Chevron (NYSE:CVX) hopes to start receiving cargoes of Venezuelan oil as soon as next month after winning a U.S. license to resume production in the country, but the Maduro government may not be so eager because U.S. sanctions restrict payments, Reuters reported Monday.
Executives at Venezuelan state firm PDVSA initially welcomed the authorization for a partial U.S. return, but they are less enthusiastic after learning of license terms that will not allow Chevron (CVX) to reimburse operational costs or pay taxes and royalties in Venezuela, according to the report.
Chevron (CVX) had negotiated a deal with PDVSA this year that proceeds from oil exports would be distributed similar to past terms – roughly a third each for debt repayment, reimbursement of operational expenses to partner PDVSA, and for capital expenses – but the U.S. seems to have approved only debt reduction and capital expenses made directly by Chevron, leaving out taxes and royalty payments, Reuters reported.
Analysts say the restrictions ultimately could limit any benefit to Venezuela’s oil production and exports, barring further U.S. authorizations.
Chevron (CVX) shares have become expensive, “trading at a valuation where it needs high double-digit long-term prices, something that history shows is unlikely,” The Value Portfolio writes in an analysis posted recently on Seeking Alpha.
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