CNOOC to buy Repsol Indonesian assets for US$585m

CNOOC to buy Repsol Indonesian assets for US$585m

Charlie Zhu
Reuters
Hong Kong

China offshore oil giant CNOOC says it has agreed to buy the
Indonesian assets of Spanish oil major Repsol-YPF for US$585
million in cash, its biggest international expansion to date.

The purchase will bring 360 million barrels of oil equivalent
(BOE) in proved net working interest reserves and CNOOC is now
targetting 2002 output of 125-130 million BOE, the Hong Kong and
New York-listed company said in a statement.

Analysts say the deal will make CNOOC's assets more
geographically diversified and that the price looked about right.

"This is quite reasonable, a pretty good deal," Howard Wong,
energy analyst at Morgan Stanley told Reuters.

The output target was higher than the 110 million BOE
announced by CNOOC late last year. CNOOC has vowed repeatedly to
keep its annual output growth rate of 15 percent in the next
several years, and has estimated its 2001 output at 95 million
BOE.

"We are making a material acquisition... at an attractive
price," CNOOC Chairman Wei Liucheng said in the statement.

A source told Reuters in mid-December that CNOOC, with cash on
hand of around $2 billion and modest gearing of 12-13 percent,
was planning a $500-600 million overseas oil field acquisition in
early 2002 to exploit cheaper prices for production assets.

CNOOC Chief Financial Officer Mark Qiu told Reuters on Friday
the Indonesian assets would boost CNOOC's net reserves by up to
20 percent. CNOOC now has net reserves of around 1.8 billion BOE,
Qiu said.

The statement said the acquisition would make CNOOC Ltd the
largest offshore oil producer in Indonesia. It already has a
presence in Indonesia through a 39.51 percent participating
interest in the Malacca Strait production sharing contract (PSC).

Merrill Lynch is the exclusive advisor to the acquisition.

The statement also said CNOOC expects its capital expenditure
for 2002 to reach $1.5-1.6 billion, including the purchase.

Excluding the purchase, the company's capex would still
increase by an estimated 30-50 percent year-on-year, it said.

CNOOC said that it would spend $650-720 million developing its
offshore China projects and $180-220 million on independent
exploration this year.

CNOOC's foreign PSC partners are expected to invest an
additional $300 million in exploration activities in offshore
China, a 150 percent increase over 2001.

Expected capital expenditure for the Indonesian assets would
be about $40-50 million, 90 percent of which will be for
development projects.

The assets to be acquired include a 65.34 percent interest in
the Southeast Sumatra PSC, 36.72 percent stake in the Offshore
Northwest Java PSC, 25 percent interest in the West Madura PSC,
50 percent interest in the Poleng TAC and 16.7 percent of the
Blora PSC.

CNOOC shares were up 1.97 percent to HK$7.75 in mid-afternoon
trade on Friday. The stock had gained more than six percent in
the past month to Thursday's close.

Repsol-YPF shares ended at 13.83 euros on Thursday after
losing 15.57 percent for the year to date. The stock has been hit
hard by Argentina's financial crisis because of its impact on
YPF, an Argentine oil company taken over by Repsol in 1999.