CNOOC (CEO) outlines merger proposal

CNOOC (ticker: CEO), a China oil and gas company made a formal bid of $67 a share for Unocal (ticker: UCL) yesterday. In a 6-K filing with the SEC, CNOOC provides a detailed explanation for its decision. Extracts:

Reasons for and benefits of the Merger Proposal include:

• Platform for growth: The combination is expected to more than double the Company’s production and increase reserves by nearly 80%. The Company believes that Unocal has an attractive portfolio of development projects with a substantial growth profile.

• An Asia-focused energy company: Both companies are already primarily Asian businesses - together they will be a leader in one of the fastest growing regions in the world. It is estimated that around 85% of the combined reserves of the companies are located in Asia and the Caspian region.

• A leading regional gas business: Approximately sixty percent of Unocal’s reserves are natural gas (mostly in Asia). The Company currently has approximately 35% of its reserves in gas; it is estimated that the combined company will have a more balanced portfolio with reserves of approximately 53% oil and 47% natural gas. The Company believes that an improved oil and gas balance will reduce its exposure to commodity price cyclicality.

The Company believes that China’s LNG market potential will allow it to accelerate the exploration and development of gas resources and position it as a long-term supplier to the Bontang LNG plant in Indonesia. This is an important part of the environmental drive to promote cleaner burning fuels.

• Optimizing investment programs: The Company expects to generate considerable synergies from the optimization of the combined exploration and capital investment programs of the two companies.

• Proven management and world-class technical expertise: The Company believes that Unocal has an excellent operational management team, and the Company can also draw on Unocal’s deepwater drilling and production expertise.

Comment: The 6-K includes an informative and colorful presentation that makes for more interesting reading than your average SEC filing. See here.