COMPANY MEETING
VENEZUELAN OIL CONCESSIONS
GREATER PRODUCTION ACTIVITY INTENSIVE DEVELOPMENT
THE twenty-third ordinary annual general meeting of the Venezuelan Oil Concessions, Limited, was held on Monday, June f2th, at Winchester House, E.C.
Sir Andrew Agnew, (the chairman), presided, and in the course of his address, said: I am sure that it is your wish that the meeting should record our appreciation of the services rendered to the company by Lord Bearsted, who was chairman since 1924, and who has tendered his resignation as a director of the company, to take effect from December 31st, 1938. I will now review the profit and loss account, and in so doing must ask you to have the exchange factor clearly in mind. On the credit side of the account the first item, Oil Proceeds and Value of Oil Stock, shows an increase of £1,150,000, being £6,450,000 for 1938 compared with £5,300,000 for 1937. This increase is largely attributable to the greater quantity of oil produced and sold. Turning now to the expenditure side we find marked increases in 1938 compared with 1937. This general increase is due to the greater production and adverse Bolivar exchange] and also to the very considerable additional labour costs. Drilling, Production and Field Expenses are £3,406,000, against £2,440,000 in 1937. In continuation of the policy adopted in recent years, a further addition of £250,000 has been made to the Exploration and General Reserve, bringing this to a total of £L00o,000. This reserve, as you are aware, has been created as a provision against the cost of exploration and development work carried out by the Venezuelan Oil Development Company, Limited, our one-third participation in which now appears in the balance-sheet for the first time at £535,000, representing our share of the expenditure to December 31st, 1938.
With regard to the various increases which took place in our expenditure last year, apart from the normal rise associated with the highest annual production in the company's history, these in- creases will have come as no surprise to you, in view of the ex- change factor and the warning as to special costs which the chairman gave you at our last meeting. A large proportion of the increased expenditure is brought about by measures designed to advance the welfare of our employees and to contribute to the betterment of conditions on the Fields generally.
In view of our very much increased expenditure it is fortunate that we were again able to increase our output lost year and to find a .ready market for it through our association with the Royal Dutch Shell Group.
DEVELOPMENT POLICY
As regards present operations, our intensive development carried out last year, including the bringing into production of the im- portant new Bachaquero field, resulted in our building up a con- siderably increased potential production. This has enabled the development programme to be decreased, and we are at present operating a total of six strings of tools, compared with twelve strings at the date of our last meeting, and here we may look for appreciable economies.
FUTURE PRODUCTION Our production during 1938 was about 15 per cent. above that for 1937. After this increase, which, of course, represents a greater proportional rise than the general growth of consumption, the present year is intended to be one of consolidation rather than of further expansion. Your directors are of the view that for the present a policy of maintenance of approximately last year's pro- duction rate is desirable rather than further expansion, which would necessarily involve additional heavy expenditure and would hardly be justified in the light of present conditions in the oil industry and generally.
For several years past the total crude oil production of the world has been in excess orthe total concurrent demand. This surplus crude oil has served to increase the stocks held by the various operating companies, and while it is logical to have somewhat larger stocks than previously, in line with the increasing magnitude of the oil industry and in view of the uncertain conditions maintaining in the world, care must be taken to ensure that this tendency is not overdone.
In the case of last year an important feature was the fact that the world's oil consumption, which in previous recent years has been increasing on average by some 8 per cent. annually, showed no appreciable increase in 1938 as compared with 1937. It is even possible that there was a slight decrease the doubt being occasioned by the fact that reliable statistics regarding Russia are not available. This pause in the upward trend of oil consumption is all the more noteworthy in view of the large quantities of oil products which have recenly been absorbed by various Governments in connection with their rearmament programmes. It can only be accounted for by the general uncertainty created throughout the world by the political conditions which we have recently been experiencing, which have recently been absorbed by various Governments in connection degree which has more than offset the abnormal demand which has been engendered. You will, of course, appreciate that this company must shape its policy in conformity with broad trends, and until general conditions become more stable it would not seem justified to count upon resumption of the rapid rate of expansion in the use of oil products to which we have become accustomed.
The report was adopted.
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