China’s CNOOC Ltd. (CEO) and Ghana National Petroleum Corp. have bid for Kosmos Energy’s (a Texas-based oil and production company) assets in the West African state, including its stake in the Jubilee field, according to news published in Bloomberg.com.
The amount of the bid was $5 billion, which topped a failed bid of more than $4 billion from ExxonMobil Corp. (XOM). Exxon’s bid includes a coveted 23.49% stake in the Jubilee field, which holds an approximately 1.8 billion barrels of crude oil.
State-owned Ghana National is also in talks with Norway’s largest oil company, Statoil ASA (STO), to become the third partner in the Kosmos bid.
The concerned companies have declined to comment on this news, which came just two weeks after CNOOC agreed to pay $2.16 billion for a stake of Chesapeake Energy Corp. (CHK) in the Eagle Ford Shale.
These foreign transactions for oil and gas reflect China’s keenness for new oil sources that could meet the country’s aggressive output targets.
We like CNOOC’s excellent execution strategy by organic as well as inorganic means. While the company’s resource hunt in foreign lands is commendable, we are concerned about higher prices that the company is paying.
CNOOC is quite active on the domestic front as well. Recently, two new oilfields in the BohaiBaycame online with a favorable production outlook. In a positive oil price environment, the Chinese offshore giant performs brilliantly both in terms of production growth and cost-control measures.
CNOOC ADRs rose approximately 2% after the U.S.shale oil deal earlier this month but slipped 0.6% on Friday. We view CNOOC’s recent international activities as a long-term growth strategy with a favorable return metric. Our Outperform recommendation with Zacks #1 Rank (Strong Buy) reflects this view.
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