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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battle axe's picture

GOP will block it, somehow. 

SilverTree's picture

Extrapolate that chart to 2012 and beyond. 

LawsofPhysics's picture

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

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?

DosZap's picture

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


Sinopec Arena in OKC?

malikai's picture

Doesn't Sinopec know how to frack already?

sudzee's picture

Out of treaury's and into something of value.

GeneMarchbanks's picture

China to America: I will make you love me.

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. 

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!!

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.

smithcreek's picture

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

midgetrannyporn's picture

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

Mercury's picture

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

aka: what's looking like the bottom.


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.

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.

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? :>)

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.

SilverRhino's picture

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

gmrpeabody's picture

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

I'll be OK...

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.



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.


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".

deboomer's picture

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


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.

midgetrannyporn's picture

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

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.

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.

TrainWreck1's picture

Fu Chengyu?

Yeah, same to you buddy.


Stuart's picture

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

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.



Dr. Engali's picture

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

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.