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New Citgo Chief Won't Sell Out as Reducing Debt Top Priority

David Wethe and Lucia Kassai

(Bloomberg) -- Citgo Petroleum Corp. isn’t for sale, says the man named the company’s new leader by the opposition to Venezuelan President Nicolas Maduro. His priority moving forward is to prepare for a return to normalcy.

“Many challenges” remain at Houston-based Citgo, Carlos Jorda said in his first interview since being named chief executive officer by opposition leader Juan Guaido. “We view this asset in the U.S. as strategic for Venezuela.”

The 70-year-old Jorda is seeking to plan out a more solid financial future for Citgo at a time when Maduro’s pick for the job, Asdrubal Chavez, continues to call himself CEO from afar. Jorda’s experience includes three decades at state oil company Petroleos de Venezuela SA when he went from being a refinery worker to running all of PDVSA’s fuel-making business.

“When PDVSA returns to be a normal company,” he said, “Citgo will definitely have to provide dividends as much as we can. That’s our obligation to the shareholder.”

The state oil company, which ultimately controls Citgo, has seen production fall to about 800,000 barrels a day, from a peak of about 3.71 million in the 1990s. Home to the world’s largest crude reserves, Venezuela depends on oil revenue to stay afloat. Output is expected to fall further if waivers on U.S. sanctions end in October, forcing out foreign drillers including Halliburton Co., Schlumberger Ltd. and Weatherford International Ltd. who have been helping to produce oil.

Citgo runs three refineries in the U.S., in Texas, Louisiana and Illinois. With the capacity to process as much as 749,000 barrels a day of crude, the company has been a key cog for Venezuela’s economy, kicking back profits to the home country while taking its heavy oil and turning it into gasoline, diesel and other fuels.

But the sanctions put into place by the Trump administration over its disagreement with Maduro have made the business more difficult for Citgo’s leaders, forcing them to avoid any contact with PDVSA, including crude purchases. Costs have climbed as well as Citgo has had to look for alternative sources of crude to refine and sell, Jorda said.

Switching “from traditionally heavy oils from Venezuela to lighter crude oils” from the U.S. has been an issue, Jorda said. But Citgo “will continue on that track until we find new supplies of crude oil, and hopefully Venezuela’s operations in the oil sector are normalized eventually,” he said.

Citgo’s workforce of 3,500 doesn’t appear overstaffed, Jorda said. "I don’t have any plans on changing the structure," he said. "No pre-emptive strike in that direction."

Dividend Sanctions

U.S. sanctions currently prohibit the payment of any dividends to PDVSA, which means any excess cash generated by Citgo would be available to pay down debt. Even if sanctions were lifted, Citgo would need to keep its debt-to-earnings ratio below two times to be able to pay dividends to PDVSA.

“We will continue deleveraging until we can meet those debt covenants so that we are in a very strong financial position,” Chairwoman Luisa Palacios said in the same interview. “When that happens, and there’s a full change in Venezuela, we will be in the position to declare dividends to the shareholder.”

Jorda, a dual citizen of the U.S. and Venezuela, has lived in America for 19 years. He said the company is definitely not looking to sell assets and it’s “very unlikely” Citgo would sell itself in an initial public offering because he doesn’t think there’d be an appetite for such a sale.

“Having lived through an IPO, its not an easy thing,” said Jorda, who served on the board of Delek US Holdings Inc. when that refiner went public in 2006. “It takes time. It’s not on our radar.”

Long Career

Jorda began his career with PDVSA in 1971 when he went to work at its Amuay Refinery in Venezuela. He worked his way up the corporate ladder to be president of PDV America Inc., which is now Citgo Holdings. He held that job for two years before taking early retirement from PDVSA by March 2003, joining others who went on strike at the time.

Since leaving, Jorda has done consulting work, mostly with the firm Gaffney Cline & Associates, working on a variety of projects around the world from upstream to downstream in the oil industry.

Jorda spoke with reporters near the end of his first full day on the job on Thursday, which happened to be the day before his birthday. He was joined by Palacios.

“Given our constraint and given that the shareholder is 100% Venezuelan, we wanted somebody that had significant experience with the Venezuelan oil industry,” she said. “The fact that he knows the complexity of the shareholder and knows the complexity of Citgo and the way it operates with the shareholder, that seemed like the ideal candidate.”

(Updates with comments from CEO in ninth paragraph.)

--With assistance from Davide Scigliuzzo.

To contact the reporters on this story: David Wethe in Houston at dwethe@bloomberg.net;Lucia Kassai in Houston at lkassai@bloomberg.net

To contact the editors responsible for this story: Simon Casey at scasey4@bloomberg.net, Reg Gale, Joe Carroll

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