NEW YORK, Jul 25, 2007 (Dow Jones Commodities News)
U.S. energy major ConocoPhillips (COP) said Wednesday it still was in discussions with Venezuela over compensation for stakes in crude-oil projects it ceded to the state-owned oil company there.
"We continue negotiations with the Venezuela government concerning appropriate compensation for the expropriation of the company's oil projects and have preserved all legal rights, including international arbitration," ConocoPhillips said in a press release disclosing second-quarter earnings.
Conoco Chief Executive Jim Mulva, addressing analysts on a conference call, declined to engage a discussion on how the company might follow through on an arbitration case, a plan it has discussed as a possibility. Mulva said the "overriding thrust" of company efforts now is to reach an agreement and that he won't comment further out of "sensitivity" to that process.
Conoco ultimately decided to leave Venezuela, because it concluded it could earn a better return for shareholders by seeking compensation than by agreeing to the new terms sought under President Chavez, Mulva said. The company earned $93 million in profits in Venezuela in the second quarter, he added.
Conoco earned $808 million in earnings from Venezuela in 2006, according to a report by investment bank UBS.
Conoco's statements Wednesday echo the stance in June, when the Houston-based company decided to leave the oil-rich Orinoco river basin. State-owned Petroleos de Venezuela SA (PVZ.YY) took control of four projects in the Orinoco belt, which produces low-quality crude that's expensive to process.
Exxon Mobil Corp. (XOM) also decided to abandon the Orinoco basin, while other global energy companies agreed to Venezuela's new terms.
Of the six oil majors active in the area, Conoco was the most exposed to Venezuela, with its 50.1% stake in Petrozuata, 40% stake in the Ameriven, or Hamaca, heavy-oil project.
In the second quarter, Conoco registered a $4.5 billion impairment related to the loss of the projects. This caused the company's net income to plunge 94% to $301 million compared with the same period in 2006.
Copyright (c) 2007 Dow Jones & Company, Inc.
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