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5 Aug, 2008 02:47

Sinopec steps up to the plate for Imperial Energy

China’s state oil company Sinopec has stepped into the bidding war for oil producer Imperial Energy. The news comes after India’s O.N.G.C. had reportedly already offered 2.6 billion dollars for full control of the London-listed oil producer that operates

The bidders are attracted by Imperial’s steep production growth in the Tomsk region of Siberia. Analysts say that means a premium of about 10 percent to the current market price.

Sinopec will have to table a higher bid than the 2.6 billion dollars reportedly offered by its Indian rival O.N.G.C. for 100 percent of Imperial Energy. Artyom Konchin, analyst at Unicredit Aton, says Imperial is an attractive target.

They are starting off basically from zero, from scratch, and they can go as high as 80,000 barrels per day, from todays 6 or 7, so you’re looking at a very steep production profile.  And also the valuations are quite reasonable, I think the company’s barrel of two key reserves is valued below 2 dollars today. Your average Russian barrel is valued at about 4 and a half to five dollars if its integrated.

Experts say Russia’s small independent producers are aiming to grow in scale through acquisitions to finally attract a strategic investor.

But Konstantin Batunin of Alfa Bank says a foreign investor will never get control over any energy company in Russia even as small as Imperial Energy.

Typically in Russia, it is pursued in such a way as the foreign investor, for instance acquires the entire stake which is on the plate and then issues an option to a state owned company for 50% plus one share. And that’s the potential way it can be done in this case.

Imperial Energy received an offer from Gazpromneft a year ago. And it is likely that current bidders will finally sell controlling stake to Gazproms oil subsiduary.