China’s MIE unveils US$534m acquisition in Canada after selling assets in China and Kazakhstan

PUBLISHED : Friday, 09 June, 2017, 11:11am
UPDATED : Friday, 09 June, 2017, 10:36pm

Shares of MIE, a privately-controlled Chinese energy firm, jumped as much as 21 per cent after it unveiled a C$722 million (US$534.4 million) acquisition of natural gas assets in Canada that would boost its reserves by over five-fold.

The deal, if approved by its shareholders and completed, would see the Beijing-based firm – controlled by chairman Zhang Ruilin and brother-in-law Zhao Jiangwei – shift focus to a developed market after major asset disposals in emerging markets.

MIE, which booked two consecutive years of losses due to a prolonged energy price slump, has agreed to buy CQ Energy Canada Partnership, which owns a portfolio of oil and gas production and processing assets, straddling five Canadian provinces, it said in a filing to the Hong Kong’s stock exchange.

“As part of its strategy [to rebuild] its asset portfolio ... the group constantly evaluates investment opportunities globally and is particularly drawn by Canada’s vast oil and natural gas resources with an established energy sector in a [developed nation],” it said.

The company said it was attracted by the growth potential of the “vast acreage of undeveloped land” and its ability to self finance its operation from its own cash flows.

The group constantly evaluates investment opportunities globally and is particularly drawn by Canada’s vast oil and natural gas resources
MIE statement

The portfolio has total proved and probable reserves of 343.6 million barrels of oil equivalent (boe) at the end of last year, of which 95 per cent was natural gas. That compares with 75 million boe for MIE.

The portfolio of assets pumped an average 55,775 boe of per day, of which 87 per cent was gas. MIE’s net output last year was 10,184 boe per day.

The acquisition price represents C$2.1 per boe of proven and probable reserves.

CQ, the asset portfolio’s owner, booked a net loss of C$48 million last year, compared to a loss of C$685.9 million in 2015 when it booked C$539 million of fixed assets and goodwill write-downs. Revenue dropped 30 per cent to C$334 million last year.

Due to low energy prices and the booking of asset impairments and asset disposal losses, MIE posted a net loss of 1.32 billion yuan (US$194 million) for last year, compared to a loss of 1.52 billion yuan in 2015, as revenue slid 26 per cent to 535 million yuan.

In April last year, it sold two projects that extract natural gas trapped in coal seams in Shanxi province for US$220 million to a Hong Kong firm, a month after it sold 60 per cent of some oil-producing assets in Kazakhstan to a Malaysian firm for US$154.9 million.

MIE shares closed just 1.4 per cent higher at 71 HK cents after trading as high as 85 cents soon after the market opened.

The stock has declined 4 per cent since the start of the year, compared to a 18 per cent rise in the Hang Seng Index.