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China's Sinopec Looking To Buy Billions In Chesapeake Assets

Tyler Durden's picture




 

Remember "What Is The Upside In Chesapeake?" from 3 weeks ago, where we said, "one thing is certain: the company has lots of good assets, as well as quite a few legacy liabilities, combined with an industry environment that is as bad as it has ever been. And sure enough, in betting that the environment might actually improve for a change, there are quite a few big firms which may be happy to onboard the assets and the liabilities, knowing they wouldn't impair the right side of their balance sheet, while acquiring some good real estate and substantial reserves on the left, at a valuation that is the cheapest in the industry. Because in finance, once central planning is (finally) stripped away, valuation is all that matters."

Today we read in the FT:

Sinopec, the Chinese oil and gas group, is considering bidding for billions of dollars worth of assets owned by Chesapeake Energy, the US gas producer.

 

Fu Chengyu, head of Sinopec, was in Oklahoma in the US this week in connection with the company’s due diligence on the Chesapeake assets, according to people familiar with the move.

 

By buying assets rather than making a bid for the company itself Sinopec hopes to minimise the sort of political backlash that forced Cnooc to drop its $18.5bn bid for Unocal in 2005, bankers and oil executives say. Chesapeake Energy has been hit hard by low natural gas prices in the US and is in the midst of an asset disposal programme to help reduce its debt; while its shares have fallen 25 per cent from their March peak.

 

Mr Fu’s vision is to shift Sinopec’s focus to upstream oil and gas production, where margins are higher. “The Achilles heel of Sinopec is the lack of oil and gas reserve growth upstream while being too dependent on downstream refining,” says analyst Gordon Kwan of Mirae Asset Securities. “Among the three national oil companies, Sinopec’s balance sheet is the weakest,” he adds.

Net result: +15% in 20 days.

 

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Wed, 06/20/2012 - 10:41 | 2543319 battle axe
battle axe's picture

GOP will block it, somehow. 

Wed, 06/20/2012 - 10:44 | 2543337 redpill
redpill's picture

Economic History of the World in one little chart

http://cdn.theatlantic.com/static/mt/assets/business/Screen%20Shot%20201...

Wed, 06/20/2012 - 10:49 | 2543364 SilverTree
SilverTree's picture

Extrapolate that chart to 2012 and beyond. 

Wed, 06/20/2012 - 10:57 | 2543401 LawsofPhysics
LawsofPhysics's picture

That is the real challenge.  It has always been about power over the sheeple and control of resources, period.  

Wed, 06/20/2012 - 11:42 | 2543625 gmrpeabody
gmrpeabody's picture

All your NG are belong to us!

Wed, 06/20/2012 - 12:31 | 2543816 Manthong
Manthong's picture

There might be something to the concept of Cosmic Justice.

http://www.youtube.com/watch?feature=player_embedded&v=DjXFEvv5M4k

Wed, 06/20/2012 - 10:54 | 2543389 IronShield
IronShield's picture

Concur.  Sinopec, as most industries of scale in China, is owned by the state.  Not gonna happen.  IF it were to happen, however, it would be one major $hit storm.  Now where's my popcorn and beer?

Wed, 06/20/2012 - 14:16 | 2544407 DosZap
DosZap's picture

I see the Oklahoma Governor,and Legislature raining major shit down on this, they are more radical and conservative than Texas.

Wed, 06/20/2012 - 10:42 | 2543325 SHEEPFUKKER
SHEEPFUKKER's picture

Sinopec Arena in OKC?

Wed, 06/20/2012 - 11:19 | 2543510 Marginal Call
Marginal Call's picture

OKC Chinos

Wed, 06/20/2012 - 10:43 | 2543328 malikai
malikai's picture

Doesn't Sinopec know how to frack already?

Wed, 06/20/2012 - 10:44 | 2543338 midgetrannyporn
midgetrannyporn's picture

#WINNING!

