Musings: Chavez Seizes OFS Assets: Obama Grabs Chrysler Loans

We were dismayed to see that the small group of Chrysler secured debt holders have given up their battle to gain a better deal from the bankruptcy court in the Chrysler restructuring due to pressure from Pres. Obama and his administration. This news came at the same time President Hugo Chavez of Venezuela acted under a newlyenacted law giving him the ability to seize the assets of oilfield service companies working in Venezuela for PdVSA, the stateowned oil company, who were determined to have taken unfair advantage of the state-owned company during the industry boom of 2007 and 2008. These are many of the same companies that PdVSA has not been paying because it doesn't have the money for the invoices.

Upon reading these two stories in the Saturday morning edition of the Calgary Herald, we immediately thought about the picture of the two presidents shaking hands and smiling at the summit meeting of the leaders of the hemisphere's democratic leaders last month. There was substantial outrage voiced in many quarters about the significance of the handshake and the willingness of Pres. Obama to engage Pres. Chavez. Maybe there was a greater kinship between the leader of the Free World and the socialist leader of Venezuela than any of us thought at that time.


We were extremely disappointed that Pres. Obama used his "bully pulpit" to attack the secured debt holders in Chrysler who were exercising their fiduciary duty to seek the maximum return for their investment through the well-established legal workings of the bankruptcy court structure. We now must consider that the United States has started down the slippery-slope in which the "ends justify the means," which violates the rule of law foundation of our country. As a result of this development, we anticipate that next year in the various business and credit risk assessments of countries, the United States will rank much lower than at any time in the past.

Energy industry executives seriously must consider the proposition unveiled in the Obama budget that the energy industry is to be a "piggy bank" to help fund the President's grand social vision. Higher taxes, greater restrictions on access to federal lands for oil and gas exploration and political attacks on the morality of "dirty fuel" executives will color the next three and half years. I guess a religious person might describe the new environment as the "lean years" that are supposed to follow the "fat years." It is one thing to lose some fat, but when an industry loses muscle and bone, the risks are magnified immensely.

G. Allen Brooks works as the Managing Director at PPHB LP. Reprinted with permission of PPHB.


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Generated by readers, the comments included herein do not reflect the views and opinions of Rigzone. All comments are subject to editorial review. Off-topic, inappropriate or insulting comments will be removed.
Andres Gonzalez | May. 21, 2009
You are mixing pears with apples, enlightenment with suffering, ego with conscience, Guess whos who? That is not to say that as humans we are bound to make mistakes. It will be all ok in the long run, maybe 8 years. Youve got to be patient!

Steve Gorham | May. 20, 2009
Two events occuring at the same time does not mean that they are related: Chavezs nationalisation of assets needed to operate his countrys petroleum infrastructure, AND the poor poor Chrysler bond holders who accepted the fat reward prospects of a bond issue to a long-troubled sacred cow?? Wouldnt you expect two heads of state to shake hands and smile? The "significance" of that is by no means clear or certain, other than the two are not puny-minded, prevaricating extremists with a pocketful of money. Kinship?? The rule of COMMERCIAL / CORPORATE law is being challenged in the specific case of a government [all taxpayers] bailing out a complacent, arrogant and lazy auto industry. It is hardly a challenge to the legal foundation of any country. If you bought bonds issued by an American auto maker, too bad. This is the risk side of "risk-and-reward". Credit rating of The United States?!: I wonder how "...the various business and credit risk assessments of...the United States..." would look if both Chrysler AND GM went full-on bankrupt within a year of each other?? Dont come a-beggin and then whine about how bland the food is! Why does the author waste words to imply that he is not religious? Is it because far right-wing nonsensical and intellectually dishonest argument-crafters are almost always religious kooks too? From Calgary, eh? Been up here long?

Cesar Bustos, Jr. | May. 18, 2009
I am an International Oil worker. I'm a US citizen. I arrived in Maracaibo Venezuela the evening President Hugo Chavez Frias delivered his fire and brimstone acceptance to the presidency speech. Very impressive, passionate speech. Anyone not familiar with the politics would have guessed that Hugo was not the problem. But, the result of many years of the status quo.

For the next seven plus years I lived in "Oriente" the Easteren part of the country.

