CITGO’S NEW CEO CONFIDENT IN AN UNCERTAIN TIME
Keeping creditors at bay, dealing with Venezuela turmoil difficult
Citgo Petroleum’s new chief executive said Friday that he plans to steer the company through geopolitical and legal challenges that have left the future of Houston refiner uncertain as Venezuela’s creditors circle and the standoff with the regime of President Nicolás Maduro hardens.
Carlos Jorda, named CEO by the Citgo board last week, is an oil industry veteran who once worked as an executive of Citgo’s parent, the Venezuelan national oil company PDVSA, and another of its U.S. subsidiaries, PDV America. He was chairman of the Citgo board from 1999 to 2002.
Jorda said the felt an obligation to Venezuelan opposition leader Juan Guaido, which led him to return to Citgo. “This is my contribution,” Jorda said in his first interview since becoming CEO.
Citgo is under the control of a board of directors named by Guaido. The United States and many other nations recognize Guaido as Venezuela’s interim president as they seek to oust Maduro, who has presided over an economic collapse that has left Venezuelans without food, medicine and other necessities.
Jorda will take control of the company that earned $834 million last year. Citgo describes itself as the fifth largest oil refiner in the nation with its three oil refineries in Lake Charles, La., Corpus Christi and Lemont, Ill. The company has roughly 3,400 employees, including about 800 employees in Houston, plus about 5,000 retail gas stations nationally.
Jorda said his first tasks will be to meet Citgo employees, get up to speed with the company’s operations, find ways to further boost its earnings and reduce its debt and to “try to keep employees happy.” Russ Dallen, a political and legal analyst, said one of Jorda’s biggest tasks will be rebuild the image of the company that has been under the under the control of Maduro and his mentor, the late socialist President Hugo Chavez, for 20 years.
American institution
Citgo Petroleum traces its roots back to Cities Service Co., started by an oil entrepreneur in the early 20th century. Warren Buffet famously bought his first
“He has to restore trust in a beloved American institution. Twenty years of rule by the anti-American regime in Caracas has made a serious dent in the historically sentimental American goodwill.” Russ Dallen, political and legal analyst
stock ever in Cities Services at the age of 11. The company’s place as an American institution is perhaps best displayed by the 60-foot tall Citgo sign that appears in the background of Boston Red Sox's games at Fenway Park and is now considered a landmark in Boston.
“He has to restore trust in a beloved American institution,” Dallen said. “Twenty years of rule by the anti-American regime in Caracas has made a serious dent in the historically sentimental American good will.”
PDVSA acquired sole ownership of Citgo in 1990 and moved its headquarters to Houston from Tulsa, Okla. in 2004. The company is now under pressure from many sides. Creditors of PDVSA want to seize Citgo assets as a way to collect on debt. The Justice Department is investigating Citgo and PDVSA’s role in an alleged foreign bribery scheme. It’s facing mounting pressure to do something
about six of its former executives detained in Venezuela for nearly two years.
In some ways, the oil refiner is a victim of its own financial success. Last month, the 3rd U.S. Court of Appeals sided with one of Venezuela’s creditors, defunct Canadian mining company Crystallex International, in a ruling that could allow Crystallex to seize Citgo’s assets as a way to collect on a $1.4 billion debt.
It’s possible the Crystallex ruling could open the door for other creditors of Venezuela and PDVSA to go after Citgo for unpaid debts. The Houston oil and gas company ConocoPhillips so far has received a fraction of payments in a $2 billion arbitration award against PDVSA.
But Luisa Palacios, chairwoman of Citgo’s board, said Citgo isn't a party in the Crystallex case against the Republic of Venezuela and directed questions about the case to PDVSA and the Venezuelan government. She said the Citgo’s recent refinancing of $1.87 billion in debt is a testament to credit markets faith in the financial operations of the company.
“This refinancing was successful because of the confidence that the market has,” Palacios said. “The bond holders and the markets are just completely aware of the different risks that surround the company and are completely comfortable with them.”
Citgo Six
Citgo leadership has stopped importing Venezuelan crude in line with U.S. sanctions, requiring it to find other sources of crude. Its Illinois refinery is processing mostly heavy Canadian crude oil while its Gulf Coast refineries processing lighter crude oil and heavy oil from a variety of sources, Jorda said. A recently-completed major maintenance project in Corpus Christi will allow the refinery there to process 10,000 more barrels a day of lighter crude oil, Jorda said.
Meanwhile, Palacios said the company is continuing to try to boost humanitarian aide to Venezuela, where many of its employee have families, through a charity, the Simon Bolivar Foundation. The company also is supporting efforts of the U.S. to win the release of six Citgo executives detained in Venezuela for nearly two years.
“We are deeply concerned about our former executives and as a company we believe all persons’ human rights must be respected,” Palacios said.