Sinopec buys Daylight Energy in $2.14 billion cash deal
By James Byrne and Li Xin | 10 October 2011 15:12 GMT
Daylight Energy’s Canadian assets. (Interfax)
Sinopec, one of China’s three state-owned energy giants, will purchase Alberta based Daylight Energy in a $2.14 billion cash deal, the company announced on Sunday.
The deal was made through Sinopec International Exploration and Production Corporation (SIPC), a wholly-owned subsidiary of Sinopec Group, which is tasked with the development and operation of foreign oil and gas projects.
Daylight Energy has an extensive portfolio, which contains several hydrocarbon rich basins in Alberta and British Columbia. The Canadian company, which can now more efficiently access its large shale deposits, is drilling in four basins spanning both provinces.
SIPC agreed to the purchase of the issued and outstanding shares at a price of C$10.08 ($9.7) – more than double Friday’s closing price of C$4.59 ($4.4) a share, and a 43.6% premium over the 60-day weighted average trading price on the Toronto Stock Exchange up to 7 October 2011. Following the announcement, Sinopec’s shares fell on the New York and Hong Kong Stock Exchanges by 3.57% and 4.406% respectively.
The Chinese company still needs the Canadian government to approve the deal before it closes.
The recent shale boom has depressed gas prices in North American markets, with Credit Suisse recording third quarter United States prices at $4.05 per million Btu (MMBtu) and forecasting $5.50/MMBtu by 2014. While American prices have fallen, those in Asia have continued to climb, reaching approximately $16/MMBtu following the Fukushima disaster and continuing surge in Asian demand.
With the planned Kitimat terminal in British Columbia expected to begin exports in 2015, Sinopec would have the logistical capabilities to transport the product, and would be in a good position to take advantage of favourable market conditions in Canada and North America. These cheap and plentiful reserves of gas would be available for export to their Shangdong LNG terminal or other Asian facilities.
The deal comes after China’s third largest oil and gas producer, China National Offshore Oil Corp., agreed to acquire energy company OPTI Canada Inc. for $2.1 billion in July. In 2010, Sinopec Group also purchased a 9.03% stake in Canadian oil sands developer Syncrude Canada for $4.65 billion, signalling China’s increased interest in foreign energy reserves.
Li Lingxuan, an analyst with Zhuochuang Information told Interfax on Monday: “It is important for Sinopec to acquire global gas resources to become more competitive internationally.” Furthermore, he added that it is a good way to make use of China’s foreign exchange reserves. “This is the second deal to see a state-owned Chinese company acquire a Canadian energy company,” he pointed out.
Despite Sinopec’s extensive foreign upstream presence through its subsidiaries, this deal marks a shift in scale for the Chinese major. Although SIPC is present in more than 20 countries and hold stakes in 38 upstream oil and gas projects, Sinopec has never bought outright such a large foreign company.
However, at Sinopec’s 2010 working conference, company president Su Shulin stated that the company was increasingly focusing on foreign oil and gas output, and was hoping to accelerate its overseas development.
Sinopec buys Daylight Energy in $2.14 billion cash deal
Daylight Energy’s Canadian assets. (Interfax)
Sinopec, one of China’s three state-owned energy giants, will purchase Alberta based Daylight Energy in a $2.14 billion cash deal, the company announced on Sunday.
The deal was made through Sinopec International Exploration and Production Corporation (SIPC), a wholly-owned subsidiary of Sinopec Group, which is tasked with the development and operation of foreign oil and gas projects.
Daylight Energy has an extensive portfolio, which contains several hydrocarbon rich basins in Alberta and British Columbia. The Canadian company, which can now more efficiently access its large shale deposits, is drilling in four basins spanning both provinces.
SIPC agreed to the purchase of the issued and outstanding shares at a price of C$10.08 ($9.7) – more than double Friday’s closing price of C$4.59 ($4.4) a share, and a 43.6% premium over the 60-day weighted average trading price on the Toronto Stock Exchange up to 7 October 2011. Following the announcement, Sinopec’s shares fell on the New York and Hong Kong Stock Exchanges by 3.57% and 4.406% respectively.
The Chinese company still needs the Canadian government to approve the deal before it closes.
The recent shale boom has depressed gas prices in North American markets, with Credit Suisse recording third quarter United States prices at $4.05 per million Btu (MMBtu) and forecasting $5.50/MMBtu by 2014. While American prices have fallen, those in Asia have continued to climb, reaching approximately $16/MMBtu following the Fukushima disaster and continuing surge in Asian demand.
With the planned Kitimat terminal in British Columbia expected to begin exports in 2015, Sinopec would have the logistical capabilities to transport the product, and would be in a good position to take advantage of favourable market conditions in Canada and North America. These cheap and plentiful reserves of gas would be available for export to their Shangdong LNG terminal or other Asian facilities.
The deal comes after China’s third largest oil and gas producer, China National Offshore Oil Corp., agreed to acquire energy company OPTI Canada Inc. for $2.1 billion in July. In 2010, Sinopec Group also purchased a 9.03% stake in Canadian oil sands developer Syncrude Canada for $4.65 billion, signalling China’s increased interest in foreign energy reserves.
Li Lingxuan, an analyst with Zhuochuang Information told Interfax on Monday: “It is important for Sinopec to acquire global gas resources to become more competitive internationally.” Furthermore, he added that it is a good way to make use of China’s foreign exchange reserves. “This is the second deal to see a state-owned Chinese company acquire a Canadian energy company,” he pointed out.
Despite Sinopec’s extensive foreign upstream presence through its subsidiaries, this deal marks a shift in scale for the Chinese major. Although SIPC is present in more than 20 countries and hold stakes in 38 upstream oil and gas projects, Sinopec has never bought outright such a large foreign company.
However, at Sinopec’s 2010 working conference, company president Su Shulin stated that the company was increasingly focusing on foreign oil and gas output, and was hoping to accelerate its overseas development.