Citic Pacific

Citic plots US$2b move on oil firm in resources hunt

PUBLISHED : Tuesday, 06 June, 2006, 12:00am
UPDATED : Tuesday, 06 June, 2006, 12:00am

Company's talks to buy Central Asia-focused Nations Energy fit with country's need to secure supplies

China International Trust & Investment Corp (Citic), one of the nation's largest conglomerates, was in advanced talks to buy Central Asia-focused oil producer Nations Energy for about US$2 billion, sources said.

The move is part of China's strategy to encourage domestic firms to expand overseas and gain control of resources that the country lacks to support its rapid industrialisation and urbanisation.

Citic, the parent company of Citic Pacific and commodities arm Citic Resources Holdings, probably would grant a first right of refusal to Citic Resources to buy its holding in Nations Energy if it succeeded in the acquisition, a source said.

This will give Citic Resources the flexibility to do the acquisition later, after it gave up an opportunity to do so earlier on concerns the deal was too large.

'The talks, while advanced, are continuing and the price tag being discussed is in the region of US$2 billion or so,' another source said.

It is understood CNOOC and PetroChina's parent firm China National Petroleum Corp had considered bidding for Nations Energy.

Citic Resources had about US$190 million in cash at the end of last year. It engages in aluminium smelting, coal and oil production as well as commodities trading.

Last year it abandoned talks to take over insolvent Thai Petrochemical Industries, amid speculation of political pressure from Bangkok on Beijing, as the proposed takeover would frustrate a Thai government-led buyout plan.

However, that did not stop Citic Resources from pursuing its strategy to buy companies producing resources that China lacks.

Nations Energy bought the Karazhanbas oil field from the Kazakhstan government in 1997 and raised its declining output from fewer than 5,000 barrels a day in 1999 to 41,000 barrels last year, according to its website. Proven reserves exceed 400 million barrels.

The privately held company also acquired exploration rights in Azerbaijan where its daily output averaged 5,150 barrels last year and expanded into Indonesia.

Nations Energy's net profit in the first 10 months of last year was US$179.15 million, up more than threefold year on year. Capital expenditure amounted to $177 million last year.

Citic and Nations Energy were unavailable for comment. Nations Energy was advised by Credit Suisse in the talks while ANZ was advising Citic, sources said.

Credit Suisse would not comment and an ANZ spokesperson was unavailable for comment.