Chinese Indie Secures Jilin Field

New York-listed China North East Petroleum (CNEP) struck a $26.7 million deal on Thursday to acquire rights to the Qian 122 oilfield in China’s Jilin province, building on its existing producing fields in the region.

The Chinese independent will gain 100% ownership of a subsidiary of China Kinwa High Technology that holds exploration and drilling rights for the field under the share transfer agreement.

The company intends to finance the acquisition with available cash, with the deal set for completion in the first quarter of 2012.

The Kinwa subsidiary has been producing from the PetroChina-owned field under a 20-year lease entered into 2004 with the Chinese state-run giant that entitled it to 80% of oil output until the fourth quarter of 2014 and 60% in the remaining 10 years.

Last year, the Qian 122 field produced about 110,000 barrels from 50 producing wells, with output this year set to exceed this figure by about 10%.

CNEP chief executive Jingfu Li said the company is looking to drill up to an additional 250 wells to tap remaining resources at the field, which is estimated by PetroChina to hold about 47.6 million barrels. It aims to drill between 25 and 35 wells annually.

“Upon the closing of the acquisition, Q122 is expected to immediately contribute to our revenue, profitability and cash flow," he said.

The field lies close to CNEP’s largest existing oilfield in Jilin, Qian 112, to provide possible operational synergies and the acquisition is “another step in becoming a major independent, regional oil producing and oilfield services company in China”, he added.

(upstreamonline.com, Edited by Topco)