Tag Archives: Helmerich & Payne

Jan
10
2012
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Chávez Threatens Pre-Emptive Strike on International Arbitration Body

In a move that may deprive businesses and investors of the most important international venue for securing compensation for expropriated property, Venezuelan President Hugo Chávez said Sunday that he “will not recognize” decisions issued by the World Bank’s International Center for the Settlement of Investment Disputes (ICSID). The announcement bodes ill for Exxon Mobil, Helmerich & Payne and many other companies that have seen their Venezuelan assets seized by the Chávez government.

“We have to get out of that ICSID. And I’ll go ahead and say it: We won’t recognize any of ICSID’s decisions,” Chávez said in a television address.

Disavowing ICSID’s authority will be difficult, as multiple treaties that bind Venezuela to the court remain in force. Experts have also suggested that rejecting the body’s rulings could hurt Venezuela’s ability to obtain credit as well as prompt companies to freeze Venezuela’s foreign assets. Nonetheless, a defiant Chávez said he will not recognize the panel’s rulings and may withdraw Venezuela from the forum altogether.

In his announcement, Chávez referred to a $900 million award that Exxon Mobil recently won in another arbitration case before the International Chamber of Commerce. ExxonMobil is one of more than a dozen companies seeking compensation from Venezuela before the ICSID, which is considered the world’s preeminent forum for settling disputes between investors and sovereign states. The Caracas-based consulting firm Ecoanalítica estimates that the Chávez government has nationalized more than $33.7 billion in assets from private companies.

Chávez’s announcement suggests that companies seeking compensation from Venezuela have a difficult road ahead, including U.S. firms like Oklahoma’s Helmerich & Payne and Ohio-based bottle maker Owens Illinois, which have filed legal claims against Venezuela.

Chávez, who often offers nationalized companies little to no compensation, has ramped up expropriations over the past years. There are currently 17 pending cases against Venezuela before ICSID. If the government follows through with Chávez’s plan, all 17 may turn into protracted disputes that further blunt foreign investments in Venezuela and alienate the country from the international community.

 
Jul
16
2010
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Expropriated Companies in Venezuela Get Little to No Compensation

The latest expropriation of an American company in Venezuela, that of Oklahoma-based contract drilling company Helmerich & Payne, yielded a familiar reaction from the U.S. government. The U.S. State Department said that “We would just call on them, if they did make such a move, to compensate the owners of those wells. This is the latest in such an instance where international investors, their investments are being nationalized by the government of Venezuela. It doesn’t speak or bode well for the investment climate there.”

The statement from the U.S. government was echoed a few months earlier by Assistant Secretary of Commerce, Walter Bastian, who when asked about the increased expropriations in Venezuela, said that “We have no problem with expropriation as long as those affected are paid.”

Therein lies the problem: expropriated companies in Venezuela are NOT being compensated. Moreover, because the Chavez regime has eradicated judicial independence in Venezuela, foreign companies have in practice no legal recourse to challenge the expropriations.

The numbers tell the story. According to a report issued in May 2010 by prominent Caracas based economic consulting firm, Ecoanalítica, the costs of the nationalizations executed by President Chavez (since 2006) add up to $23.3 billion. These costs include that of the major nationalizations but do not include that of the “rescued land or farms, expropriated sugar mills or the expropriations of industrial zones in Barquisimeto and Maracaibo, so the figure could be higher.” It does include the expropriations of U.S. companies such as Hilton, Exxon, Conoco, and Cargill. Ecoanalítica estimates that of this $23.3 billion, $14.65 billion of compensation have yet to be paid by the government. In fact, the Venezuelan government has only paid 37.2% of what it owes to the expropriated companies. According to the Ecoanalítica report, of the $14.65 yet to be paid, nearly half, “$ 7.25 billion are payable to companies in the oil sector, such as ConocoPhillips and ExxonMobil.”

