23-g), which establishes a cap price of US$.70 per barrel until February 19, 2013 and a cap price of US$.80 per barrel from February 20, 2013 Petrodelta, S.A. incurred in this tax during 2014, 2013 and 2012 for US$.39,624 thousands, US$.38,609 thousands and US$.31,181 thousands (Bs.249,631 thousands, Bs.243,237 thousands and Bs.134,078 thousands), respectively, included in the statements of comprehensive income under royalties. In relation to b) above, at December 31, 2014, 2013 and 2012, this special advantage tax was lower than what the Company paid and accrued for royalties and special advantages tax.

 

Official Gazette Nº 39,273 of the Bolivarian Republic of Venezuela, published on September 28, 2009, approved the modification of article regulating special advantages tax levied on mix companies to redistribute the use of funds by the additional royalty of 3.33% that mix companies have to pay on hydrocarbons volumes extracted from delimited areas. The modified article establish deliver 1.11% to municipalities where oil activities in the country take place and 2.22% for a special fund to be administered by the Executive branch to finance endogenous development projects. During the year ended December 31, 2014 and 2013 the Company paid to the special fund administered by the Executive branch for financing endogenous development projects the amount of US$.38,842 thousands and US$.28,664 thousands (Bs.244,707 thousands and Bs.180,586 thousands), respectively, and paid municipalities during the year ended December 31, 2014 the amount of US$.35,353 thousands (Bs.222,724 thousands). 

 

 

41


 

PETRODELTA, S.A

(Subsidiary owned 56% by Corporación Venezolana del Petróleo, S.A.)

Notes to the financial statements

 

December 31, 2014, 2013 and 2012

 

(8)     Property, Plant, and Equipment, Net

 

Property, plant, and equipment, net at December 31 comprises the following (in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Dollars-

 

Wells and production facilities

 

Construction
in progress

 

Asset retirement costs

 

Furniture and equipment

 

Strategic inventories

 

Total

Cost:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balances at December 31, 2011

 

440,657 

 

111,255 

 

29,569 

 

15,576 

 

6,220 

 

603,277 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additions

 

-

 

177,349 

 

-

 

6,871 

 

-

 

184,220 

Transfers and capitalization

 

167,517 

 

(167,517)

 

-

 

-

 

-

 

-

Strategic inventories

 

-

 

-

 

-

 

-

 

6,742 

 

6,742 

Asset retirement obligation

 

-

 

-

 

23,229 

 

-

 

-

 

23,229 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balances at December 31, 2012

 

608,174 

 

121,087 

 

52,798 

 

22,447 

 

12,962 

 

817,468 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additions

 

-

 

265,380 

 

-

 

3,856 

 

-

 

269,236 

Transfers and capitalization

 

145,902 

 

(136,284)

 

-

 

(9,618)

 

-

 

-

Strategic inventories

 

-

 

-

 

-

 

-

 

7,518 

 

7,518 

Asset retirement obligation

 

-

 

-

 

(8,823)

 

-

 

-

 

(8,823)

Asset retirement

 

(2,844)

 

-

 

(387)

 

-

 

-

 

(3,231)

 

 

 

 

 

 

 

 

 

 

 

 

 

Balances at December 31, 2013

 

751,232 

 

250,183 

 

43,588 

 

16,685 

 

20,480 

 

1,082,168 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additions

 

-

 

393,799 

 

-

 

36,830 

 

-

 

430.629 

Transfers and capitalization

 

241,891 

 

(241,891)

 

-

 

-

 

-

 

-

Strategic inventories

 

-

 

-

 

-

 

-

 

47,605 

 

47.605 

Asset retirement obligation

 

-

 

-

 

(7,589)

 

-

 

-

 

(7.589)

Asset retirement

 

-

 

(13.888)

 

-

 

-

 

-

 

(13.888)

 

 

 

 

 

 

 

 

 

 

 

 

 

Balances at December 31, 2014

 

993,123 

 

388,203 

 

35,999 

 

53,515 

 

68,085 

 

1.538.925 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Depletion, depreciation and amortization -

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balances at December 31, 2011

 

174,148 

 

-

 

13,141 

 

5,823 

 

-

 

193,112 

 

 

 

 

 

 

 

 

 

 

 

 

 

Depletion, depreciation, and amortization

 

80,362 

 

-

 

2,806 

 

2,837 

 

-

 

86,005 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balances at December 31, 2012

 

254,510 

 

-

 

15,947 

 

8,660 

 

-

 

279,117 

 

 

 

 

 

 

 

 

 

 

 

 

 

Depletion, depreciation, and amortization

 

77,945 

 

-

 

5,674 

 

3,584 

 

-

 

87,203 

Asset retirement

 

(1,464)

 

-

 

(137)

 

-

 

-

 

(1,601)

 

 

 

 

 

 

 

 

 

 

 

 

 

Balances at December 31, 2013

 

330,991 

 

-

 

21,484 

 

12,244 

 

-

 

364,719 

 

 

 

 

 

 

 

 

 

 

 

 

 

Depletion, depreciation, and amortization

 

119,213 

 

-

 

3,978 

 

6,218 

 

-

 

129,409 

 

 

 

 

 

 

 

 

 

 

 

 

 

 Balances at December 31, 2014

 

450,204 

 

-

 

25,462 

 

18,462 

 

-

 

494,128 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total net cost at December 31, 2014

 

542,919 

 

388,203 

 

10,537 

 

35,053 

 

68,085 

 

1,044.797 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total net cost at December 31, 2013

 

420,241 

 

250,183 

 

22,104 

 

4,441 

 

20,480 

 

717,449 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total net cost at December 31, 2012

 

353,664 

 

121,087 

 

36,851 

 

13,787 

 

12,962 

 

538,351 

 

42


 

PETRODELTA, S.A

(Subsidiary owned 56% by Corporación Venezolana del Petróleo, S.A.)

Notes to the financial statements

 

December 31, 2014, 2013 and 2012

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Bolivars-

 

Wells and
production facilities

 

Construction
in progress

 

Asset
retirement
costs

 

Furniture
and
equipment

 

Strategic
inventories

 

Total

Cost:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balances at December 31, 2011

 

1,894,826 

 

478,396 

 

127,146 

 

66,977 

 

26,746 

 

2,594,091 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additions

 

-

 

762,602 

 

-

 

29,545 

 

-

 

792,147 

Transfers and capitalization

 

720,323 

 

(720,323)

 

-

 

-

 

-

 

-

Strategic inventories

 

-

 

-

 

-

 

-

 

28,991 

 

28,991 

Asset retirement obligation

 

-

 

-

 

99,886 

 

-

 

-

 

99,886 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balances at December 31, 2012

 

2,615,149 

 

520,675 

 

227,032 

 

96,522 

 

55,737 

 

3,515,115 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additions

 

-

 

1,671,894 

 

-

 

24,293 

 

-

 

1,696,187 

Transfers and capitalization

 

919,183 

 

(858,589)

 

-

 

(60,594)

 

-

 

-  

Strategic inventories

 

-

 

-

 

-

 

-

 

47,363 

 

47,363 

Asset retirement obligation

 

-

 

-

 

(55,585)

 

-

 

-

 

(55,585)

Asset retirement

 

(17,917)

 

-

 

(2,438)

 

-

 

-

 

(20,355)

Effect for variation in the presentation currency

 

1,216,347 

 

242,173 

 

105,595 

 

44,894 

 

25,924 

 

1,634,933 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balances at December 31, 2013

 

4,732,762 

 

1,576,153 

 

274,604 

 

105,115 

 

129,024 

 

6,817,658 

 

Additions

 

-

 

2,480,934 

 

-

 

232,029 

 

-

 

2,712,963 

Transfers and capitalization

 

1,523,913 

 

(1,523,913)

 

-

 

-

 

-

 

-  

Strategic inventories

 

-

 

-

 

-

 

-

 

299,912 

 

299,912 

Asset retirement obligation

 

-

 

-

 

(47.811)

 

-

 

-

 

(47,811)

Asset retirement

 

-

 

(87,494)

 

-

 

-

 

-

 

(87,494)

 

 

 

 

 

 

 

 

 

 

 

 

 

Balances at December 31, 2014

 

6,256,675 

 

2,445,680 

 

226,793 

 

337,144 

 

428,936 

 

9,695,228 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Depletion, depreciation and amortization -

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balances at December 31, 2011

 

748,837 

 

-

 

56,505 

 

25,040 

 

-

 

830,382 

 

Depletion, depreciation and amortization

 

345,555 

 

-

 

12,067 

 

12,199 

 

-

 

369,821 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balances at December 31, 2012

 

1,094,392 

 

-

 

68,572 

 

37,239 

 

-

 

1,200,203 

 

 

 

 

 

 

 

 

 

 

 

 

 

Depletion, depreciation and amortization

 

491,054 

 

-

 

35,746 

 

22,579 

 

-

 

549,378 

Asset retirement

 

(9,223)

 

-

 

(863)

 

-

 

-

 

(10,086)

Effect for variation in the presentation currency

 

509,021 

 

-

 

31,894 

 

17,318 

 

-

 

558,234 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balances at December 31, 2013

 

2,085,244 

 

-

 

135,349 

 

77,136 

 

-

 

2,297,729 

 

 

 

 

 

 

 

 

 

 

 

 

 

Depletion, depreciation and amortization

 

751,042 

 

-

 

25,061 

 

39,173 

 

-

 

815,276 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balances at December 31, 2014

 

2,836,286 

 

-

 

160,410 

 

116,309 

 

-

 

3,113,005 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total net cost at December 31, 2014

 

3,420,389 

 

2,445,680 

 

66,383 

 

220,835 

 

428,936 

 

6,582,223 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total net cost at December 31, 2013

 

2,647,518 

 

1,576,153 

 

139.255 

 

27,979 

 

129,024 

 

4,519,929 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total net cost at December 31, 2012

 

1,520,757 

 

520,675 

 

158,460 

 

59,283 

 

55,737 

 

2,314,912 

 

During the years ended December 31, 2014, 2013 and 2012 the Company added furniture and equipment and construction in progress for approximately US$.430,629 thousands, US$.269,236 thousands and US$.184,220 thousands (Bs.2,712,963 thousands, Bs.1,696,187 thousands and Bs.792,147 thousands, respectively.

 

During the years ended December 31, 2014, 2013 and 2012, the Company assessed asset impairment, taking into account new market and business conditions, and determined that there was no evidence of impairment of production assets.

43


 

PETRODELTA, S.A

(Subsidiary owned 56% by Corporación Venezolana del Petróleo, S.A.)

Notes to the financial statements

 

December 31, 2014, 2013 and 2012

 

During the year ended December 31, 2014 and 2013, the Company received guidelines from its main Shareholder and increased the discount rate it uses to calculate the value of the provision for asset retirement costs. This increase of the discount rate from 12.88% used at the end of December 31, 2013 to 22.69% as of December 31, 2014 resulted in a decrease in the costs for asset retirement as well as in the present value of the provision. The decrease for the year ended December 31, 2014 and 2013 were in the amount of US$.7,589 thousands and US$ 8,823 thousands (Bs.47,811 thousands and Bs.55,585 thousands), respectively. For the year ended December 31, 2012, the discount rate used resulted in an increase in the provision and the costs in the amount if US$.23,229 thousands (Bs.99,886 thousands), (See Note 14).

 

The balance of construction in progress mainly comprises investment projects for exploration and production activities related to drilling, maintenance, electrical systems, pipelines, well reconditioning and adaptation, expansion and infrastructure aimed at maintaining and increasing production capacity and adapting the infrastructure to production levels set out in the Corporation’s business plan.  At December 31, 2014, 2013 and 2012, the balance of construction in progress for investments related to the aforementioned activities amounts to approximately US$.388,203 thousands, US$.250,183 thousands and US$.121,087 thousands (Bs.2,445,680 thousands, Bs.1,576,153 thousands and Bs.520,675 thousands), respectively. During the years ended December 31, 2014, 2013 and 2012 fixed assets capitalized amounted to US$.241,891 thousands, US$.136,284 thousands and US$.167,517 thousands (Bs.1,523,913 thousands, Bs.858,589 thousands and Bs.720,323 thousands), respectively.

