US structured Venezuela oil position to protect it from dilution, official says

The U.S. government has structured its 35% ownership in a Venezuelan oil venture using penny warrants in North American Blue Energy Partners to protect its stake from being diluted by further capital raises, according to a U.S. official. The Pentagon implemented this safeguarding mechanism through warrants that allow the U.S. to potentially purchase the equity at a nominal price in the future.

The venture, controlled by Venezuelan businessman Alejandro Betancourt and granted 100-year rights to 17 oilfields estimated to hold 65 billion barrels of reserves, was awarded without a competitive process. This arrangement ensures the U.S. maintains its ownership levels even as NABEP raises funds for the project's capital requirements.

The warrants serve as an anti-dilution mechanism until the project reaches maturity, enabling the U.S. to benefit from full project value after achieving production levels. Despite potential scrutiny over Betancourt's past business dealings, the structure still allows the U.S. to receive dividends before exercising the warrants.

Additionally, the Pentagon holds a right of first refusal to purchase NABEP's oil output, with 20% purchasable at production cost prices and the remainder at market rates.