Bridget Carter, Mergers & Acquisitions Editor, Sydney
Gretchen Friemann, Mergers & Acquisitions Editor, Sydney
China’s Fosun Group will continue to seek out investment opportunities in the oil and gas sector after keeping a low profile following its $474 million acquisition of Australia’s Roc Oil nearly two years ago.
Roc Oil is the first acquisition Fosun has made in the sector so far, bringing the Chinese conglomerate into the upstream oil and gas industry with its established petroleum and natural gas businesses in China, Southeast Asia and Australia.
In the resources space, Fosun also has a 54 per cent interest in iron ore producer Hainan Mining, which is listed in Shanghai. It is understood that Fosun will not eye further investment in mining as the company continues its “light-asset” strategy from 2015, reducing capital expenditures.
However, oil and gas assets are still on Fosun’s radar, as it might be a better time to buy than two years ago as oil prices have dropped 70 per cent since mid-2014.
Fosun had been eyeing two small natural gas fields in the eastern Mediterranean from Israel’s Delek Group earlier this year. But there hasn’t been any update since Fosun scrapped a 1.8 billion shekel ($632m) deal to buy Phoenix Holding from Delek.
The Israeli group is being forced by the government to sell off some of its oil and gas assets in an effort to open the sector to new competition.
With a foot in Australia through Roc Oil, it will be reasonable for Fosun to sniff around Australia for better opportunities in the space.
After all, almost every local player has been forced to take writedowns on assets, reduce costs or even shed assets after the significant fall in oil prices, which will bring potential bidders and sellers closer on value expectations. More asset sale programs are expected for companies with balance sheets under pressure, according to law firm Minter Ellison. There is also an opportunistic market for distressed sales, with Santos and Origin potential targets.
Santos remains vulnerable to a takeover after rejecting a proposed $7.14 bid by Scepter Partners late last year, as does Oil Search after knocking back a $11.6 billion proposal from Woodside Petroleum. Smaller-cap oil and gas companies are the most vulnerable.
Additional reporting: Ben Wilmot, Maggie Lu Yueyang, Barry Fitzgerald
SOURCE