 

 

(9)     Prepaid expenses and other assets

 

Prepaid expenses and other assets comprise the following (in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31,

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2014

 

2013

 

2012

 

2014

 

2013

 

2012

 

 

U.S. dollars

 

Bolivars

 

 

 

 

 

 

 

 

 

 

 

 

 

Prepaid insurance

 

893 

 

663 

 

669 

 

5,626 

 

4,177 

 

2,877 

Prepaid services

 

96 

 

192 

 

450 

 

605 

 

1,210 

 

1,935 

Prepaid rent

 

30 

 

14 

 

42 

 

189 

 

88 

 

181 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,019 

 

869 

 

1,161 

 

6,420 

 

5,475 

 

4,993 

 

 

(10)   Inventories

 

A summary of inventories is shown below (in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31,

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2014

 

2013

 

2012

 

2014

 

2013

 

2012

 

 

U.S. dollars

 

Bolivars

 

 

 

 

 

 

 

 

 

 

 

 

 

Materials and supplies

 

132,565 

 

125,712 

 

90,640 

 

835,160 

 

791,986 

 

389,752 

Less:

 

 

 

 

 

 

 

 

 

 

 

 

Inventory obsolescence provision (see Note 3-i)

 

(1,626)

 

(1,236)

 

(41)

 

(10,244)

 

(7,787)

 

(176)

Materials and supplies classified as inventory for strategic
projects in other non-current assets (See Note 8)

 

(68,085)

 

(20,480)

 

(12,962)

 

(428,936)

 

(129,024)

 

(55,737)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

62,854 

 

103,996 

 

77,637 

 

395,980 

 

655,175 

 

333,839 

 

44


 

PETRODELTA, S.A

(Subsidiary owned 56% by Corporación Venezolana del Petróleo, S.A.)

Notes to the financial statements

 

December 31, 2014, 2013 and 2012

 

(11)   Accounts Receivable

 

Accounts receivable comprise the following (in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31,

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2014

 

2013

 

2012

 

2014

 

2013

 

2012

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. dollars

 

Bolivars

 

 

 

 

 

 

 

 

 

 

 

 

 

Related parties (see Note 21)

 

1,383,153 

 

1,717,946 

 

1,232,199 

 

8,713,864 

 

10,823,060 

 

5,298,456 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current portion of recoverable tax credits
(See Note 7 - k)

 

-

 

-

 

14,860 

 

-

 

-

 

63,901 

Advances on windfall tax

 

-

 

70,194 

 

64,694 

 

-

 

442,222 

 

278,185 

Other

 

9,809 

 

7,630 

 

1,549 

 

61,797 

 

48,069 

 

6,660 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,392,962 

 

1,795,770 

 

1,313,302 

 

8,775,661 

 

11,313,351 

 

5,647,202 

 

During the years ended December 31, 2014, 2013 and 2012, the Company offset accounts receivables and payables between PDVSA and its affiliates, including CVP with the Company in the amounts approximately of US$.1,291 million, US$.442 million and US$.770 million (Bs.8,133 million, Bs. 2,785 million and Bs. 3,311 million), respectively. These offsetting of accounts are in the process of being approved by the Board of Directors of the Company (See Note 21). Exposure to credit risk related to accounts receivable are presented in Note 19.

 

At of December 31, 2014, 2013 and 2012, accounts receivable from the sale of crude from El Salto field and for which are in process of being invoiced under the Boscán pricing formula due to the amended contract on November 15, 2014 amounts to US$.1,245,539 thousands, US$.756,695 thousands and US$.352,721 thousands (Bs.7,846,895 thousands, Bs.4,767,180 thousands and Bs.1,516,704 thousands), respectively. The approved amendment in the date mentioned above resulted in an increase in the accounts receivable and thus in revenues net of estimated royalty and recorded related to prior periods to the year 2014 in the amount of US$.53,806 thousands (Bs.338,978 thousands) and for which has been recorded in the statements of comprehensive income during the year ended December 31, 2014 in the corresponding revenue and royalty accounts. Should the changes related to the Boscan price formula used by the Company be known to estimate its revenues from Boscan crude, the income before tax for the years ended December 31, 2013, 2012 and 2011 would have increased by the amounts of US$.32,211 thousands, US$.19,099 thousands and US$.2,496 thousands (Bs.202,927 thousands, Bs.120,324 thousands and Bs.15,726 thousands), respectively (See Note 24-a).

 

Advances on windfall tax at December 31, 2013 and 2012 corresponds to payments made by PDVSA Petróleo, on behalf of the Company, to MPPPM for special contributions on extraordinary prices and exorbitant prices in the international hydrocarbons market for the last four months of 2013 and the fourth quarter ending December 31, 2012 in the amount of US$.70,194 thousands and US$.64,694 thousands (Bs.442,222 thousands and Bs.278,185 thousands), respectively.

 

45


 

PETRODELTA, S.A

(Subsidiary owned 56% by Corporación Venezolana del Petróleo, S.A.)

Notes to the financial statements

 

December 31, 2014, 2013 and 2012

 

(12)   Cash and Cash Equivalents

 

Cash and cash equivalent comprises the following (in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31,

 

 

2014

 

2013

 

2012

 

2014

 

2013

 

2012

 

 

U.S. dollars

 

Bolivars

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash on hand

 

 

 

 

19 

 

19 

 

22 

Cash at banks

 

2,838 

 

5,957 

 

3,330 

 

17,879 

 

37,529 

 

14,314 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2,841 

 

5,960 

 

3,335 

 

17,898 

 

37,548 

 

14,336 

 

 

(13)   Equity

 

a)  Capital stock

 

At December 31, 2014, 2013 and 2012, the Company’s nominal capital stock is represented by 1,500,000 common shares, fully authorized and paid in, with a par value of US$.4.65 each (Bs.10 each) (See Note 13-f).

 

The Company’s capital stock is divided into two types of shares: Class “A” and Class “B” shares. Only the Venezuelan government or Venezuelan state-owned companies can own Class “A” shares.  In October 2007, when the Company was incorporated, shareholders made an initial capital contribution of approximately Bs.1,000 thousands (US$.465 thousands).

 

On August 14, 2012, the Shareholders of the Company approved the transfer of 4% of capital stock CVP has in the Company to PDVSA Social, S.A. (PDVSA Social), a wholly owned subsidiary of Petróleos de Venezuela, S.A. (PDVSA) (See Note 1).

 

Capital stock has been fully subscribed and paid in as follows:

 

 

 

 

 

 

 

 

 

 

 

 

Shareholders

 

Type of
shares

 

Number of
shares

 

Par value
US$.

 

Bs.

 

Share of
equity

 

 

 

 

 

 

 

 

 

 

 

Corporación Venezolana del Petróleo, S,A, (CVP)

 

A

 

840,000 

 

3,906,977 

 

24,613,954 

 

56%

PDVSA Social, S.A.

 

A

 

60,000 

 

279,070 

 

1,758,139 

 

4%

 

 

 

 

 

 

 

 

 

 

 

HNR Finance, B,V, (HNR Finance)

 

B

 

600,000 

 

2,790,698 

 

17,581,395 

 

40%

 

 

 

 

1,500,000 

 

6,976,745 

 

43,953,488 

 

100%

 

b)  Legal Reserve

 

According to Venezuela Commerce Code, Venezuelan companies are required to establish a legal reserve which has been fully apportioned by the Company (see Note 3-o). This legal reserve is not available for dividend distribution. As of December 31, 2014 the amount apportioned as legal reserve is approximately US$.698 thousands (Bs.4,395 thousands).

 

c)  Deferred Tax Asset Equity Reserve

 

In June 2009, CVP issued instructions to all mixed companies regarding the accounting for deferred tax assets. The mixed companies have been instructed to set up a reserve within the equity section of the balance sheet for deferred tax assets. The setting up of the reserve had no effect on the Company financial position, results of operations or cash flows. However, the

46


 

PETRODELTA, S.A

(Subsidiary owned 56% by Corporación Venezolana del Petróleo, S.A.)

Notes to the financial statements

 

December 31, 2014, 2013 and 2012

 

new reserve reduces the amount of reserves available to pay of dividends in the future. Changes in the deferred tax asset are recorded in appropriation to (transfer from) other reserves.

 

At December 31, 2014, 2013 and 2012, management has recorded as equity reserve and amount equal to the balance of the net deferred tax assets and liabilities at that date equivalent to US$.120,706 thousands, US$.88,089 thousands and US$.70,426 thousands (Bs.760,446 thousands, Bs.554,954 thousands and Bs.302,833 thousands), respectively (see Note 7-f), which has been approved by the Board of Directors of the Company (See Note 2-a). 

 

d)  Share premium

 

The share premium is in respect of contributions of fixed assets and inventories made by shareholders in conformity with the Agreement for Conversion into a Mixed Company, whose value exceeds the par value of common shares issued.  At December 31, 2014, 2013 and 2012, the share premium amounts to approximately US$.212,451 thousands, equivalent to approximately Bs.1.338,442 thousands, included in equity.

 

Class “A” share premiums are in respect of fixed assets contributed by CVP.  The value of this share premium amounts to approximately US$.191,206 thousands, equivalent to approximately Bs.1,204,598 thousands, pursuant to Exhibit H of the Agreement for Conversion into a Mixed Company.

 

Class “B” share premiums are in respect of fixed assets and inventories contributed by HNR Finance.  The value of this share premium amounts to approximately US$.21,245 thousands, equivalent to approximately Bs.133,844 thousands, pursuant to Exhibit G of the Agreement for Conversion into a Mixed Company.

 

In conformity with the Company’s bylaws, in case of Company liquidation, all assets will be transferred only to the Class “A” shareholder.

 

e)  Dividends

 

On November 12, 2010, in Extraordinary Shareholders meeting the shareholders of the Company resolved to distribute and pay dividends in the amount of US$.30,550 thousands. This dividend corresponds to the remaining portion of retained earnings at the end of December 31, 2009 and is recorded as dividends payable at December 31, 2014, 2013 and 2012 in the statements of financial position for the amount resolved of US$.30,550 thousands (Bs.192,465, Bs. 192,465 thousands and Bs.131,365 thousands, respectively).

 

On August 4, 2010, in Extraordinary Shareholders meeting the shareholders resolved to pay dividends based on retained earnings as of December 31, 2009 in the amount of US$.30,550 thousands (Bs.131,365 thousands). The dividend approved was paid on October 2010 to HNR Finance for its share in the Company in the amount of US$.12,220 thousands (Bs.52,546 thousands). At December 31, 2011 the portion of the dividend corresponding to CVP for US$.18,330 thousands (Bs.78,819 thousands) was paid by means of offsetting accounts receivable and payables between PDVSA and its Affiliates, including CVP, this transaction was approved by the Board on January 12, 2012 (See Note 21).

47


 

PETRODELTA, S.A

(Subsidiary owned 56% by Corporación Venezolana del Petróleo, S.A.)

