Sinochem buys asset in North America
Source: Agencies |
January 31, 2013, Thursday
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Print Edition
Print Edition
OIL and gas producer Pioneer Natural Resources Co yesterday said it would sell a 40 percent stake in about 207,000 net acres in the Wolfcamp shale field in Texas to China's Sinochem Group Co for US$1.7 billion.
The deal is the latest in a string of investments by Chinese companies in North America.
Sinochem will pay US$500 million in cash and spend US$1.2 billion to fund a portion of Pioneer's future drilling costs. Sinochem will acquire about 82,800 net acres of leasehold as per the deal. Pioneer will continue as the operator of the joint interest area, the Dallas-based company said.
Production in the joint interest area averaged about 2,000 barrels oil equivalent per day in 2012, with a year-end exit rate of about 5,000 boe per day.
At least four analysts said the deal was a big win for Pioneer, with valuations beating their expectations by a wide margin.
"We believe the US$18,100 per acre price on the Southern Midland Wolfcamp JV is about US$3,000 per acre above Street expectations and is positive for the stock," Global Hunter Securities analyst Mike Kelly wrote in a note.
Most analysts' expectations were between US$10,000 and US$15,000 per acre.
The deal was also positive for nearby producers such as Devon Energy Corp and Laredo Petroleum Holdings Inc, Robert W. Baird analyst Michael Hall wrote in a note.
The emerging Wolfcamp Shale may ultimately rival the success of Eagle Ford shale in the same state, information provider IHS Inc said in December.
The deal is expected to close during the June quarter.
Pioneer and Sinochem plan to drill 86 horizontal wells this year in Wolfcamp, increasing it to 120 in 2014 and 165 in 2015.
This is Pioneer's second partnership with an overseas company. Indian conglomerate Reliance Industries Ltd bought a 45 percent stake in Pioneer's Eagle Ford assets for US$1.3 billion in 2010.
The deal is the latest in a string of investments by Chinese companies in North America.
Sinochem will pay US$500 million in cash and spend US$1.2 billion to fund a portion of Pioneer's future drilling costs. Sinochem will acquire about 82,800 net acres of leasehold as per the deal. Pioneer will continue as the operator of the joint interest area, the Dallas-based company said.
Production in the joint interest area averaged about 2,000 barrels oil equivalent per day in 2012, with a year-end exit rate of about 5,000 boe per day.
At least four analysts said the deal was a big win for Pioneer, with valuations beating their expectations by a wide margin.
"We believe the US$18,100 per acre price on the Southern Midland Wolfcamp JV is about US$3,000 per acre above Street expectations and is positive for the stock," Global Hunter Securities analyst Mike Kelly wrote in a note.
Most analysts' expectations were between US$10,000 and US$15,000 per acre.
The deal was also positive for nearby producers such as Devon Energy Corp and Laredo Petroleum Holdings Inc, Robert W. Baird analyst Michael Hall wrote in a note.
The emerging Wolfcamp Shale may ultimately rival the success of Eagle Ford shale in the same state, information provider IHS Inc said in December.
The deal is expected to close during the June quarter.
Pioneer and Sinochem plan to drill 86 horizontal wells this year in Wolfcamp, increasing it to 120 in 2014 and 165 in 2015.
This is Pioneer's second partnership with an overseas company. Indian conglomerate Reliance Industries Ltd bought a 45 percent stake in Pioneer's Eagle Ford assets for US$1.3 billion in 2010.
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