PetroChina agrees $ 2.2 bn gas deal

Updated 15 December 2012
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PetroChina agrees $ 2.2 bn gas deal

CALGARY, Alberta: PetroChina will pay Encana Corp. C$ 2.2 billion ($2.2 billion) for a 49.9 percent stake in a rich Alberta shale gas prospect, the first test of new guidelines issued by Ottawa for major energy investments by foreign state-owned enterprises.
Encana said the venture, with a non-controlling interest for PetroChina, allows the partners to bypass stringent reviews under the Canadian government’s new restrictions announced recently.
The government said it was examining the proposed deal to determine if it would face a review under the Investment Canada Act, which governs foreign investment.
It is the second overseas deal announced by PetroChina this week, after the $ 1.63 billion purchase of a minority stake in an Australian liquefied natural gas project, as the state-controlled oil giant seeks to have half its production outside of China within eight years.
“As in all such cases, due diligence is being exercised by reviewing details of the proposed investment to determine if it is reviewable under the act,” Margaux Stastny, spokeswoman for Industry Minister Christian Paradis, said in a statement.
Investments by foreign state-owned companies that do not involve acquisition of control were not reviewable under the act except for their national security implications, she said, but added: “There are circumstances in which control is deemed to be acquired even where a minority ownership interest is involved.”
Canada issued its new framework for approving takeovers of resource assets, particularly oil sands, by foreign state-owned companies, when it approved a $ 15.1 billion takeover by China’s CNOOC Ltd. of oil producer Nexen Inc, and a bid for Progress Energy Resources by Malaysia’s Petronas.
Analaysts were surprised at the timing of the announcement, coming so soon after the politically sensitive Nexen deal, and the release of the new investment guidelines.
“The timing of this deal is really quite unbelievable,” said lawyer Richard Steinberg, head of Fasken Martineau’s mergers & acquisitions practice group.
“This is a step removed from the oil sands and so to the extent that this is not Canadian oil sands, it does seem to be in a less sensitive area and not directly in the bulls-eye,”
said Steinberg, noting that the deal appears to tick all the boxes in the government’s new rule book.
Under the deal, which follows a failed joint-venture attempt by the pair in 2011, a unit of PetroChina known as Phoenix Duvernay Gas will take the nearly-half interest in Encana’s Duvernay play in west-central Alberta, estimated to contain 9 billion barrels of oil equivalent.
It has already paid C$ 1.18 billion and the other C$ 1 billion is payable over the next four years to help pay for development, said Encana, Canada’s largest natural gas producer.
During the period, the partners will spend C$ 4 billion on drilling and processing facilities.
PetroChina was not immediately available for comment. But a source close to the situation told Reuters in Hong Kong that PetroChina expects to receive Canadian regulatory approval for the deal as it is only buying a minority stake.
China’s state-owned energy giants have been bidding aggressively for foreign oil and gas fields as Beijing looks to secure energy supplies to meet rising demand. China also aims to double the share of gas in its overall energy mix to more than 8 percent by 2015, while coal will be cut to just over 60 percent.
PetroChina, the country’s dominant oil and gas producer, said in August that it had earmarked close to $ 16 billion for overseas investment this year and was “actively” looking for acquisition opportunities in Central Asia, East Africa, Australia and Canada.
With the agreement, Encana would be making good on a big part of a high-profile effort to attract partners to help fund development of a host of prospects across North America. It is concentrating on those that feature natural gas that is high in liquid hydrocarbon content.
Such fuels are priced closer to crude oil than to dry gas, of which there is continent-wide glut that has driven down prices at times to decade lows.
“It’s largely an opportunity for us to explore, delineate and ultimately develop what we think is a huge resource that, on our own, we would likely not be able to bring to
commercialization as quickly as we can now with having a partner,” Encana Chief Executive Randy Eresman said in an interview.
“Our understanding is that it does not require any government approvals at all.”
Encana shares rose 41 Canadian cents, or 2 percent, to C$20.85 on the Toronto Stock Exchange. They are up about 12 percent this year.
The government’s new framework effectively bans enterprises controlled by foreign governments from taking control of more businesses in Canada’s oil sands, but the government said it welcomed investment and joint ventures.
“We were waiting to find out if the rules would in any way impact our deal and basically what we think at this point is that the government has made it clear that it supports this kind of transaction — a non-controlling interest in a joint venture,” Eresman said.
Encana and PetroChina in 2011 tried to set up a C$ 5.4 billion joint venture on British Columbia gas assets, but the deal fell through over reported disagreements about asset value and development pace.
“We never ever concluded that transaction, so there were a lot of discussion points that we never ultimately resolved,” Eresman said.
The failed venture would have included Encana’s producing and undeveloped assets, as well as processing equipment, while Thursday’s deal with PetroChina’s new Phoenix unit is essentially the start of a new project, he said.
Encana has spent the past couple of years attracting partners to other parts of its business and has sought more for such assets as the Tuscaloosa Marine Shale in Louisiana and Mississippi and Eaglebine Shale in Texas.
Bond rating agency DBRS said the new venture will strengthen Encana’s cash position to $ 3 billion from $ 2 billion at the end of September, and that it expects proceeds from asset sales will keep funding large portions of the company’s capital spending.
Encana has drilled nine wells on its 180,100 hectares of land in the Duvernay, where numerous companies have amassed large land positions through government land sales and takeovers.
In October, Exxon Mobil Corp. agreed to spend C$ 2.6 billion to take over Celtic Exploration Ltd, which has extensive acreage in the region.
A study by the Alberta Energy Resources Conservation Board and Alberta Geological Survey said the Duvernay formation, which extends through much of central Alberta, contains 443 trillion cubic feet of total gas in place, 11.3 billion barrels of natural gas liquids and 61.7 billion barrels of oil, putting it on par with some of the continent’s largest shale prospects.


