Argentina’s Cia General de Combustibles SA has acquired Sinopec Argentina Exploration and Production, giving the producer additional oil output from the southern part of the country.
CGC, majority owned by billionaire Eduardo Eurnekian’s Corporación América International, closed the deal for the local unit of China Petroleum & Chemical Corp on Wednesday, the Buenos Aires-based company said in a statement. Terms weren’t disclosed. The purchase includes Sinopec’s assets in southern Argentina’s San Jorge and Cuyana basins, and allows CGC to boost daily production by 35 percent compared to levels in late 2019.
The deal is valued at US$240 million including debt, according to a person with knowledge of the matter. The purchase will be financed with bridge syndicated loans, said the person, who asked not to be identified because details of the transaction are private.
The deal comes when the world’s oil majors have been seeking to sell non-core assets, especially those requiring significant exploration budgets, in recent years to focus more on cash generation. Sinopec had sought to sell its Argentine assets since 2017.
CGC’s purchase is part of its big bet to explore untapped conventional oil and gas reserves in the southern province of Santa Cruz, where it already has operations, rather than the famed Vaca Muerta shale deposit in Patagonia. With the deal, the company’s proven oil reserves will increase by 50 percent and crude will account for 37 percent of total production – up from 15 percent previously – with natural gas making up the rest.
“We’re convinced of the enormous and diverse potential offered by our country’s geology, not just in shale but especially in tight and conventional,” CGC Chief Executive Officer Hugo Eurnekian said in the statement. “This step is proof of it.”
The 100-year old company, which is 70 percent held by Corporación América International and 30 percent owned by publicly traded holding company Sociedad Comercial del Plata, has taken several steps to boost production in the south of Argentina. In 2015, it paid US$101 million to buy more than 20 natural gas and oil fields from Petroleo Brasileiro SA. In the following years, it tripled gas production by developing two key unconventional tight gas fields.
The transaction also marks a further shift in investment in Argentina, in which local investors are taking advantage of opportunities as foreign firms seek to curb their exposure to the South American nation. During the past few years, companies including Walmart Inc and Latam Airlines Group SA have been among multinationals selling local operations as they grapple with currency controls, three years of recession and inflation that’s expected to end the year near 50 percent.
by Carolina Millan, Bloomberg