Notes to the financial statements

 

December 31, 2014, 2013 and 2012

 

f)  Effect for Variation of the Exchange Rate in the Presentation Currency

 

The statements of changes in equity, in bolivars, for the year ended December 31, 2014, include the following effect originated for the variation in the official exchange rate for the year ended December 31, 2013 when translating the financial statements in U.S. dollars (Functional Currency) to Bolivars (Presentation Currency), in conformity with IAS 21 (see Note 3-a) (in thousands, net):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balances as of December 31, 2014

 

 

U.S.
dollars

 

Bolivars
Before
translation
adjustment

 

Bolivars
After
translation
adjustment

 

Translation
Adjustment

 

 

 

 

 

 

 

 

 

Capital stock

 

6,977 

 

30,000 

 

43,953 

 

13,953 

Share premium

 

212,451 

 

913,540 

 

1,338,442 

 

424,902 

Legal reserve and other reserves

 

 

 

 

 

 

 

 

Legal reserve

 

698 

 

3,000 

 

4,395 

 

1,395 

Deferred tax equity reserve    

 

120,706 

 

619,590 

 

760,446 

 

140,856 

 

 

121,404 

 

622,590 

 

764,841 

 

142,251 

Retained earnings:

 

 

 

 

 

 

 

 

Undistributable retained earnings at January 1, 2013

 

707,841 

 

3,519,959 

 

4,459,397 

 

939,438 

Transfer from other reserves in 2013

 

(32,617)

 

(205,487)

 

(205,487)

 

-

Total comprehensive  income for
the year 2013

 

144,725 

 

911,768 

 

911,768 

 

-

 

 

 

 

 

 

 

 

 

 

 

819,949 

 

4,226,240 

 

5,165,678 

 

939,438 

 

 

 

 

 

 

 

 

 

Equity

 

1,160,781 

 

5,792,370 

 

7,312,914 

 

-

 

 

 

 

 

 

 

 

 

Translation adjustment not allocated

 

 

 

 

 

 

 

1,520,544 

 

 

(14)   Provisions

 

Provisions at December 31 comprise the following (in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31,

 

 

2014

 

2013

 

2012

 

2014

 

2013

 

2012

 

 

U.S. dollars

 

Bolivars

 

 

 

 

 

 

 

 

 

 

 

 

 

Provision for asset retirement costs 
(see Note 14)

 

44,918 

 

65,616 

 

70,425 

 

282,984 

 

413,381 

 

302,828 

Provision for retirement benefits

 

92,827 

 

22,644 

 

18,799 

 

584,810 

 

142,657 

 

80,835 

Provision for benefits payable

 

4,524 

 

2,075 

 

3,878 

 

28,500 

 

13,073 

 

16,676 

Commitments and Contingencies
(see Note 20)

 

745 

 

1,313 

 

1,563 

 

4,695 

 

8,273 

 

6,719 

 

 

143,014 

 

91,648 

 

94,665 

 

900,989 

 

577,384 

 

407,058 

Less: Non-current portion of provisions

 

(141,972)

 

(90,149)

 

(93,096)

 

(894,423)

 

(567,940)

 

(400,314)

 

 

 

 

 

 

 

 

 

 

 

 

 

Current portion

 

1,042 

 

1,499 

 

1,569 

 

6,566 

 

9,444 

 

6,744 

 

At December 31, 2014, 2013 and 2012, the provision for retirement benefits for personnel assigned to the Company amounts to US$.92,827 thousands, US$.22,644 thousands and US$.18,799 thousands, (Bs.584,410 thousands, Bs.142,657 thousands and Bs.80,835 thousands), respectively. The variation in the provision for retirement benefits for the year ended

48


 

PETRODELTA, S.A

(Subsidiary owned 56% by Corporación Venezolana del Petróleo, S.A.)

Notes to the financial statements

 

December 31, 2014, 2013 and 2012

 

December 31, 2014 was US$.70,183 thousands (Bs.442,153 thousands) and it was due mainly with the increases related to the approved oil collective contract for the years 2013-2015 (See Note 22) and the inclusion of all personnel assigned by PDVSA to the Company in the benefit of food electronic card once they retired.  At December 31, 2014, 2013 and 2012, PDVSA sent a statement for the liability according to the report of an independent actuary firm. The Company has analyzed demographic and financial data, considers that it reasonably reflects the liability for such concept and adjusted the obligation at the date of the statements of financial position. This pension and retirement plan covers all PDVSA employees and mixed companies payroll. Pension cost is not tax deductible until future periods when the pension is settled in cash. The Company is not required to reimburse the pension costs to PDVSA until PDVSA pays them.

 

Below are the movements of provisions during the years ended December 31, 2014, 2013 and 2012, (in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. dollars-

 

Balance at
December
31, 2013

 

Increase

 

Decrease

 

Balance at
December
31, 2014

 

Current
portion

 

Non-
current
portion

 

 

 

 

 

 

 

 

 

 

 

 

 

Provision for asset retirement costs

 

65,616 

 

 

 

(20,698)

 

44,918 

 

-

 

44,918 

Provision for retirement benefits

 

22,644 

 

70,183 

 

-

 

92,827 

 

41 

 

92,786 

Provision for benefits payable

 

2,075 

 

2,449 

 

-

 

4,524 

 

256 

 

4,268 

Commitments and Contingencies
(see Note 20)

 

1,313 

 

-

 

(568)

 

745 

 

745 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

Total provisions

 

91,648 

 

72,632 

 

(21,266)

 

143,014 

 

1,042 

 

141,972 

 

 


 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. dollars-

 

Balance at
December
31, 2012

 

Effect for
devaluation

 

Increase

 

Decrease

 

Balance at
December
31, 2013

 

Current
portion

 

Non-
current
portion

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Provision for asset retirement costs

 

70,425 

 

-

 

-

 

(4,809)

 

65,616 

 

-

 

65,616 

Provision for retirement benefits

 

18,799 

 

(12,831)

 

16,676 

 

-

 

22,644 

 

18 

 

22,626 

Provision for benefits payable

 

3,878 

 

(2,647)

 

844 

 

-

 

2,075 

 

168 

 

1,907 

Commitments and Contingencies
(see Note 20)

 

1,563 

 

(1,067)

 

817 

 

-

 

1,313 

 

1,313 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total provisions

 

94,665 

 

(16,545)

 

18,337 

 

(4,809)

 

91,648 

 

1,499 

 

90,149 

 

 


 

 

 

 

 

 

 

 

 

 

 

 

U.S. dollars-

 

Balance at
December 31,
2011

 

Increase

 

Decrease

 

Balance at
December 31,
2012

 

Current
portion

 

Non-
current
portion

 

 

 

 

 

 

 

 

 

 

 

 

 

Provision for asset retirement costs

 

41,518 

 

28,907 

 

-

 

70,425 

 

-

 

70,425 

Provision for retirement benefits

 

11,556 

 

7,243 

 

-

 

18,799 

 

 

18,793 

Provision for benefits payable

 

-

 

3,878 

 

-

 

3,878 

 

-

 

3,878 

Commitments and Contingencies
(see Note 20)

 

1,799 

 

-

 

(236)

 

1,563 

 

1,563 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

Total provisions

 

54,873 

 

40,028 

 

(236)

 

94,665 

 

1,569 

 

93,096 

 

49


 

PETRODELTA, S.A

(Subsidiary owned 56% by Corporación Venezolana del Petróleo, S.A.)

Notes to the financial statements

 

December 31, 2014, 2013 and 2012

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Bolivars-

 

Balance at
December
31, 2013

 

Increase

 

Decrease

 

Balance at
December
31, 2014

 

Current
portion

 

Non-
Current
portion

 

 

 

 

 

 

 

 

 

 

 

 

 

Provision for asset retirement costs

 

413,381 

 

-

 

(130,397)

 

282,984 

 

-

 

282,984 

Provision for retirement benefits

 

142,657 

 

442,153 

 

-

 

584,810 

 

258 

 

584,552 

Provision for benefits payable

 

13,073 

 

15,427 

 

-

 

28,500 

 

1,613 

 

26,887 

Commitments and Contingencies (see Note 20)

 

8,273 

 

-

 

(3,578)

 

4,695 

 

4,695 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

Total provisions

 

577,384 

 

457,580 

 

(133,975)

 

900,989 

 

6,566 

 

894,423 

 

 


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Bolivars-

 

Balance at
December
31, 2012

 

Effect for
devaluation

 

Increase

 

Decrease

 

Balance at
December
31, 2013

 

Current
portion

 

Non-
Current
portion

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Provision for asset retirement costs

 

302,828 

 

140,850 

 

-

 

(30,297)

 

413,381 

 

-

 

413,381 

Provision for retirement benefits

 

80,835 

 

-

 

105,059 

 

(43,237)

 

142,657 

 

113 

 

142,544 

Provision for benefits payable

 

16,676 

 

-

 

5,317 

 

(8,920)

 

13,073 

 

1,058 

 

12,015 

Commitments and Contingencies (see Note 20)

 

6,719 

 

-

 

5,147 

 

(3,593)

 

8,273 

 

8,273 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total provisions

 

407,058 

 

140,850 

 

115,523 

 

(86,047)

 

577,384 

 

9,444 

 

567,940 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Bolivars-

 

Balance at
December 31,
2011

 

Increase

 

Decrease

 

Balance at
December 31,
2012

 

Current
portion

 

Non-
current
portion

 

 

 

 

 

 

 

 

 

 

 

 

 

Provision for asset retirement costs (see Note 9)

 

178,527 

 

124,301 

 

-

 

302,828 

 

-

 

302,828 

Provision for retirement benefits

 

49,691 

 

31,144 

 

-

 

80,835 

 

25 

 

80,810 

Provision for benefits payable

 

-

 

16,676 

 

-

 

16,676 

 

-

 

16,676 

Commitments and Contingencies (see Note 20)

 

7,736 

 

 

 

(1,017)

 

6,719 

 

6,719 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

Total provisions

 

235,954 

 

172,121 

 

(1,017)

 

407,058 

 

6,744 

 

400,314 

 

50


 

PETRODELTA, S.A

(Subsidiary owned 56% by Corporación Venezolana del Petróleo, S.A.)

Notes to the financial statements

 

December 31, 2014, 2013 and 2012

 

The movement of the provision for asset retirement costs at December 31 is shown below (in thousands):

 

 

 

 

 

 

 

 

U.S. Dollars

 

Bolivars

 

 

 

 

 

Balance at December 31, 2011

 

41,518 

 

178,527 

 

 

 

 

 

Change on estimation

 

23,229 

 

99,886 

Financial cost

 

5,678 

 

24,415 

 

 

 

 

 

Balance at December 31, 2012

 

70,425 

 

302,828 

 

 

 

 

 

Change on estimation

 

(8,823)

 

(55,585)

Financial cost

 

5,046 

 

31,790 

Dismantlement

 

(1,032)

 

(6,501)

Effect for variation in the presentation  currency

 

-

 

140,849 

 

 

 

 

 

Balance at December 31, 2013

 

65,616 

 

413,381 

 

 

 

 

 

Change on estimation

 

(7,589)

 

(47,811)

Financial cost

 

(13,109)

 

(82,586)

Dismantlement

 

-

 

-

Effect for variation in the presentation currency

 

-

 

-

 

 

 

 

 

Balance at December 31, 2014

 

44,918 

 

282,984 

 

During 2014, 2013 and 2012, Company management reviewed, based on new information, estimates on assumptions used for calculating the provision for asset retirement costs based on new information received from its main Shareholder such as discount and inflation rate to be used in the model it uses to determine present values of costs and future obligation for asset retirements. This review modified both rates at the beginning and at the end of the years ending December 31, 2014, 2013 and 2012 to 22.69%, 12.81% and 9.02%, respectively for the discount rate and 1.22%, 2.82% and 2.41%, respectively for the inflation rate.

 

The changes in both rates resulted in a decrease in the financial cost of the future obligation for the year ended December 31, 2014 in the amount of US$.13,109 thousands (Bs.82,586 thousands) and a decrease in the change on estimation net of new wells that came into production added during the year ending December 31, 2014 in the amount of US$.7,589 thousands (Bs.47,811 thousands). For the year ended December 31, 2013, the change in rates previously mentioned resulted in an increase in the financial cost of the future obligation for the year ended December 31, 2013 in the amount of US$.5,046 thousands (Bs.31,790 thousands) and a decrease in the change on estimation net of new wells that came into production added during the year ending December 31, 2013 in the amount of US$.8,823 thousands (Bs.55,585 thousands). For the year ended December 31, 2012, the change in rates previously mentioned resulted in an increase in the financial cost of the future obligation for the year ended December 31, 2012 in the amount of US$.5,678 thousands (Bs.24,415 thousands) and an increase in the change on estimation net of new wells that came into production added during the year ending December 31, 2012 in the amount of US$.23,229 thousands (Bs.99,886 thousands).

 

The Company´s business plan as of December 31, 2014, contemplates the realization of hydrocarbons drilling and production activities until the year 2027; therefore, the accrual for asset retirement costs was calculated based on the disbursements for this concept during this period.

 

51


 

PETRODELTA, S.A

(Subsidiary owned 56% by Corporación Venezolana del Petróleo, S.A.)