I lived the country's evolution, through the Venezuelan Medias rude awakening to the fact that they had fallen in love with the wrong "novio". So like a Virgin Arrepentida" sought the morning after pill. But it was too late!- And eventually Hugo would kill the 54 year old Media bride - RCTV. The Quinta republica political party had a baby, and so the Uncles were brought over to see it. Fidel brought his gifts with hundreds of unemployed Doctors, medics and specialist and the proud father pledged 500,000 BBls P/D of Oil to Cuba. The Argentinian Uncle sent some Meat But Hugo would later deliver to them about 880, 000 Dollars in a suitcase - a little campaign contribution. Ignacio Lula Da Silva and Poor Evo Morales are all mystified under the spell of this - Guapo de barrio.

I Watched in disbelief how the ONLY possible chance to remove Hugo slipped away. Thanks to the badly handled coup, The opposition marches the. endless elections, the interminable "Cadenas nacionales de radio y television". The "paro nacional" the arming of "Circulos Bolivarianos" the referndums with Jimmy Carter's blessing and the PDVSA "despedidos". We Watched by the sidelines the approving nod of the Hugo when the poor squaters stole from the land owners. And now..... the handshake!!, You know what I mean. (Profesional society polarizers.)

Wow, Im not formally educated but I'd bet I could handle foreign affairs better.

"You cannot help the poor by destroying the rich. You cannot strengthen the weak by weakening the strong. You cannot bring about prosperity by discouraging thrift. You cannot lift the wage earner up by pulling the wage payer down. You cannot further the brotherhood of man by inciting class hatred. You cannot build character and courage by taking away peoples initiative and independence. You cannot help people permanently by doing for them, what they could and should do for themselves."

.....Abraham Lincoln

Larry Worley | May. 16, 2009
Obama is carrying out the greatest power grab in the history of our country through his massive expansion of the federal government. It will destroy wealth and take many years to recover from (if and when it is reversed).

Craig | May. 15, 2009
The problem with the Obama administration's policy is that they believe that through helping the lower and middle tiers of the economy, they will spur growth in the long run. In order to do this, they have to get involved in ways that are anti-capitalist, hence, anti-competitive.

What this amounts to is fostering mediocrity, eliminating competition and driving those who have both (1) the capital and the (2) appetite for risk out of the business.

This will eventually result in a fall of our economic standing, unless something is done to change it. WE have a collective voice, and should use it.

Richard | May. 15, 2009
I agree with Antonio Cardenas.........The world had better take notice of Chavez....He is evil.

He often uses this resource and threatens to cut off supplies to the US. I say do it and see how long Venezuela will last without this revenue. His latest move to take over the assets is only a scheme not to pay the contractors.

Everything Chavez does is either for HIS benefit or to hurt the US. Wake up people and stop this dictator

Ben Allen | May. 15, 2009
You have to be kidding? After the mess your system has led you into, and in light of the dire economic woes facing this government through years of unregulated markets, you have the NERVE to criticize your own President's plan to salvage what's left of your country's major corporations. Desperate times require desperate measures, and America has been selling itself off overseas for a very long time. You would do very well to look at some of the world's "moderately" managed and regulated economies such as Australia and Canada, who are economically tiny in comparison to the USA, and yet are in a hell of a lot stronger position (fiscally) in the current climate than your country is. Wake UP! The world is either laughing or cringing at American greed and capitalism. You don't need to change, you HAVE to change.

Alexis P. | May. 15, 2009
President Bush did many things wrong, but if anything can be saved from his administration was that he knew Chavez has to be kept at distance. Chavez is a real threat to the free world, he may not be an evil genius but is not alone (he is friends with Castro and Ahmadinejad). He is also highly impressionable by these two or any other "cowboy" hostile to US' interests and has no fear of retaliation as long as it serves the purpose for him to retain the power indefinitely.

Chavez has oppressed his countrymen for 10 years already in spite of an unprecedented - almost obscene - revenue from oil exports, and he has been accused of countless human rights violations. This has clearly been allowed for too long, and the US and the international community are to blame for their shameful passiveness. I think the Obama’s and the previous administration are making a big mistake by letting Chavez get away with his fake Socialism, which has already been spread throughout several countries in Latin America. Venezuela is dangerously close to the US and although Venezuelans are very kind in nature, the threat may come from a mix of Iranian nuclear weapons and Venezuelan Uranium nurtured by Castro’s hatred. It is contradictory how the US has taken measures to protect itself from terrorism within their borders and far away (Afghanistan, Iraq, etc), but has overlooked at Chavez due to the fact that, although openly and repeatedly insulted President Bush and the “American Imperialism”, he continues to provide with important oil imports to the US.

