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Sinopec to buy Addax for $7.3b
By Wan Zhihong (China Daily)
Updated: 2009-06-25 07:51
 Sinopec Group, China's second largest oil company, yesterday agreed to buy the Geneva-based oil and gas producer Addax Petroleum Corp for $7.3 billion, in a bid to tap oil reserves in West Africa and the Middle East. Sinopec Group made the deal through its subsidiary Sinopec International Petroleum Exploration and Production Corp (SIPC). The company offered to pay C$52.80 ($45) per share in cash for the takeover, the Beijing-based Sinopec said in a statement yesterday. "The deal will enable SIPC to achieve its strategic objective of building a stronger presence and operations in West Africa and Iraq, accelerating its international growth strategy as well as optimizing its offshore oil and gas assets portfolio," said the statement. "In addition, Addax Petroleum's exploration potential, particularly in offshore deepwater exploration projects, will provide a strong platform for SIPC's ongoing growth and development," it said. Addax, which is based in Geneva but lists its shares in Toronto and London, had 536 million barrels of proven and probable oil reserves as at end-2008, and average production of approximately 140,000 barrels of oil per day (equivalent to 7 million tons per year) in 2008. Addax's oil and gas assets are mainly based in West Africa and the Middle East, with core assets in Nigeria. The company said it produced 134,730 barrels of oil a day in the first quarter, with more than three quarters of its output coming from properties in Nigeria. The price of C$52.80 per share is at a 47 percent premium to Addax's closing share price on June 5, the day prior to its announcement that it had received a takeover approach. Analysts said that given the fact that many oil and gas assets had been devalued in the face of the global financial crisis, Sinopec's offer was "reasonable". "The timing is now good for domestic oil companies to make overseas deals as they can buy assets cheaper," said Lin Boqiang, director of the China Center for Energy Economics Research at Xiamen University. Compared with $147 per barrel last July, crude prices have fallen by over 50 percent.
"It is in line with China's energy strategy to diversify its energy supplies," said Han Xiaoping, energy analyst with Beijing Falcon Pioneer Technology Co. Currently, imported oil accounts for around half of China's total oil consumption. Industry insiders have long suggested the country further diversify its oil importing sources to find more sustainable supplies. China's three major oil companies, Sinopec, China National Petroleum Corp (CNPC) and China National Offshore Oil Corp (CNOOC), have all accelerated the pace of their overseas development in recent years. CNPC, the country's biggest oil producer, is reportedly starting talks this month to expand exploration and production opportunities in Mongolia. The negotiations will cover investments for a refinery and transportation and storage facilities, Galsan Batsukh, Mongolia's ambassador to China, said in an interview to Bloomberg News. Longer-term plans may include a pipeline from Mongolia to the bordering Chinese province of Inner Mongolia, Batsukh added. (For more biz stories, please visit Industries)
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