Jereh $190 Million Shipment to PDVSA, New Boost for SA

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Jereh $190 Million Shipment to PDVSA, New Boost for South America.

YANTAI, China, June 27, 2014 /PRNewswire/ -- On June 12th, 2014, the first more than 400 sets of cementing and coiled tubing units by Jereh Group (SZ 002353), a world-leading oil and gas equipment manufacturer and engineering services provider, began its shipment to Petroleos de Venezuela SA (PDVSA), and the rest will be delivered before this September. The total amount is up to $190 million.

Signed in January 2013, 970 sets of oilfield equipment, including cementing, acidizing, coiled tubing, and nitrogen are ordered for PDVSA's first oil & gas service business. This project greatly enhances the market recognition of Chinese oil & gas equipment in South America, laying a solid foundation for the in-depth business development.

Although there is only four months left before delivery due to the unsetting situation, Jereh people provide high-quality products by the virtue of strong manufacturing capability including 42 continuous production stations and $33 million spares stock, and mature project control system, exceeding customer expectations as what it always does. It also proves the large project management of Chinese oilfield equipment manufacturing enterprises.

"Besides the 400 sets, Jereh's training team, more than 30 executives, technical, and after-sales engineers will be there for three months professional training to ensure the operation and maintenance," Mr. Jim Wang, Jereh-PDVSA project leader, said. There had been dozens of PDVSA operators coming to Jereh headquarters for systematic training in 2013. On the other hand, Jereh will continue localization to improve services in Latin America by establishing subsidiaries, offices and spare warehouse, thereby strengthening the after-sales system in Venezuela, Mexico, Brazil, Colombia, and Argentina. And American Jereh R&D center in Houston will also provide more timely technical support.

"PDVSA announced this year there will be $24 billion investment to increase oil & gas exploration and more cooperation with big oilfield service companies," said a senior analyst. "As the world's largest stimulation and completion equipment manufacturer, Jereh has been a model of Sino-Venezuela cooperation, which has great significance for the future win-win development."

About Jereh

Jereh, headquartered in Yantai, China, is a worldwide leading company in providing oil and gas equipment and services for drilling, completion, gas purification, transportation, liquefaction, fueling, and engineering services. Leveraging its strong R&D, high-quality production facilities and a global sales network, Jereh has served customers in over 60 countries.

For more information, visit www.jereh.com (http://en.jereh.com/)

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10.5% Yields From Petróleos De Venezuela Sinking Yankee Bonds, Average Life Oct. 2016

When the preliminary numbers for 2013 began leaking in local newspapers last month, the 2014 bonds for Petróleos de Venezuela S.A. (PDVSA) began marching back towards par in anticipation of redemption this October. Considering that many of our clients purchased these (soon to be redeemed) bonds at a substantial discount, we believe the over 10½% yield now indicated in the discounted price of PDVSA's slightly longer 2017 sinking notes is a superior investment opportunity. This slightly longer debt instrument, dated November 2017, bears an 8.5% coupon, but only has an average life of only 28 months because of its scheduled amortization of principal. Although this Yankee note may lack some appeal with many U.S. investors because of the unpopularity and geopolitical risk associated with Venezuela's current socialist government, it does represent the debt of the most highly prized and crucial state owned company within the country's most valuable industry. Here at Durig Capital we have developed our own strict criteria for evaluating lesser rated high yield junk bonds, and as a result of our research as presented in more detail below and in anticipation of PDVSA's 2014 bonds this October, we believe that the high cash flow and over 10½% yields of this note merit a short-term overweighting in both of our high-yielding managed income portfolios, Fixed-Income1.com and Fixed-Income2.com.

Venezuela's Economy

Venezuela remains highly dependent on oil revenues, which account for roughly 95% of export earnings, about 40% of federal budget revenues, and around 18% of GDP. Venezuela is the fifth largest member of OPEC, and is reported to have the world's largest proven oil reserves, surpassing both Canada and Saudi Arabia. However, a lack of technology and limited drilling sees its output at only 31 percent of Saudi Arabia's and its exports at only 22 percent of those of Saudi. GDP growth rose to 6.8% in 2013, while government spending, minimum wage hikes, and improved access to domestic credit continues to cause high inflation - roughly 27% in 2013. The government tightly controls Venezuela's currency, the bolivar. It was devalued in 2013 (officially trading at 6.3 bolivars to the dollar), pushing up prices for most products. Since oil is priced in dollars, a weaker bolivar increases the local value of oil revenues, giving the government more cash.