October 4th, 2010 - Chinese companies spent a record $US32 billion last year acquiring energy and resources assets overseas to meet demand in the world's fastest-growing major economy. Cnooc Ltd., China's biggest offshore oil explorer, agreed in March to buy a 50 per cent stake in Argentine producer Bridas Corp. for $US3.1 billion while PetroChina Co. in December won Canadian government approval to buy a stake in two Alberta oil-sands projects for C$1.9 billion.
Statoil ASA, Norway's largest oil and natural gas company, in May agreed to sell a 40 per cent stake in the Brazilian offshore Peregrino field to Sinochem Group for $US3.07 billion in cash.
Brazil Fields
Repsol, Spain's biggest oil company, has stakes in Brazil's Santos and Espirito Santo basins and plans to invest as much as $US14 billion there through 2019 in fields that may hold as much as 3 billion barrels.
Shares in Repsol jumped to a two-year high yesterday, climbing 5 per cent to close at 19.83 euros in Madrid and giving the company a market value of 24 billion euros ($US33 billion).
The valuation of the transaction is "surprisingly high," Banco BPI SA analysts Bruno Silva, Flora Trindade and Gonzalo Sanchez-Bordona wrote in a research note. They have a "buy/accumulate" rating on Repsol shares.
Repsol had also considered a plan to sell about 40 per cent of the Brazilian business through an IPO. Repsol now won't be selling shares in the Brazilian unit to the public, Madrid-based spokesman Kristian Rix said.
Too Large
"For us, Brazil was way too large," Repsol's Chief Operating Officer Miguel Martinez said in an interview on Bloomberg Television. "Obtaining a partner was a move that was necessary." Repsol and Sinopec may work together in other areas in the future, he said.
Since 2007, Repsol and partners BG Group Plc and Brazil's Petroleo Brasileiro SA have found hydrocarbons in the offshore Carioca, Guara and Iguacu fields in the Santos Basin's BM-S-9 block. They are ultra-deep deposits beneath a salt layer under the seabed.
Petrobras, as the Brazilian state-controlled company is known, estimated in November 2007 that the Santos Basin's pre- salt Tupi field may contain as many as 8 billion barrels of oil, the largest find in the Americas since Mexico's Cantarell field in 1976. Repsol doesn't own a stake in Tupi.
The investment by Sinopec comes after Petrobras last week completed the world's largest share sale, raising about $US70 billion.
Energy Shares
Shares of other energy companies with stakes in Brazilian offshore projects advanced yesterday after the Sinopec investment in the Repsol unit was announced. Galp Energia SGPS SA rose as much as 7.8 per cent in Lisbon, while BG Group Plc, the UK's third-largest oil and natural gas producer, climbed as much as 5.8 per cent in London.
"This puts a hefty valuation on reserves in Brazil," said Peter Hitchens, an analyst at Panmure Gordon & Co. in London. "It could read through into BG's assets."
Repsol wants to invest in exploration in Brazil's offshore Santos Basin and elsewhere to increase reserves and output, while trying to reduce exposure to mature fields in Argentina. The company forecasts annual production growth of as much as 4 per cent through 2014 as projects in Brazil and Peru come on stream. Repsol plans to invest a total of 28.5 billion euros in the period.
Oil and gas production at Repsol's upstream division, which doesn't include Argentine unit YPF, was unchanged from a year earlier at 340,000 barrels of oil equivalent a day in the second quarter. Output from Buenos Aires-based YPF, of which Repsol owns 84 per cent, fell 7 per cent to 556,000 barrels a day as fields matured.
The Spanish company wants to sell part of its holding in YPF "sooner rather than later," Chief Executive Officer Antonio Brufau said on April 29. In 2008 Repsol delayed a public offering of a stake in YPF. - Bloomberg
