China National Petroleum to acquire Canada's Verenex Energy for $357 million

China has been buying up energy assets in several countries in preparation for the demands of the future, and has often been in competition with India's own ONGC for the same piece of the overseas energy resources. (See: China's Sinopec competes with ONGC's $2.5-billion bid for UK's Imperial Energy)

Yesterday China National Petroleum Corp launched a friendly C$443-million ($357 million) offer for Verenex Energy Inc to give the Chinese state-owned oil company a stake in a promising Libyan oil concession.

Shares of Calgary-based Verenex, which operates in part of the Ghadames Basin in Libya, surged C$1.75, or 22 per cent, to C$9.55 on the Toronto Stock Exchange. Under the deal, CNPC's international arm will offer C$10 in cash for each share of Verenex, representing a 28 per cent premium to Wednesday's closing price. After taking Verenex's debt into consideration, CNPC International Ltd, an indirect wholly owned subsidiary of CNPC, will probably spend around C$499 million to complete the deal.

Verenex's committee of independent directors has recommended the deal to the shareholders. Vermilion Energy Trust, which owns a 45 per cent stake in Verenex, has already agreed to tender its shares to CNPC. The agreement requires two-thirds of Verenex shareholder accept it. It includes a break fee of C$15 million should the deal fall through.

Verenex is the operator of Area 47 in Libya under an exploration and production-sharing agreement reached by the Canadian company and the Libyan National Oil Corp. The deal enabled Verenex to conduct commercial development over a long period in the rich oil and gas area of Libya. Late last year, Verenex said an independent assessment of gross contingent oil and gas resources identified as much as 2.15 billion barrels. It last announced a discovery in Area 47, its 10th, in January. The well flowed at a test rate of 1,315 barrels of oil and 16.2 million cubic feet of gas a day.

The deal is the latest in a global buying spree by China, which has seen the voracious giant buy up stakes in resource companies around the world to secure supplies for its growing economy. China Petrochemical and Chemical Corp., known as Sinopec, in December closed its two-billion-dollar deal for Tanganyika Oil, which has oil fields in Syria. (See: Sinopec buys Tanganyika Oil in Syria for $2 billion)

The deal marks the latest in a recent string of foreign takeovers of Canadian companies, including a bid for Nova Chemicals Corp by Abu Dhabi's International Petroleum Investment Co, friendly acquisition of Bow Valley Energy by Britain's Dana Petroleum and a hostile play for UTS Energy Corp by Total SA of France.
(See: UTS Energy fights against Total bid)