CNOOC Buys PetroKazakhstan
PetroKazakhstan, based in Calgary, Alberta, but managed from Windsor, England, is a considerably smaller company than Unocal, and it does not have Unocal's extensive natural gas reserves or Unocal's reputation for high technology. It nonetheless commanded a price of $55 a share in today's deal, a premium of 21.1 percent to the stock's closing price on the New York Stock Exchange on Friday.It doesn't appear to necessarily be a good deal, though, or at least a trouble-free one:
In the oil industry, "China has consistently been willing to overpay for assets; it's more of a security issue for them than the absolute price," said John Kuzmik, a partner and China specialist at Baker Botts, a big Houston energy law firm. India's Oil and Natural Gas Corporation reportedly bid $3.6 billion.
Today's deal, announced before the opening of trading in New York, represents a huge payday for PetroKazakhstan's investors and the company's chief executive, Bernard Isautier.
PetroKazakhstan used to be owned by Hurricane Hydrocarbons, which was bankrupted in 1999 by low oil prices. But the company still held one superb investment: its stakes in the Kazakh oil fields, purchased for just $120 million in 1996 when Hurricane bought Yuzhneftegaz, a Kazakh state-owned oil company.
After the bankruptcy filing, Mr. Isautier joined the business, led the company out of bankruptcy, bought 88 percent of a large Kazakh refinery for $51 million, and began investing $143 million to develop the oil fields.
As oil prices soared and the value of the Kazakh oil fields soared with them, PetroKazakhstan's relations with the Kazakh government deteriorated. The government and the company have been locked in extensive legal battles over issues like the company's flaring burning off -- of natural gas, which the government wants to see shipped to markets instead.