Citic Resources Holdings Ltd., a unit of China's fourth-largest oil producer, had its shares rated „buy” by CLSA Ltd. because a planned purchase of a Kazakhstan oil field will expand the company's crude output.
CLSA started coverage of Citic Resources with a target price of HK$4, Hong Kong-based head of China oil and gas research Gordon Kwan wrote in a research note yesterday. The planned acquisition will increase the company's production by about 20% annually during the next five years, he said. Citic Resources is in talks to buy the oil field from parent China International Trust & Investment Corp., which paid $1.9 billion for the asset.
The company wants to add to oil output in Indonesia, where the Hong Kong-based unit bought its first energy assets, and tap demand in the world's fastest-growing major economy. China imported a record amount of oil in January, customs said February 12. „Citic Resources is among the fastest growing oil producers globally,” Kwan wrote in the note.
„Next door to energy-hungry China, Kazakhstan has been the sweet spot for discovering giant oil fields.” Shares of Citic Resources rose 5.9% to HK$3.22 by the Hong Kong market's 4 p.m. close, adding to a 4.8% gain yesterday. The city's benchmark Hang Seng Index fell 1.8% today.
The company on February 9 sold 700 million shares at HK$2.46 each, raising HK$1.72 billion to help fund the purchase of the Karazhanbas field. „Geological and development risks are minimized by the fact that the Karazhanbas field has been producing for 10 years, with good benchmark field performance data and existing transportation infrastructure,” Kwan said in his research note. Citic Group, as China International is known, bought the Kazakh field from Canada's Nations Energy Co. last October.
Citic Resources has made an initial payment of $200 million to its parent, the company said November 2. China, the world's biggest energy user after the US, is encouraging state-owned companies to scour the globe for energy resources. Oil imports rose 3.5% in January to 13.7 million metric tons (about 3.2 million barrels a day), the Customs General Administration of China said.
That's higher than the 13.54 million tons imported in November, the previous record. Citic Group granted KazMunaiGaz National Co., an oil company owned by the Kazakhstan government, an option to buy a 50% stake in the project, part of an agreement to win the Central Asian government's approval for the transaction. KazMunaiGaz will pay $955 million for the 50% stake. (Bloomberg)