Transcript
A (0:00)
Foreign.
B (0:05)
It's a small world after all. I promise this will make sense soon because Motley fool money starts now. I'm Rick Menars and today I'm joined by fellow analyst Nick Scipal and Jon Kwast. We're going to take a look at some potential bounce back candidates for 2026 and a look at Disney predictions heading into the new year. But first, Venezuela. The big news over the weekend was the US Capturing Venezuelan President Nicolas Maduro and his wife, detaining them in the US to face charges of narco terrorism, drug trafficking and conspiracy. Nick, you are covering this story. We will obviously not be digging too deep into the political ramifications. That's not really what we do here. But what are the biggest implications of this news for investors?
C (0:53)
Certainly huge news. Geopolitically would argue this is the biggest US Military commando operation really going back to the bin Laden raid more than a decade ago. For investors, for the business community, the big takeaway is what's going to happen with Venezuela's energy production. Venezuela has more proven reserves than Saudi Arabia, yet produces less than 1% of global supply today. And that's really a trend of kind of withering infrastructure that's been going on for the past couple decades. First under the Hugo Chavez administration and then under former president, now Maduro. As I mentioned, Venezuela has over 300 billion barrels of proven reserves, about 17% of the global total. But production today, just 1% of global supply. In the late 1990s, Venezuela was producing 3.5 million barrels of oil per day. Today now under $1 million a day, that's a 70% decline under the Chavez Maduro administrations. And if you look at disclosures from the national oil company of Venezuela, its pipelines haven't been updated in by some accounts 50 years. Would need over $58 billion to rebuild those pipelines. And by the reports of the administration, the US Administration, part of what's going to happen after this, after this regime change is an investment in that energy infrastructure. What becomes of Venezuela's oil production going forward? Can new investment return that, that trend to the growth that we saw in the late 90s? Yeah.
B (2:19)
So speaking of that growth and potential, who are the potential winners and losers from a comeback in Venezuelan energy production?
C (2:27)
Right. So it's the big winners, you know, to really jump off, off the bat are the US oil major, Chevron, the big one. They're the only US major currently operating in Venezuela. Produces about 150,000 barrels a day, about 70% of Venezuela's overall output. Those other oil Companies formerly operated in Venezuela, however, in the nationalization push over a decade ago, lost some of their production, have some claims against the Venezuelan government to try to get some of those back. So those big US oil companies, particularly Chevron, have the relationships, the infrastructure, the head start to get underway in Venezuela. However, these are companies that were burned in the past. Under nationalization, they're going to want stability before they line up to spend big money on the investment needed to get production back in line. Any realistic timeline, we're looking three to five years before really meaningful production increases take place. That's really a long term thesis. That said, to the extent that production can get back online, the losers here would be potentially Canadian oil producers. Venezuelans crude oil is very similar in grade to the oil that comes out of Canada's oil sands. That same heavy sour grade of oil that are used to produce things, things like diesel fuel in US Gulf coast refineries. With that decline in Venezuelan oil production that I talked about earlier, Canadian producers have come in to fill that gap. Canada went from producing 2.7 million barrels a day exported to the US in 2013 up to 4.4 million barrels back in 2024. Obviously if those Venezuelan barrels come back online, that is direct competition for those Canadian oil producers and could put downward pressure on that production. But again, as I said, you know, we would need several years of investment to get that production back online. And again, these are on all one for one substitutions. A lot of this Canadian heavy oil gets piped directly to Midwestern refineries. So the competition would be really more for oil that goes to supply refineries on the Gulf Coast. But if you know, investment can get Venezuelan oil production back online, that would be direct competition for Canadian producers. That's why you've seen, you know, the same way big US oil companies have moved up. Today on the news of what's going on in Venezuela, you've seen some, some real downward pressure on the Canadian producers.