Venezuela Willing to Pay Exxon $255 in Arbitration Deal

On the back of the recent arbitration decision by the International Chamber of Commerce (ICC) which awarded ExxonMobil (NYSE:XOM) $907 million for its Venezuelan assets that were nationalized in 2007, the Venezuelan government made a statement that it would have to pay the oil major only about $255 million after reducing debts and other items. ^[1] According to the arbitration award, Exxon should receive as much as $555 million cash and be relieved of debt totaling $352 million. ^[2] Exxon has been involved in a longstanding dispute with the Venezuelan government over the nationalizations and was seeking over $10 billion for its heavy crude facility in the Orinoco Basin. Rival ConocoPhillips (NYSE:COP) is also seeking compensation from Venezuela.

We have a $93 price estimate for ExxonMobil which is at a 10% premium to its stock price.

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Assets frozen

Exxon has already managed to freeze around $300 million held by Venezuela in U.S. bank accounts. ^[1] Additionally, Exxon held about $191 million related to the financing of an oil project in the country and the tribunal relieved the company of about $160 million in debt. Exxon, which had initially demanded $10 billion for the assets, still has an appeal with the World Bank’s International Centre for Settlement of Investment Disputes (ICSID).

The ICC’s decision to use the book value to compensate Exxon has vindicated Venezuela’s practice of compensating investors for the amount invested in the projects. ^[2] The country nationalized 4 projects in 2007 and has 17 cases pending against it that are listed in the ICSID website.

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1. Venezuela to pay Exxon Mobil only $255 million, Associated Press [↩] [↩]
2. Arbitration Award for Exxon Is Detailed, NYT [↩] [↩]