PetroChina Downplays Acquisition Talks

Earlier this week Husky Energy confirmed reports that they were in talks with PetroChina about a possible acquisition. However, now PetroChina is downplaying these talks by describing them as insubstantial.

Husky Energy is Canada's fifth-largest integrated energy company. If PetroChina were to acquire the Canadian company it could cost as much as $4.4 billion. However, Cao Zheng-Yan, a spokesman in Beijing at the office of PetroChina president Huang Yan, said: "At the moment, we have limited our activities to simply collecting data and information from Husky. There were some preliminary discussions earlier on, but they did not yield anything substantial." Some industry analysts questioned whether Husky would be a good fit for PetroChina, which has no assets outside China but is anxious to grow. PetroChina is a publicly traded subsidiary of state-owned China National Petroleum Corp. and is 72% owned by Hong Kong billionaire Li Ka-shing.

The company initially said it was interested only in Husky's Canadian upstream side, its exploration and production assets, but a Canadian energy analyst at Peters & Co. in Calgary said that a sale of these couldn't make sense for Husky, an integrated company that also has pipelines, a refining business and service stations. Husky feeds 75,000 barrels of oil a day to its heavy oil upgrader and 25,000 barrels to its asphalt refinery in Lloydminster, Saskatchewan. He also questioned the reported $4.4 billion value of the deal. "We don't feel that a takeover of $18 or $19 a share is an acceptable price to Li Ka-shing," he said. "If you put a price more like $21 on it then the upstream assets by themselves, in our estimation, are worth about $5.5 billion."

A PetroChina spokesman said that, like any big publicly listed company, PetroChina is always searching and evaluating opportunities for acquisitions to create better value for its shareholders. Press speculations about PetroChina having received approval from State Council to buy Husky at $4.4 billion were unfounded. Oil companies in China have recently sought acquisitions but have moved slowly. Flush with fresh capital raised from offshore IPOs, the three big Chinese oil firms, PetroChina, China Petroleum and Chemical Corp., or Sinopac, along with the smaller China National Offshore Oil Co., or CNOOC, can afford to spend.