American Energy Corporation ConocoPhillips has reportedly settled on a payment agreement of $2 billion with Venezuela’s PDVSA. The settlement has brought to rest the disputes between the two corporations that apparently restrained the state-run PDVSA from exporting oil from its primary Caribbean plants.
The dispute dates back to over a decade, during the nationalization of Conoco’s assets, when a court ruling required PDVSA to pay up capital to Conoco. With no payments issued by PDVSA however, Conoco went on to seize most of the Caribbean assets belonging to PDVSA.
According to spokesman Daren Beaudo, the agreement will suspend the legal enforcement on PDVSA, as long as it makes regular payments. However, Beaudo refused to confirm any speculation regarding the method of payment.
PDVSA has apparently affirmed the agreement, adding that the deal will once again prove the firm’s determination to resolve issues with its creditors. PDVSA has agreed to settle $500 million in 90 days, and then compensate the remaining amount over the next 4.5 years. The companies did not reveal accurate quarterly terms of the agreements, but sources close to the matter claim that Venezuela could owe $83.33 million per quarter for 18 quarters post the initial payments.
For the record, oil is the country’s primary source of revenue, which has been facing a serious downfall owing to lack of investments, hyperinflation, and recession that has pushed the nation’s economy to near collapse. According to TheStreet, investment bank Barclays claims that Venezuela’s oil production will take a serious dip of 700,000 barrels per day to 1.43 million barrels in 2018 from its recorded estimate in 2017.
Conoco stated that it will make sure the agreement meets U.S regulatory requirements as well as any applicable sanctions against Venezuela.
Post the announcement of the deal Conoco’s shares were up by 1.4% to $70.78.