Sinopec to buy Canada's Daylight Energy for $2.1 billion

Mon Oct 10, 2011 6:16am EDT
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By Lewis Krauskopf and Wan Xu

NEW YORK/BEIJING (Reuters) - A unit of China Petrochemical Corp (Sinopec) has signed a deal to buy Canadian oil and gas explorer Daylight Energy Ltd DAY.TO for C$2.2 billion ($2.1 billion) in cash, underscoring China's quest to secure enough energy to power its booming economy.

Chinese buyers have been taking advantage of depressed stock prices and a difficult fundraising environment to make deals. A combination of falling oil prices and debt levels has hit Canadian oil and gas shares in recent months as investors fret that growth prospects are shriveling.

Sinopec International Petroleum Exploration and Production Corp (SIPC) agreed to buy Calgary, Alberta-based Daylight for C$10.08 per share. That is more than double the closing price of C$4.59 per share on Friday, but Daylight said it is only a 43.6 percent premium over the 60-day weighted average trading price.

A key reason for the deal is that Daylight is predominately a natural gas company and China would like to export liquefied natural gas from western Canada, said Neil Beveridge, a research analyst at Sanford C. Bernstein & Co in Hong Kong.

Sinopec Group "will further expand its portfolio in Canada as it advances its international businesses," the company said in a statement on Monday.

With Beijing's blessing, China's big state-owned firms have aggressively moved to buy overseas assets. State energy firms in particular have the responsibility to secure enough natural resources to satisfy growing demand in the world's biggest energy consumer.

China's outbound deals in energy and mining so far this year total $26 billion, compared with $32.3 billion in the same period last year, according to Thomson Reuters data.

In July, China's top offshore oil producer, CNOOC Ltd (0883.HK: Quote) agreed to buy struggling Opti Canada Inc OPC.V for $34 million and $2 billion in debt and late last month, China's Minmetals Resources Ltd (1208.HK: Quote) agreed to buy Africa-focused copper miner Anvil Mining AVM.TO AXM.AX for $1.28 billion.   Continued...

<p>The Sinopec logo is seen at one of its gas stations in Hong Kong April 26, 2010. REUTERS/Bobby Yip</p>