EXCLUSIVE-Citgo struggles with long-term direction as sale process remains frozen, sources say ​

By Marianna Parraga and Sheila Dang

HOUSTON, Feb 10 (Reuters) - U.S. refiner Citgo Petroleum is struggling to make key decisions about investments and finances as the sale of its Venezuela-owned parent to an affiliate of Elliott Investment Management remains frozen months after a U.S. judge signed off on the process, two sources with knowledge of the matter told Reuters.

A Delaware court late last year approved a $5.9 billion bid from Elliott's affiliate Amber Energy for Citgo parent PDV Holding and ordered the sale after two years of auctions as part of complex proceedings to compensate creditors for defaults and expropriations in Venezuela.

The transaction, however, remains unexecuted as it still needs approval from the U.S. Treasury Department.

The department's Office of Foreign Assets Control in early February extended its long-standing protection from creditors for Citgo through March 20. It did not give a reason for the extension and the approval does not have a clear deadline, according to the court's sale terms.

A political transition in Venezuela after the U.S. removed President Nicolas Maduro from power last month, alongside plans to re-activate the country's energy sector, is raising fresh questions about who should own and control Citgo, the crown jewel of Venezuela's foreign assets.

The U.S. State Department is seen as one of the main barriers holding up the sale, while the Treasury, Commerce and Energy Departments all support the transaction going through, said a separate source familiar with the talks.

The State and Treasury departments and the White House did not immediately respond to requests for comment.

Until OFAC greenlights the sale or issues an opinion against it, Citgo - the seventh-largest U.S. refiner - is prohibited from making material changes to its business plans that can alter the value assigned to the company as part of the sale, which includes changing ownership in any way, taking on new debt or making major investments, the two sources with knowledge of the matter said.

The company's board keeps running the business and making routine decisions - last month it approved buying Venezuelan oil for the first time since 2019. But the sale order prevents it from major hires or spin-offs, refining turnarounds or infrastructure expansions that were not included in its business plans, unless approved by Amber, the people added.

Meanwhile, Amber is increasingly plunging itself into the refiner's decision-making process, with the company seeking information about Citgo's board meetings, financial and operating details "on a daily basis," even though it is not formally in control of the company, the sources said.

Citgo did not reply to a request for comment. Elliott and boards supervising the refiner declined to comment.

CITGO CREDITORS WAIT IN THE WINGS

The sale of Citgo is critical to compensating over a dozen creditors collectively claiming some $19 billion for debt defaults and expropriations in the South American nation.

These include U.S. oil producer ConocoPhillips COP.N, which exited Venezuela in 2007 and filed for arbitration after its assets there were expropriated, and bondholders that have collateral over Citgo's equity.

Conoco has made the recovery of the funds it is owed a key prerequisite to consider returning to the country as part of President Donald Trump's call for $100 billion of new investment there, the company has said.

Conoco did not reply to a request for additional comment.

Parties that want the sale executed have argued to the Trump administration, which took control of Venezuela's oil revenue after capturing Maduro in January, that the Amber transaction supports U.S. interests because it is an American company, the source familiar with the talks said.

The parties say that transferring Citgo to Amber would transform the refiner into a truly American company and would pave the way to fairly compensate other U.S. companies, including Conoco, the person added.

Efforts to arrange meetings between Elliott founder Paul Singer and top U.S. cabinet officials are ongoing, the source said.

Both Elliott and the Venezuela parties have expanded lobbying in Washington in recent weeks, but the administration has not shown itself ready to make a decision, three sources close to the preparations said.

The Venezuela parties, supported by opposition leader Maria Corina Machado, have not had relevant meetings about Citgo with top U.S. officials since a government led by interim President Delcy Rodriguez took office last month, the sources said.

Both Rodriguez and Venezuela's political opposition have rejected the auction and asked the U.S. to keep the refiner in Venezuela's hands as a tool for the country's planned reconstruction.

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