China's CNOOC emerges from shadows, eyes big deal

China National Offshore Oil Corp’s likely acquisition of oil field assets in Africa should silence critics concerned that the country’s top offshore oil producer has been sitting on too much cash for too long.

CNOOC has been a noticeable absentee from overseas M&A since it paid $2.7 billion for a stake in French oil major Total’s African Akpo field in 2006. A year earlier, it was bumped by a U.S. political backlash from buying U.S.-based oil company Unocal.

Analysts had begun to question the group’s bullish production growth forecasts, pushing CNOOC to seek more outbound deals.

The Chinese group may now be about to pay up to $2.5 billion for Ugandan assets owned by Heritage Oil Plc.

“This deal makes a lot of sense in the longer term,” said Gordon Kwan, head of regional energy research at Mirae Asset Securities. “Acquisitions are the fastest way for a company to grow its production and reserves, while not every exploration effort will result in new discoveries.”

“Now’s the best time to come back to the market, with oil prices down 50 percent from an all-time high,” Kwan said, noting that if CNOOC were to pay $2.5 billion for a 20 percent stake, it would be getting 164 million barrels at $15 per barrel.

Reuters