Saudi insurance stocks soar as female drivers take to the road

Saudi Majdoleen Mohammed Alateeq, a newly licensed Saudi driver, gets out of her car in Riyadh on Sunday. The insurance sector is just one segment of the economy set to benefit from the lifting of restrictions on women drivers in the Kingdom. AFP
Updated 25 June 2018
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Saudi insurance stocks soar as female drivers take to the road

LONDON: Saudi insurance stocks surged on Sunday, with investors expecting the sector to reap significant dividends following the lifting of the ban on female drivers.
Insurance stocks — one of the worst performing sectors on the Saudi bourse for the year to date — outperformed other classifications on Sunday, ending 2.4 percent higher, compared with a 1.8 percent rise for the Kingdom’s headline index.
Amana Insurance and AlRajhi Takaful were the best performers of the day, gaining 9.9 percent each. Tawuniya, the Kingdom’s largest insurer, ended Sunday 1.1 percent higher, with only one of the country’s 33 listed insurance providers closing lower for the day.
The lifting of restrictions on female drivers — which came into effect on Sunday after first being announced in September — is part of a series of wide-ranging reforms introduced as part of Saudi Arabia’s Vision 2030 economic transformation program, designed to diversify the economy away from a reliance on oil revenues.
The advent of women drivers is forecast to benefit the economy by significantly increase female participation in the workforce, and stimulating financial, insurance and retail sectors among others.
The insurance sector is set to draw particular benefit from the move, but may remain under pressure, according to rating agency S&P.
“We anticipate that efforts of the local authorities to tackle the large number of uninsured drivers, combined with the arrival of women drivers … and the introduction of additional benefits under the unified medical policy from July 1, will support further premium growth in the industry in the medium term,” said S&P in a research note in April.
“However, these factors may be offset by the large number of foreign workers that have already left or will be leaving the Kingdom in 2018.”
In spite of yesterday’s price surge, insurance stocks are 8.4 percent lower for the year to date. Tadawul as a whole is up 15.6 percent so far this year, making the bourse one of the world’s best performers for 2018.
Investor sentiment on Sunday was also boosted by investor optimism after index provider MSCI announced last week that it would upgrade Saudi stocks to its Emerging Markets Index from next year.
The widely anticipated upgrade — which puts Saudi equities on an index tracked by around $2 trillion worth of global assets — is expected to attract up to $40 billion of international funds, Tadawul CEO Khalid Al-Hussan told Arab News last week.
MSCI’s upgrade came after a similar move by fellow index provider FTSE Russell in February, which is also scheduled to come into effect from next year.
Banks were among the other bright performers on Tadawul on Sunday. Arab National Bank led gains, closing up 4.2 percent, while blue-chip names NCB and AlRajhi rose 1.6 percent and 2.3 percent respectively.
Some petrochemical companies also added value, Reuters reported, following a rise in oil prices after OPEC decided on only modest increases in crude production last week.
Outside Saudi Arabia, Gulf markets posted minor gains. In Dubai, where the index was flat, Air Arabia was unchanged. Shares in the airline have declined by more than 10 percent since early last week, when the company said it had hired experts to protect its business interests in private equity firm Abraaj, which has filed for provisional liquidation. The airline said its exposure was around $336 million.
Last week, the UAE’s securities regulator asked listed companies to declare their exposure to Abraaj.