ConocoPhillips, Houston, (NYSE: COP) reports that it was unable to reach an agreement with the Venezuelan government concerning its reorganization into an Empresa Mixta structure mandated by Venezuela decree.
Pursuant to the decree, state-owned Caracas, Venezuela-based Petróleos de Venezuela SA (PDVSA) will directly assume activities associated with ConocoPhillips' interests in the Petrozuata and Hamaca heavy-oil ventures and the offshore Corocoro development project.
Negotiations are continuing between ConocoPhillips and Venezuela, and the company expects to receive US$4.5-billion impairment of its oil project interests in Venezuela (before and after-tax) in its second-quarter. The company has preserved all legal rights including international arbitration.
Prior to the expropriation, ConocoPhillips held a 50.1% interest in Petrozuata, a 40% interest in Hamaca, and a 32.5% interest in Corocoro. Production in the first quarter from Petrozuata and Hamaca was approximately 82,000 net barrels of oil per day. Proved reserves as of Dec. 31 were 1.1 billion barrels of oil equivalent.
According to news reports, ExxonMobil Corp., Irving, Texas, (NYSE: XOM) and Petro-Canada, Calgary, (Toronto: PCA; NYSE: PCZ) have also abandoned their Venezuelan claims.
Standard & Poor's Ratings Services reports the loss of the Venezuelan assets does not affect the company's rating of A-/Positive/A-2.
Standard & Poor's credit analyst Ben Tsocanos says, "While the loss of Venezuelan operations without compensation is clearly unfavorable for the company, current strong commodity prices should allow ConocoPhillips to achieve its near-term goals, including funding its capital budget and meeting debt reduction targets, despite the loss of cash flow."
He adds that the impasse increases the likelihood that the company will exit the country entirely, and that Venezuela represents about 10% of ConocoPhillips' total oil and gas reserves and about 4% of its production.
Consolidated AGX Resources Corp., Vancouver, (Toronto Venture: PEG) has acquired 75% of the shares of Colombia-based Rubiales Holdings Ltd. for an undisclosed price.
Consolidated has changed its name to Petro Rubiales Energy Corp.
Rubiales Holdings' subsidiary Meta Petroleum Ltd. is an oil and gas operator with assets in the Llanos Basin in Colombia. Meta Petroleum holds interest in three hydrocarbon properties with Colombia-based, state-owned Ecopetrol SA, including the Rubiales, Piriri and Quifa blocks.
Production is more than 18,500 gross barrels of oil (5,000 net) per day from its Rubiales and Piriri association contracts.
Pacific Stratus Energy Ltd., Toronto, (Toronto: PSE) has been awarded blocks 135, 137 and 138 in Peru from Lima, Peru-based Perupetro for an undisclosed price.
The blocks total 1.9 million hectares in the Maranon Basin. The commitments for the first exploration phase include regional studies and seismic acquisition. Upon the successful completion of the first phase, the company has the option to continue the program with additional seismic acquisition and drilling one well per block.
Pacific Stratus chief executive Jose Francisco Arata says, "The Maranon Basin is a well-known, prolific hydrocarbon-bearing area with very attractive geological prospects and access to the Pacific Ocean and the growing Asian markets. Peru is a stable democracy, with a business-friendly government, offering very attractive legal and fiscal terms."
PetroFalcon Corp., Caracas, Venezuela, (Toronto: PFC) plans to acquire Lundin Latina de Petroleos SA (Lundin Venezuela), a subsidiary of Lundin Petroleum AB, Stockholm, Sweden, (OMX: LUPE) for US$41 million in stock.
Lundin Venezuela owns 5% of Baripetrol SA, a joint venture between Venezuelan state-owned Petroleos de Venezuela SA, Tecpetrol and Perenco. Baripetrol operates the Colon Unit in western Venezuela. Gross production is 10,500 barrels of oil and 5 million cubic feet of gas per day. Gross proved and probable reserves as of Jan. 1 were 61 million barrels equivalent.
Lundin Petroleum will hold approximately 40% of PetroFalcon on a fully diluted basis and become its primary shareholder. It will nominate two representatives to join the PetroFalcon board.
PetroFalcon chairman and chief executive Juan Francisco Clerico says, "Through this transaction, we are continuing our expansion in Venezuela, and we are gaining a strategic shareholder committed to further expansion in the region."
Nanes Delorme Capital LLC is financial advisor to PetroFalcon.
Nanes Delorme managing director Julien Balkany says, "The transaction should be extremely well received by the international financial community, being the first asset-based transaction completed since the (Hugo) Chavez administration implemented the new joint-venture with PDVSA known as 'Empresa Mixta'. It is significant because it shows that international exploration and production companies can still benefit by investing or returning to Venezuela."
The deal is expected to close later this year.
Total SA, Paris, (NYSE: TOT; Paris: FP) and Statoil ASA, Stavenger, Norway, (NYSE: STO; Oslo: STL) have renegotiated its contact for its Venezuelan operating company Sincor with state-owned Caracas, Venezuela-based Petróleos de Venezuela SA (PDVSA).
Sincor will now be a mixed company. Total's interest has been reduced from 47% to 30.32%, and Statoil's has been reduced from 15% to 9.7%. PDVSA's has increased from 38% to 60%. This change is due to recent Venezuelan decree on transforming strategic joint ventures in the Faja region, known as the Orinoco Belt. The agreement also indemnifies the payment that that will be paid to Total that was determined after a negotiation based on the value of the assets.
The Sincor project comprises the upstream development of the Zuata extra-heavy oil field in the Orinoco Belt and the downstream upgrading of the oil in a dedicated facility. Sincor's production capacity is around 200,000 barrels per day of extra-heavy oil, corresponding to 180,000 barrels per day of synthetic crude following upgrading.
Total also has interests in the Yucal Placer project (69.5%) and the offshore Plataforma Deltana Block 4 (49%). Total's net production in Venezuela is 96,000 barrels per day.
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