Notes to the financial statements

 

December 31, 2014, 2013 and 2012

 

(15)   Accruals and Other Liabilities

 

Accruals and other liabilities at December 31 comprise the following (in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31,

 

 

2014

 

2013

 

2012

 

2014

 

2013

 

2012

 

 

U.S. dollars

 

Bolivars

 

 

 

 

 

 

 

 

 

 

 

 

 

Royalties and other taxes

 

36,338 

 

125,373 

 

130,709 

 

228,929 

 

789,850 

 

562,049 

Endogenous and social development

 

15,104 

 

10,240 

 

11,431 

 

95,155 

 

64,512 

 

49,153 

Antidrug National Fund

 

448 

 

14,066 

 

13,828 

 

2,822 

 

88,616 

 

59,461 

Science and Technology (LOCTI)

 

1,547 

 

9,623 

 

8,292 

 

9,746 

 

60,625 

 

35,656 

Sport Organic Law

 

435 

 

9,108 

 

4,192 

 

2,741 

 

57,380 

 

18,026 

 

 

 

 

 

 

 

 

 

 

 

 

 

Others:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accrued expenses with PDVSA and related parties (See Note 21)

 

426,617 

 

209,402 

 

213,173 

 

2,687,687 

 

1,319,233 

 

916,644 

Accrued payables to suppliers

 

137,516 

 

102,668 

 

119,209 

 

866,351 

 

646,808 

 

512,599 

Income taxes withheld

 

1,969 

 

2,001 

 

1,185 

 

12,405 

 

12,606 

 

5,096 

Other accruals

 

22,358 

 

11,431 

 

8,529 

 

140,856 

 

72,016 

 

36,679 

 

 

642.332 

 

493,912 

 

510,548 

 

4,046,692 

 

3,111,646 

 

2,195,363 

 

At December 31, 2014, 2013 and 2012, accrued payables with PDVSA in respect to drilling services and infrastructure amount to US$.226,402 thousands, US$.183,359 thousands and US$.143,174 thousands (Bs.1,426,332 thousands, Bs.1,155,164 thousands and Bs.615,651 thousands), respectively.

 

 

(16)   Accounts Payable

 

Accounts payable comprise the following (in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31,

 

2014

 

2013

 

2012

 

2014

 

2013

 

2012

 

U.S. dollars

 

Bolivars

 

 

 

 

 

 

 

 

 

 

 

 

Trade payables

113,215 

 

135,272 

 

94,747 

 

713,255 

 

852,214 

 

407,412 

Related parties (see Note 21)

547,216 

 

776,875 

 

450,184 

 

3,447,461 

 

4,894,312 

 

1,935,791 

 

 

 

 

 

 

 

 

 

 

 

 

Total

660,431 

 

912,147 

 

544,931 

 

4,160,716 

 

5,746,526 

 

2,343,203 

 

Foreign currency and liquidity risk exposure in respect of accounts payable to suppliers is shown in Note 19.

(17)   Operational Expenses

 

Below is a summary of operational expenses incurred by the Company (in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Years ended December 31,

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2014

 

2013

 

2012

 

2014

 

2013

 

2012

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. dollars

 

Bolivars

 

 

 

 

 

 

 

 

 

 

 

 

 

Crude and gas operations

 

255,301 

 

121,071 

 

97,562 

 

1,608,396 

 

762,748 

 

419,517 

Crude transportation

 

41,122 

 

35,635 

 

29,610 

 

259,069 

 

224,501 

 

127,323 

Others

 

35,138 

 

12,960 

 

11,433 

 

221,369 

 

81,647 

 

49,162 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

331,561 

 

169,666 

 

138,605 

 

2,088,834 

 

1,068,896 

 

596,002 

 

52


 

PETRODELTA, S.A

(Subsidiary owned 56% by Corporación Venezolana del Petróleo, S.A.)

Notes to the financial statements

 

December 31, 2014, 2013 and 2012

 

(18)   Financial Income and Expenses

 

Financial income and expenses comprised the following (in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Years ended December 31,

 

 

 

 

 

 

 

 

 

 

 

 

 

2014

 

2013

 

2012

 

2014

 

2013

 

2012

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Dollars

 

Bolivars

 

 

 

 

 

 

 

 

 

 

 

 

Financial income:

 

 

 

 

 

 

 

 

 

 

 

Gain on variation of exchange rate

-

 

147,224 

 

-

 

-

 

927,511 

 

-

Financial benefit on provision for asset retirement
costs (see Note 14)

13,109 

 

-

 

-

 

82,586 

 

-

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

13,109 

 

147,224 

 

-

 

82,586 

 

927,511 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

Financial expenses

 

 

 

 

 

 

 

 

 

 

 

Adjustment to net realizable value on financial
assets (see Note 7-k)

12,971 

 

16,513 

 

1,339 

 

81,717 

 

104,037 

 

5,759 

Financial cost on provision for asset retirement
costs (see Note 14)

-

 

5,046 

 

5,678 

 

-

 

31,790 

 

24,415 

Other financial expenses

 

175 

 

 

57 

 

1,097 

 

25 

 

 

 

 

 

 

 

 

 

 

 

 

 

12,980 

 

21,734 

 

7,023 

 

81,774 

 

136,924 

 

30,199 

 

 

Gain on variation of exchange rate

 

On February 8, 2013, the Exchange Agreement Nº 14 was published in the Official Gazette Nº 40,108, which establishes the new official rate for the purchase and sale of the U.S. dollar and effective from February 9, 2013. The new official rate increased from Bs.4.30 to Bs.6.30 per U.S. dollar. Therefore, all transactions and balances in Bolivars were converted to U.S. dollars as per the new exchange rate, resulting in a net gain for the variation effect in the exchange rate due to the fact of maintaining a net liability monetary position in bolivars at the date when the variation of the exchange rate went into effect (See Note 4).

 

(19)   Financial Instruments

 

Credit Risk

 

Exposure to Credit Risk

 

The book value of financial assets represents the highest level of credit risk exposure. A breakdown is shown below (in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31,

 

 

 

 

 

 

 

 

 

 

 

 

 

2014

 

2013

 

2012

 

2014

 

2013

 

2012

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. dollars

 

Bolivars

 

 

 

 

 

 

 

 

 

 

 

 

Accounts receivable (see Note 11)

1,383,153 

 

1,717,946 

 

1,232,199 

 

8,713,864 

 

10,823,060 

 

5,298,456 

Recoverable tax credits (see Note 7-k)

115,503 

 

46,878 

 

44,581 

 

727,669 

 

295,331 

 

191,702 

Accounts receivable other (see Note 11)

9,809 

 

77,824 

 

66,243 

 

61,797 

 

490,291 

 

284,845 

Cash and cash equivalents (see Note 12)

2,841 

 

5,960 

 

3,335 

 

17,898 

 

37,548 

 

14,336 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,511,306 

 

1,848,608 

 

1,346,358 

 

9,521,228 

 

11,646,230 

 

5,789,339 

 

53


 

PETRODELTA, S.A

(Subsidiary owned 56% by Corporación Venezolana del Petróleo, S.A.)

Notes to the financial statements

 

December 31, 2014, 2013 and 2012

 

Aging of the account receivables are shown below (in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31,

 

 

 

 

 

 

 

 

 

 

 

 

 

2014

 

2013

 

2012

 

2014

 

2013

 

2012

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Dollars

 

Bolivars

 

 

 

 

 

 

 

 

 

 

 

 

Under 30 days

1,383,153 

 

1,034,241 

 

709,815 

 

8,713,864 

 

6,515,718 

 

3,052,205 

Between 31 and 180 days

-

 

124,298 

 

106,050 

 

-

 

783,077 

 

456,015 

Between 180 days and one year

-

 

482,012 

 

410,908 

 

-

 

3,036,676 

 

1,766,904 

More than one year

-

 

77,395 

 

5,426 

 

-

 

487,589 

 

23,332 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,383,153 

 

1,717,946 

 

1,232,199 

 

8,713,864 

 

10,823,060 

 

5,298,456 

 

In the accounts receivable under 30 days are included unbilled receivables of US$.1,245,539 thousands, US$.756,695 thousands and US$.352,721 thousands (Bs.7,846,895 thousands, Bs.4,767,180 thousands and Bs.1,516,704 thousands) as of December 31, 2014, 2013 and 2012 respectively, which will be billed due to the approval and amendment of the Boscan price to the Petroleum Purchase and Sale Agreement on November 15, 2014 (See Notes 1, 11, and 21).

 

Liquidity risk

 

Maturity of financial liabilities, Short-term payable, including estimated interest payments and excluding the impact of offset agreements, is shown below (in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Book value

 

Contractual cash flows

 

6 months or less

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-derivative financial liabilities at December 31,

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2014

 

2013

 

2012

 

2014

 

2013

 

2012

 

2014

 

2013

 

2012

U.S. Dollars

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accounts payable to  suppliers (see Note 16)

 

113,215 

 

135,272 

 

94,747 

 

113,215 

 

135,272 

 

94,747 

 

113,215 

 

135,272 

 

94,747 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Bolivars

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accounts payable to  suppliers (see Note 16)

 

713,255 

 

852,214 

 

407,412 

 

713,255 

 

852,214 

 

407,412 

 

713,255 

 

852,214 

 

407,412 

 

Foreign Currency Risk

 

Petrodelta, S.A. has the following monetary assets and liabilities denominated in currencies other than the U.S. Dollar, which were converted into U.S. dollars at the exchange rate in effect at the statements of financial position (in thousands):

 

 

 

 

 

 

 

 

 

 

December 31,

 

 

 

 

 

 

 

 

 

2014

 

2013

 

2012

 

 

 

 

 

 

 

Monetary assets:

 

 

 

 

 

 

Bolivars

 

1,590,361 

 

1,011,474 

 

277,152 

 

 

 

 

 

 

 

 

 

1,590,361 

 

1,011,474 

 

277,152 

 

 

 

 

 

 

 

Monetary liabilities:

 

 

 

 

 

 

Bolivars

 

3,506,267 

 

6,683,445 

 

2,646,171 

 

 

 

 

 

 

 

 

 

3,506,267 

 

6,683,445 

 

2,646,171 

 

 

 

 

 

 

 

Net monetary liability position

 

(1,915,906)

 

(5,671,971)

 

(2.369,019)

 

54


 

PETRODELTA, S.A

(Subsidiary owned 56% by Corporación Venezolana del Petróleo, S.A.)

Notes to the financial statements

 

December 31, 2014, 2013 and 2012

 

The year-end exchange rate, the average exchange rate for the year and the interannual increases in the National Consumer Price Index (NCPI), as published by BCV, were as follows:

 

 

 

 

 

 

 

 

 

 

December 31,

 

 

 

 

 

 

 

 

 

2014

 

2013

 

2012

 

 

 

 

 

 

 

Exchange rate at year end (Bs./US$.1)

 

6.30

 

6.30

 

4.30

 

 

 

 

 

 

 

Average exchange rate for the year (Bs./US$.1)

 

6.30

 

6.08

 

4.30

Exchange rate at year end under the Complementary System for Administration of
Foreign Currency (SICAD I) (Bs./US$.1)

 

12.00

 

11.30

 

-

Exchange rate at year end under the Foreign Currency Alternative Exchange
System (SICAD II) (Bs./US$.1)

 

49.99

 

-

 

-

 

 

 

 

 

 

 

Inter-annual increase in the NCPI (%)

 

68.50

 

56.19

 

20.10

 

Sensitivity analysis resulting in applying an exchange rate of SICAD 1 or SICAD 2, of Bs.12 or Bs.49.99 per U.S. dollar, respectively to net monetary position of the Company as of December 31, 2014 will increase net income for the year ended December 31, 2014 by US$.60 million and US$.110 million respectively.