Wed, 06/20/2012 - 10:45 | 2543343 sudzee
sudzee's picture

Out of treaury's and into something of value.

Wed, 06/20/2012 - 10:45 | 2543345 GeneMarchbanks
GeneMarchbanks's picture

China to America: I will make you love me.

Wed, 06/20/2012 - 11:25 | 2543535 Uncle Remus
Uncle Remus's picture

And long time.

Wed, 06/20/2012 - 16:35 | 2544978 bjonsson
bjonsson's picture

And up the tailpipe.  With no lube.

Wed, 06/20/2012 - 10:46 | 2543346 Jason T
Jason T's picture

tell the Chinese they can't buy shit in the US until they allow our SEC to audit their auditors in China. 

Wed, 06/20/2012 - 10:52 | 2543378 Wu Qi Ming
Wu Qi Ming's picture

Love to be a fly on the wall: Watching 2 teams of dyslexic accounts quarrel over figures, all the while knowing their both full of crap. Hilarious!!

Wed, 06/20/2012 - 10:47 | 2543350 eclectic syncretist
eclectic syncretist's picture

Quick, give them some more pieces of paper and make them go away!

Anyone notice that Proctor & Gamble and Adobe lowered earnings estimates?  One would almost think that earnings don't matter anymore,....but they do.

And earnings warning season hasn't even kicked in yet.

Wed, 06/20/2012 - 10:49 | 2543353 smithcreek
smithcreek's picture

Welcome to BananAmerica.  China to US: "I drink your milkshake."

Wed, 06/20/2012 - 10:49 | 2543354 midgetrannyporn
midgetrannyporn's picture

No, I buy you out, you don't buy me out.  [/moe green]

Wed, 06/20/2012 - 10:49 | 2543357 Mercury
Mercury's picture

Remember "What Is The Upside In Chesapeake?" from 3 weeks ago

aka: what's looking like the bottom.

Nice.

Wed, 06/20/2012 - 10:50 | 2543362 Cognitive Dissonance
Cognitive Dissonance's picture

America is on sale. Come and get it while your Federal Reserve fiat still retains some value.

In other words......use it or lose it.

Wed, 06/20/2012 - 10:52 | 2543376 LawsofPhysics
LawsofPhysics's picture

Won't matter when possession becomes 100% of the law.  Got PM's, physical assets that generate revenue, or tradable skills?  You fucking better.

Wed, 06/20/2012 - 11:09 | 2543443 Cognitive Dissonance
Cognitive Dissonance's picture

I own PMs. <check>

I own rental property that produces an income. <check>

I can design, supervise, build, wire, plumb, roof, side, mason, wallpaper, sheetrock, paint, build and install cabinets, bathrooms, kitchens etc etc etc. <check>

Whatcha got to trade bro? :>)

Wed, 06/20/2012 - 11:11 | 2543469 LawsofPhysics
LawsofPhysics's picture

Many of the same physical assets and skillsets.  Plus a significant group of like-minded and well armed neighbors.  Our co-op farms several hundred thousand acres.   Many of us are vets.  Fucking bring it.

Wed, 06/20/2012 - 11:34 | 2543581 SilverRhino
SilverRhino's picture

How the hell do you get into a coop farm org?

Wed, 06/20/2012 - 12:15 | 2543757 LawsofPhysics
LawsofPhysics's picture

Really?  Here is one place to start;

http://www.ncfc.org/

 

Wed, 06/20/2012 - 11:47 | 2543645 gmrpeabody
gmrpeabody's picture

I have a good personality, a great sense of humor, and a growing knowledge of Spanish cheese...

I'll be OK...

Wed, 06/20/2012 - 13:45 | 2544170 emersonreturn
emersonreturn's picture

today's business clip on bbc news...china is insisting rare earth minerals will have to cost foreign buyers more...  china bought a small rare earth company in canada last fall to no real dismay...maybe their luck will continue to hold.

