CNOOC said to consider sale of $3.1 bn stake in Bridas


CNOOC said to consider sale of $3.1 bn stake in Bridas


BEIJING (Bloomberg) -- CNOOC is considering selling its stake in Argentina’s Bridas to free up money for other projects, according to people with knowledge of the deliberations.

CNOOC recently reviewed its overseas projects and is weighing a sale of the Bridas holding if it can make a profit on the disposal, said the people, who asked not to be identified as the information is private. CNOOC bought 50% of Bridas for $3.1 bn in 2010, while the rest is owned by Argentina’s billionaire Bulgheroni brothers.

CNOOC is under pressure to cut operating costs, after boosting planned capital spending for 2014 by 31% to $19.3 bn while output is only expected to rise 5.6%. Sinopec and PetroChina said last month they will cut spending, invite private investment and focus more on returns this year.

“It should be a good thing if CNOOC manages to sell the asset and redeploy the money elsewhere,” said Neil Beveridge, a Hong Kong-based analyst at Sanford C. Bernstein & Co.“The contribution from Argentina is minimal, and the investment as a whole puts CNOOC in a passive position as a minority shareholder.”

CNOOC shares rose as much as 1.8% in Hong Kong, even as the city’s benchmark stock index slumped.

Bridas owns 40% of oil and gas producer Pan American Energy, after an effort to acquire the remaining 60% stake from BP failed in 2010. Pan American Energy produced 211,000 bpd last year, according to its website.

Pan American Energy’s Cerro Dragon oil field, located in the San Jorge Gulf basin, is the largest in Argentina. A Beijing-based spokeswoman at CNOOC declined to comment.

The $3.1 bn acquisition of Bridas marked CNOOC’s entry into Latin America. The focus of the company’s overseas operations shifted to Canada after it completed a deal to acquire Nexen for $15.1 bn in 2013 in China’s biggest overseas acquisition.

CNOOC’s South American projects, including its share of Bridas, contributed 16.1 MMboe last year or 4 % of total output, according to CNOOC’s annual earnings statement. Nexen contributed 60.8 MMboe, or 15 % of total output, while production from offshore China accounted for 64%, it showed.

Argentine President Cristina Fernandez de Kirchner’s government seized 51% of YPF, then an arm of Repsol, in April 2012 after saying Repsol hadn’t invested enough in the operations.

Repsol’s board agreed in February to accept at least $5 bn in compensation for Argentina’s expropriation of the unit. Ending the two-year international dispute may help attract investors to the country to develop some of the world’s largest shale fields.

Argentina’s Chubut provincial prosecutor said he initiated a probe of alleged bribes by Pan American Energy seven years ago to extend the Cerro Dragon oil field concession. If a judge rules bribes were paid, the extension will be considered void and the company’s concession will expire in 2017, Chubut prosecutor Miguel Montoya said by phone.

Montoya filed the investigation request with the province’s attorney general after it became public March 30 that the U.S. Securities and Exchange Commission initiated a similar probe in 2010. Pan American denied any wrongdoing in full-page advertisements published in Argentine national newspapers.

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