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Top Biz News

Cnooc may snag 50% of Argentine oil producer

By Wan Zhihong (China Daily)
Updated: 2010-03-16 10:12

BEIJING - Cnooc Ltd, China's largest offshore oil and gas producer, said on Sunday it will pay $3.1 billion to acquire a 50 percent stake in Argentine oil producer Bridas Corp, a deal analysts said will add to the company's reserves and production substantially.

"It is not only significant as a positive, long-term business strategy, but also will serve to add substantially to Cnooc's production and reserves immediately," said Frank Gong, vice-chairman of China investment banking at JP Morgan. The company is the sole financial adviser to Cnooc in the deal.

Based on 2009 statistics, the deal would increase Cnooc's proven reserves and average daily production by 318 million barrels of oil equivalent (BOE) and 46,000 BOE respectively, said a company statement.

"Bridas, with a world-class oil and gas asset portfolio, is a very good beachhead for us to enter Latin America. Through this transaction, we'll establish a fair presence in this region," said Yang Hua, president of Cnooc.

Currently, Bridas, through its affiliates, has oil and gas exploration and production activities in Argentina, Bolivia and Chile.

Latin America is one of the foremost growth areas in the global oil and gas business. Bridas is among the top players in the region on various fronts, including reserve additions, production growth, and low cost operations, said analysts.

Bridas itself has huge upside potential. Energy demand in Argentina is growing rapidly and the regulatory environment is evolving favorably. In addition, there are distinct growth opportunities arising from the exploration portfolio and from increased recovery rates, they said.

It has been some time since Cnooc made its last overseas acquisition, said Liu Gu, an analyst at Guotai Junan Securities.

"The deal confirms with Cnooc's future strategy to focus more on deep-water oil exploration and overseas expansion," said Qiu Xiaofeng, an analyst at China Merchants Securities in Shanghai, adding that the company will see accelerated growth in its overseas expansion between 2011-2015.

The deal still needs the approval of the Chinese government, and is expected to take place in the first half of 2010, according to Cnooc.