Here is update on Hovensa (Hess & PDVSA JV) Outlook revision & potential future Credit Rating risks that is sign of issues to come for PDVSA supplied refineries as well as PDVSA given the trend of oil prices away from speculative prices and back to fundamentals. And because of the downward trend in product prices as function of the demand destruction that has occurred with the long period of high prices.
I would not be suprised to find Hovensa on PDVSA’s sale block as price crude falls and puts even more pressure on revenue for both oil companies.
Hovensa also has the increased capital/debt cost hit from PRI (Petroleum Refinery Initiative) from meeting the EPA CFP (Clean Fuel Program) to meet products low sulfur requirements as did the rest of US Refineries (with little payout despite environmental claims of potential higher product value).
And additional burden comes from the dependence on crude from CSA (Crude supply agreements) for Merey & Mesa Crudes from PDVSA – Hovensa’s other 50% owner and its credit risk due large expense of social spending tapping revenue in much the same manner that social revenue has exacted from huge tolls on Mexico’s Pemex Refining sector. While Merey and Mesa are Lt. Heavy Conventional Crudes they are not in the same cost advantage as blended bitumen or syncrudes that other Caribbean & USGC refineries can process.
Another burden has been the high cost of its self generated electricity cost of cogens using multiple fuels from Refinery Gas to VGO (Vacuum Gas Oil). The only upside from falling crack spreads is that the falling price of products will also mean lower cost for these intermediate product fuels & electricity.
Regards