 

Fair Value of Financial Instruments

 

The following estimated amounts do not necessarily reflect the amounts at which the instruments could be exchanged in the current market. The use of different market assumptions and valuation methods can significantly affect the estimated fair values. The bases for determining the fair value are disclosed in Note 5 (in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31,

 

 

2014

 

2013

 

2012

 

U.S. dollars-

Book Value

 

Fair Value

 

Book Value

 

Fair Value

 

Book Value

 

Fair Value

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

Accounts receivable (see Note 11)

1,383,153 

 

1,383,153 

 

1,717,946 

 

1,717,946 

 

1,232,199 

 

1,232,199 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Recoverable tax credits

115.503 

 

115,503 

 

46,878 

 

46,878 

 

44,581 

 

44,581 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Advances on windfall tax (See Note 11)

-

 

-

 

70,194 

 

70,194 

 

64,694 

 

64,694 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accounts receivable other (See Note 11)

9,809 

 

9,809 

 

7,630 

 

7,630 

 

1,549 

 

1,549 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents (See Note 12)

2,841 

 

2,841 

 

5,960 

 

5,960 

 

3,335 

 

3,335 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

Accounts payable to suppliers (See Note 16)

113,215 

 

113,215 

 

135,272 

 

135,272 

 

94,747 

 

94,747 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other liabilities (included in provisions, accruals and other payables)
(See Notes 14 and 15)

785,346 

 

785,346 

 

585,560 

 

585,560 

 

605,213 

 

605,213 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accounts payables to  shareholders and related companies
See Note 16)

577,766 

 

577,766 

 

776,875 

 

776,875 

 

450,184 

 

450,184 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31,

 

 

2014

 

2013

 

2012

 

Bolivars-

Book Value

 

Fair Value

 

Book Value

 

Fair Value

 

Book Value

 

Fair Value

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

Accounts receivable (See Note 11)

8,713,864 

 

8,713,864 

 

10,823,060 

 

10,823,060 

 

5,298,456 

 

5,298,456 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Recoverable tax credits

727,669 

 

727,669 

 

295,331 

 

295,331 

 

191,702 

 

191,702 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Advances on windfall tax (See Note 11)

-

 

-

 

442,222 

 

442,222 

 

278,185 

 

278,185 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accounts receivable other (See Note 11)

61,797 

 

61,797 

 

48,069 

 

48,069 

 

6,660 

 

6,660 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents (See Note 12)

17,898 

 

17,898 

 

37,548 

 

37,548 

 

14,336 

 

14,336 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

Accounts payable to suppliers (see Note 16)

713,255 

 

713,255 

 

852,214 

 

852,214 

 

407,412 

 

407,412 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other liabilities (included in provisions, accruals and other payables)
(See Notes 14 and 15)

4,947,681 

 

4,947,681 

 

3,689,030 

 

3,689,030 

 

2,602,421 

 

2,602,421 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accounts payables to  shareholders and related companies
(See Note 16)

3,639,926 

 

3,639,926 

 

4,894,312 

 

4,894,312 

 

1,935,791 

 

1,935,791 

 

55


 

PETRODELTA, S.A

(Subsidiary owned 56% by Corporación Venezolana del Petróleo, S.A.)

Notes to the financial statements

 

December 31, 2014, 2013 and 2012

 

(20)   Commitments and Contingencies

 

At December 31, 2014, 2013 and 2012 the Company has recorded a provision for labor related claims in the amount of US$.49 thousands, US$.11 thousands and US$.16 thousands (Bs.306 thousands, Bs.69 thousands and Bs.69 thousands), respectively. Should the outcome of existing lawsuits and claims be unfavorable to the Company, it could have a material adverse effect on its results of operations. Although it is not possible to predict the outcome, Company management, based in part on the opinion of its legal advisors, does not believe it is likely that losses related to the aforementioned legal procedures will exceed recognized estimated amounts or generate significant amounts that could affect the Company’s financial position or results of operations.

 

Compliance with Environmental Regulations

 

The subsidiaries of CVP are subject to different environmental laws and regulations which may require significant expenditures to modify facilities and prevent or remedy the environmental effects from waste disposal and spills of pollutants.

 

Petrodelta, S.A. and its parent company CVP are taking steps to prevent environmental risks, protect employee health and preserve the integrity of their facilities.

 

Damages to Land

 

Management estimated potential liabilities as of December 31, 2014, 2013 and 2012 amounting to US$.696 thousands, US$.1,302 thousands and US$.1,547 thousands (Bs.4,386 thousands, Bs.8,204 thousands and Bs.6,650 thousands), respectively, and were included in the Statements of Comprehensive Income for these years.

 

Agreements with the Organization of Petroleum Exporting Countries (OPEC)

 

The Bolivarian Republic of Venezuela is a member of OPEC, an organization mainly dedicated to establishing agreements to maintain stable crude oil prices by setting production quotas. To date, the reduction in crude oil production resulting from changes in the production quotas set by OPEC and price fluctuations has not significantly affected the Company’s results of operations, cash flows or financial results.

56


 

PETRODELTA, S.A

(Subsidiary owned 56% by Corporación Venezolana del Petróleo, S.A.)

Notes to the financial statements

 

December 31, 2014, 2013 and 2012

 

(21)   Related Party Transactions

 

Petrodelta, S.A. considers its shareholders and related subsidiaries and affiliates, Company directors and executives, as well as other governmental institutions, as related parties.

 

A summary of transactions and balances with related parties is shown below (in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

December 31,

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2014

 

2013

 

2012

 

2014

 

2013

 

2012

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. dollars

 

Bolivars

Activities for the year:

 

 

 

 

 

 

 

 

 

 

 

 

Crude oil and natural gas sales

 

1,309,734 

 

1,275,601 

 

1,160,653 

 

8,251,324 

 

8,036,287 

 

4,990,808 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operational expenses

 

175,580 

 

100,310 

 

72,480 

 

1,106,154 

 

631,953 

 

311,664 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sales, general, administrative and selling  expenses

 

17,512 

 

7,145 

 

7,623 

 

110,326 

 

45,014 

 

32,779 

 

 

 

 

 

 

 

 

 

 

 

 

 

Production royalties for oil and gas

 

358,572 

 

347,823 

 

280,909 

 

2,259,004 

 

2,191,285 

 

1,207,909 

 

 

 

 

 

 

 

 

 

 

 

 

 

Reimbursement of expenses

 

784,823 

 

189,567 

 

135,465 

 

4,944,388 

 

1,194,272 

 

582,500 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balances at the end of the year:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accounts receivable (see Note 11)

 

1,383,153 

 

1,717,946 

 

1,232,199 

 

8,713,864 

 

10,823,060 

 

5,298,456 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accounts payable and accrued expenses to
Shareholder B (see Note 16)

 

2,064 

 

2,907 

 

2,722 

 

13,003 

 

18,314 

 

11,705 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dividends payable to Shareholders A and B

 

30,550 

 

30,550 

 

30,550 

 

192,465 

 

192,465 

 

131,365 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accounts payable to PDVSA

 

524,640 

 

751,029 

 

429,223 

 

3,305,232 

 

4,731,483 

 

1,845,659 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other mixed and related companies

 

43,952 

 

22,940 

 

18,239 

 

276,898 

 

144,515 

 

78,427 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accrued expenses with PDVSA

 

403,176 

 

209,402 

 

213,173 

 

2,540,009 

 

1,319,233 

 

916,644 

 

As of April 2006, due to the migration of operating agreements to mixed companies (see Note 1), PDVSA Petróleo signed the purchase and sale agreements with these companies, which set out that mixed companies will notify PDVSA Petróleo of the estimated volume of hydrocarbons expected to be delivered the following month. PDVSA Petróleo must pay the mixed companies for delivered volumes, net of volumes for royalties in kind and paid to the Venezuelan government.

 

In conformity with the terms and conditions of the agreements, CVP mixed companies agree to sell and deliver to PDVSA Petróleo, and the latter agrees to purchase and receive from these mixed companies, crude oil and natural gas produced in the delimited areas that are not used for primary activities or for payment of royalties in kind to the Venezuelan government.

 

Crude oil delivered from the Petrodelta fields to PDVSA is priced with reference to Merey 16 and Boscan published prices, weighted for different markets and adjusted for variations in gravity and sulphur content, commercialization costs and distortions that may occur given the reference price and prevailing market conditions, (see Notes 1 and 11). Market prices for both crude oil of the type produced (Merey 16 and Boscán) in the fields operated by Petrodelta averaged approximately US$.82.45, US$.91.22 and US$.95.90 per barrel for the year ended December 31, 2014, 2013 and 2012, respectively.

 

During the years ended December 31, 2014, 2013 and 2012, the Company recorded revenues in process of being invoiced, and royalty paid in kind, for the sale of crude oil in the amount of US$.666,757 thousands, US$.566,738 thousands and US$.404,619 thousands (Bs.4,200,572 thousands, Bs.3,570,453 thousands and Bs.1,739,862 thousands), respectively, corresponding to Boscan crude production from El Salto field. As of December 31, 2014, 2013 and 2012, the Company has accounts receivable of US$.1,245,539 thousands, US$.756,695 thousands and US$.352,721 thousands (Bs.7,846,895 thousands, Bs.4,767,180 thousands and Bs.1,516,704 thousands), respectively, for the delivery of such crude (see Note 24-a).

57


 

PETRODELTA, S.A

(Subsidiary owned 56% by Corporación Venezolana del Petróleo, S.A.)

Notes to the financial statements

 

December 31, 2014, 2013 and 2012

 

During the years ended December 31, 2014, 2013 and 2012, the Company sold crude oil and natural gas to PDVSA Petróleo SA for US$.1,309,734 thousands, US$.1,275,601 thousands and US$.1,160,653 thousands (Bs.8,251,324 thousands, Bs.8,036,287 thousands and Bs.4,990,808 thousands), respectively, included in the statements of comprehensive income under Income.

 

At December 31, 2014, 2013 and 2012, the statement of financial position includes US$.1,383,153 thousands, US$.1,717,946 thousands and US$.1,232,199 thousands (Bs.8,713,864 thousands, Bs.10,823,060 thousands and Bs.5,298,456 thousands) of accounts receivable which represent mostly  crude and gas sales to PDVSA.

 

During 2014, 2013 and 2012, PDVSA Petróleo charged Petrodelta, S.A. US$.1,284 million, US$.777 million and US$.888 million (Bs.8,086 million, Bs.4,893 million and Bs.3,816 million), respectively, for labor and other costs, taxes, royalties, cash advances and operating costs.

 

On July 1, 2013 the Company´s results of operations were impacted by PDVSA Petróleo changing its policy with respect to invoicing in disbursements made in Bolivars on behalf of the Company to require that such invoices be denominated in US dollars rather than in Bolivars (See Note 24-e).

 

Certain Company directors hold key positions in other related entities; some of their attributions include influencing the operational and financial policies of these entities.

 

For the years ended December 31, 2014, 2013 and 2012, transactions with related parties do not necessarily reflect the results that would have been obtained had these transactions been held with third parties, especially the recording of transactions and accounting estimates instructed by PDVSA.

 

In the month of December, 2014, the Company following instructions from its shareholder CVP proceeded to offset accounts receivables and payables between PDVSA and its affiliates, including CVP for royalties, contributions, taxes, advances and operational expenses outstanding resulting in a netting of US$.834 million (Bs.5,257 million) against the accounts receivable with PDVSA and its affiliates, including CVP, for the crude and gas sold, invoiced and delivered at the prevailing exchange rate applicable at such date. The minutes related to this offset is in process of being approved by the Board of Directors of the Company.

 

On March 31, 2014, the Company following instructions from its shareholder CVP proceeded to offset accounts receivables and payables between PDVSA and its affiliates, including CVP for royalties, contributions, taxes, advances and operational expenses outstanding resulting in a netting of US$.457 million (Bs.2,882 million) against the accounts receivable with PDVSA and its affiliates, including CVP, for the crude and gas sold, invoiced and delivered at the prevailing exchange rate applicable at such date. Subsequently, on September 3, 2014 the Board of Directors of the Company approved the compensation made on March 31, 2014.

 

58


 

PETRODELTA, S.A

(Subsidiary owned 56% by Corporación Venezolana del Petróleo, S.A.)

Notes to the financial statements

 

December 31, 2014, 2013 and 2012

 

On August 30, 2013, the Company following instructions from its shareholder CVP proceeded to offset accounts receivables and payables between PDVSA and its affiliates, including CVP for royalties, contributions, taxes, advances and operational expenses outstanding as of August 31, 2013 resulting in a netting of US$.115 million (Bs.722 million) against the accounts receivable with PDVSA and its affiliates, including CVP, for the crude and gas sold and delivered outstanding as of August 31, 2013 at the prevailing exchange rate applicable at such date. Subsequently, on Februrary 24, 2014 the Board of Directors of the Company approved the compensation made on August 30, 2013.

 

On February 1, 2013, the Company following instructions from its shareholder CVP proceeded to offset accounts receivables and payables between PDVSA and its affiliates, including CVP for royalties, contributions, taxes, advances and operational expenses outstanding as of January  31, 2013 resulting in a netting of US$.327 million (Bs.2,061 million) against the accounts receivable with PDVSA and its affiliates, including CVP, for the crude and gas sold and delivered outstanding as of January 31, 2013 at the prevailing exchange rate applicable at such date. On October 8, 2013 the Board of Directors of the Company approved the offset of accounts receivables and payables executed on February 1, 2013.

