Just 17 days before the United States announced a fresh round of sanctions against Venezuela, two American drilling executives stood in the presidential palace alongside President Nicolas Maduro. CEO Todd Swanson and general counsel Brent Mills were there to sign a memorandum of understanding between their little-known drilling company, Horizontal Well Drillers, and Venezuela's state-owned oil company, Petroleos de Venezuela S.A. Swanson, who once served on the board of Massey Energy for Dan Loeb when he worked for Loeb's hedge fund Third Point, made a speech at the event.

"I first came to Venezuela in 1996, and I immediately fell in love with the country because of the spirit of the people and the physical beauty of the landscape," Swanson said. "And we are pleased to be working closely with you to help expand oil production in Venezuela and help it become one of the largest oil producers in the world." Swanson even shook Maduro's hand.

Horizontal Well Drillers CEO Todd Swanson signs a memorandum of understanding with Venezuela’s state-run oil company as President Nicolás Maduro looks on. Source: PDVSA

The timing of the deal is curious considering the country is on the verge of economic collapse. Numerous corporations have stopped doing business there. More than 20 have filed cases against the Venezuelan government at the World Bank after their assets were seized by the socialist government. And when it comes to oil, Venezuela's most important sector, the country is struggling to pay its bills — issuing promissory notes because it can't come up with the cash. According to their latest quarterly reports, Halliburton has $429 million in outstanding bills; Schlumberger has about $700 million. Baker Hughes has $100 million in receivables and inventory at risk in Venezuela. And the red flags don't end there. PDVSA is also at the center of an ongoing bribery investigation by the U.S. Department of Justice. In October, Florida businessman Fernando Ardila Rueda pleaded guilty to his role in paying bribes to employees at PDVSA. Rueda is just the latest of 10 individuals who have pleaded guilty in the DOJ's investigation, raising questions about doing business with PDVSA without violating the Foreign Corrupt Practices Act, which prohibits U.S. companies from engaging in corrupt activities in foreign countries.

Horizontal Well Drillers employees work on one of the company’s rigs in Purcell, Oklahoma. Source: CNBC

It's not illegal for an American company to drill in Venezuela. But why would a small Oklahoma firm want to do business in Venezuela, when many companies think the best option is to get out? For weeks the company declined to answer any questions. When a CNBC investigative team showed up in Oklahoma and started knocking on the doors of Horizontal Well Drillers' executives and former executives, the company finally agreed to answer questions via email. In that statement, the company said it has a deal to drill nearly 200 wells in the Carabobo area of the Orinoco heavy oil belt, a region that is home to some of the world's largest oil reserves. Horizontal Well Drillers noted, too, that it has a Master Services Agreement in place with oil services company Halliburton to provide drilling tools and equipment. Texas-based Halliburton confirmed its participation in this agreement. Horizontal Well Drillers says it is "uniquely qualified" to take on this project because its drills are "well suited" for the geologic formations found in Venezuela's Orinoco oil belt. The company credits its rigs' large capacity and small footprint for allowing it to drill in difficult-to-reach areas. Pedro Burelli, a former member of PDVSA's board who opposes the current Venezuelan government, isn't buying it. He said he has never seen a deal like this awarded to a company like Horizontal Well Drilllers. "I'm not questioning their ability to do small jobs. I'm just questioning their credentials to do large jobs," Burelli said. "I'm questioning their financial whereabouts to guarantee the work that they're doing. And definitely, I'm questioning their managerial talent to operate in an environment like Venezuela." An environment, he says, where equipment theft is rampant and corruption is prolific. In its statement to CNBC, Horizontal Well Drillers said the company takes compliance with U.S. sanctions and the Foreign Corrupt Practices Act very seriously. While the company may be physically equipped to take on this deal, its financial backing raises more questions. According to a press release from PDVSA, the deal requires the companies to provide the upfront investment capital for the drilling. Paperwork filed with the Oklahoma County clerk shows the company has been financed, at least in part, by Callidus Capital, a Canadian firm that provides "funding solutions to companies that cannot access traditional lending sources." Court filings show Callidus is suing a former employee because that employee "allowed Horizontal to create a letter on forged Callidus letterhead, purporting to make financial commitments on behalf of Callidus" to provide to Venezuelan government officials comfort that Horizontal would be able to meet its financial commitments. Horizontal Well Drillers told CNBC it did not create a fake letter and that it is not a party to the Canadian litigation. Callidus and the attorney for the former employee, who is disputing the allegations, declined to comment on the litigation. As a private company, Horizontal Well Drillers declined to comment further on its finances. Callidus declined to clarify whether or not it is still providing capital to the Oklahoma company. Horizontal Well Drillers' executives did explain why they attended the lavish signing ceremony in Caracas: The company said it was required by the Venezuelan government. Burelli said he's not surprised. He thinks Maduro used the two executives as props.

A photo tweeted by PDVSA shows PDVSA President Nelson Martínez (left), Chevron President for the Americas and Africa Clay Neff, Venezuelan President Nicolás Maduro and Venezuelan Vice President Tareck El Aissami meeting in Caracas, Venezuela. Source: PDVSA