CITIC Resources to buy Kazakh oil assets for $1 bln
HONG KONG, May 9 (Reuters) CITIC Resources Holdings Ltd. said on Wednesday it will buy oil assets in Kazakhstan from its state parent for US$1 billion, making it China's fourth-largest crude producer and sending its shares to their highest in nearly a decade.
Its shares have soared 62 percent in the year to April 30, prior to a trading suspension, and surged as much as 14 percent on Wednesday to HK$4.20, their highest since October 1997.
The deal had been expected as Chinese firms armed with cash -- especially resource-oriented ones -- scour the globe for investments to feed the world's fourth-largest economy and establish a larger worldwide presence.
State-owned investment group CITIC bought the Kazakh oil assets of Canada-based Nations Energy Co. Ltd. for $1.9 billion in 2006. The cornerstone of those assets was the Karazhanbas oil and gas field, which has proven reserves of more than 340 million barrels and production of over 50,000 barrels per day.
The CITIC Resources' acquisition represents about half of the assets that its parent bought in 2006. The parent has also granted an option to the Kazakhstan government to buy more than 40 percent of the assets, but it has not yet been exercised.
CITIC Resources, a listed arm of China's top investment firm, said it planned a seven-year U.S. dollar bond issue to bankroll the deal, without elaborating. The firm raised more than US$220 million earlier this year selling new Hong Kong shares.
CITIC Resources also said on Wednesday it would also exercise an option to buy 90 percent of Tincy Group Energy Resources Ltd. for US$150 million.
Tincy holds the right to develop and operate an oilfield -- with estimated original oil in place ranging from about 65 million tonnes to 75 million tonnes -- in the Bohai Bay basin in northeastern Liaoning province.
CITIC Resources, of which Singaporean state investment firm Temasek Holdings [TEM.UL] owns about 7 percent, said that if the Kazakh acquisition had taken place on Jan. 1, 2006, the company's net profit would have more than tripled to HK$718 million (US$91.83 million) in 2006.
CITIC Resources made HK$201 million last year.
CITIC Resources joins an entrenched oil triumvirate -- PetroChina Co. Ltd. , Sinopec Corp.
and CNOOC Ltd. -- as the largest oil producers in the country.
GLOBAL QUEST FOR OIL China's double-digit economic growth is fuelling a quest for resources globally, spearheaded by its largest state-owned corporations. But the ever-expanding search is encountering political resistance from countries fearful of relinquishing control over strategic resources.
Analysts say the oilfield that CITIC Resources plans to acquire -- the Hainan-Yuedong block in Liaoning, which is near PetroChina's recent big oil find in Jidong oilfield -- would boost CITIC Resources's oil production even further.
Citigroup upgraded CITIC Resources to buy from hold and raised its price target to HK$4.80 from HK$3.55 after the deal.
''The Panjin state authority expects the fields to commence production before the end of 2009 and that they should have a peak production rate of 27,000 barrels per day (adjusted by equity stake),'' Citigroup said.
''At its peak production, Liaohe should add 60 percent to the company's scheduled peak production of 45,000 barrels per day.'' Other analysts say they may not see operating data from either the Kazakh field or the Liaoning field until late 2007.
Listed CITIC Resources raised more than US$220 million in February to help bankroll the Kazakh acquisition.
Last November, it made its first foray into the oil industry with the purchase of 51 percent of a production-sharing contract relating to the Seram Non-Bula Block on Seram Island, Indonesia.
That block had average daily production of 4,700 barrels of oil in 2006.
(US$1=HK$7.8) REUTERS SR DS1343