ConocoPhillips joins the fight over Citgo assets

ConocoPhillips is the latest Venezuela creditor asking a US court to grant its claim over shares of US refiner Citgo's holding company to satisfy an unpaid debt.

ConocoPhillips yesterday asked the US district court in Delaware to allow it to take over shares in PdV Holding, the Delaware-registered subsidiary of Venezuelan state-owned PdV that directly owns Citgo. ConocoPhillips in August 2018 struck a settlement with PdV to recover the $2bn in compensation awarded to the company by the International Chamber of Commerce related to Venezuela's expropriation of the US company's stakes in two Orinoco upgraders in 2007.

ConocoPhillips as of late October had received $750mn under that settlement. But the company told the court that PdV has "failed to perform its obligations under the settlement agreement." Under the term of the settlement, PdV had to make a $500mn initial payment and pay $83.33mn every quarter — more than $900mn to date.

ConocoPhillips is far from the first company trying to seize Citgo. The US refiner, with 750,000 b/d of complex US refining capacity and associated pipelines and terminals, has offered the most lucrative target for Venezuela creditors seeking more than $150bn. More than a dozen companies, bondholders and other entities have filed to have their debts, including arbitration awards for expropriated assets, recognized in US courts.

But ConocoPhillips argues that its claim is superior to most. It argues that the terms of its settlement are directly with PdV, rather than with the Venezuelan government, so it does not need to go through a complicated legal process of proving its claim to PdV assets. Former Canadian mining firm Crystallex, now controlled by investment firm Tenor, successfully argued that Citgo and its controlling holding companies represented an alter ego of Venezuela and PdV. "Unlike those cases, this motion is simple," ConocoPhillips' lawyers said.

But ConocoPhillips' lawsuit also has to contend with litigation brought forward by Wall Street firms and other holders of a PdV 2020 bond backed by a 50.1pc stake in PdV Holding.

Complicating the matter is the political crisis in Venezuela that has muddied the ownership claims to PdV and its US refining assets. Venezuelan National Assembly speaker Juan Guaido's shadow administration has won control over Citgo but no authority over PdV, which is under the control of President Nicolas Maduro's government.

The US administration, which recognizes Guaido as Venezuela's interim leader, has blocked a potential takeover of Citgo by PdV 2020 bondholders until 22 January. The bondholders and the Guaido team are locked in a court battle with the bondholders to have the debt declared invalid.

The US Treasury Department in any case has consistently warned that any claimant to Citgo and other PdV assets must seek authorization from its sanctions enforcement division, Office of Financial Assets Control (OFAC), to enforce liens and judgments transferring Venezuelan property in the US.

ConocoPhillips' lawsuit recognizes that hurdle.

"When the time comes, the court, ConocoPhillips and the other mature judgment creditors of PdV should coordinate any execution on the PDV Holding shares to account for the legitimate interests of the various stakeholders, and should proceed only with the approval of OFAC," the lawsuit said.

Citgo was not immediately available for comment.

A senior member of Guaido's team told Argus that the move came as no surprise and is "logical" from the perspective of ConocoPhillips.

By Haik Gugarats