The acquisition of BP's 60% remaining share in Pan American Energy by state-owned China National Offshore Oil Corporation will have a "significant" impact on the Chinese company's oil and gas reserves, which is perceived to be a weakness for CNOOC, an analyst said.
"Overall proven reserves will be increased by 16% alone on the back of this deal, which will certainly boost CNOOC's overall [reserves-to-production] ratio," Bernstein Research's analyst Neil Beveridge said in a research note on Monday.
The Chinese company said on Sunday that its wholly owned subsidiary CNOOC International and Bridas Energy Holdings will jointly contribute about $4.94 billion to Bridas Corp. for the acquisition of BP's remaining interest in Pan American for $7.06 billion.
CNOOC International and Bridas Energy both hold 50% shares in Bridas Corp.
The acquisition establishes CNOOC as a major producer in Argentina with net production of 113,000 barrels of oil equivalent/day, although "much will depend on how much additional oil and gas CNOOC will be able to squeeze out of Pan American's fields using enhanced oil and gas recovery techniques," Beveridge said.
The analyst added that even though there could be more reserves to extract than currently on Pan American's books, government tax incentive programs will play a big part as they offer incentives for companies to grow production and reserves of low-margin barrels from Pan American's fields.
The current transaction will boost CNOOC's proven reserves and production by an additional 429 million boe and 68,000 boe/day, respectively, the analyst added.
"Given the regulated oil pricing in Argentina, however, net income contribution is likely to be low at the $8-10/boe range, or 2% of our 2011 earnings estimate for CNOOC," Beveridge said.
"We maintain our positive view on CNOOC given our belief that organic production growth and earnings next year will continue to surprise to the upside," he added.
"Overall proven reserves will be increased by 16% alone on the back of this deal, which will certainly boost CNOOC's overall [reserves-to-production] ratio," Bernstein Research's analyst Neil Beveridge said in a research note on Monday.
The Chinese company said on Sunday that its wholly owned subsidiary CNOOC International and Bridas Energy Holdings will jointly contribute about $4.94 billion to Bridas Corp. for the acquisition of BP's remaining interest in Pan American for $7.06 billion.
CNOOC International and Bridas Energy both hold 50% shares in Bridas Corp.
The acquisition establishes CNOOC as a major producer in Argentina with net production of 113,000 barrels of oil equivalent/day, although "much will depend on how much additional oil and gas CNOOC will be able to squeeze out of Pan American's fields using enhanced oil and gas recovery techniques," Beveridge said.
The analyst added that even though there could be more reserves to extract than currently on Pan American's books, government tax incentive programs will play a big part as they offer incentives for companies to grow production and reserves of low-margin barrels from Pan American's fields.
The current transaction will boost CNOOC's proven reserves and production by an additional 429 million boe and 68,000 boe/day, respectively, the analyst added.
"Given the regulated oil pricing in Argentina, however, net income contribution is likely to be low at the $8-10/boe range, or 2% of our 2011 earnings estimate for CNOOC," Beveridge said.
"We maintain our positive view on CNOOC given our belief that organic production growth and earnings next year will continue to surprise to the upside," he added.