Not only are expropriated companies not being compensated as legally required, but companies impacted by the nationalization policies have little legal recourse to challenge the taking of their property. This is so because Venezuela’s judicial system has been politicized by President Chavez and lack independence, thus in practice denying domestic and foreign companies the right to due process to challenge the government’s taking. The 2009 U.S. State Department Human Rights Report described Venezuela’s “corrupt, inefficient, and politicized judicial system characterized by trial delays and violations of due process.”

In its 2009 report on Venezuela, the OAS’ Inter-American Commission on Human Rights noted “the Executive Branch’s alleged interference in decisions of the judiciary.” To put it lightly, those counting on Venezuelan’s judicial system to overrule an action taken by the government, much less a decree issued by the President himself, are indeed tempting fate.

One need only look at the case of the coffee company, Fama de América. Fama de America, the best known coffee brand in Venezuela, was expropriated last year by the government. As part of negotiations to determine compensation, company representatives and the government agreed to name a three member panel of experts to determine the value of the company. Two of the members of the panel where named by the government.

The panel conducted a study and determined a fair price, yet the government offered to pay only 10% of the value agreed upon by the experts. It was a take it or leave it offer: take the 10% and then we take the company, or refuse the offer and we’ll take the company anyway. That sounds more like extortion than a fair negotiation.

The bottom line for American and other foreign expropriated companies in Venezuela is that compensation for the taking of their property is likely never to come. It may not be surprising then that following the taking of their property, Helmerich & Payne issued a warning to fellow companies in their industry about investing in Venezuela: “Reflecting on last week’s forced exit from Venezuela, it is clear now that PDVSA was not interested in both sides achieving commercial terms to return our rigs to work… That approach only heightens concerns for our oil-field-service peers contemplating their future there, as it should.”

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Jul
7
2010
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Helmerich Warns Other Firms After Venezuela Seizes Oil Rigs

Article originally published by The Wall Street Journal

Helmerich & Payne is warning other oil-field-services companies doing business in Venezuela after the drilling contractor saw 11 of its idled rigs expropriated last week by the government of President Hugo Chavez.

In a press release Tuesday, the Oklahoma-based company said other oil-services firms should be contemplating whether to stay in Venezuela. It also criticized the way state oil company Petroleos de Venezuela, or PDVSA, conducts its business.

“Reflecting on last week’s forced exit from Venezuela, it is clear now that PDVSA was not interested in both sides achieving commercial terms to return our rigs to work,” Helmerich said. “That approach only heightens concerns for our oil-field-service peers contemplating their future there, as it should.”

The Chavez-led government, which has nationalized large parts of its all-important oil industry as part of a declared push toward socialism, announced plans last month to take ownership of Helmerich’s rigs.

The rigs haven’t been used since late 2009, and the U.S. company said it wasn’t going to put them back into service until PDVSA paid it the $43 million it owed for work that was already completed.

PDVSA President Rafael Ramirez said the government decided to nationalize Helmerich’s rigs because the country couldn’t afford to let them continue to sit idle while new wells needed to be drilled.

In a partial response to PDVSA’s nonpayment to Helmerich, Mr. Ramirez accused the company of stubbornly refusing to renegotiate the rates it charged to PDVSA when oil prices were falling in early 2009 and PDVSA was falling behind on its bills.

Venezuela’s legislature approved the nationalization plan of Helmerich’s rigs last week, and the government has officially taken control of them. Mr. Ramirez said PDVSA plans to pay Helmerich for the rigs at “book value.”

In announcing the nationalization plan for Helmerich’s rigs last month, PDVSA also said it reached a deal for oil-services work with U.S. energy giant Schlumberger Ltd.

Helmerich said in its statement Tuesday that it leaves Venezuela “with our heads held high,” adding that the company fulfilled all of its contractual obligations. It also said it trained and employed thousands of Venezuelans and achieved an outstanding long-term safety record.

“The loyalty of our employees and many suppliers there will long be appreciated and remembered,” Helmerich said.

Helmerich said its future is partly reflected in new rig-building for “paying customers.”

Officials at PDVSA weren’t available to comment on Helmerich’s latest statement.