CNPC Acquires Verenex

Brian Hicks

Written By Brian Hicks

Posted February 27, 2009

It may seem like a circuitous route, but China has wisely cut its path to fresh African oil through Calgary, Canada.

Alberta-based Verenex Energy (TSE:VNX) was an early holding in my Global Growth Stocks service, picked because of the company’s pole position in reviving Libya’s oil industry.

Piggybacking on drill holes that had been abandoned in the 80s when a diplomatic frost chilled Libya’s hydrocarbon exploration industry, Verenex notched success after success after the West allowed companies back in to Libya after 2004.

A new generation’s seismic imaging tools highlighted abundant light, sweet crude reserves in the Ghadames Basin near Tunisia.

As the Canadians drilled, China’s CNPC (HKG:0315) watched eagerly.

Now, China National Petroleum Corporation is paying a 28% premium for Verenex shares as it buys out the company’s Area 47 property. The buyout will not include Verenex’s partner in the Libya exploration plan, Indonesia’s Medco Energy. That stock rose 25% on Friday in Jakarta trading.

GGS subscribers got into Verenex at around $4.60 Canadian and cheered as it reached levels of over C$16 at one point. Though the $9.55 CNPC is offering isn’t as high as the top, Verenex investors and 45% owner Vermillion Energy Trust made out nicely.

And this is not the beginning, nor the end of foreign acquisitions that target Canada-based international energy exploration firms.

As Reuters reports:

"The deal marks the latest in a recent string of foreign takeovers of Canadian companies, including a bid for Nova Chemicals Corp (NCX.TO) by Abu Dhabi’s International Petroleum Investment Co, friendly acquisition of Bow Valley Energy (BVX.TO) by Britain’s Dana Petroleum (DNX.L) and a hostile play for UTS Energy Corp (UTS.TO) by Total SA (TOTF.PA) of France."

Official Libyan National Oil Company estimates say the country’s oil can be produced for $1 per barrel.

And earlier this year, Russia’s Gazprom announced a deal with Italy’s Eni to acquire that company’s Elephant oil field interest in Libya.

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