Analysts: CNPC is overpaying
(Bloomberg.com)
Updated: 2005-08-23 20:56

China National Petroleum Corp. may be paying too much when it agreed to buy Petrokazakhstan Inc. for $4.18 billion, analysts said.

China National Petroleum's bid would be equivalent to $10.3 for a barrel of oil equivalent for the Calgary-based company's proved reserves, according to a Deutsche Bank AG report.

"This valuation seems expensive versus other recent acquisitions," analysts including Beijing-based David Hurd said in the report issued yesterday. The Beijing-based producer agreed on Aug. 22 to pay Petrokazakhstan's shareholders $55 a share, 21 percent more than the then latest closing price.

China's oil companies are expanding overseas as local fields are failing to meet domestic demand, which more than doubled in the past decade to about 6.75 million barrels a day, according to an estimate by the International Energy Agency. China National Petroleum outbid Oil & Natural Gas Corp., India's biggest oil producer, in its pursuit of Petrokazakhstan.

Statoil ASA, Norway's largest explorer, acquired fields in the Gulf of Mexico for EnCana Corp. for $2 billion, which represents $5.9 for a barrel of oil equivalent, Deutsche said. Petrochina on June 10 agreed to pay $2.5 billion for 50 percent of the parent's overseas assets, which was valued at $4.45 a barrel, the analysts said.

Merrill Lynch & Co. and Credit Suisse First Boston said in separate reports China National Petroleum may fold Petrokazakhstan's assets into a venture with its traded unit, PetroChina Co.

"Apparently, China National Petroleum will inject the assets into the joint venture, at a later stage probably at the same price," Merrill analysts, including Shanghai-based Bin Guan, said in the report.

PetroChina will obtain 50 percent stake in Petrokazakhstan's assets through the venture, the analysts said.

CSFB analysts Prashant Gokhale and Edwin Pang said in their report that the venture, once established by end of this year, may make the acquisition.

The analysts estimated China National Petroleum will be paying $10.2 for every barrel of oil equivalent of proved reserves. That represents $7.3 per barrel of proved and probable reserves, they said.

"The transaction is not cheap," Gokhale and Pang wrote.

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