May 4 (Bloomberg) -- United Energy Group Ltd., the Hong Kong-based explorer controlled by Chinese billionaire Zhang Hongwei, is in talks to buy a Toronto-listed oil and gas company for $1 billion, which would be its biggest purchase since 2007.
“We’ve had several rounds of discussions with our target company this year and both sides are seriously considering the terms,” Chief Financial Officer Thomas Pang said in an interview in Hong Kong yesterday. “We hope to get the deal done within the year.”
Pang declined to identify the company, saying only it’s a Toronto-listed independent energy producer with “strong” conventional oil and gas output. The company has a “simple” shareholding structure and the owners may want to sell to retire, he said.
The explorer may also target energy companies based in North America or Europe that are valued at about $1 billion and have producing assets in those locations, Africa or Southeast Asia, Pang said.
United Energy, which paid BP Plc about $750 million for oil fields in Pakistan in 2010, seeks assets to feed demand in the world’s fastest-growing major economy. Funding will come from a $5 billion credit line obtained from state-owned China Development Bank Corp. in December 2010, which Pang said can be used to pay for as much as 80 percent of an acquisition.
United Energy, which also owns assets in China, has climbed 27 percent this year, compared with a 14 percent increase in the benchmark Hang Seng Index. The stock closed unchanged at HK$1.67 in Hong Kong trading yesterday.
Natural gas in the U.S. was sold for less than 14 percent of average Asian liquefied natural gas prices in March because of increased output from shale reserves.
There were $8.7 billion in deals announced in Canada’s oil and gas industry in the first quarter, the busiest start to the year since 2009, when mergers and acquisitions in the sector there peaked at $47 billion, according to data compiled by Bloomberg.
United Energy plans to raise daily output at its onshore fields in Pakistan to as much as 30,000 barrels by the year-end, Pang said. Production from Pakistani assets was 24,700 barrels a day as of March 31, according to an April 24 release.
The company is looking for a partner to explore offshore assets in Pakistan, in which it controls 75 percent and the government owns 25 percent. United Energy can sell as much as 50 percent of its shares to a partner, Pang said.
“We have had discussions with several major offshore oil companies in the past months and we hope a deal can be struck soon,” Pang said. The company must invest at least $8 million in the offshore fields by February 2013 to qualify for an extension of the exploration rights from the Pakistan government, he said.
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