Company News: Chinese, FSU firms in thick of acquisition deals

Acquisitions involving companies in communist or formerly communist countries dominate this week’s company news.

Among those transactions:

• BP PLC said it has completed a transaction with Alfa Group and Access-Renova to increase by 15% its stake in Russian oil and gas firm Sidanco for $375 million. BP now holds 25%, plus one share, in the company–a level that matches its current voting rights, BP said.
• PetroChina Co. Ltd. has entered into an agreement to acquire all of the Indonesian operations of Devon Energy Corp., Oklahoma City, for $262 million in cash and working capital. The deal is expected to close at the end of this month.
• The international unit of Williams Cos. Inc., Tulsa, and Russian oil company OAO Yukos have submitted to the Lithuanian government signed agreements outlining Yukos’s purchase of share equity in Lithuanian oil company Mazeikiu Nafta for $75 million.

In other industry acquisitions:

• Statoil has acquired a 12% stake in Norwegian deepwater drilling group Atlantis, which has a patented technology for drilling and production of deepwater oil and gas.
• Koch Holdings Enterprises LLC has bought a 40% ownership interest in a natural gas liquids fractionator from subsidiaries of Valero Energy Corp., San Antonio. Terms of the deal were not disclosed.

BP-Sidanco deal

BP executives hold positions as chairman and other key officers in Sidanco. "This purchase underlines BP’s confidence in Russia and its improving business environment," said BP Chief Executive John Browne. "BP will now second further staff into Sidanco’s management to help drive the company forward," Browne said.

"We view this transaction as an important step in developing our cooperation with BP and as a signal of renewed investor confidence in Russia," said Alfa Group Chairman Mikhail Fridman.

Sidanco produces 380,000 b/d of oil, mainly from fields in Western Siberia. Following completion of the transaction, Alfa Group and Access-Renova will remain majority stakeholders in Sidanco.

PetroChina acquires Devon assets

PetroChina is a subsidiary of Chinese state oil company China National Petroleum Corp. Devon’s assets, which were placed up for sale earlier this year, include six blocks, five of which were operated by Devon (OGJ Online, Jan. 24, 2002). Indonesian state oil firm Pertamina previously had been projected to be the likely purchaser of the assets (OGJ Online, Jan. 24, 2002). The properties were acquired by Devon through its acquisition of Santa Fe Snyder Corp. in 2000.

As of yearend 2001, Devon’s oil and gas properties in Indonesia had estimated proved reserves of 80 million boe, of which 20% was classified as proved developed producing, the company said. Reserves are 60% liquids and 40% natural gas, Devon said. These properties produced about 1.1 million boe net to Devon’s interest during the first quarter of this year.

Devon said that in 2001 the Indonesian properties were producing 5.3 million boe/year. Essentially all of this production was oil, the firm said.

"With the sale of the Indonesian operations, we have now largely accomplished our goal of bringing focus to Devon’s asset base by eliminating noncore properties," said J. Larry Nichols, Devon’s chairman, president, and CEO.

Devon’s divestiture of its Indonesian assets comes after a buying spree last year, including the purchase of Calgary-based Anderson Exploration Ltd. and Houston-based Mitchell Energy & Development Corp. (OGJ, Sept. 10, 2001, p. 44).

Williams-Yukos agreements

The Williams unit’s contracts also detail a 10-year supply agreement under which Yukos will provide a minimum of 35 million bbl/year of crude oil to Mazeikiu Nafta’s 263,420 b/d refinery. In addition, Yukos will provide a $75 million credit line to the Lithuanian company. Williams and Yukos signed a cooperative agreement for the contracts at midyear 2001 (OGJ Online, June 15, 2001).

Following completion of the transaction, the Williams unit and Yukos will each hold a 26.85% stake in Mazeikiu Nafta, with Lithuania holding a 40.66% equity interest. Williams also will retain management of Mazeikiu Nafta, based on an agreement signed with Lithuania in October 1999.

The contracts await approval from the Lithuanian government.

"Williams will be requesting that the Lithuanian government agree to hold a Mazeikiu Nafta board meeting in time to be able to amend the agenda of this month’s general meeting of shareholders in order for the company to approve two new share issues," said Randy Majors, managing director, of Williams’s international unit.

Mazeikiu Nafta has scheduled a general meeting of shareholders for Apr. 30.

Statoil’s Atlantis stake

"[The Atlantis] solution is based on reducing the distance between a floating installation and the bottom of the sea by installing an artificial seabed," Statoil said. A steel tank installed in 300 m of water would provide a subsea platform that is used for the installation of drilling and production equipment. This artificial seabed would be mounted on well casing that extends from the reservoir and is anchored at the seabed

"This technology is being considered for a number of deepwater areas, both off Norway and internationally," said Martin Sigmundstad, vice-president, industrial development, for Statoil. The concept is the brainchild of Terje Magnussen, who currently serves as technical vice-president at Atlantis.

By using the Atlantis system, Statoil said, rig operations can be carried out quickly and safely in deep water, due mostly to the more-convenient depth at which critical equipment can be installed and operated.