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ConocoPhillips: Victory

Mar. 11, 2019 10:10 PM ETConocoPhillips (COP)7 Comments

Summary

  • The management team at ConocoPhillips announced that an international court ruled in its favor over Venezuela, awarding it $8.7 billion plus interest.
  • This move may seem meaningless given the country's financial condition, but a deal struck last year seems to be working out alright.
  • An alternative for management might be to seize assets outside of Venezuela's territory, but there could be many hands in the pot there.
  • Even some sizable cash amounts will create real value for shareholders, even if the full payment isn't made or is made over a long period of time.
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ConocoPhillips (NYSE:COP) is in for a big payday… possibly. The management team at the massive oil and gas firm announced that it had struck a major win in its legal fight to receive compensation from Venezuela related to assets the country seized from it in 2007. Following a similar ruling last year, this ruling sets the company up to benefit from cash payments owed to it, but investors anticipating a quick and easy payday for the firm may end up waiting. Any cash or assets management can seize in response to this ruling will add real value to the firm, and as we have seen in the past, payment over an extended period of time is possible and, if it occurs, will benefit investors in the long run.

A look at the news

According to the management team at ConocoPhillips, the company received a favorable ruling from an international arbitration tribunal set up under the International Centre for Settlement of Investment Disputes wherein Venezuela will owe ConocoPhillips $8.7 billion in cash, plus an unspecified amount of interest. As an early player in helping Venezuela develop what has, at times, been considered the largest oil reserves out of any country in the world, the firm seemed to be in a good position to capitalize on its exposure to the region until the government, in a wave of nationalizations, seized the assets entitled to the business back in 2007. These assets consisted of heavy crude investments in the Hamaca and Petrozuata projects, as well as the offshore Corocoro development project.

As I have written about before, the state of Venezuela’s economy is horrible and only getting worse. By some accounts, the country could be considered either fully collapsed or in the process of collapsing, and with the Guaido faction having gained legitimacy in various countries (including the

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This article was written by

Daniel Jones profile picture
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Daniel is an avid and active professional investor.

He runs Crude Value Insights, a value-oriented newsletter aimed at analyzing the cash flows and assessing the value of companies in the oil and gas space. His primary focus is on finding businesses that are trading at a significant discount to their intrinsic value by employing a combination of Benjamin Graham's investment philosophy and a contrarian approach to the market and the securities therein. Learn more.

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Comments (7)

c
Ocasio-NoCortex should be dispatched to Caracas to right the ship of state, then and only then can we hope to recover what is owed!
v
They should try to claim Citgo in the courts. Unlikely they’ll get that money ever as VZ is collapsing. $8.7b plus their cash on hand pretty much pays their entire debt off. We know they’ll do more dumb buybacks anyways but this would still be great!
j
How do you get blood out of a turnip is the question of the day for all who have claims on Venezuela's assets.
d
They’ve still got the terminals in the ABC’s and Citgo. That’s it. Everyone is going to get out the knives and carve the turkey. Fun fun.

Socialism. Gotta love it! As far as the people of Venezuela go, they elected the turds that got them where they are. They wanted free shit, they all waved flags when the criminals stole Conoco’s property. Oh well. Maybe they’ll know better than to vote socialist next time. If they do then they’d be smarter than we are, and smarter than the Europeans.
Daniel Jones profile picture
I'm not sure how 'socialist' the US or Europe is. Quite a bit removed from what Venezuela has been. That said, I'm not sure about the election aspect either. Certainly the people of Venezuela who did vote for Chavez and Maduro after him are paying the price, but it's my understanding that the elections may not have been legitimate. If that's true, it's tough to blame the people of Venezuela for their current predicaments.
p
The first election of Chavez may have been legit. Started the whole mess.
Fangorn profile picture
They could always go for Venezuela's GOLD being held by Bank of England as a starter, and go for the other 50% of Citgo not covered by the bond holders collateralisation clauses.

hTTps://uk.reuters.com/article/us-venezuela-gold/venezuela-gold-holdings-in-bank-of-england-soar-on-deutsche-deal-sources-idUKKCN1PF1Z8
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