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Three years after $1-billion Venezuela deal, US oil firm shuts doors

Horizontal never completed the wells, its financial backer took a provision for losses on the loan, and Venezuela's production continued to fall

Liz Hampton & Lawrence Delevingne | Reuters 

Crude Oil

An Oklahoma oilfield company that played a central role in Venezuela’s high profile attempt to convince the world it could halt production declines at its dilapidated oilfields has shut its doors, said three people familiar with the matter.

In 2016, Horizontal Well Drillers, a closely held US driller, won a $1.29 billion contract to drill 191 wells in Venezuela's Orinoco Belt, part of an unusual plan to sharply boost output and halt Venezuela's economic collapse. It and two other drilling contractors were asked to finance the work themselves and be paid in future production, according to documents obtained by Reuters at the time.

But the blockbuster deal did not pan out for the company, its Canadian lender Callidus Capital, or for Venezuela.

Horizontal never completed the wells, its financial backer took a provision for losses on the loan, and Venezuela's production continued to fall.

Todd Swanson, Horizontal's former chief executive who attended the contract signing ceremony in Venezuela, didn’t respond to a request to his email or a LinkedIn account seeking comment. Jeremy Klein, its former president, also did not respond to requests for comment.

David Moore, an attorney for Callidus, wrote in response to requests for comment that "any reporting on the Horizontal matter would require a meticulous review and understanding of the existing public disclosure, which is utterly lacking from your inquiries."

Moore did not respond to questions about the size of the loan, recoveries or other specifics. But he emailed legal documents citing a previous allegation by Callidus that one of its former executives had tampered with the Horizontal loan.

That litigation centres on claims by Callidus and its main owner, Catalyst Capital Group, that various investors, borrowers and journalists had conspired to hurt the two Toronto companies.

PDVSA did not reply to a request for comment on the agreement.

Horizontal opened an office in Venezuela, according to an oil industry executive in Venezuela. US sanctions against state-run oil firm PDVSA put the project on hold, said another person who answered a call to its Purcell, Oklahoma, office, but declined to be identified.

The contracts were big news in Venezuela, where cash-strapped PDVSA had driven away top suppliers by not paying its bills on time or making payments with promissory notes.

Swanson, Horizontal's CEO, stood alongside Venezuelan President Nicolas Maduro during a 2017 televised signing ceremony where Maduro touted the three drillers' potential to add up to 250,000 barrels per day to its oil output.

Instead oil output fell. Venezuela pumped 1.01 million barrels per day of crude from January through November last year, according to official numbers, near a 75-year low for the country and less than half the nation's 2.49 million bpd when the deal was announced.

On Tuesday, Horizontal's drilling equipment goes on the auction block in Oklahoma City in what Superior Energy Auctioneers advertised as a "complete liquidation." The Oklahoma company's misadventure in Venezuela was followed by a sharp drop in US demand for drilling services.

First Published: Sun, January 12 2020. 00:00 IST