Frank Harris | May. 15, 2009
Clearly the actions of Chavez is nothing more than a huge theft. This is key to the oilfield activities that Rigzone covers. A plan to resolve this is important to all of us.

Communications between Obama and Chavez are one method to resolve problems. Bush's isolationistic philosophy did nothing, and without the ability to interact this is bound to continue. This doesn't mean that Chavez is going to act in anyone's best interest other than his own. He is the leader of Venezuela, and we need to have dialog or we will end up doing nothing.

Your comments regarding Chrysler are not related to Oil Field activities and points out that this article is more of a political editorial than it is a news item. Is Rigzone a political instrument or does it supply news related to the oilfield?

RESPONSE: This is an opinion piece supplied by an outside contributer and respected analyst in the industry.
Steve Parker | May. 15, 2009
You can not be serious! How does any intelligent human equate the two?

In one case the company in question, Chrysler, is destined to go into bankruptcy and insolvency without government interceding.

In the other case the Government, Venezuela, is likely to go into insolvency due to a drop in commodity prices of its sole source of income so it decides to fleece foreign companies doing business there.

I don't know about you, but I don't want my tax dollars to continue to prop up a limping company on its last legs. The same secured debt holders you are sympathetic to are the same folks that caused the greatest depression since 1929.

Thanks but No Thanks. I am not buying what you are selling.

John Cornell | May. 15, 2009
I feel the currant president and the democratic party in general just don't understand the need for a stable fuel source. The oil companies are just that ... oil companies ... if they deem it appropriate to enter other areas of energy, that is free enterprise and their choice. The currant administration is out to reward failure with our tax dollars and at the same time tax success.

Andy | May. 15, 2009
Just as he promised. Obama will take our dollars and give us change.

Carlos E. Mateus | May. 14, 2009
It is a shame that our president acts and thinks like 3rd world country dictators.

Ronald Mitaxa | May. 14, 2009
The oil and gas buddies of Bush and Cheney were not complaining when they were handed billions in windfall profits by the republican's global military fiasco. Every motorist and industry is still paying premium prices for fuels whilst the price of crude oil has dropped by over 50% from where it stood 12 months ago.

Frenchie StLaurent | May. 14, 2009
The Energy industry is in deeper trouble than is noted daily. This is just the first 100 days.

John Contino | May. 14, 2009
I have some Venezuelan friends who are blacklisted from working for PdVSA for supporting the 2003 strike. During the US election campaign last fall, these prescient Venezuelans coined a nickname for Obama: Chabama. As the saying goes, "If the shoe fits..."

Renato | May. 14, 2009
Me parece un buen comienzo para que se restablezcan las relaciones entre ambos paises, ya que entre ambos se necesitan. ojo no soy chavista ni de la oposicion.

OUR TRANSLATION: I think this is a good start to reestablishing the relations between the countries, something they both need. Look I'm no Chavista nor of the opposition.
David S | May. 14, 2009
There isn't a nickel's worth of difference between giving 55% ownership in Chrysler to the unions at the expense of investors or stealing the assets of the oil service companies and giving it to "the people." When Obama looks in the mirror the reflection is Hugo Chavez. Chavez told Obama we should be more like them. Apparently Obama agrees.

Michael Roberts, P.E. | May. 14, 2009
Obama and crew are rapidly destroying the infrastructure of the US energy industry, specifically that of coal, and most rapidly, oil and gas. The president and his administration have yet to discover that there is no such thing as a solar-powered 747 or battery powered 18-wheeler.

A sensible transition to gradually evolve the "green energy" potential over a period of several years seems to have totally eluded the Obama Administration. Instead, the industry is virtually shut down.

Heretofore investors in oil and gas have relied on reasonable tax breaks and risk incentives to explore here in the Western USA. As a cover-up to already evident congressional gross mismanagement of the banking business, major manufacturing (GM, Chrysler), insurance (AIG) and a growing list of others, the government is turning once more to the "evil" oil companies as a scapegoat as the only recipients of "greedy, selfish" tax breaks.

