Sinopec expands Canada assets with Daylight deal
Daylight, which is predominately a natural gas company, will provide liquefied natural gas (LNG) for export from western Canada. Analysts cited this scenario as a major factor behind the deal. Sinopec Group "will further expand its portfolio in Canada as it advances its international businesses," the company said in a statement on Monday.
China's large, state-owned firms have been making assertive moves on overseas assets. In particular, state energy firms are seeking to secure more natural resources to meet growing energy demand in the world's largest consumer. Depressed stocks and a lapse in fundraising have prompted Chinese investors to make deals in Canada, where falling oil prices and debt levels have dented shares of Canadian oil and gas firms in recent months.
Although Canadian assets are expensive compared to assets in other regions, analysts confirmed that the move is in line with Sinopec’s upstream-focused strategy. Daylight’s production in the first half of 2011 averaged 38,000 barrels of oil equivalent per day, according to Sinopec. The Chinese firm already holds a stake in Syncrude Canada’s Athabasca Oil Sands venture in Alberta.
So far in 2011, China's energy and mining acquisitions have totaled $26.0 billion, compared with $32.3 billion in the same period in 2010. The Sinopec/Daylight deal may be large enough to warrant a review under the Investment Canada Act, which seeks to determine if foreign purchases of domestic companies are beneficial to Canada.
The transaction awaits approval from Daylight shareholders and regulatory authorization from the Chinese and Canadian governments. Daylight expects the sale to close before the end of 2011.
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