HONG KONG - Tullow Oil is the latest Africa-focused energy firm to draw Chinese takeover interest, but the $8 billion oil and gas independent, emboldened by its prospects, has snubbed potential buyers, dealmakers say.
London-listed Tullow runs oil and gas projects in 23 countries across Africa, Europe, South Asia, and South America.
Unlike many energy firms struggling with low oil prices in a global financial crisis, Tullow has a relatively strong balance sheet and even stronger growth potential, especially in Uganda and Ghana, and isn't for sale -- at least not officially.
Still, Chinese oil giants Sinopec Corp, CNOOC and China National Petroleum Corporation -- parent of PetroChina) -- have all looked at Tullow, three Hong Kong-based bankers told Reuters.
Tullow was approached and rebuffed those advances, a banker with direct knowledge of the situation said, adding the Chinese firms have eyed Tullow since December.
China's state-backed energy behemoths often link up for acquisitions and scour the world for targets together until the state picks a preferred bidder, the banker added.
Any takeover bid would at this point be hostile and would require a mouth-watering premium to win the support of Tullow's shareholders. A buyer would need to stump up roughly $10 billion to make a persuasive case, one of the sources said.
All three sources asked not to be named because of client sensitivities.
A Tullow spokesman declined to comment.
In August, Tullow Chief Operating Officer Paul McDade said the firm had received no takeover approaches, despite being the subject of bid rumors.
THE ALLURE OF AFRICAN OIL
Tullow's best assets are in Uganda and Ghana, analysts say. In January, it and British oil explorer Heritage Oil Plc said they made a potentially world class discovery in Uganda.
Reserves found by the Giraffe-1 well in the Lake Albert Rift Basin and a linked discovery, Buffalo -- announced in December -- could total more than 400 million barrels of oil, Tullow and Heritage said in separate statements.
The last year has proven transformational for Tullow with a string of discoveries in Ghana/Uganda positioning the company well for a multi-year growth phase, Merrill Lynch analysts said in a recent research note.
We believe the market is yet to value what looks one of the most visible and compelling growth stories in mid-cap oils.
In January, Tullow raised 402 million pounds in a share placing as it seeks to secure finance to develop big oil finds in the face of harsh debt markets.
China's state-owned energy firms have spent years hunting for deals to satisfy growing oil demand back home, scooping up assets in Africa, the Middle East, South America and Canada. Outbound energy deals are expected to accelerate in 2009.
The country's $200 billion sovereign wealth fund, China Investment Corp (CIC), is eyeing opportunities in energy and commodities as prices have fallen steeply, CIC chief risk officer Jesse Wang said on Wednesday.
Last month, China National Petroleum Corp launched a friendly C$443 million ($357 million) offer for Verenex Energy Inc to give the state-owned oil company a stake in a promising Libyan oil concession.
CNOOC (CEO.N) is rumored to be looking at the Ghana-based assets of Kosmos Energy LLC, which is backed by private equity giants Blackstone Group and Warburg Pincus.
And in February, Reuters reported CNOOC is eyeing Africa and Middle East-focused oil and gas firm Addax Petroleum.
It's a natural extension of policy, said Larry Grace, an independent Hong Kong-based energy consultant, referring to China's oil majors eyeing African-focused firms.
I fully expect them to try more, but whether they're successful is more up to the seller than any governmental inhibition.
(Editing by Ian Geoghegan)