ConocoPhillips Aims to Maintain Creditor Priority in Citgo Auction

ConocoPhillips Takes Action in Citgo Share Auction

ConocoPhillips (NYSE: COP) is actively working to ensure its position as a top creditor in the auction of Citgo Petroleum shares. This auction aims to generate cash for Venezuela's outstanding foreign debts, with Citgo being the sole asset of PDV Holding, which a U.S. court has determined is liable for these debts.

Understanding the Stakes Involved

The auction has significant implications, with numerous creditors aiming to recover an estimated $21.3 billion. Conoco’s recent court filing strives to protect its interests amid competing claims from holders of Venezuelan bonds and notes attempting to shift their positions ahead of other creditors.

Legal Maneuvers by ConocoPhillips

ConocoPhillips is seeking writs of attachment against the shares of Citgo Holding, asserting the priority order previously established in court. This motion highlights the complexity and urgency surrounding the financial dealings of Citgo, especially given the substantial claims by various creditors.

Citgo’s Relationship with Venezuela

In 2019, Citgo distanced itself from its parent company, PDVSA, a state-owned entity in Caracas, while still maintaining U.S. subsidiaries such as Citgo Holding and PDV Holding. This separation further complicates matters as it involves international and domestic financial laws amidst Venezuela's economic challenges.

Potential Outcomes of the Auction

The upcoming auction is expected to finalize within a few months, with a conditional bid of up to $7.3 billion already proposed, though this figure may represent only a fraction of total claims. Conoco has multiple arbitration claims already recognized by Delaware, ensuring its chances of recovery remain strong.

Conoco's Strategic Moves

In addition to pursuing auction proceeds, ConocoPhillips is also requesting payments from a natural gas project involving PDVSA, Shell, and the National Gas Company of Trinidad and Tobago. The U.S. Treasury Department has granted Conoco a license to pursue these payments, which could offer further financial recovery for the company.

Underlying Legal Challenges

Conoco's legal strategy also acknowledges the risk posed by those challenging the status of PDV Holding in relation to PDVSA and Venezuela's government. The attempt to classify PDV Holding as an alter ego of PDVSA could significantly impact the distribution of property based on court decisions.

Conclusion: A Complex Financial Landscape

The developments surrounding the Citgo auction reflect a broader context of financial turmoil and strategic maneuvering among creditors of Venezuela. ConocoPhillips is at the forefront of this struggle, working diligently to safeguard its financial interests and maintain its priority status as a significant creditor.

Frequently Asked Questions

What is the purpose of the Citgo auction?

The Citgo auction aims to generate funds for settling Venezuela's substantial foreign debts, with proceeds potentially divided among various creditors.

Why is ConocoPhillips focused on this auction?

ConocoPhillips seeks to maintain its priority as a creditor, ensuring it recovers the maximum possible amount from the auction proceeds.

What are the recent actions taken by ConocoPhillips?

Conoco has filed a court motion to secure its creditor status and is also pursuing payments from related natural gas projects.

How does the relationship between Citgo and PDVSA affect the auction?

Citgo's recent separation from PDVSA complicates the auction process, particularly in terms of legal claims and creditor recovery.

What could be the outcome of the auction?

The auction's outcome is uncertain, but it is anticipated to provide only a fraction of the total claims due to the extensive debts involved.

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