President Donald Trump may have changed the trajectory of Venezuela and the broader geopolitical landscape forever when his administration directed U.S. soldiers to seize Venezuelan President Nicolás Maduro and transport him back to the U.S. to face criminal charges. Delcy Rodriguez, Maduro's vice president, has become the interim leader, but Venezuela's future remains unclear.
A big part of Trump's plan is to have U.S. oil companies go into Venezuela and revitalize the industry, which reportedly holds the largest reserve of crude oil yet only exports less than 1% of global oil supply today. While the risks are significant, here are three U.S. oil stocks that could benefit from a renewed oil sector in Venezuela.
Image source: Getty Images.
1. Chevron: Best positioned
The most obvious beneficiary is Chevron (CVX +3.15%), the sole U.S. oil company with operations in Venezuela. In 2007, former Venezuelan President Hugo Chávez aggressively forced many oil companies operating in the country at the time to renegotiate their oil project contracts with the government on unfavorable terms. Many failed to strike a deal and left the country.
However, according to a 2007 Reuters article, Chevron, along with foreign oil companies such as Statoil (now Equinor ASA), BP, and TotalEnergies SE signed contracts with the Chávez regime, allowing the Venezuelan government to increase their stake to as much as 83% in oil projects worth $30 billion. Since then, however, Equinor and TotalEnergies have left the country.
NYSE: CVX
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Chevron has successfully navigated the complex international relations between the U.S. and Venezuela, maintaining operations in the country. In fact, Chevron currently produces about 20% of the country's current oil production.
Chevron holds a license from the Office of Foreign Assets Control that allows it to continue participating in joint ventures with Venezuela's state-owned oil company, Petróleos de Venezuela. Under this license, Chevron is prohibited from launching new oil projects or significantly increasing production from current levels. The money Chevron makes in the country is not to benefit the state oil company or the country.
With Trump pushing to get U.S. oil companies involved again, Chevron is clearly the best-positioned company, given its 3,000 employees in the country, existing infrastructure, and a clear understanding of how the country and its oil sector operate.
Now, many risks remain, given the uncertainty in the country's political and geopolitical landscape right now. Management will have to weigh the risks and rewards of investing heavily to update the country's oil infrastructure, but if you are going to bet on a U.S. oil stock reaping the rewards of more oil production in Venezuela, Chevron is the most clear-cut play at this point.
2. ConocoPhillips: Owed at least $10 billion by the Venezuelan government
Houston-Texas based ConocoPhillips (COP +2.67%) is one of the U.S. oil companies that failed to come to terms with the Chávez regime in 2007. The company left the country and said it would have to write down $4.5 billion after losing oil assets in Orinoco, one of the longest rivers in South America, and another smaller project.
ConocoPhillips sued the Venezuelan government in international arbitration courts and won various cases, entitling it to $10 billion in claims, only a fraction of which have been paid. Venezuela is not in the best financial position, having already defaulted on roughly $60 billion in bonds. However, the company's chances of getting paid back have increased, given what Trump is saying publicly about Venezuela.
NYSE: COP
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While it's likely premature to say whether ConocoPhillips will reenter the country, the company has been mentioned by various media outlets that have reported on the Trump administration's plans to meet with oil companies about the future of Venezuela. Given that the company has operated there in the past, it is a potential candidate to re-enter the country if the Trump administration can convince it, or make a deal that the company feels confident in.
3. ExxonMobil: Can benefit in a few ways
ExxonMobil (XOM +1.78%) is another company that left Venezuela in 2007, due to similar circumstances as ConocoPhillips. The company is owed approximately $1 billion by the Venezuelan government and has been named by various media outlets as a company with which the Trump administration will hold discussions.
NYSE: XOM
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Interestingly, ExxonMobil also has a significant oil presence in Venezuela's neighbor, Guyana, which has become a new international hub for oil companies, and reportedly holds 10 billion barrels of oil. The two oil-rich countries have had some major dust-ups in recent years, and Venezuela even breached international maritime agreements last March when it entered waters under Guyana's control.
Experts believe that with Maduro gone, Guyana should face less of a threat from Venezuela, potentially making oil project investments less risky in the country. This, in turn, should make ExxonMobil's operations less risky.