 

On December 28, 2012, the Company following instructions from its shareholder CVP proceeded to offset accounts receivables and payables between PDVSA and its affiliates, including CVP for royalties, contributions, taxes, advances and operational expenses outstanding as of November 30, 2012 resulting in a netting of US$.267 million (Bs.1,149 million) at the prevailing exchange rate applicable at such date against the accounts receivable with PDVSA and its affiliates, including CVP, for the crude and gas sold and delivered outstanding as of November 30, 2012 at the prevailing exchange rate applicable at such date. On January 31, 2013 the Board of Directors of the Company approved the offset of accounts receivables and payables executed on December 28, 2012.

 

On June 20, 2012, the Company following instructions from its shareholder CVP proceeded to offset accounts receivables and payables between PDVSA and its affiliates, including CVP for royalties, contributions, taxes, advances and operational expenses outstanding as of May 31, 2012 resulting in a netting of US$.298 million (Bs.1,282 million) at the prevailing exchange rate applicable at such date against the accounts receivable with PDVSA and its affiliates, including CVP, for the crude and gas sold and delivered outstanding as of May 31, 2012 at the prevailing exchange rate applicable at such date. On January 31, 2013 the Board of Directors of the Company approved the offset of accounts receivables and payables executed on June 20, 2012.

 

On January 12, 2012, the Company following instructions from its shareholder CVP proceeded to offset accounts receivables and payables between PDVSA and its affiliates, including CVP for royalties, contributions, taxes, advances, operational expenses and dividends payable to CVP approved by the shareholders of the Company on August 4, 2010 (see Note 13) against the Company accounts receivable with PDVSA and its affiliates, including CVP, for the crude and gas sold, outstanding as of December 31, 2011, resulting in a netting of US$.205 million (Bs.882 million) at the prevailing exchange rate applicable at such date. On February 23, 2012 the Board of Directors of the Company approved the offset of accounts receivables and payables executed on January 12, 2012.

 

As of December 31, 2014, 2013 and 2012, the accounts payable to PDVSA shown in the table above in the amount of US$.524,640 thousands (Bs.3,305,232 thousands), US$.751,029 thousands (Bs.4,731,483 thousands) and US$.429,223 thousands (Bs.1,845,659 thousands) respectively, includes the amount of US$.517,674 thousands, US$.604,064 thousands and US$.190,351 thousands, respectively, denominated in United States dollars and the amount of US$.6,966 thousands, US$146,964 thousands and US$.238,873 thousands (Bs.43,888 thousands, Bs.925,874 thousands and Bs.1,027,153 thousands), respectively, denominated in Venezuelan bolivars converted into U.S dollars at the official exchange rate at the dates mentioned before.

 

As of December 31, 2014, 2013 and 2012, the balances owed to other mixed companies shown in the table above in the amount of US$.43,952 thousands (Bs.276,898 thousands), US$.22,940 thousands (Bs.144,515 thousands) and US$.18,239 thousands (Bs.78,427 thousands) respectively, include the amount of US$.27,830 thousands, US$.7,133 thousands and US$.41 thousands, respectively, denominated in United States dollars, and the amount of US$.16,122 thousands, US$15,809 thousands and US$.18,198 thousands (Bs.101,557 thousands, Bs.99,598 thousands and Bs.78,250 thousands), respectively, denominated in Venezuelan bolivars converted into U.S dollars at the official exchange rate at the dates mentioned before.

 

As of December 31, 2014, 2013 and 2012, accrued payables with PDVSA shown in the table above in the amount of US$.403,176 thousands (Bs.2,540,009 thousands), US$.209,402 thousands (Bs.1,319,233 thousands) and

59


 

PETRODELTA, S.A

(Subsidiary owned 56% by Corporación Venezolana del Petróleo, S.A.)

Notes to the financial statements

 

December 31, 2014, 2013 and 2012

 

US$.213,173 thousands (Bs.916,644 thousands) respectively, include the amount of US$.183,351 thousands, US$.82,526 thousands and US$.52,363 thousands, respectively, denominated in United States dollars and the amount of US$.219,641 thousands, US$291,928 thousands and US$.160,809 thousands (Bs.1,383,740 thousands, Bs.1,839,144 thousands and Bs.691,480 thousands), respectively, denominated in Venezuelan bolivars converted into U.S dollars at the official exchange rate at the dates mentioned before.

 

(22)   Collective Labor Agreement

 

On February 11, 2014 the Collective Labor Agreement was signed, valid for the period from October 1, 2013 to October 1, 2015, between the employees of the oil industry represented by the Venezuelan Unitary Federation of Workers of the Oil, Gas, and Derivatives (FUTPV) and PDVSA. The Collective Labor Agreement establishes a salary raise and payroll and retirement benefits which has a significant impact on the Company’s payroll cost. The most significant impacts are a step increase of salary around 90%, where 59% is to be retroactive from October 1, 2013, then a 23% raise from next May 1, 2014 and finally the remaining portion to be adjusted on January 1, 2015. Also, the benefit for electronic card was raise from Bs.2,700 to Bs. 5,000 per month.

 

Before, on July 20, 2012 the Collective Labor Agreement was signed, valid for the period from October 1, 2011 to October 1, 2013, among the employees of the oil industry represented by the Venezuelan Unitary Federation of workers of the oil, gas, its similar and derivatives (FUTPV) and the Ministry of Popular Power for Energy and Mining (MPPPM) and PDVSA. The Collective Labor Agreement establishes a salary raise and payroll and retirement benefits which has a significant impact on the Company’s payroll cost. The most significant impacts had an economic and social benefit on workers and are summarized as follows:

 

i.Focus the contract to a higher social justice through increases in the quality of life of workers by supporting the acquisition of school supplies for their children, provide benefits for newborns, marriage, attention to handicapped people and financing tourism packages for workers and their families under the Collective Labor Agreement.

 

ii.A salary raise of Bs.40 daily from October 1, 2011. Payment of this increase was done Bs.30 at end of July 2012 and Bs.10 from January 1, 2013.

 

iii.An increase in the monthly amount for electronic card for foods from Bs.1,700 to Bs. 2,700.

 

iv.Provide 65 days of vacation bonus to contractual payroll and between 15 and 30 days of post-vacation bonus depending on the type of payroll. Also it was agreed to increase to Bs.200,000 the amount to finance housing acquisition.

 

 

(23)   Laws, Resolutions and Legal Contributions

 

a)  Law of the National Institute of Training and Socialist Education (INCES)

 

On November 19, 2014, reforms to the Law of the National Institute of Training and Socialist Education (INCES) was published in the Extraordinary Official Gazette Nº6,155 by means of decree-law. The purpose of this Law is to develop the INCES principles, functions, and strategies, as an entity through which the Venezuelan State trains workers to join the workforce. The Law among other things establishes a tax contribution to private entities and State enterprises with own income and self-managed, giving employment to five or more workers, and are obliged before the National Institute Socialist Training and Education, to pay  two percent (2%) of the monthly average wage paid to workers, within the next five days at the end of each quarter.

b)  Partial reform on the Workers Alimentation Law

 

On November 17, 2014, a partial reform to the Workers Alimentation law was published in the Extraordinary Official Gazette Nº 6,147 by means of decree-law. This reform provides:

 

·

The value of the benefit to the worker for every working day may not be less than zero point five tax units (0.50 UT) or greater than zero point seven five tax units (0.75 UT).

·

The monthly payment made to the employee shall not exceed forty percent (40 of the sum of the monthly salary of the worker's what it receives by way of nutrition benefit.

60


 

PETRODELTA, S.A

(Subsidiary owned 56% by Corporación Venezolana del Petróleo, S.A.)

Notes to the financial statements

 

December 31, 2014, 2013 and 2012

 

Additionally, this reform includes a transitional provision which reads as follows:

 

·

When the value of the benefit are receiving the worker is twenty tributary units (0.25 UT) and zero point five tax units (0.50 UT), inclusive between zero point shall be adjusted linearly increasing the perceived benefit zero point two five tax units (0.25 UT).

·

When the value of the benefit are receiving greater than zero point five tax units (0.50 UT), but less than zero point seven five tax units (0.75 UT), shall conform to the upper limit of zero point seven five tax units (0.75 UT).

 

Such adjustments will be effective from 1 December. In this regard, the monthly calculations based on the rank of major number of days worked (27 days) stay in Bs. 1714.50, in the case of 0.50 UT and Bs. 2571.75 when the calculation basis is at 0.75 UT .

 

 

c)  Tax Unit Adjustment

 

On February 19, 2014 Providence NºSNAT/2014/0008 from the National Integrated Service on Tributes and Customs Administration (SENIAT) was published in Official Gazette Nº 40,359 in which the current tax unit value was adjusted from Bs.107 to Bs.127 (See Note 24-d).

 

d)  Law of Exchange Regime and Illicit

 

On February 19, 2014, the Venezuelan Government published in the Extraordinary Official Gazette Nº 6,126, decree Nº798 enacted by the President of the Bolivarian Republic of Venezuela by means of Decree-Law the Law of Exchange Regime and Illicit. The object of this decree-law is to dictate terms and conditions for different State agencies with responsibilities on managing foreign currency in accordance with exchange agreements in force; permit the participation of private companies and individuals obtaining foreign currency and establish violations and sanctions when dealing with foreign currency. This decree-law opens the path to the creation of the Foreign Currency Alternative Exchange System (SICAD II) and eliminates the Law of Illicit Exchange published in the Extraordinary Official Gazette Nº 6,117 on December 4, 2013. Furthermore, this Decree-Law permits individuals and private companies obtain foreign currency from the Central Bank of Venezuela (BCV), Petróleos de Venezuela, S.A. (PDVSA) and private companies and individuals, a condition exclusive of the BCV in the prior Law.

 

Later, on November 18, 2014 the Venezuelan Government published in the Extraordinary Official Gazette Nº 6,150, the Decree-Law Law of Exchange Regime and Illicit which modifies aspects of the same law published in the Extraordinary Official Gazette Nº 6,126 on February 19, 2014. Modifications to the Law relate to changes on general terms to transactions in foreign currency in the country. Among the main changes are a new authority on exchange matters, incorporates new violations regarding forging documents and stimulating others to violate current exchange agreements, among other aspects.

 

e)  Enabling Law

 

On November 20, 2013, the National Assembly published in the Extraordinary Official Gazette Nº 6,112 the Law Authorizing the President of the Bolivarian Republic of Venezuela to issue Decree-Laws in a range of areas for a term of 12 months after publication thereof. Under this law, the authorization encompasses areas among other things fighting corruption and defending the country´s economy.

 

On November 18, 2014, the President of the Bolivarian Republic of Venezuela, by means of this Enabling Law it was published in the Extraordinary Official Gazette N.6,152 various decrees-laws concerning fiscal policy, tourism, agriculture, fair prices, mining exploration and exploitation and foreign investments among other areas to boost the economy in order to ensure growth and stability.

 

Some of the laws modified and their most significant aspects having an effect in the Company are the following:

Organic Tax Code: a) increase in the number of years of prescription from 4 to 6 years and in certain cases depending on the tax violation to 10 years; b) increase fines and days of closure of establishments, especially those considered as special contributors for committing tax illicit and related compliance with formal duties; c) penal fines for defrauding and instigating publicly noncompliance of tax obligations.

61


 

PETRODELTA, S.A

(Subsidiary owned 56% by Corporación Venezolana del Petróleo, S.A.)

Notes to the financial statements

 

December 31, 2014, 2013 and 2012

 

Income Tax Law: a) Eliminate the deduction of losses for destruction of inventory or goods intended for sale, and only it is allowed losses of fixed assets associated with the production of income; b) sets a limit of tax losses carry foward to 25% of enrichment achieved in each taxable year, but the operating tax loss carry forwards remain for the next three years the loss occurred; c) Tax loss carry foward from inflation adjustment is eliminated; d) National Price Index (INPC) is established for inflation adjustment; e) a new provision is added where the taxable rate can be set by the National Executive.

Value Added Tax Law: a) tax credits deductibility is eliminated when these credits are not directly linked to the economic or professional activity of the taxpayer and are not reflected in the invoices after 12 months from the date the invoice is issued, the date of the payment of tax in the case of receipt of services or date tax was paid in the case of services received; b) electronic printing of invoices is obliged unless exceptional cases; c) the rates of goods and services of luxury consumption are increased between 15% and a maximum 20%.

