Conoco to recover $2 billion in agreement with Venezuela

NEW YORK and HOUSTON (Bloomberg) -- ConocoPhillips said it will recover about $2 billion in a settlement pact with Petroleos de Venezuela, the state-owned oil company, for oil assets seized in 2007.

An international tribunal awarded the amount in April for oil-asset seizures carried out by the late president Hugo Chavez. The agreement covers the full amount of that award, according to a statement Monday by Conoco. PDVSA will make initial payments of about $500 million within 90 days, with the balance paid quarterly over four and a half years, Conoco said in the statement.

Conoco said it will suspend its actions against PDVSA in the Dutch Caribbean, where about 16% of Venezuela’s crude exports are stored before shipping to the U.S., China and India. The pact comes days after Venezuela President Nicolas Maduro devalued the bolivar to trade nearly in line with the black market exchange rate. He’s also moving to remove some gasoline subsidies and raising the value added tax.

The deal “brings Conoco one step closer to a full resolution for this settlement and removes some doubt around the timing and amount Conoco might recoup," Scott Hanold, an RBC Capital Markets analyst, said in a note Monday. “We are increasingly optimistic the company will successfully recover the full amount."

Conoco shares rose less than 1% to $70 at 8:08 a.m. in New York trading. For Conoco, the settlement could help the Houston-based driller accelerate share buybacks -- a key demand of investors -- and fund increased capital spending on its drilling budget, Bloomberg Intelligence analysts Fernando Valle and Jonathan Mardini said in a Monday research note.

Since May, the U.S. producer has relentlessly pursued PDVSA in courts across the globe, in a bid to force the Venezuelan oil giant to pay the arbitration award. Conoco filed attachment orders freezing PDVSA assets in the Caribbean and is seeking to depose PDVSA’s U.S. refinery Citgo Petroleum Corp.

Conoco was also seeking to intercept potential proceeds from a lawsuit filed by PDVSA in U.S. courts against oil traders who have allegedly defrauded the company.

The legal war waged by Conoco, in addition to U.S. sanctions, has hampered PDVSA’s ability to export crude oil, the commodity that bankrolls the Maduro regime. After an international tribunal in April awarded Conoco $2.04 billion for oil-asset seizures carried out by Chavez, the company moved to take over Venezuelan oil facilities on the Caribbean islands of Bonaire, Curacao, St. Eustatius and Aruba.

The $2 billion represent about a quarter of Venezuela’s international reserves held at the central bank. The oil producer is behind on $6.1 billion of bond payments to creditors and a judge in Delaware recently granted Canadian miner Crystallex the ability to seize shares of U.S. refiner Citgo that are held by a Venezuelan parent. The court decision is being appealed.