Thursday - October 19, 2006

Chavez Bites Big Oil

Our favorite South American tinpot dictator is grabbing American, French and Norwegian oil companies in Venezuela. It’s going to cost him beaucoups cash though. Maybe he feels it’s worth it to get rid of the “devil yanquis”?

Regardless, it looks like Citgo will be the only presence left now. I noticed last week that several Citgo stations here in St. Louis are refusing to take Citgo credit cards with the explanation that they will be “re-branding soon”.

I guess that means they’ll still Citgo gas but call it something else. Maybe Hugo Supremo? ChavCo? Vexxon? My mind is awhirl with all kinds of new advertising slogans. Help me out here ...

Chavez Risks $1.6 Billion Bond Default in Oil Venture Takeovers
_{(BLOOMBERG) - October 16, 2006}

Venezuelan President Hugo Chavez’s plan to take control of oil production joint ventures run by Exxon Mobil Corp. and ConocoPhillips may lead to defaults on $1.6 billion in bonds.

Chavez said his government would seize four companies owned in part by Exxon, ConocoPhillips, Chevron Corp., France’s Total SA and Norway’s Statoil ASA. The ventures, set up before Chavez came to power in 1999, pump 22 percent of the nation’s oil. Two of them sold the bonds and the others owe $2.3 billion in loans.

Defaults may require state-run Petroleos de Venezuela SA to repay bonds that now cost as little as 90 percent of their face value, providing a “nice windfall’’ for investors, said Miguel Octavio, a fund manager at BBO Financial Services in Caracas who holds the securities.

“You would have a completely different project than the bondholders originally agreed to finance,’’ said Gersan Zurita, an analyst in New York with Fitch Ratings. “What the government wants would constitute a major material change. If it’s done without private bondholder consent, we could have a default.’’

The ventures—Petrozuata CA, Cerro Negro CA, Sincor SA and Hamaca—pump 540,000 barrels of crude a day for the world’s fifth-largest oil exporter. Irving, Texas-based Exxon; ConocoPhillips of Houston; San Ramon, California-based Chevron; and others invested about $17 billion in the companies in the 1990s when oil prices were as low as $10 a barrel. Spokesmen for the companies either declined to comment or didn’t return calls.

Petrozuata, 50.1 percent owned by ConocoPhillips, sold $1 billion in bonds in three parts. Its $625 million of 8.22 percent bonds due in 2017 have risen to 97.8 cents from 95 cents on the dollar a year ago, according to data compiled by Bloomberg. If the bonds are paid in full by year-end, they would generate a price gain of 2.25 percent, Bloomberg data show.

Cerro Negro, run by Exxon, has $600 million in outstanding bonds, also in three maturities. The company’s $50 million of 8.03 percent bonds due in 2028 would gain about 11 percent if repaid at face value. The securities were recently trading at about 90.12 cents on the dollar.

Petroleos de Venezuela and Exxon each own just less than 42 percent of Cerro Negro, and BP Plc has the balance. Sincor, whose foreign shareholders include Paris-based Total and Statoil, in Stavanger, has $1.2 billion in outstanding loans, while Hamaca has $1.1 billion in loans. Hamaca is owned by ConocoPhillips, Chevron, and Petroleos de Venezuela.

Posted by The Skipper     on 10/19/2006 at 11:02 AM   
Filed Under: • Latin-America •  
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It's been a long strange trip without you Skipper, but thanks for pointing us in the right direction and giving us a swift kick in the behind to get us going. Keep lookin' down on us, will ya? Thanks.

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