 

f)  Partial Rules on Labor and Workers Organic Law

 

On May 16, 2013, in the Official Gazette Nº 40,157 was published decree Nº 44 issued by the National Executive related to partial rules of the labor and workers organic law related to working time. Companies private and public are obliged to post in visible areas working day and night time as well resting days. Also, establishing fixed and partial shifts as well permits on extraordinary working time.

 

g)  Law Creating a Special Contribution on Extraordinary Prices and Exorbitant Prices  in the International Hydrocarbons Market

 

On April 18, 2011, the Venezuelan government published in the Extraordinary Official Gazette Nº 6,022, by means of decree-law Nº 8,163 of same date, the Law Creating a Special Contribution on Extraordinary Prices and Exorbitant Prices in the International Hydrocarbons Market. This law supersedes the Law for Special Contributions on Extraordinary International Hydrocarbon Market Prices, and modifies calculation and payment of royalty, extraction tax and export registry tax as per LOH as well as special contribution for extraordinary prices and creates a special contribution for exorbitant prices from the date published. The law defines the contribution on Extraordinary Prices for 20 percent to be applied to the difference between the average monthly price up to US$.70 or less per barrel, on international markets for the Venezuelan liquid basket of hydrocarbons and the price fixed by the Venezuela Annual Budget Law for the relevant fiscal year. The law also defines the contribution on Exorbitant Prices for (1) 80 percent when the average price mentioned before exceeds US$.70 per barrel but is less than US$.90 per barrel; (2) 90 percent when the average price mentioned before exceeds US$.90 per barrel but is less than US$.100 per barrel; and (3) 95 percent when the average price mentioned before exceeds US$.100 per barrel. The law also established the maximum price to be used for calculating royalty paid in cash on production at US$.70 per barrel.

 

Then, on February 27, 2012, Official Gazette Nº 39,871 was published the decree Nº 8,807 modifying the articles 2 and 10 of the Law Creating a Special Contribution on Extraordinary Prices and Exorbitant Prices in the International Hydrocarbons Market. The partial reform indicates that the use of resources derived from this law be used in financing the Great Missions created by the National Executive, and projects of infrastructure, roads, health, education, among others. The development of the national production sector, among others areas. The partial reform also stipulates treasury aspects on how the contributions is to handle between PDVSA, the National Development Fund (FONDEN).

 

On February 20, 2013 in the Official Gazette Nº 40,114, the reform to the law that creates a special contribution on extraordinary prices and exorbitant prices in the international hydrocarbons market published in the Extraordinary Official Gazette Nº 6,022 by means of decree Nº 8,163 from the Executive branch on April 18, 2011 was published. The most significant aspects are: a) guarantee financing of social  missions created by the government as well as projects related to infrastructure, roads, health, education, communication, agriculture, food and in general for the development of the national productive sector, b) modify the parameter that defines what constitutes contributions from extraordinary prices (under US$.80 per barrel) and what constitutes contribution from exorbitant prices (from US$.80 per barrel and up), c) establish the new intervals to apply the percentage to calculate such contributions as per the following scheme: 1) 80% of the difference when exorbitant prices are higher than US$.80 per barrel but lower than US$.100 per barrel, 2), 90% of the difference when exorbitant prices are equal or higher than US$100 per barrel but lower than US$.110 per barrel, and 3) 95% when exorbitant prices are higher than $110 per barrel; d) modify the maximum price to calculate and pay royalty at US$.80 per barrel, e) supersede decree Nº 8,807 that modified this law and published in the Official

62


 

PETRODELTA, S.A

(Subsidiary owned 56% by Corporación Venezolana del Petróleo, S.A.)

Notes to the financial statements

 

December 31, 2014, 2013 and 2012

 

gazette Nº 39,871 on February 27, 2012; and f) eliminates dispositions on the law from the Central Bank of Venezuela that regulates funding from PDVSA Petróleo to the National Development Fund (FONDEN) and any other provision of exceeding that collides with the present Law.

 

The price per barrel established in the Venezuela Annual Budget Law for the years ended December 31, 2014, 2013, and 2012 was US$.60, US$.55 and US$.50, respectively.

 

h)  Special Law on Severance National Fund

 

On June 15, 2012 the National Executive published by means of decree-law Nº 9,053 the Special Law on Severance Benefits National Fund in order to create the program National Fund for Severance Benefits which establishes the conditions to receive and manage deposits corresponding to the severance benefit guarantees of workers into government financial institutions.

 

i)  Labor Organic Law and Workers

 

On April 30, 2012, the National Executive promoted by means of decree-law Nº 8,938 the Labor Organic Law and Workers. On May 7, 2012 the National Assembly published on the Official Gazette Nº 6,076 this organic law. The most significant aspects of this law are:

 

(1)  Obligation by employers to calculate severance benefits retroactively by a) paying employees the equivalent of 15 days of salary every quarter with the most recent salary, this right is acquired at the beginning of each quarter, b) after the first year of service, the employer will pay employees 2 days of salary for every year worked, cumulative until a maximum of 30 days is reached, c) when by any reason the working relation ends, severance benefits will be calculated for 30 days for every year worked or fraction over 6 months and calculated with the most recent salary earned. Workers will receive as severance benefits, the higher amount between a) and b) or c) as described above. Quarterly or annual payments shall be deposited in the National Fund for Severance Benefits under each workers name, or at a trust fund in financial institutions or at the employer´s accounting records as long as workers authorize it in writing.

 

(2)    Increase in the rest periods woman have during pregnancy, providing as its main benefits 6 weeks prior to giving birth and 20 weeks after, as well as prohibition by employers to resign labor relation up to 2 years after giving birth.

 

(3)    Reduction of the daily working time to 5 working days and 2 resting days.

 

(4)    Increase in the number of holidays during the year.

 

The Company recognized a provision in respect of the impact of the new Labor Law, through the actuarial calculation prepared by independent actuaries contracted by PDVSA.

 

j)  Sports Organic Law

 

On August 24, 2011, the National Assembly published on the Official Gazette 39,741 the Sports Organic Law promoted by the Executive branch of power. This law declares of national and general interest as well as a public service all activities for promoting, organizing and administering sports and physical activity in Venezuela. The law among other things creates the National Fund for the Development of Sports, Physical Activity and Physical Education to be constituted on contributions from companies and organizations, private or public, performing profit seeking economic activities within the national territory. These contributions are not deductible for income tax purposes and shall be 1% over net profit when net profit is above 20,000 tax units. The Company uses as the basis of calculation for this item according to guidelines of its main shareholder net income for the year excluding the following concepts: tax expense on income , expense or deferred tax benefit , any gain or loss recognized in earnings, expense LOD (see Note 23-m) and the expense adjustment in the fair value of tax credits recognized in the income statement. As of December 31, 2014, 2013 and 2012 the

63


 

PETRODELTA, S.A

(Subsidiary owned 56% by Corporación Venezolana del Petróleo, S.A.)

Notes to the financial statements

 

December 31, 2014, 2013 and 2012

 

Company has recorded as contribution under the Sport Organic Law the amount of US$.2,549 thousands, US$.6,337 thousands and US$.3,082 thousands (Bs.16,059 thousands, Bs.39,923 thousands and Bs.13,253 thousands), respectively.

 

On February 28, 2012, Official Gazette Nº 39,872 was published containing decree-law Nº 8,820 on partial regulation Nº1 to the Sports Organic Law. The partial regulation scope the National Fund for the Development of Sports, Physical Activity, duties of the National Sports Institute, guidelines on the executions of resources and taxpayers subject to the law and their responsibilities, as well as means of making contributions.

 

k)  Law to Suppress and Liquidate the Endogenous Development Fund

 

On May 18, 2011, the National Assembly published on the Official Gazette Nº 39,676 the means of decree-law Nº 8,204 promoted by the President of the Bolivarian Republic of Venezuela, the Law to Liquidate and Suppress the Endogenous Development Fund, an autonomous institute created by the Law for the Creation of the Endogenous Development Fund, published in the National Gazette 38.500 on August 15, 2006.

 

l)  Organic Law on Science and Technology and Innovation (LOCTI)

 

On August 16, 2010, in the Official Gazette Nº 39,575 the Partial Amendment to the Organic Law on Science and Technology and Innovation (LOCTI) was published. This amendment among other things supersedes prior law published in the Official Gazette Nº 38,242 on August 3, 2005.

 

Later, on November 18, 2014, in the Extraordinary Official Gazette Nº 6,151 by means of decree law was published the Law Reforming the Organic Law on Science, Technology and Innovation. This reform introduces changes to general aspects of the Law. Among the main changes is the obligation to pay on an annual basis a percentage of gross revenues earned in the previous year for any activity performed and the contribution is calculated on income from the activity that generates more value.  Contribution rates will be applied according to the following:

 

-Two percent when economic activity is framed within those listed in the Law for the Control of Casinos, Bingo Halls and Slot Machines, and any area related to the industry and trade of alcoholic beverages and snuff.

 

-One percent for privately owned enterprises operating in business areas subject to the Organic Law on Hydrocarbons and Gaseous Hydrocarbons, including mining, processing and distribution activities.

 

-Half percent for publicly owned companies if the business pursued is one of those listed in the Organic Law on Hydrocarbons and Gaseous Hydrocarbons including mining, processing and distribution activities.

 

-Half percent for any other business activity.

 

The amount recorded for this concept during the years ended December 31, 2014, 2013 and 2012 amounts to US$.6,189 thousands, US$.4,117 thousands and US$.5,238 thousands (Bs.38,991 thousands, Bs.25,937 thousands and Bs.22,523 thousands), respectively.

 

m)    Antidrug Organic Law (LOD)

 

On September 15, 2010, the Antidrug Organic Law was published in Official Gazette Nº 39,510. The LOD eliminates the Law on Narcotic and Psychotropic Substances (LOCTISEP) and its partial regulation published June 5, 1996 under Official Gazette Nº 35,986. Among the significant changes are:

 

·

The tax base is changed, previously established the "Net Income" and is now established as taxable to the "Profit or Profit from Operations" exercise. Gain or Utility Operations for the year corresponds to the profit before income tax expense on income, expenditure or deferred tax benefit (see Note 7), LOD expense and expense Organic Law of Sport.

 

·

The deadline for the declaration and payment of this tax, which spends 15 days following each calendar year, 60 days counted from the close of the fiscal year is extended.

64


 

PETRODELTA, S.A

(Subsidiary owned 56% by Corporación Venezolana del Petróleo, S.A.)

Notes to the financial statements

 

December 31, 2014, 2013 and 2012

 

·

Regarding sanctions, is established by: 1) failure of contribution (1%), equivalent to twice the corresponding tax penalty, if any recidivism, is 3 times the respective contribution and; 2) for breach of its special contribution (2%), the same fine, down from 60.000 UT or suspension of activities within 1 year, in case of recurrence.

 

·

In the previous law, the donations made by natural and legal persons in favor of plans and programs established by the State on drugs and approved by the ONA, could be deductible from income tax, after verification by public document . In the new law, the latter is removed as a requirement for the admissibility of such deductibility.

 

·

The obligation to state institutions and public and private enterprises employing more than 50 workers to provide job placement for people rehabilitated as part of rehabilitation programs is included.

 

On February 23, 2011, providence Nº 0001-2011 was published in the Official Gazette Nº 39,622, establishing that labor matters related to Projects for Integral Prevention on Drug Consumption must be presented to the National Antidrug Fund (FONA). The providence establishes that private and public companies must present between January 2 and April 30 the projects and all of their requirements to be executed in order to carry-out technical and economical evaluations necessary for the appropriate approval.  Projects for Integral Prevention in regards to labor matters can only be submitted by those companies in which their fiscal year ends before the established time frame mentioned in order to be eligible and once the contribution of 1% has been paid. When companies cannot submit projects, they can present them in the same timing period of the following year and the corresponding charge shall be the year immediately before to the year corresponding the contribution determination.

 

During the years ended December 31, 2014, 2013 and 2012, the Company recognized and recorded an expense for US$.2,624 thousands, US$.4,155 thousands and US$.3,082 thousands (Bs.16,531 thousands, Bs.26,177 thousands and Bs.13,253 thousands), respectively, which was recorded as general and administrative expenses, net in the statement of comprehensive income of each year.

