ConocoPhillips (COP) hopes to limit losses by allying with Big Oil against Hugo Chavez over the Orinoco Belt. Last month, Big Oil companies with a stake in the Orinoco Belt lost control of their projects when Venezuelan president Hugo Chavez declared that the Orinoco Belt would be managed and controlled by the state oil company, Petroleos de Venezuela (also known as PDVSA – PVZ.YY). However, Big Oil companies aren't taking it lying down. The major oil companies, including ExxonMobil (XOM), ConocoPhillips (COP), Statoil (STO), Total SA (TTFNF.PK), BP (BP) and Chevron (CVX) have all rejected the terms of the takeover. Chavez says they can all leave and that they are unneeded.
The company that stands to lose the most by this development is ConocoPhillips. Briefing.com reports on COP's stake in the Orinoco Belt:
COP has the most to lose, with majority stakes in two of the four Orinoco deals, along with a stake in two untapped conventional oil fields in the Gulf of Paria. Venezuela has said Conoco is providing the most resistance to its plan to take at least a 60% stake, up from its current 40% stake in its projects. An estimated 10% of COP's reserves are located in Venezuela.
This means that, even as I write, COP is losing ground on the stock market. While other Big Oil companies continue to move up, ConocoPhillips is seeing its value move down.
Investing in Big Oil is likely to continue to provide returns, especially since Congressional Republicans came to the rescue of their Big Oil campaign supporters and blocked a tax hike for oil companies. This means that the additional tax revenue, which was originally slated to benefit renewable energy, may not be able to help boost alternative energy values at this time.
Big Oil looks to be back on the rise, with the exception of COP. When choosing your Big Oil stocks, carefully consider which are likely to rise, and even whether a falling COP could provide value.
Disclosure: The only Big Oil stock I am investing in is BP.