The bitter, eight-year legal battle over the fate of CITGO Petroleum’s three U.S. refineries, related pipelines and terminal assets appeared to be at an end last fall, when a federal court gave the green light to Elliott Investment Management’s Amber Energy to purchase the assets for $7.3 billion. But instead of putting an end to the drama, the court restarted the bidding from scratch on December 18. In today’s RBN blog, we’ll discuss what the court’s ruling means for CITGO and its refineries, which have a combined capacity of more than 800 Mb/d.
Let’s start with some background, which we discussed in depth in I’ll be Around. Since 2017, there’s been a primarily below-the-radar battle playing out in the U.S. District Court for the District of Delaware about how best to help satisfy the claims of a dozen-plus creditors who collectively lost more than $20 billion when the government of Venezuela — the de facto owner of CITGO Petroleum and its parent company, PDV Holding (PDVH) — defaulted on its bonds. (In 2019, control of CITGO was transferred away from the ruling Maduro regime in Venezuela to the opposition “shadow” government, which, at the time, was led by Juan Guaido.) In May 2021, U.S. District Court Judge Leonard P. Stark appointed Robert B. Pincus as a special master tasked with devising a plan to sell PDVH/CITGO. After a two-round bidding process that concluded in June 2024, Pincus recommended on September 27, 2024, that the district court approve Amber Energy and its $7.3 billion bid. While considerably lower than PDVH/CITGO’s appraised value of $11 billion to $13 billion, it was found to be the best offer the bidding process generated.
RBN’s Refined Fuels Analytics (RFA) practice has a deep understanding of the U.S. (and global) refining sector, including the individual companies and refineries that comprise it. For more information on RFA and its areas of expertise, click here. The next edition of its biannual Future of Fuels report will be published January 31.
CITGO has a long and storied history. It started out as Cities Service Co., which was formed by oilman and financier Henry Latham Doherty in 1910 to supply gas and electricity to small public utilities in several Midcontinent states. By the mid-1930s, the company had accumulated dozens of oil and gas companies and several refineries, and it left the utility business entirely in 1935 to focus on petroleum activities. In the early 1940s, it was part of a consortium of oil giants that quickly built the famed “Big Inch” and “Little Inch” pipelines from Texas to New Jersey to aid the war effort, which it also supported through the supply of large volumes of high-octane aviation gasoline to U.S. military aircraft, sourced from its recently constructed flagship refinery in Lake Charles, LA. In 1982, Cities Service was acquired by Occidental Petroleum (Oxy), which the following year flipped the company’s then-only refinery (Lake Charles) and thousands of CITGO-badged (a brand name first used in 1965) retail gas stations to Southland Corp., which was then the owner of the 7-Eleven convenience store chain. Southland sold a 50% stake in CITGO to Petróleos de Venezuela SA (PDVSA, which owns PDVH) in 1986 and sold the rest in 1990.
Since then, there have been many ups and downs and twists and turns, not only within PDVH and CITGO but also in Venezuela itself. Most importantly for our discussion of CITGO and its current assets, the company acquired a half-stake in the Lemont Refinery 30 miles southeast of Chicago in 1989 (from Unocal) and purchased the other half in 1997. Also, CITGO came to own the Corpus Christi Refinery as part of its merger with Champlin Refining & Chemicals in 1991.
While CITGO hasn’t filed for bankruptcy, its assets have been subject to legal proceedings and potential sale because of issues in Venezuela for 15 years. For example, in 2010, then-Venezuelan President Hugo Chavez announced his intentions to sell CITGO; following his death in 2013, Venezuela’s economic crisis worsened, leading to more instability. In 2016, Venezuela pledged 49.9% of CITGO to Russian oil firm Rosneft as collateral for a $1.5 billion loan. In 2017, Venezuela defaulted and declared insolvency, complicating matters.
Before we discuss CITGO’s refineries — and the company’s other assets — in detail, let’s delve into the new auction. It comes as no surprise that CITGO’s creditors weren’t happy with Amber Energy’s bid and filed lawsuits to prevent the agreement from moving forward. As we said, claims against Venezuela are more than $20 billion, but the bid from Amber at $7.3 billion wouldn’t even cover half the debt. Things went from bad to worse for those creditors in November when Amber Energy dropped its offer to $5.3 billion. Amber had attempted to appease creditors by changing its pay schedule — offering direct payments rather than payments to a trust — but the lower bid prompted more backlash from creditors and questions about Amber’s finances.
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