Sinopec the latest to cash in on Canada
October 11th, 2011 | Shanghai DailyCHINA Petrochemical Corp, better known as Sinopec Group, has agreed to buy Canadian oil and gas explorer Daylight Energy for C$2.2 billion (US$2.1 billion), laying down a significant premium for the takeover.
The deal marks the latest effort by Chinese companies to invest in the energy industry in Canada, which has vast conventional oil and gas reserves but also capital-intensive oil sands deposits in Alberta province.
In July, CNOOC, China’s dominant offshore oil producer, agreed to acquire bankrupt oil producer OPTI Canada for US$2.1 billion.
Sinopec’s cash offer of C$10.08 per share is more than double Daylight’s closing price of C$4.59 last Friday, the companies announced yesterday.
The offer “recognizes the highly attractive asset portfolio and exceptional terms we have assembled at Daylight,” according to Anthony Lambert, chief executive of Daylight.
Daylight’s proven and probable reserves rose 46 percent to 174 million barrels of oil equivalent at the end of last year, of which 70 percent is natural gas. This makes Daylight a predominantly natural gas company.
Analysts at Sanford C Bernstein said the strategic driver for Sinopec acquiring Daylight is linked to the potential for liquefied natural gas exports from west Canada.
Analysts said: “Asian companies are in a dash to secure gas assets in west Canada in the same way we have seen in Australia over the past five years.”
This deal will expand some of Sinopec’s long-term options for international gas and LNG.
The Sinopec-Daylight deal, which has been approved by Daylight’s board, is subject to the approval of Daylight shareholders and the Chinese and Canadian governments.
By Richard Fu