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WSJ’s report that China’s government is considering merging some of its big oil companies has caught the attention of Asia’s energy analysts, but Jefferies analysts doubt that the leadership actually will pull the trigger, saying the merger talk is "more brainstorming and thinking outside the box rather than feasible proposals.”
- The firm notes that CNPC (NYSE:PTR) already is plenty big enough to compete with Exxon Mobil (NYSE:XOM): It is bigger than XOM on an asset basis, production at the group level exceeded XOM in 2013, and the value of CNPC's proved reserves at year-end 2013 likely exceeded XOM's by ~50%.
- Jefferies also notes that Sinopec’s (NYSE:SNP) production and value of in-ground reserves exceeds that of ConocoPhillips (NYSE:COP).
- A merger between Cnooc (NYSE:CEO) and SinoChem could make sense, as it would create a fully integrated, 1M bbl/day company spanning upstream and downstream operations.
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WSJ's Liam Denning writes that any such merger would be a step backward because smaller companies offer a better chance for growth, and supermajors such as XOM and COP mostly have struggled to increase their production.