PetroChina Company Limited (PTR) announced the successful completion of the acquisition of Arrow Energy Limited (“Arrow”) along with Royal Dutch Shell (RDS.A). The deal was approved by the board of Arrow and Chinese and Australian governmental authorities, almost five months after the announcement of the acquisition in March.
 
As per the announcement, PetroChina International Investment Company Ltd (“PetroChina”), a subsidiary of PetroChina Company Limited, and Shell Energy Holdings Australia Ltd. (“Shell”), a subsidiary of Royal Dutch Shell agreed to acquire 100% of Arrow shares through a 50/50 joint venture.
 
(Read the previous report on the acquisition: Shell, PetroChina to Acquire Arrow)
 
Under the deal, the joint venture of PetroChina and Shell paid A$4.70 cash per share for all of the shares in Arrow, with the total consideration coming to A$3.5 billion ($3.1 billion). The joint venture would have Queensland coal-seam gas (CSG) assets and domestic power business of Arrow along with Queensland CSG assets of Shell and the site for a proposed liquefied natural gas (LNG) plant on Curtis Island at Gladstone.
 
Following the acquisition, the advanced technological expertise of PetroChina and Shell will merge with the leading position of Arrow as a CSG developer of Australia. The joint venture will also enjoy the benefits of a strong capital backing, an experienced and efficient management team and innovative marketing strategies.
 
With all these strengths, the joint venture will look forward to explore and develop the CSG and LNG industry of Australia.
 
PetroChina sets its foot in the Australian CSG sector with this transaction. With abundant resources, Australia offers plenty of investment opportunities and this deal will only reinforce the bonds of China-Australia relationship. This bid is considered to be a part of PetroChina’s long-term strategic plan to transform into an international major energy company.
 
However, considering the company’s sluggish oil production growth prospects and high-priced gas imports in the face of low domestic gas sale prices, we have a short-term Zacks #5 Rank (Strong Sell) rating on PetroChina.
 
We have a short-term Zacks #3 Rank (Hold) recommendation for Shell, reflecting the company’s operational and production efficiency, growth projects and cost reduction initiatives, partially offset by an uncertain commodity-price scenario and the weak refining business.
 
PETROCHINA ADR (PTR): Free Stock Analysis Report
 
ROYAL DTCH SH-A (RDS.A): Free Stock Analysis Report
 
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