United Energy looks afar for assets

PUBLISHED : Friday, 03 February, 2012, 12:00am
UPDATED : Friday, 03 February, 2012, 12:00am


United Energy, a firm controlled by mainland tycoon Zhang Hongwei and supported by a US$5 billion credit facility from China Development Bank, is seeking to buy oil-and-gas assets in Asia, the Middle East, Africa and the United States.

The company, 68-per-cent-owned by Zhang, is eyeing opportunities to buy mature producing projects in both developed and emerging markets, chief financial officer Thomas Pang Pui-yin said.

'Valuation of assets in developed markets have become more attractive amid the sovereign debt crisis, while emerging nations are still hotbeds for energy assets acquisitions although political risks are higher and valuations have not changed much.'

Last September, United completed a US$750 million acquisition of oil-and-gas assets in Pakistan from BP, as part of the latter's assets sale to finance a US$20 billion fund to compensate victims of a major oil spill in the Gulf of Mexico.

State-owned China Development Bank (CDB) had granted United a five-year, US$5 billion credit facility to fund its overseas oil-and-gas business, Pang said. In the Pakistan acquisition, the CDB has lent United HK$5 billion for 10 years at an interest rate of about 5 per cent.

United said in September it was in early talks on two possible acquisition deals, whose size was unlikely to be less than the Pakistan purchase.

Zhang chairs the Orient Group, one of the mainland's largest private firms, whose businesses span transportation, construction, manufacturing and property. He took over garment maker and property developer Orient Resources Group in 1997, and renamed it United Energy in 2008, when it diversified into the oil sector.

Pang said United planned to spend up to US$190 million this year to develop the Pakistan projects and add reserves, up from US$40 million last year. The projects have proved and probable oil-and-gas reserves of 73.9 million barrels-of-oil equivalent (boe), of which 75 per cent is gas.

Average daily output is expected to be 24,000 to 26,000 barrels by December, up from 21,400 barrels last year, while operating profit margin is expected to fall to US$20 per boe from US$26 as it ramps up drilling and seismic data collection.

United budgeted US$23 million this year for its oil-output enhancement project in Liaohe, northeastern China, a joint venture with PetroChina. It expects to book output of 1,100 to 1,200 barrels a day, up from 1,024 in last year's second half. Its operating margin is expected to be at least US$24 a barrel, compared to US$27.50 in last year's second half.