- ConocoPhillips is the largest creditor in a U.S. court auction for Venezuela-owned Citgo Petroleum
- The oil producer submitted a credit bid using its claims instead of cash, according to Reuters
- Other bidders also tried to apply their claims in bids, which could reduce the cash available for other creditors
- Citgo is valued at about $12 billion, but its shares could fetch less due to legal risks and market conditions
- Citgo operates a large oil refining network in the U.S. and supplies fuel to thousands of gas stations
Citgo Petroleum, a Houston-based oil refiner owned by Venezuela’s state oil company PDVSA, is at the center of a historic case to settle Venezuelan debts. The South American nation has defaulted on billions of dollars of bonds, and expropriated assets from foreign companies, including ConocoPhillips.
Conoco’s Claim
ConocoPhillips is the largest creditor in the case, with a $12 billion claim from an arbitration award over the nationalization of its oil projects in Venezuela. The company is been pursuing Citgo’s assets as a way to collect on its award, which Venezuela has not paid..
ConocoPhillips has a long history with Venezuela, dating back to the 1990s when it invested in several oil projects in the South American country. However, in 2007, Venezuela nationalized ConocoPhillips’ assets, along with those of other foreign oil companies, without paying fair compensation. ConocoPhillips sued Venezuela in international arbitration courts and won awards totaling about $12 billion.
But collecting the money from Venezuela has been a challenge, as the country has been suffering from economic and political turmoil, sanctions, and debt defaults. ConocoPhillips has tried to seize Venezuelan oil assets and shipments around the world, but with limited success.
ConocoPhillips saw an opportunity when a U.S. court ruled in 2018 that Citgo could be seized and auctioned to satisfy Venezuela’s debts. Citgo is one of the most valuable assets that Venezuela still owns abroad, and ConocoPhillips is its largest creditor. Citgo could be valued at about $12 billion, but shares may ultimately fetch only half that amount.
ConocoPhillips Using its Claims to Bid
According to Reuters, ConocoPhillips submitted a credit bid using its claims in lieu of cash, in the first round of bidding that ended on January 22. This means that the company would not pay any money upfront, but rather use its arbitration award as a credit to acquire Citgo’s assets. This way, ConocoPhillips can reduce its exposure to Venezuela’s default risk and potentially acquire a valuable asset at a discount.
ConocoPhillips is also a surprise bidder because it exited oil refining 12 years ago when it spun off Phillips 66. It was unclear whether the credit bid was placed with another company or intended to secure Citgo assets that could be broken off.
In addition to ConocoPhillips, energy companies Chevron, Reliance Industries, Koch Industries and Valero Energy, and at least one activist investor have expressed interest in the sales process, according to people familiar with the matter.
Everyone Else
Credit bids by ConocoPhillips and others could have significant implications for other creditors who are trying to recover their money from Venezuela. If ConocoPhillips’ bid is approved by the court, there could be little or no cash left to distribute among the other creditors, who have claims totaling $21 billion.
This could spark legal disputes and appeals that could delay or derail the auction process. Some creditors might also try to block or challenge the sale of Citgo on national security or humanitarian grounds, as Citgo supplies fuel to millions of Americans and supports humanitarian programs in Venezuela.
Citgo and its Employees
Citgo is one of the largest oil refiners in the U.S., with a capacity of 807,000 barrels per day across three refineries in Illinois, Louisiana, and Texas. The company also owns interests in pipelines and terminals, and supplies fuel to about 4,200 independent gasoline outlets in the U.S.
The outcome of the auction could have implications for jobs and employment in the U.S. oil sector. Citgo employs about 3,400 people directly and supports about 46,000 jobs indirectly through its operations and supply chain, contributing more than $12 billion annually to the U.S. economy. The company also contributes to various social and environmental causes in its communities.
Citgo has been profitable and well-managed despite its ownership troubles, but it faces competitive pressures from other refiners, environmental regulations, and changing consumer preferences. It also faces potential lawsuits from Venezuela or its allies if they regain control of PDVSA or challenge the legitimacy of the auction.
The potential buyers of Citgo have different profiles and strategies that could affect their plans for Citgo’s workforce and assets. For example, Chevron is already a major refiner in the U.S., while Reliance is an Indian conglomerate with interests in energy, telecoms, retail, and media. Koch Industries is a private company with diverse businesses ranging from chemicals to agriculture. Valero is an independent refiner that operates 15 refineries in the U.S., Canada, and the U.K.
Career Opportunities
ConocoPhillips offers diverse career opportunities across various fields, including business, engineering, geosciences, and more. They provide internships for university students and actively recruit transitioning military personnel.
CITGO offers a wide range of career opportunities for everyone from recent graduates to seasoned professionals. For now, at least.
If you are interested in working for ConocoPhillips or Citgo, you can visit their websites for more information and current job openings.