* Sinopec unit to buy ConocoPhillips' 9 pct Syncrude stake
* Largest ever Chinese acquisition of Canadian asset
* Price tag higher than market had expected
* ConocoPhillips shares up 1.2 pct; Sinopec down 0.3 pct
* Canadian regulators not expected to block deal
By Michael Flaherty and Jeffrey Jones
HONG KONG/CALGARY, Alberta, April 13 A
subsidiary of China's Sinopec Group (0386.HK)(600028.SS)(SNP.N)
agreed to pay $4.65 billion for ConocoPhillips's (COP.N) stake
in a Canadian oil sands project, marking the country's second
largest investment in North America.
China, Asia's largest refiner, has been scouring the globe
and spending billions of dollars on energy resources to support
booming growth in the world's third-largest economy.
China's power and energy companies spent around $20 billion
alone last year on outbound acquisitions, an amount that
includes Sinopec's $7.2 billion purchase of Addax Petroleum, a
company with oil assets in West Africa and Iraqi Kurdistan.
The latest Sinopec deal, China's fifth-largest acquisition
in history, underlines a resurgence in interest in the vast but
difficult-to-extract oil sands energy resource located in the
province of Alberta.
Investment in the oil sands has jumped since crude prices
shot past $80 a barrel with the global economic recovery
U.S.-based oil major ConocoPhillips said it would sell its
9.03 percent interest in the Syncrude Canada Ltd project to
China's top refiner. The deal, China's largest-ever purchase of
a Canada-based asset, is set to close in the third quarter.
The price paid for the ConocoPhillips stake "is more than
the market was expecting. They were expecting about $4
billion," said Phil Skolnick, an analyst with Genuity Capital
Markets. "It just shows that the Chinese are a different kind
Indeed, China's state-owned companies can take a
longer-term view of major investments in sectors such as
energy, where they have outbid many domestic players having no
need to tap public markets for financing.
DEAL TO CLOSE IN Q3
In a separate statement, Sinopec International Petroleum
Exploration and Production Corp, a Sinopec subsidiary, said the
transaction was subject to government and regulatory approvals
in China and Canada.
State-owned Sinopec controls Hong Kong-listed China
Petroleum & Chemical Corp (Sinopec Corp), which announced in
March that it will buy a stake in upstream assets in Angola for
$2.46 billion. [ID:nTOE62P02C]
Syncrude, the largest project in the oil sands, has
operated since 1978, and can now pump out 350,000 barrels a
day, roughly 13 percent of Canada's overall oil output.
The ConocoPhillips transaction differs from other Chinese
oil sands deals, which involved early-stage projects, according
to FirstEnergy Capital Corp analyst Mike Dunn.
"Sinopec will continue to buy overseas assets but their
priority will be on more developed projects that have started
to generate profits," said Gideon Lo, an analyst at DBS Group
Research. Sinopec is seen expanding in overseas E&P markets and
reducing its reliance on the volatile refining sector in China.
For ConocoPhillips, the deal is part of a 2-year, $10
billion program of asset sales. When it first said it was
putting the stake on the block last October, analysts pegged
the value at $3.6 billion to $4 billion.
"This deal goes a long way in helping them reach their $10
billion asset-sale goal. It's probably a bigger chunk than they
had anticipated," said Allen Good, analyst with Morningstar.
After Monday's announcement, ConocoPhillips shares climbed
64 cents, or 1.2 percent, to $55.96 on the New York Stock
Exchange. Sinopec shares edged up 0.3 percent to HK$6.61 in a
broader market .HSI down 0.6 percent.
Graphic showing the world's largest oil reserves:
Graphic showing China's top 10 foreign M&A deals:
FACTBOX on Chinese investments in oil sands:
For related BREAKINGVIEWS: [ID:nLDE63B1L1]
OIL SANDS INTEREST
The oil sands make up the largest crude deposit outside the
Middle East, a resource attracting a Who's Who of the global
oil industry willing to pay extra in development costs in
exchange for a secure supply in a politically stable country.
Last April, Sinopec bought an additional 10 percent
interest in Total's (TOTF.PA) planned Northern Lights oil sands
project for an undisclosed sum.
Canada recently subjected deals involving foreign
state-owned enterprises to more regulatory scrutiny, but has
not rejected any oil sands transactions.
Asked about the Sinopec deal during an event in Calgary,
Canadian Finance Minister Jim Flaherty simply noted that large
investments must meet tests on whether they are in the national
"There are a couple of standards that have to be met and
I'm sure the process will be followed," he told reporters.
Analysts said they do not see regulators blocking the deal.
"We've already seen a number of oil sands transactions that
have been applauded by both the Alberta and federal
governments, and there's basically a green light given to
foreign entities," Skolnick, of Genuity Capital Markets, said.
Syncrude's largest owner, Canadian Oil Sands Trust
COS_u.TO, was seen as a prospective buyer of ConocoPhillips'
stake. Officials at the trust, which has a 37 percent interest,
were not immediately available for comment.
Its trust units jumped 5 percent to C$32.22 on the Toronto
Stock Exchange. The value of the deal showed the trust is
likely worth more than the market had been affording it,
although not the price Sinopec was paying, Skolnick said.
Syncrude's other owners are Imperial Oil Ltd (IMO.TO),
Suncor Energy Inc (SU.TO), Nexen Inc NXY.TO, Murphy Oil Corp
(MUR.N) and Nippon Oil Corp 5001.T unit Mocal Energy.
According to Thomson Reuters data, China Investment Corp's
[CIC.UL] $5 billion investment in Morgan Stanley (MS.N) was
China's biggest deal in North America.
(Additional reporting by Alison Leung and Alison Lui in HONG
KONG, Mike Erman in NEW YORK, Anna Driver in HOUSTON, Louise
Egan in OTTAWA and Jeffrey Hodgson and Pav Jordan in TORONTO;
Editing by Jean Yoon)