RE: RE: RE: RE: IHS 2009 O&G M&A reportLooks like China is willing to pay $16/bbl for P2 reserves. Prices are going up, not down. Recent sales in the Pembina region of Alberta were over $30/bbl for P2 reserves. Looks like the truth wins over Goofy's fake numbers.
maxim of the high-risk energy business is "you don't drill for oil in Switzerland." But you can buy oil companies based there.
Addax Petroleum, with an office in Geneva but reserves spread among Nigeria, Gabon and Iraq, is selling itself to China Petrochemical Corp., or Sinopec, for $8.8 billion, including net debt.
Sinopec is paying about $16 a barrel of proven and probable reserves. The average for African and Middle Eastern deals in 2008 -- a year with triple-digit crude prices -- was under $5 a barrel, according to consultants IHS Herold and Harrison Lovegrove & Co.
Throw in Addax's possible reserves and contingent natural-gas reserves and the multiple drops to just over $7 a barrel of oil equivalent. Your average buyer would never factor in such rosy assumptions. But then Sinopec, 66%-owned by the Chinese government, isn't your average buyer. Besides slaking Beijing's thirst for oil, Sinopec must be hoping to gain cachet by landing a large foreign transaction while other recent attempts, such as Aluminum Corp. of China's deal with miner Rio Tinto, have failed.
One potential wrinkle is Baghdad, which still has no official agreement with Kurdish authorities on managing the region's oil. The Iraqi government might take offense at Sinopec's move and block access to bigger projects elsewhere in the country.
Then again, would cash-strapped Baghdad really confront a major oil consumer ready to pay top dollar for reserves? Even if it did, Addax's Kurdish assets represent just a fifth of its proven and probable reserves. For the sake of expediency, Sinopec could potentially split them off to appease Baghdad and still gain Africa's riches.