Cnooc Parent $1.5 Billion Angola Bid Reflects Risks, CLSA Says

By Winnie Zhu

Aug. 11 (Bloomberg) -- China National Offshore Oil Corp.'s reported $1.5 billion joint bid with China Petrochemical Corp. for an Angolan oil and gas asset reflects political and operating risks in the African nation, said CLSA Ltd.

The bid translates to an acquisition cost of $10.60 per barrel based on net proven reserves of 142 billion barrels of oil equivalent, Gordon Kwan, a Hong Kong-based China energy research director, said in e-mailed comments on a South China Morning Post report. The offer is cheaper than the $23.30 valuation for the reserves of China National's unit, Cnooc Ltd.

China National, the nation's third-biggest oil company, and Sinopec Group, as China Petrochemical is known, plan to bid for the Angolan asset owned by U.S.-based Marathon Oil Corp., the Hong Kong-based English-language newspaper said today, citing people it didn't name. Angola, which had been embroiled in a civil war until 2002, is preparing for its first nationwide elections in 16 years.

The acquisition discount takes into account ``offshore operating risks and deferred start-up risks,'' Kwan said.

Li Shiqiang, the media relation director of China National, declined to comment when contacted by Bloomberg News. Zhang Zhiguo, the spokesman of Sinopec Group, didn't reply to calls made to his mobile.

Marathon's Stake

Marathon is selling a 20 percent stake in offshore Block 32, where it has drilled 11 successful exploration wells, according to the South China Morning Post report. Marathon will retain a 10 percent stake in the field slated to start production in 2012. Exxon Mobil Corp. has 15 percent and Total SA 30 percent, the newspaper said.

Marathon will meet the bidders, including India's Oil and Natural Gas Corp. and Brazil's Petroleo Brasileiro SA, and select a winner over the next few days, the report said.

The joint bid marks a change in approach from past acquisitions where the Chinese government typically selects one company to move forward with an offer, CLSA's Kwan said. The joint effort will avoid two Chinese firms bidding up the price, he said.

China, the world's second-biggest energy user, is seeking supplies to fuel an economy that grew 11.9 percent in 2007.

``This potential acquisition makes long-term strategic sense to boost reserves and production,'' Kwan said.

China International Trust & Investment Corp., a government investment arm, bought the Karazhanbas field from Canada's Nations Energy Co. in October 2006 for $1.9 billion.

To contact the reporters on this story: Winnie Zhu in Shanghai at wzhu4@bloomberg.net.