 

(sarc)

Wed, 06/20/2012 - 10:56 | 2543390 GeneMarchbanks
GeneMarchbanks's picture

America is on sale

Let's not kid ourselves, that has always been the motto. As for 'use it or lose it' they use it, you lose it.

Just kidding you don't really lose it, you use it to prop up BofA. Investing in the future.

 

Wed, 06/20/2012 - 11:00 | 2543416 Cognitive Dissonance
Cognitive Dissonance's picture

I agree that America, and Amercians (little whores that we are), have always been "for" sale.

But now America is having a clearance sale, thus it is "on sale".

Wed, 06/20/2012 - 10:49 | 2543363 deboomer
deboomer's picture

We give them paper currency and they buy our assets to hold us enegy hostages.

 

Wed, 06/20/2012 - 10:51 | 2543373 falak pema
falak pema's picture

Oil is a private sector game in US and a public sector game all over the world. How does that interface? We see it clearly in US-Saudi relation its very crony Oligarchy state+ private kiss n match, amongst born again bible belters and wahhabist Allah worshippers. But with China...the bull in the china shop, all good enticing, roundly moulded, under priced, hidden assets are good for brutal grab. Will the mating be tame or a bleeding shame, with the bedsheets soiled from forced and repeated deep penetration of feudal type, and no concern for dainty white flesh of new england flower beds. Chesapeake will have to be key-holed constantly to monitor encounters of the third type, unknown to western Oligarchs who eat their pancakes with maple syrop, not spiced garlic and ginger.

Wed, 06/20/2012 - 10:53 | 2543379 midgetrannyporn
midgetrannyporn's picture

Sinopec, they're baaack! [/Poltergeist II]

Wed, 06/20/2012 - 10:54 | 2543387 LawsofPhysics
LawsofPhysics's picture

Right, because China, isn't printing or reporting false economic data (like everyone else).  FAIL.

Possession is rapidly becoming 100% of the law, bitchez.

Wed, 06/20/2012 - 10:57 | 2543402 Benjamin Glutton
Benjamin Glutton's picture

how about a nice game of basketball?

 

With the Oklahoma City Thunder in the NBA Finals, and 19% owner Aubrey McClendon in the media spotlight, it’s worthwhile revisiting the sordid circumstances under which McClendon and his pals orchestrated the acquisition and relocation of the team formerly known as the Seattle SuperSonics.

It was in July 2006 that the group consisting of McClendon, his Chesapeake Energy co-founder Tom Ward, and their friend Clayton Bennett cut a deal to buy the Sonics (and the WNBA’s Storm) from Starbucks founder Howard Schultz for $350 million.

http://www.forbes.com/sites/christopherhelman/2012/06/13/the-sordid-stor...

Wed, 06/20/2012 - 11:00 | 2543412 TrainWreck1
TrainWreck1's picture

Fu Chengyu?

Yeah, same to you buddy.

 

Wed, 06/20/2012 - 11:04 | 2543426 Stuart
Stuart's picture

Hands off US oil, just keep buying US treasuries.  What?... China, you have a problem with this?  why?

Wed, 06/20/2012 - 11:11 | 2543464 proLiberty
proLiberty's picture

Don't worry like many did when the Japanese bought up a lot of Manhattan and Hawaiian real estate.  They can't take very many corporate assets with them and I am happy they are recycling dollars in this manner.  When their loss is perfected then I am happy to bid for them.

 

 

Wed, 06/20/2012 - 11:16 | 2543490 Dr. Engali
Dr. Engali's picture

Yep they bought up a lot of assets then we bought them back up on the cheap.

Wed, 06/20/2012 - 11:13 | 2543475 shovelhead
shovelhead's picture

"Y'all git yer ass movin on that rig or Fu Manchu will cut yer noodle allotment."

If we were really smart we would keep the oil and gas and sell em GM.

Serve em right.

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