CNOOC Abandons Acquisition of Argentine Pan American Energy

CNOOC (00883.HK) announced on the evening of November 6 that CNOOC decided to abandon the purchase of Argentine oil and gas assets Pan American Energy from BP.

China National Offshore Oil Corporation ("CNOOC International"), a subsidiary of CNOOC, and Bridas Energy Holdings, a joint venture company of Bridas Energy Holdings, informed CNOOC one day ago that they had abandoned the acquisition.

CNOOC International owns 50% equity of the joint venture company. On November 28, 2010, CNOOC and BP signed an equity purchase agreement, deciding that the joint venture will acquire 70% of Pan American Energy.

CNOOC International agreed at the time that the joint venture company would inject approximately US$4.94 billion into Bridas. The capital injection will be made by the two parties and each party will have approximately US$2.47 billion in each.

The remaining 30% of the aforesaid purchase price, which is approximately USD 2.12 billion, will be supplemented by a third-party agency arranged by Bridas or by CNOOC International and BEH.

Pan-American's oil and gas assets are mainly located in Argentina and Bolivia. Pan American Energy has 23 oil and gas production blocks, of which 13 are in Argentina and 10 in Bolivia.

In addition, Pan-American Energy also has interests in 15 exploration blocks. These blocks are located in four oil and gas basins, located in northwestern Argentina. The company also has a complete oil and gas industry chain, including pipelines, oil terminals and power generation.

Pan American Energy has 8061 square kilometers of exploration area in South America. In 2008, Pan American Energy produced a total of 186,000 cubic meters of natural gas in this area, which accounted for 17% of the country's daily production and occupied 15% of Argentina’s domestic market share.

In 2009, Pan American Energy's daily production of oil and gas was 144.8 thousand barrels. From 2000 to 2008, Pan American Energy’s oil and gas production increased by 65%, from 24 million barrels to 39.7 million barrels; natural gas sales increased by 112% from 32 million cubic meters to 68 million cubic meters.

If this acquisition is successful, CNOOC's proved reserves will reach 3.089 billion barrels of oil equivalent, an increase of 16%; the average daily production will reach nearly 700,000 barrels of oil equivalent, an increase of nearly 11%.

Today, the acquisition has failed. Yang Hua, chief executive of CNOOC, explained that starting from the maximization of shareholders' interests, we were very willing to strengthen the cooperation with BEH through this transaction and further expand the company’s business in Argentina. However, Bridas chose to terminate the transaction because certain preconditions of the transaction were not met as expected.

Yang Hua also said that in the future, CNOOC will continue to look for overseas opportunities that can create value for the company's long-term and short-term development.