Marathon’s Angola oil field stake sale shows realism in the market

Sinopec and CNOOC of China have agreed to pay $1.3bn for Marathon Oil’s 20 per cent stake in Angola’s offshore oil block 32, in the latest move by well-financed Chinese companies to secure resource assets at a time when prices are depressed by the global recession.

The big Chinese oil groups have been on a spate of acquisition activity in recent months, including Sinopec’s $8.8bn (including debt) agreed bid to buy Addax Petroleum, and M&A advisers say more deals are in the works.

The really interesting thing about the deal is the price, for an stake that was being speculated about a year ago as being worth up to $2bn.

The $1.3bn agreed by Marathon last week supports the argument that, contrary to the common suggestion, Chinese companies are not paying crazy prices to win deals. The fact that the two Chinese groups did not get into a bidding war against each other will no doubt have helped.

There is a pre-emption right for the other partners on the block – Total, Sonangol, Exxon and Galp – so we will wait to see whether one of them comes in to snatch it from under the noses of Sinopec and CNOOC. But if they do not, the Chinese companies will be entitled to feel that they have paid enough, but not too much.

The real test of China’s ambitions remains CNOOC’s interest in Kosmos Energy, however. Kosmos, which has been put up for sale by its private equity backers, is interesting many big western oil groups because is is a potential entry into an exciting new region for oil discoveries off Ghana and westward along the coast.

The deadline for bids, which was last Friday, has now been extended to allow the government of Ghana to have more of a say in the process. Ghana is interested in possibly joining a consortium to put in a bid for the Kosmos stake in the large Jubilee oil field. The western groups would be more naturally appealing partners than the Chinese companies, because they bring higher levels of deep water expertise. If CNOOC nevertheless manages to secure the Jubilee stake, that will really announce China’s arrival as a force to be reckoned with in the global competition between oil companies.

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