PetroChina seeks to swap out oilsands assets in price slump

Swap preferred to sale because it’s ‘hard to find willing buyers’

PetroChina Co. says it’s in talks with international oil companies about swapping assets in North America to help it ride out the slump in crude prices.

China’s biggest oil and gas company said the negotiations are mostly focused on its Canadian oilsands holdings. The rationale is that swapping assets would be more efficient than outright sales, which, while oil prices are low, would “cause losses for international oil companies,” vice-chairman Wang Dongjin said in Hong Kong at the company’s earnings briefing. He didn’t name the companies PetroChina is talking to.

“We may try asset swaps for our North America assets, mostly in Canada, as the low crude environment makes it hard to find willing buyers,” Wang said.

“If we can strengthen co-operation with international oil companies and have our assets swapped, that will help us restructure our assets and complement each other.”

PetroChina, which reported a 17-per-cent profit decline on Thursday, completed its purchase of the Dover oilsands for $1.1 billion from Athabasca Oil Corp last year. In 2012, it paid Encana Corp. $1.2 billion for a 49.9-per-cent stake in Alberta’s Duvernay formation.

“There is a tax efficiency in an asset swap rather than just a sale, there is no question about that,” said Neil Beveridge, a Hong Kong-based analyst at San- ford C. Bernstein.

“But an asset swap doesn’t help you protect the value of your properties.”

China’s CNOOC Ltd., the country’s biggest offshore oil and gas explorer, reported a 6.6-per-cent increase in full-year profit on Friday, beating the downturn in crude prices by raising oil and gas output and lowering its production costs.

“This should help restore faith in China’s leading explorers moving forward,” Beveridge said.

The explorer’s total oil and gas output was 432.5 million barrels in 2014, up from 411.7 million barrels a year earlier.

CNOOC said it plans to increase production by as much as 15 per cent this year, while cutting capital expenditure by as much as 35 per cent.

Its Canadian unit, Calgary-based Nexen Energy, earlier this month announced it was cutting 400 jobs and getting out of the oil-trading business.

CNOOC is “actively looking” at overseas acquisition opportunities and considering using methods such as asset or share swaps to pay for them, chairman Wang Yilin said in a briefing Friday.

“We can’t only rely on cash for acquisitions and have to work creatively to find other means to buy new assets,” he said.

There is a tax efficiency in an asset swap rather than just a sale, there is no question about that.