CNOOC buys into Texas shale
By Richard Fu |
October 12, 2010, Tuesday
|
Print Edition
Print Edition
CNOOC Ltd agreed to pay almost US$2.2 billion for a major interest in a Chesapeake Energy Corp shale oil and gas field in Texas, the Chinese firm's first acquisition deal in the United States after a failed Unocal Corp bid in 2005.
Analysts said this could be a win-win deal because Chesapeake has a weak balance sheet, which has hindered its ability to fully monetize its vast gas resources, while CNOOC's huge production growth has been outpacing its increases in reserves.
In the deal announced yesterday, the state-owned China National Offshore Oil Corporation plans to pay US$1.08 billion for a one-third stake in the 242,811 hectares that Chesapeake leases in the Eagle Ford shale project. CNOOC also agreed to fund 75 percent of Chesapeake's share of drilling and completion costs, up to another US$1.08 billion.
CNOOC withdrew an US$18.5 billion bid for Unocal in 2005 amid US political opposition. Soon after, Unocal merged with Chevron. This time a confident CNOOC expects the transaction to be closed in the fourth quarter of this year.
"We see no regulatory hurdles in this deal," said analyst Gordon Kwan of Mirae Asset Securities.
Kwan estimated CNOOC's acquisition cost is about US$18 per barrel of oil equivalent in the Eagle Ford deal, which is attractive when compared with its existing proved reserves valued at US$35.
Chesapeake expects the project will reach a peak production of 400,000-500,000 barrels of oil equivalent per day by 2020. Kwan said CNOOC's stake will translate to about 150,000 barrels, or about 17 percent of its current production rate.
Oil shale is an underground rock that holds oil and natural gas reserves. It has become a key energy source in the US thanks to new techniques.
Chesapeake CEO Aubrey McClendon said the project will advance the efforts of both the US and China to reduce greenhouse gas emissions and boost commercial opportunities in shale gas resources in China.
The CNOOC deal came the same day that Canada's Talisman Energy and Norway's Stateoil said they will acquire acreage on the Eagle Ford prospect for US$1.3 billion.
Analysts said this could be a win-win deal because Chesapeake has a weak balance sheet, which has hindered its ability to fully monetize its vast gas resources, while CNOOC's huge production growth has been outpacing its increases in reserves.
In the deal announced yesterday, the state-owned China National Offshore Oil Corporation plans to pay US$1.08 billion for a one-third stake in the 242,811 hectares that Chesapeake leases in the Eagle Ford shale project. CNOOC also agreed to fund 75 percent of Chesapeake's share of drilling and completion costs, up to another US$1.08 billion.
CNOOC withdrew an US$18.5 billion bid for Unocal in 2005 amid US political opposition. Soon after, Unocal merged with Chevron. This time a confident CNOOC expects the transaction to be closed in the fourth quarter of this year.
"We see no regulatory hurdles in this deal," said analyst Gordon Kwan of Mirae Asset Securities.
Kwan estimated CNOOC's acquisition cost is about US$18 per barrel of oil equivalent in the Eagle Ford deal, which is attractive when compared with its existing proved reserves valued at US$35.
Chesapeake expects the project will reach a peak production of 400,000-500,000 barrels of oil equivalent per day by 2020. Kwan said CNOOC's stake will translate to about 150,000 barrels, or about 17 percent of its current production rate.
Oil shale is an underground rock that holds oil and natural gas reserves. It has become a key energy source in the US thanks to new techniques.
Chesapeake CEO Aubrey McClendon said the project will advance the efforts of both the US and China to reduce greenhouse gas emissions and boost commercial opportunities in shale gas resources in China.
The CNOOC deal came the same day that Canada's Talisman Energy and Norway's Stateoil said they will acquire acreage on the Eagle Ford prospect for US$1.3 billion.
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