Sinopec Acquires Daylight Energy for a 70% Premium

Written By Brianna Panzica

Posted October 10, 2011

On Monday, Sinopec (NYSE: SHI), a leading Chinese oil company, announced its decision to purchase Canadian oil and natural gas producer Daylight Energy (TSE: DAY) for $2.1 billion.

According to Forbes, this makes the purchase worth $9.70 per share, which is more than double Daylight’s Friday closing price of $4.45.

And Daylight’s Board of Directors agreed unanimously to accept the offer.

Sinopec’s offer, Bloomberg reports, is 70% higher than Daylight’s average price for the past 20 days, and this is double the average 32% premium for similar deals.

But Sinopec scored a pretty good find with Daylight.

As Bloomberg reports, the purchase of Daylight will give Sinopec access to over 300,000 acres of oil and natural gas fields in Canada. 

They will also gain access to Daylight’s 130,000 acres at the Duvernay shale deposit in Alberta.

For the first half of this year, Daylight’s 69 oil and gas fields produced 38,000 barrels of oil equivalent, the article says.

This is just one example of recent Chinese oil company acquisitions, an occurrence that popping up more and more as China’s energy needs continue to grow. 

In fact, Bloomberg reports, Chinese oil companies have, over the past five years, spent approximately $30 billion on Canadian assets. 

And that won’t stop soon. Bloomberg reported that Asian buyers are looking to spend $150 billion on oil companies by 2016, and some of the potential targets include Tullow Oil Plc (LON: TLW), Canadian Oil Sands Ltd (TSE: COS), and Kosmos Energy Ltd (NYSE: KOS). 

Sinopec’s rivals China National Petroleum Corp and Cnooc (NYSE: CEO) are among some of the companies looking overseas for energy resources.

Recent estimates from the shale gas boom have approximated that by 2017, North America could export up to 5 billion cubic feet of liquid natural gas to Asia and Europe.

Yet China is actually believed to hold more shale gas potential than the U.S. and Canada combined. The U.S. Energy Information Administration estimated that China holds around 1,275 trillion cubic feet of shale gas potential, says Bloomberg.

But at the moment, China shale development is not a priority for the nation.  Instead, they are focusing on obtaining energy supplies through overseas acquisitions.

That’s all for now, 


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