China’s Brightoil eyes multi-billion dollar oil and gas acquisition

Brightoil Petroleum (Holdings) said it is looking to buy oil and gas resource assets worth over US$1 billion despite its heavy debt load, after posting a sharp drop in annual profit and making a surprise reversal in asset impairments booked earlier.

The Shenzhen-based company, one of mainland China’s largest privately-controlled oil firms, is banking on a marked recovery in oil prices in the future to support its expansion ambitions and aggressive asset valuation approach.

“We will only consider buying assets worth over US$1 billion, preferably US$2 billion to US$3 billion,” chairman Sit Kwong-lam told reporters on Tuesday. “We are mostly looking at natural gas projects as oil prices have been on a roller coaster ride, while gas is a cleaner energy with good demand growth prospects.”

Brightoil on Monday posted a 39.1 per cent year-on-year fall in net profit to HK$844 million for the 12 months to June 30.

The poor result was blamed on a 80.6 per cent fall in oil and gas production profit to HK$276 million, of which an underlying loss of HK$178 million was recorded from offshore China oilfield stakes it bought in mid 2014 for US$946 million when oil prices were more than double current levels.

These losses were partially offset by a 79.3 per cent jump in fuel transportation profit to HK$547 million on the back of rising crude oil imports by China amid low oil prices. Profit from fuel trading and marine fuel supply fell 4 per cent to HK$727 million.

In late February Brightoil booked HK$619 million of impairment losses on its mining interests, property, plant and equipment in its interim results for the six months to December 31.