Hugo Chávez: Nationalize Nationalize

Venezuelan President Hugo Chávez recently announced he would nationalize power utilities and the country’s biggest telecommunications firm CANTV VNT. After the announcement the share prices of CANTV tanked from trading around $20/share to $12/share. Ouch !!!

He also mentioned that he plans to nationalize the entire energy sector indicating there are more targets for take-over. But he said he would permit foreign firms to hold minority stakes in energy deals. It was not immediately clear whether he intends to nationalize the whole sector or moves against specific projects or companies.

Venezuela will have to judge how closely private firms must be connected to the country’s oilfields, refineries, pipelines, gasoline stations and coal mines to count as targets for nationalization.

Companies at Stake
Huge oil service companies such as Halliburton HAL and Schlumberger SLB operate in Venezuela but Chávez gave no indication whether deals involving such businesses were now in his sights. Chávez also said Venezuela was almost ready to take over the foreign-run oil projects of the Orinoco Belt, which produce about 600,000 barrels per day. Those projects are run by U.S. majors including Chevron, Conoco Phillips and ExxonMobil, as well as European heavyweights such as France’s Total, Norway’s Statoil and Britain’s BP. Chávez confirmed such firms could stay on as minority stakeholders after the state had acquired 51 %.

Another noteworthy company that has operations in Venezuela is Crystallex International Corporation KRY. They are engaged in the production of gold, including exploration, development, mining and processing. The shares also took a plunge with the announcement, but it recovered after the management responded that nothing had changed the status of their mining operation.

Recommendation: For now i would not touch these stocks. They are high risk stocks and will depend on the intention of the Venezuela government.