 

 

(24)   Subsequent Events

 

a)  On January 12, 2015 the Company issued invoices to PDVSA Petróleo in the amount of US$.1,225,573 thousands (Bs.7,721,107 thousands) according to the amendment of the hydrocarbon purchase sale agreement which incorporated the Boscán pricing formula on November 15, 2014 and permitted the Company to invoice unbilled revenues for 70% of volumes delivered from this field since the month ending October 21, 2011 until including the month ending November 30, 2014 (see Notes 1, 11 and 21).

 

b)  On February 6, 2015 was published in the Official Gazette Nº 40,597 Decree Nº 1,599 which increases the minimum monthly wage salary mandatory in all geographic areas of Bolivarian Republic of Venezuela and for all workers rendering services to private and public entities. The increase represents a 15% effective next February 1, 2015 to Bs.5,622. For youth and apprentice workers, the salary will be increased in 15% effective on February 1, 2015, established at Bs.4,181.

 

c)  On February 19, 2015 was published in the Extraordinary Official Gazette of the Bolivarian Republic of Venezuela Nº 6,171, Exchange Agreement Nº 33 whereby Rules governing Foreign Exchange Operations in the National Financial System, as well as two Notices of the Ministry of  Popular Power of Economy and Finance in conjunction with the Central Bank of Venezuela (BCV) were issued, which informs operator institutions authorized to act through the Foreign Currency Alternative Exchange System (SICAD II) as well as the general public, that as of February 12, 2015 no quotation for purchasing and selling foreign currency in cash or securities in foreign currency will be processed thru the System, as well as informing to the exchange operators and the general public, the minimum and maximum amounts of foreign exchange operations conducted in accordance with the provisions of the Exchange Agreement Nº 33..

 

d)  On February 25, 2015 Providence NºSNAT/2015/0019 from the National Integrated Service on Tributes and Customs Administration (SENIAT) was published in Official Gazette Nº 40,608 in which the current tax unit value was adjusted from Bs.127 to Bs.150.

65


 

PETRODELTA, S.A

(Subsidiary owned 56% by Corporación Venezolana del Petróleo, S.A.)

Notes to the financial statements

 

December 31, 2014, 2013 and 2012

 

e)  On March 4, 2015 the Company received from its main shareholder, CVP, new guideline in relation to invoicing disbursements between PDVSA and mix companies, including Petrodelta, S.A. This new guideline will enable PDVSA to invoice goods and services paid on behalf of the Company during the year 2015 according to the currency in which they are paid.

 

f)  In Extraordinary Board of Director meeting held on June 19, 2015 it was approved the fifteenth offsetting of accounts receivable and accounts payable with PDVSA for the amount of US$.834,446 thousands (Bs.84,576 thousands). Likewise, in this meeting of Board of Director it was supported and raised for approval before the Shareholders Assembly the equity reserve provision of deferred income tax asset as of December 31, 2014, which amounted US$.120,706 thousands (Bs.760,441 thousands).

 

g)On June 19, 2015 the Board supported the issuance of the financial statements of the Company as at December 31, 2014, prepared in accordance with International Financial Reporting Standards (IFRS) and agreed to submit it to the Shareholders Assembly for approval and is expected to be approved without modification.

66


 

PETRODELTA, S.A

(Subsidiary owned 56% by Corporación Venezolana del Petróleo, S.A.)

Notes to the financial statements

 

December 31, 2014, 2013 and 2012

 

(25)   Supplementary Information on Oil and Gas Exploration and Production Activities (unaudited)

 

The following tables provide supplementary information on oil and gas exploration, development and production activities.  All exploration and production activities are conducted mainly by CVP and Mixed Companies in Venezuela.

 

Table I - Crude Oil and Natural Gas Reserves

 

All crude oil and natural gas reserves located in Venezuela are owned by the Bolivarian Republic of Venezuela.  Crude oil and natural gas reserves are estimated by PDVSA and reviewed by the People’s Power Ministry for Energy and Oil (MPPPM) using reserve criteria that are consistent with those prescribed by the American Petroleum Institute (API) of the United States of America.

 

Proved reserves are the estimated quantities of crude oil and gas which, with reasonable certainty, are recoverable in future years from known deposits under existing economic and operating conditions. Due to the inherent uncertainties and limited nature of reservoir data, reserve estimates are subject to changes over time, as additional information becomes available. Proved reserves do not include additional volumes which may result from the extension of currently explored areas or from the application of secondary recovery processes not yet tested and determined to be economically feasible.

 

Proved developed oil and gas reserves are the quantities that can be recovered from existing wells with existing equipment and methods.  Proved undeveloped reserves are those volumes that are expected to be recovered from new wells on undrilled acreage or from existing wells.

 

A summary of annual changes in proved crude oil and natural gas reserves is shown below:

 

(a)  Conventional Crude Oil (in thousands of barrels)

 

 

 

 

 

 

 

 

 

 

Years ended December 31,

 

 

2014

 

2013

 

2012

Proved developed and undeveloped reserves of
conventional crude oil at January 1

 

625,100 

 

857,628 

 

499,237 

Revisions

 

16,461 

 

(217,990)

 

-

Expansions and discoveries

 

-

 

-

 

371,563 

Production

 

(15,561)

 

(14,538)

 

(13,172)

Proved developed and undeveloped reserves of
conventional crude oil at December 31

 

626,000 

 

625,100 

 

857,628 

Proved developed reserves of conventional crude oil at
December 31 (included on the previous amount)

 

59,922 

 

69,833 

 

65,755 

 

At December 31, 2014, 2013 and 2012, certified reserves assigned to the Company amounted to 626,000 thousands, 625,100 thousands and 574,725 thousand barrels, respectively. Production for the year ended December 31, 2014, 2013 and 2012 was 15,561 thousands, 14,538 thousands and 13,172 thousand barrels.

67


 

PETRODELTA, S.A

(Subsidiary owned 56% by Corporación Venezolana del Petróleo, S.A.)

Notes to the financial statements

 

December 31, 2014, 2013 and 2012

 

(b)  Natural Gas Reserves (in millions of cubic feet)

 

 

 

 

 

 

 

 

 

 

Years ended December 31,

 

 

2014

 

2013

 

2012

Proved developed and undeveloped reserves of natural gas at January 1

 

454,982 

 

705,457 

 

532,082 

Revisions

 

56,333 

 

(247,882)

 

-

Expansions and discoveries

 

-

 

 

 

175,546 

Production

 

(2,981)

 

(2,593)

 

(2,171)

Proved developed and undeveloped reserves of natural gas at December 31

 

508,334 

 

454,982 

 

705,457 

Proved developed reserves of natural gas at December 31 in Uracoa and Tucupita (included on the previous amount)

 

23,014 

 

8,291 

 

23,390 

 

Natural gas production is shown on the basis of actual volumes before the extraction of liquefiable hydrocarbons.

 

Table II - Costs Incurred in Exploration and Development Activities

 

Exploration costs include costs incurred from geological and geophysical activities, and drilling and equipping exploratory wells. The Company did not conduct exploration activities in the year 2012.  Development costs include those for drilling and equipping development wells, enhanced recovery projects and facilities to extract, treat and store crude oil and natural gas.  Annual costs, summarized below, include amounts both expensed and capitalized for the Company’s conventional crude oil reserves (In thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Conventional Crude

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. dollars

 

Bolivars

 

 

 

 

 

 

 

 

 

 

 

 

 

2014

 

2013

 

2012

 

2014

 

2013

 

2012

 

 

 

 

 

 

 

 

 

 

 

 

Development costs

386,210 

 

264,075 

 

207,320 

 

2,433,123 

 

1,663,673 

 

891,479 

Total costs incurred from development Activities

386,210 

 

264,075 

 

207,320 

 

2,433,123 

 

1,663,673 

 

891,479 

 

68


 

PETRODELTA, S.A

(Subsidiary owned 56% by Corporación Venezolana del Petróleo, S.A.)

Notes to the financial statements

 

December 31, 2014, 2013 and 2012

 

Table III - Costs Recorded as Assets in Oil and Gas Production Activities

 

Costs recorded as assets for oil and gas exploration and production activities, as well as the related accumulated depreciation and amortization at December 31 for PDVSA’s conventional and extra-heavy crude oil reserves are summarized below (In thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Conventional Crude

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. dollars

 

Bolivars

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2014

 

2013

 

2012

 

2014

 

2013

 

2012

 

 

 

 

 

 

 

 

 

 

 

 

 

Assets used in production 

 

1,029,122 

 

794,820 

 

660,972 

 

6,483,469 

 

5,007,366 

 

2,842,181 

Equipment and facilities

 

53,515 

 

16,685 

 

22,447 

 

337,145 

 

105,116 

 

96,522 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,082,637 

 

811,505 

 

683,419 

 

6,820,614 

 

5,112,482 

 

2,938,703 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated Depletion, depreciation and amortization

 

(494,128)

 

(364,719)

 

(279,117)

 

(3,113,006)

 

(2,297,730)

 

(1,200,203)

Construction in progress

 

388,203 

 

250,183 

 

121,087 

 

2,445,679 

 

1,576,153 

 

520,675 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total net costs capitalized as assets

 

976,712 

 

696,969 

 

525,389 

 

6,153,287 

 

4,390,905 

 

2,259,175 

 

Table IV - Results of Operations for Oil and Gas Production Activities for Each Year (In thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Conventional Crude

 

 

 

 

 

 

 

 

 

 

 

 

 

Years ended December 31

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. dollar

 

Bolivars

 

 

 

 

 

 

 

 

 

 

 

 

 

2014

 

2013

 

2012

 

2014

 

2013

 

2012

 

 

 

 

 

 

 

 

 

 

 

 

Net production income:

 

 

 

 

 

 

 

 

 

 

 

Sales (see Note 21)

1,309,734 

 

1,275,601 

 

1,160,653 

 

8,251,324 

 

8,036,287 

 

4,990,808 

Production costs

(361,910)

 

(187,311)

 

(158,888)

 

(2,280,033)

 

(1,180,059)

 

(683,219)

Royalties in kind and other taxes (See Note 7
and Note 21)

(594,822)

 

(566,197)

 

(604,003)

 

(3,747,379)

 

(3,567,042)

 

(2,597,213)

Contributions and funding for social development

(16,226)

 

(17,127)

 

(14,889)

 

(102.224)

 

(107,900)

 

(64,023)

Depletion, depreciation and Amortization

(123,191)

 

(82,018)

 

(83,168)

 

(776,103)

 

(516,713)

 

(357,622)

 

 

 

 

 

 

 

 

 

 

 

 

Results of operation before income Tax

213,585 

 

422,948 

 

299,705 

 

1,345,585 

 

2,664,573 

 

1,288,731 

 

 

 

 

 

 

 

 

 

 

 

 

Income tax

(106,793)

 

(211,474)

 

(149,853)

 

(672,793)

 

(1,332,287)

 

(644,366)

 

 

 

 

 

 

 

 

 

 

 

 

Results production operation

106,792 

 

211,474 

 

149,852 

 

672,792 

 

1,332,286 

 

644,365 

 

Income from oil production is calculated at international market price as if all production were sold (See Note 21).

 

Production costs are lifting costs incurred to operate and maintain productive wells and related facilities and equipment, including operating labor costs, materials, supplies, fuel consumed in operations and operating costs of natural liquid gas plants.

 

Depreciation and amortization expenses relate to assets used in exploration and production activities. Income tax expense is computed using the statutory rate for the year.  For these purposes, the results of production operations do not include finance costs and corporate overhead or their associated tax effects.

 

69


 

PETRODELTA, S.A

(Subsidiary owned 56% by Corporación Venezolana del Petróleo, S.A.)

Notes to the financial statements

 

December 31, 2014, 2013 and 2012

 

A summary of average per unit sale prices and production costs is shown below:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Years ended December 31,

 

 

 

 

 

 

 

 

 

 

 

 

 

2014

 

2013

 

2012

 

2014

 

2013

 

2012

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. dollar

 

Bolivars

 

 

 

 

 

 

 

 

 

 

 

 

Average sale price

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Crude oil per barrel

82.45 

 

91.22 

 

95.90 

 

519.44 

 

574.69 

 

412.37 

 

 

 

 

 

 

 

 

 

 

 

 

Natural gas per BOE

1.54 

 

1.54 

 

1.54 

 

9.70 

 

9.70 

 

6.62 

 

 

 

 

 

 

 

 

 

 

 

 

Average production cost per BOE

22.54 

 

12.51 

 

11.74 

 

142.00 

 

78.81 

 

50.48 

 

 

70