Citic unit bullish on Richfirst oil project
Citic Resources Holdings, the resources vehicle of China International Trust & Investment Corp, expects a newly acquired oil project to start contributing to the firm's top line in October at the earliest, according to an executive director.
Li So-mui said that under the contract, sales from Richfirst Holdings since March 1 would be recognised on Citic Resources' profit and loss account when the acquisition was due for completion in October.
Minority shareholders in Citic Resources yesterday approved the US$21.2 million acquisition of Richfirst, which holds 40 per cent of a contractor right to explore, develop and produce petroleum in the Kongnan block of the Dagang oilfield for 30 years until 2025. Its parent holds the remaining interest.
Located 201km southeast of Beijing, the Kongnan block covered 9,064 gross hectares and produced 1,000 barrels of oil daily, Ms Li said.
The Richfirst acquisition was announced in late June. With cash reserves of HK$1.4 billion, Citic Resources has been seeking growth through takeovers of raw materials and metals-related businesses.
'Next year will see the project's contribution in full to our book,' Ms Li said.
Chairman Peter Kwok Viem, who declined to reveal the contribution, said the project performed better than expected.
The Kongnan block is scheduled to begin commercial operation in 2006. By then, its daily production capacity is expected to reach 14,000 barrels.
With its huge cash resources, Citic Resources' financial position remained strong despite the Richfirst acquisition and a US$176 million capital expenditure commitment to the project.
Ms Li said the project would be funded by bank loans and oil sales.
Assuming crude prices at an average of US$26 per barrel, Citic Resources estimated the project would generate cash flows of up to $60 million annually at peak production.