Last year Barbara Boxer (dem, California) threatened to nationalize the oil and gas industry. During his campaign, Obama threatened to "bankrupt" the coal companies.

I have yet to see any (I mean ANY) politician, Republican or Democrat, have the guts to exhibit a pair of brass ones and stand up and make real noise against this full-blown charge into the the Marxist camp. It appears that Obama and crew are seriously studying and absorbing the "Quotations from Chairman Hugo."

Marvin Brandon | May. 14, 2009
I feel the U.S. business world is so afraid of the Obama government that they are willing to forgo their basic tenant of promoting the best interest of the share holders; they have become spineless and remain the greedy group that got us in this mess to begin with. Their motto is "As long as I hang on to my wealth it's O.K."

Obama's words are identical to Chaves' just much better spoken. But I do think America is starting to wake up to his Socialistic and possibly Communistic ideology.

Scott S | May. 14, 2009
It is the naive people like Papercage below that got us into this mess in the first place - electing Obama and giving the Democrats control of both houses of Congress. Since when has our government (Republican or Democrat) demonstrated that it can manage financial issues? How long have we been hearing about Social Security and Medicare/Medicaid going bankrupt? Why would anyone think Obama and his administration have any capability at all to solve the problems in the financial sector, the housing market, the auto industry.....?

Who in their right mind would make multi-billion dollar loans to a company that hasn't shown a profit in ages? Mercedes sold Chrysler for a reason - they saw the company had no future. And why should the government get involved in helping a privately owned corporation stay solvent (using taxpayer money)? What happened to free enterprise and our fair market system? No one is offering to pay me for the "losses" I have incurred with my investments. I'd sure appreciate for someone to make me "whole" again!

Government should not be involved in the operation or funding of private enterprise. The more government intervenes, the closer we come to having a socialistic economy. "Big brother" will decide who survives and who perishes, who has a house and who doesn't, who has a new car and who doesn't..... Where will it stop?

Edward | May. 14, 2009
In regards to El Coquere | May. 14, 2009 below, I suggest that if he can afford to live out of his country, that he send all his money back to help out. I also think the US should Nationalize Cities Services and quit buying oil from Venezuela. We should also freeze any bank accounts of Venezuela. We have most of the refining capacity that will handle the heavy Venezuelan Crude.

Antonio Cardenas | May. 14, 2009
I am a Venezuelan who has just arrived in the US last year. My comments are more related to Chavez. Please do not qualify him as socialist, since this qualification is vague and depending on the reader it may include political systems of some countries with very high standard of living, social responsible, sustainable economies such as the Scandinavian countries, The Netherlands, Germany, Austria, Switzerland, Canada, New Zealand, to some extent Australia, Japan and some others. Chavez behaviour is that of a totalitarian, militar (very badly trained actually), communist dictator (it does not matter if he was elected president in a clean election only the first time in 1998, the other elections very obscure to say the least). He is surrounded by nearly illiterate ministers, hates knowledge, all form of private enterprise but those of his close political followers and is definitely evil. Therefore, totalitarian nazi/communist may be a better adjective to put him in the group of the leaders of regimes of Cuba, Iran, Zimbawe, North Korea, Sudan, Lybia (Kadaffi), Iraq (Sadam Hussein). In my opinion Lula or Michelle Bachelet may be called socialist indeed; some people may like them others obviously not, depending on their political orientation but at least they are civilised, decent presidents.

Left-winger | May. 14, 2009
In the case of President Chavez, I think it may be an act of desperation on his part to take some stand to cover the state oil company's insolvency. In the case of President Obama, I think when the stronger children get out of hand and a bit too big for their britches, its time for the parent to step in and even things out.

R Jones | May. 14, 2009
The first steps to socialism!!!

Reese Mitchell | May. 14, 2009
I agree completely! People of the United States of America do not understand the drastic changes that are going on each day.

El Coquere | May. 14, 2009
Socialist - phobia in a "Capitalist" world mind set makes people write nonsense articles like this. I'm a Venezuelan citizen living outside my country and yet can't see why people is so reluctant to let a more equal spread of the wealth. Maybe cause only 10% of the global population handles 80% of this planet's money and, obviously, they are frightened to the bone to loose that grip.

