ConocoPhillips Selling Algerian Oil Fields to Pertamina

on Dec 19, 2012

The Indonesian state-backed company Pertamina followed the suit of Asian companies acquiring oil and gas assets in Africa, agreeing to buy the Algerian business of the USenergy producer ConocoPhillips (NYSE:COP). The sale is also in line with the divestment strategy of ConocoPhillips, with the Houston-based company offloading assets overseas to cut debt and increase investment in domestic energy resources.

**Pertamina to Acquire Algerian Fields from Conoco**
On December 8, ConocoPhillips announced in a press release that it had entered into an agreement to sell its Algerian business to Indonesia’s Pertamina. The Algerian unit includes interests in three major oil fields, with Conoco’s 2012 net production from the fields in question averaging 11 thousand barrels of oil equivalent per day through October. Pertamina is to acquire the assets for $1.75 billion (£1.07 billion), which at October 31 were estimated as carrying net value of $850 million.

The deal, expected to close by mid-2013, is pending approval by the Algerian government and by ConocoPhillips’ partners in the fields, including the Calgary-based Talisman Energy (TSE:TLM), the Italian Eni SpA (BIT:ENI), as well as Algeria’s state-owned Sonatrach Petroleum Corp.
“The sale of our Algerian business unit represents another important step in transforming ConocoPhillips’ asset base, and advances the strategic interests of both Pertamina and ConocoPhillips,” noted Don Wallette, Conoco’s executive vice president of business development and corporate planning in the company press release.

ConocoPhillips Selling Algerian Oil Fields to Pertamina
Bloomberg reports that ConocoPhillip’s share price, which has climbed 6.8 percent this year, rose 1.8 percent to $59.30 at the close in New York.
**Deal Part of ConocoPhillips’ Asset Sale Programme**
ConocoPhillips, which recently announced the sale of its stake in the giant Kashagan oil field in Kazakhstan to India’s Oil & Natural Gas Corp (NSE:ONGC, BOM:500312), is in the middle of its 2012-13 asset disposal programme. The sale of the Algerian oil fields to Pertamina is expected to bring the proceeds from the disposition programme to about $9 billion.

Indonesia’s State-Owned Company Expanding Overseas Assets
Reuters reports that ConocoPhillips has been shedding overseas assets to cut debt and increase its investment in lower-cost domestic shale oil and gas. Earlier in December, the US energy producer announced a 2013 capital budget of $15.8 billion, noting that 60 percent of the budget would be allocated toward North America, whereas the remaining 40 percent would target Europe, Asia Pacific and other international businesses.

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As noted by the Financial Times, earlier in 2012, Conoco spun off its refining, pipelines and chemicals business into a separate company, Phillips 66 (NYSE:PSX).
**Pertamina Focusing on Overseas Expansion**
Pertamina, on the other hand, has been looking to acquire energy assets overseas similarly to other Asian state-backed peers. In November, however, the Indonesian energy producer dropped a bid for the Houston-based Coastal Energy Co (TSE:CEN, LON:CEO), with Bloomberg reporting that the companies failed to agree on a price.
In June, Pertamina acquired the interests of Harvest Natural Resources (NYSE:HNR) in Venezuela. Bloomberg quotes government data as indicating that Pertamina may pump 127,889 barrels of oil a day in 2012, making it Indonesia’s biggest oil producer after a unit of Chevron (NYSE:CVX).


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