Sinochem Group, China’s biggest supplier of chemical products, agreed to buy a 40 percent stake in Texas oil-shale acreage from Pioneer Natural Resources Co. for $500 million.
Sinochem also will pay $1.2 billion of Pioneer Natural’s share of future drilling costs, the Dallas-based company said in a statement yesterday. Pioneer Natural will continue to operate the 207,000 net acres in the Wolfcamp. The acquisition is Beijing-based Sinochem’s first oil and natural gas purchase from a U.S. company, according to data compiled by Bloomberg.
Sinochem’s purchase follows past deals in which a Chinese buyer has acquired a stake in U.S. shale formations in exchange for funding drilling costs. Cnooc Ltd. agreed to pay as much as $1.3 billion including drilling costs for an interest in Chesapeake Energy Corp.’s Niobrara shale project in 2011. China Petrochemical Corp. and Devon Energy Corp. agreed to a shale deal valued at as much as $2.5 billion last year.
“This transaction provides Sinochem with valuable exposure to an attractive U.S. oil shale play, further strengthening our foreign investment portfolio,” Zhang Wei, vice president of Sinochem, said in a statement today. “With decades of potential, we look forward to successful joint development and continued growth of our relationship with Pioneer.”
The companies plan to drill 86 horizontal wells in the Wolfcamp this year, increasing to 120 next year and 165 in 2015, Pioneer said yesterday.
Pioneer is the largest acreage holder in the Wolfcamp, with more than 400,000 acres, according to its website. Its first two wells in the area produce about 75 percent oil, 20 percent natural gas liquids and 5 percent gas. The company had planned to drill 90 horizontal wells in the area by the end of 2013.
“This accelerated development will add significant production and reserves for Pioneer while enhancing shareholder value,” Scott Sheffield, chairman and chief executive officer of Pioneer Natural, said in the statement yesterday. Pioneer Natural is also halting efforts to sell properties in the Barnett Shale because of low bids, the company said in a separate statement.
In the past 12 months, Chinese companies have announced acquisitions valued at $17.9 billion for North American oil and gas companies, according to data compiled by Bloomberg. Chinese interest in shale, a dense rock formation that holds oil and gas, comes as the nation seeks the technology to unlock its own reserves.
China holds 25.1 trillion cubic meters of exploitable shale reserves, the country’s Ministry of Land and Resources said March 1, citing a nationwide survey.
Bank of America Corp. Merrill Lynch served as Pioneer’s financial adviser and Vinson & Elkins LLP was its legal adviser. Tudor Pickering Holt & Co. and law firm Mayer Brown LLP advised Sinochem.