China Petroleum and Chemical Corp (Sinopec) is to expand its overseas investments by acquiring oil and gas exploration assets in Kazakhstan and Russia from its parent for close to US$3 billion.
The proposed acquisitions will be conducted through a new 50-50 joint venture company, JV HK. The joint venture is formed by SHI, a wholly owned subsidiary of Sinopec, and Tiptop HK, a wholly owned subsidiary of its controlling shareholder, China Petrochemical Corp, according to a statement filed with the Hong Kong stock exchange.
"The transaction will expand the company's overseas business and enhance its resources and reserves so as to realise long-term and sustainable development," said the statement.
First, the joint venture plans to acquire 50 per cent of the total issued share capital of Caspian Investment Resources (CIR), which is principally engaged in oil and gas exploration and development and production activities in Kazakhstan, for US$1.57 billion. The vendor is Tiptop, a subsidiary of China Petrochemical.
CIR holds a 100 per cent interest in the Karakuduk and Arman oil fields and a 50 per cent interest in North Buzachi, Kozhasai, and Alibekmola. The remaining interests belong to an independent third party.
Second, JV HK is to pay US$776 million for 50 per cent of the total issued share capital of Mansarovar Energy Colombia together with the Mansarovar shareholder's loan from Sinopec Overseas Oil & Gas, a wholly owned subsidiary of China Petrochemical.
Mansarovar is principally engaged in exploration, development, and production of oil and gas. It owns a 50 per cent interest in Nare Contract Block and a 100 per cent interest in Velasquez Contract Block. It is also the operator in these two blocks.
The other equity interest owner of Nare Contract Block is an independent third party.
JV HK also entered into an agreement to pay US$652.77 million for 49 per cent of the total issued share capital of Taihu, from Sinopec Overseas.
Taihu is principally engaged in oil and gas exploration, development and production in Russia, and holds a 97.14 per cent interest in Udmurtneft, a Russian company.
Sinopec reported a 12.8 per cent decline in net profit last year because of a fall in revenue from its upstream and chemical business. Net profit dropped to 63.87 billion yuan (HK$78.94 billion) for the year to December, from 73.22 billion yuan a year earlier.