China's giant refining company is adding Occidental Petroleum's $2.45 billion Argentine unit to its global empire as Beijing's energy acquisition spree continues to deliver new deals
The mystery surrounding the precise valuation is a factor of the immature state of the fields, which have yet to be fully explored to the point where analysts can formally estimate their reserves. But in any event, the deal seems a little rich given the amount of work that needs to be done.
Petrobras (PBR, quote) paid the Brazilian government equivalent of $8.50 in stock per barrel of oil in its recent recapitalization. Unlike the SNP-OXY deal, those barrels were fully delineated, but even given the maturity differential, that valuation was considered expensive -- but the buyer was motivated enough to pay whatever the seller asked.
Likewise, Chinese oil has emerged as motivated buyers throughout the world. SNP and its peers have now paid $38 billion this year for Latin projects and still seem eager to pay nearly any price to boost their reserves.
This kind of activity can only boost valuations throughout the oil patch.
Meanwhile, OXY is using the cash to fund massive M&A of its own back in the United States, as well as boost its dividend.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.