Earlier today, China’s state-controlled petroleum refiner China Petroleum and Chemical Corp. – also known as Sinopec (SNP) – completed its previously announced acquisition of Geneva-based oil and gas explorer Addax Petroleum for $7.5 billion in China’s largest overseas takeover. Per the deal terms, Addax shareholders received $47.80 in cash for each share they owned.
The strategic rationale of the deal seems compelling for Sinopec as the Chinese refining giant would gain access to Addax’s substantial reserves off the coast of West Africa and in Iraq. Addax, with 538 million barrels in proved and probable reserves and average production of about 135,000 barrels a day, is one of the largest independent oil producers in West Africa and the Middle East, with oil fields in Nigeria and the autonomous Kurdish region of northern Iraq.
In particular, Addax’s offshore deep-water exploration projects are likely to play an important part in Sinopec’s growth and development. Besides, the addition of exploration and production capacity would help Sinopec cushion against some of its recent losses on account of spikes in global crude oil prices, market distorting fuel price caps, and heavy taxes.
With its head office in Beijing, Sinopec is one of the largest petroleum and petrochemical companies in Asia. It is the second-largest crude oil and natural gas producer, besides being the largest refiner and marketer of refined petroleum products in China.
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