HONG KONG - China Petrochemical, the nation's second-largest energy company, will pay $1.02 billion cash to buy 50 percent of Chesapeake Energy's Mississippi Lime assets, seeking to benefit from surging U.S. crude output.
The assets in Oklahoma produced 46,000 barrels of oil a day at the end of 2012, according to an emailed statement released Monday by Beijing-based unit Sinopec International Petroleum Exploration & Production. About 93 percent of the payment will be due on closing expected next quarter, Chesapeake, based in Oklahoma City, said Monday in a separate statement.
Chinese companies may pursue more U.S. energy acquisitions after Cnooc, a unit of China's largest offshore oil producer, this month won approval from the U.S. Committee on Foreign Investment to buy Nexen for $15.1 billion. Chinese companies are seeking energy assets globally to lock in supplies for the world's fastest growing major economy and learn how to access technology to retrieve fuel trapped in rocks that has driven U.S. oil production to the highest in almost 21 years.
"While Chesapeake has many quality assets, Chinese oil companies care more about their drilling and shale-fracking technology," Laban Yu, a Hong Kong-based analyst at Jefferies Group, said in a telephone interview. "The reason Chinese oil companies have gone after Chesapeake in the past year was also because they wanted to apply the technology to tap the world's No. 1 shale gas reserves in China."
Cnooc has bought $1.65 billion of assets from Chesapeake since 2010.
Chesapeake reported Feb. 21 that Mississippian production had tripled in the fourth quarter from a year earlier. Net proved reserves were about 140 million barrels of oil equivalent as of Dec. 31, the company said Monday.
Sinopec's purchase reflects 425,000 net acres, according to Chesapeake.
"Sinopec is paying a reasonable rate for oil and gas production, $65,000 a flowing barrel for oil and $5,000 a flowing thousand cubic feet for gas," Scott Hanold, a Minneapolis-based analyst for RBC Capital Markets, said Monday in an interview. "They're getting the acreage for free."
Hanold rates Chesapeake at sector perform, equivalent to a hold, and owns no shares.
China Petroleum & Chemical Corp., the listed unit of the Sinopec Group, gained 0.5 percent to HK$8.80 in Hong Kong. The shares have increased 0.2 percent this year, compared with a 0.7 percent gain in the benchmark Hang Seng index.
U.S. oil output climbed 54,000 barrels a day to 7.12 million in the week ended Feb. 15, the highest level since July 1992, the Energy Information Administration, a division of the Energy Department, said Friday.
Chesapeake may need to sell as much as $9 billion in assets this year after divesting about $11 billion in oil fields and pipelines in 2012 to plug a funding shortfall, Brian Gibbons, an analyst at CreditSights Inc., said last week.
Aubrey McClendon, chief executive officer at Chesapeake, agreed on Jan. 29 to step down by April 1 from the company he co-founded 23 years ago after slumping gas prices erased profits, worsened Chesapeake's debt load and triggered job cuts and asset sales. The company's $13.6 billion market value is less than half its $35.6 billion peak from 2008 and a fraction of the $100 billion estimate that McClendon pegged as its true value during a March 2012 interview.
Sinopec Chairman Fu Chengyu said in May his company had held talks with Chesapeake and others about investing in shale assets. Fu was seen sitting in a front-row seat at Chesapeake Energy Arena in Oklahoma City in June 2012 watching the Oklahoma City Thunder take on the Miami Heat in an NBA final, according to The Deal. The Thunder is partly owned by McClendon.