Alastair M. John | May. 14, 2009
Dear Sir,

However misguided some of the current President's actions may seem, in my opinion they are no more or less so than those of the preceding administration. Apparently the ends justified the means then (invading Iraq as a shining example), and that suited your view just fine, although it involved a different set of people being "persecuted", as you claim to be being persecuted now.

If you are saying you enjoyed the fat of those years (including the eventual opening of the Iraqi oil fields to American and International oil companies operating out of the USA, finally taking place now) maybe you should start cultivating your own operations to take maximum advantage of the current political conditions, rather than just bemoan the fact that this administration may be trying to alleviate the severity of global issues including a global financial crisis which in no small amount was due to too severely deregulated US banking and financial systems, climate change and an overall energy shortage predicted for the future. Retaining domestic fields intact will ultimately result in a a stronger position for the US in the future, both from an economic as well as energy-independence viewpoints.

As someone working a job that takes me away from home for months at a time, working 80+ hour weeks, I do not see how you have the right to even argue the point illustrated above. If instead you put as much time and energy into developing a product (in my case natural gas from tight shale) that addresses some of the issues we face, rather than creating a rather dubious argument, the entire country might soon be in a better place.

Yours sincerely,

Alastair M. John

Wellsite Geologist

Rayward Sonnier | May. 13, 2009
I think we are going into the world country thanks to Mr.Obama. I have worked there and it is not pretty. I would like to see all production shut down and see how they like it. See if they can run a troutline to be able to eat.

Papercage | May. 13, 2009
There is no narrative logic to this article (or anything else written by G. Allen Brooks, for that matter). If I understand correctly, he's equating Obama to Chavez because the US government intervened when, for example, the entire banking system of the United States became insolvent. Better, I suppose, to sit on our hands and watch banks and financial institutions fail one by one? Of course, this alleged Chavez-style intervention in the free market only came after the banks themselves begged and pleaded for assistance, and after the failure of Lehman Brothers sent huge shock waves throughout the financial sector. And of course, extreme laissez-faire attitudes toward the banking sector and the total failure of regulatory oversight allowed the market practices that led to this collapse. This argument that we're on a slippery slope toward Chavez-style socialism is absurd beyond belief, and yet it keeps making the rounds in the usual echo chambers (Fox News, the Wall Street Journal editorial page and so on). We are facing the worst global economic slowdown in 70 years. Government action in the face of an insolvent banking sector, 9% unemployment and crashing global trade is not a move toward socialism - it's a rational response. To hear libertarians desperately trying to make their case at a time like this reminds me of Don Quixote.

G Johnson | May. 13, 2009
The actions of this administration are deplorable. Commies here we come.

Marvin Wagner | May. 13, 2009
I think that anyone now feigning surprise by the personal and sociopolitical character of the regime of Mr. Obama and the Democrat party, or the methods by which they attain their ends, are either disingenuous or hopelessly naive.

The days of the producing class avoiding the taking of a political stand in defense of Libertarian principals for fear of being targeted for retribution should their publicly preferred candidate lose the election must finally give way to principled and energetic activism. Unity across the spectrum of this class is not simply a nice sounding preference at this point but a necessity. The Statists are so united and committed. If they are not in like manner vigorously and persistently opposed, and their policies and programs dismantled by a united Libertarian front then a preview of life in a future America can be gained by looking at Europe. When in the last 200 some years has Europe ever acted as a positive role model for America?

If we would not be incorporated into the "Borg" like so many domesticated cattle, then we must unify in defense of individualism, liberty, minimal taxes, a minimized State, and a society of equal opportunity but outcomes based upon risk and industry. Unity on this side must be firm and determinedly kinetic going forward. If not, provided they can still read, your children and theirs will only be able to view America's best days in the pages of some old, unrevised history book that they may be able to pick up at a garage sale.

The petroleum industry, like many others gave support to the Statist philosophy over the years, overtly or tacitly through half-hearted and weak defenses of the industry and its crucial contribution to the betterment of the nation and the world in general. If we sell your soul (mind) to the Devil, should it be any surprise to find ourselves in hell?

David | May. 13, 2009
I agree, if the federal government can dictate and control private companies like GM, Chrysler and the entire banking system then what's to stop it from controlling the energy sector. We are well on our way to following the socialist path of Hugo Chavez and Venezuela. And this is "change YOU can believe in"!

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