* Largest ever Chinese acquisition of Canadian asset
* Price tag higher than market had expected
* ConocoPhillips shares up 1.2 pct; Sinopec down 0.3 pct
* Canadian regulators not expected to block deal
HONG KONG/CALGARY, Alberta, April 13 (Reuters) – A subsidiary of China’s Sinopec Group (0386.HK)(600028.SS)(SNP.N) agreed to pay $4.65 billion for ConocoPhillips’s (COP.N) stake in a Canadian oil sands project, marking the country’s second largest investment in North America.
China, Asia’s largest refiner, has been scouring the globe and spending billions of dollars on energy resources to support booming growth in the world’s third-largest economy.
China’s power and energy companies spent around $20 billion alone last year on outbound acquisitions, an amount that includes Sinopec’s $7.2 billion purchase of Addax Petroleum, a company with oil assets in West Africa and Iraqi Kurdistan.
The latest Sinopec deal, China’s fifth-largest acquisition in history, underlines a resurgence in interest in the vast but difficult-to-extract oil sands energy resource located in the province of Alberta.
Investment in the oil sands has jumped since crude prices shot past $80 a barrel with the global economic recovery gaining traction.
U.S.-based oil major ConocoPhillips said it would sell its 9.03 percent interest in the Syncrude Canada Ltd project to China’s top refiner. The deal, China’s largest-ever purchase of a Canada-based asset, is set to close in the third quarter.
The price paid for the ConocoPhillips stake “is more than the market was expecting. They were expecting about $4 billion,” said Phil Skolnick, an analyst with Genuity Capital Markets. “It just shows that the Chinese are a different kind of buyer.”
Indeed, China’s state-owned companies can take a longer-term view of major investments in sectors such as energy, where they have outbid many domestic players having no need to tap public markets for financing.
DEAL TO CLOSE IN Q3
In a separate statement, Sinopec International Petroleum Exploration and Production Corp, a Sinopec subsidiary, said the transaction was subject to government and regulatory approvals in China and Canada.
State-owned Sinopec controls Hong Kong-listed China Petroleum & Chemical Corp (Sinopec Corp), which announced in March that it will buy a stake in upstream assets in Angola for $2.46 billion. [ID:nTOE62P02C]
Syncrude, the largest project in the oil sands, has operated since 1978, and can now pump out 350,000 barrels a day, roughly 13 percent of Canada’s overall oil output.
The ConocoPhillips transaction differs from other Chinese oil sands deals, which involved early-stage projects, according to FirstEnergy Capital Corp analyst Mike Dunn.
“Sinopec will continue to buy overseas assets but their priority will be on more developed projects that have started to generate profits,” said Gideon Lo, an analyst at DBS Group Research. Sinopec is seen expanding in overseas E&P markets and reducing its reliance on the volatile refining sector in China.
For ConocoPhillips, the deal is part of a 2-year, $10 billion program of asset sales. When it first said it was putting the stake on the block last October, analysts pegged the value at $3.6 billion to $4 billion.
“This deal goes a long way in helping them reach their $10 billion asset-sale goal. It’s probably a bigger chunk than they had anticipated,” said Allen Good, analyst with Morningstar.
After Monday’s announcement, ConocoPhillips shares climbed 64 cents, or 1.2 percent, to $55.96 on the New York Stock Exchange. Sinopec shares edged up 0.3 percent to HK$6.61 in a broader market .HSI down 0.6 percent.