Canada's Talisman Energy has approached China National Offshore Oil Corp, the third-largest oil company on the mainland, over a joint listing of assets in Hong Kong with a potential valuation of as much as US$10 billion, market sources said. A successful tie-up would see both companies contribute assets, potentially worth between US$7 billion and US$10 billion, to a listing company that would then sell shares in an initial public offering in Hong Kong, sources said. 'A Canadian-Chinese joint venture in Southeast Asia could work. China could gain from working even closer with Talisman and learning from its strong natural gas experience and the company might in return get access to mainland projects,' said Larry Grace, an energy analyst at Kim Eng Securities. Advantages for CNOOC would be the partial ownership of new assets, which the company is desperately seeking and the possibility of launching foreign acquisitions using a combined vehicle in the hopes it would encounter less political opposition. China's strong growth requires more and more natural resources such as the oil and gas required to power the economy and mainland resources companies have been scouring the globe to meet the demand. The trouble is most of the best assets are not up for sale and any seller is holding out for the highest price as oil continues to trade at more than US$100 a barrel. CNOOC pulled out of the US$18 billion acquisition of United States-based Unocal Corp three years ago in the face of a nationalistic backlash. Talisman in May said that it was trying to raise as much as US$2 billion from divesting oil and gas blocks in the North Sea, Australia, Trinidad and Denmark. For Talisman, a listing of assets in Hong Kong would help it fetch a higher valuation than in the New York Stock Exchange where the company trades now. Talisman's NYSE-listed shares trade at a price-earnings multiple of 6.73 this year. PetroChina, the largest oil and gas company in Asia by market capitalisation, trades at 10.46 times this year's earnings while CNOOC trades at 9.45 times. 'They would be re-rated at an Asian multiple and that's a big difference to how it trades now,' one source said. Talisman and CNOOC declined to comment. Talisman raised US$480 million from selling some of the North Sea assets last week. The current talks with CNOOC came from discussions that initially had been focused on the asset sales. However, many energy experts felt it would be difficult to get CNOOC to agree. CNOOC's small portfolio means the group would likely end up the junior partner in the venture. Also, a venture seeking acquisitions abroad could still encounter anti-Chinese protectionism despite Talisman's majority presence.
