President Trump pressed executives from more than 20 U.S. energy companies Friday, but he received few public pledges to quickly invest the vast sums of money needed to revive Venezuela’s shattered oil industry, raising doubts about Trump’s previous claim that U.S. firms were ready to spend $100B or more to rebuild the country’s crude oil infrastructure.
Exxon Mobil (XOM) CEO Darren Woods offered the starkest assessment, telling Trump in the live-streamed meeting at the White House that Venezuela is “uninvestable” without significant changes to the country’s commercial frameworks, legal system and hydrocarbon laws, but he said he was “confident that with this administration and President Trump, working hand in hand with the Venezuelan government, that those changes can be put in place.”
“We’ve had our assets seized there twice, so you can imagine to re-enter a third time would require some pretty significant changes from what we’ve historically seen,” the CEO said.
Woods did say that Exxon (XOM) could have a technical team visit to assess the current state of Venezuelan assets within the coming weeks, and could assist getting Venezuelan crude to market through its integrated businesses, which include refining and trading.
Chevron (CVX) ice Chairman Mark Nelson, attending in place of CEO Mike Wirth, who had a knee replacement earlier this week, said the company has brought its production in Venezuela to 240K bbl/day at its four joint ventures with state oil company PDVSA and can boost output by “100% essentially effective immediately.”
Chevron (CVX), the only U.S. oil major still operating in Venezuela, has a “differentiated opportunity among peers to increase production,” and its efforts could add $400M-$700M to its annual cash flow, but the company is unlikely to invest further until the situation in the country stabilizes, TD Cowen analyst Jason Gabelman said in a note.
Exxon (XOM) could still be a big winner from higher Venezuelan oil production largely due to its underappreciated refining footprint, UBS analysts said in a note, since “refining earnings tend to be resilient and provide stability and lower earnings volatility” in an environment of lower crude prices, adding that after Valero (VLO), Exxon has the best Gulf Coast operations to run lower quality oil barrels from Venezuela.
ConocoPhillips (COP) CEO Ryan Lance, said banks including the U.S. Export-Import Bank need to be involved in any discussions to deliver the financing and billions of dollars needed to repair Venezuela’s energy infrastructure.
Lance told Trump that Conoco (COP) had left behind $12B when it exited the country and is the largest non-sovereign credit holder in Venezuela today; “We’re not gonna look at what people lost in the past because that was their fault… You’re gonna make a lot of money, but we’re not going to go back,” Trump said in response.
Hilcorp’s Jeff Hildebrand offered one of the few explicit commitments made by an oil CEO whose company is not now active in Venezuela, saying his company is fully committed and ready to go rebuild the infrastructure in the country.
Crude oil futures rose Friday and settled higher on the week, as the perception of rising geopolitical risk Russia-Ukraine and Iran – which produces more than 3M bbl/day of crude – outweighed prospects of increased Venezuelan supply.
The Iran government said “rioters” who damage public property or clash with security forces would face the death penalty, just a day after Trump warned the mullahs they would “pay hell” if protesters were killed.
“Iran protests seem to be gathering momentum, leading the market to worry about disruptions,” Saxo Bank head of commodity analysis Ole Hansen said in a note.
On Friday, front-month Nymex crude (CL1:COM) for February delivery closed +2.3% to $59.12/bbl, and front-month Brent crude (CO1:COM) for March delivery ended +2.2% to $63.34/bbl; for the week, Nymex rose 3.1% and Brent jumped 4.2%.
U.S. natural gas ended the day and the week lower with market uncertainty that an expected cooldown in late January weather will keep the supply surplus from growing; front-month Nymex February natgas (NG1:COM) settled -7% on Friday at $3.169/MMBtu, losing 12.4% on the week.
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Energy stocks, as represented by the Energy Select Sector SPDR Fund (XLE), finished the week up 2.2%.