CNOOC Limited Proposes Merger With Unocal Offering US$67 Per Unocal Share In Cash
June 22 2005 - 7:22PM
PR Newswire (US)
CNOOC Limited Proposes Merger With Unocal Offering US$67 Per Unocal
Share In Cash HONG KONG, June 22 /PRNewswire-FirstCall/ -- CNOOC
Limited (SEHK:0883)(NYSE:CEO) announces today that it has proposed
a merger with Unocal Corporation ("Unocal"; NYSE: UCL) offering
US$67 in cash per Unocal share. The offer values Unocal at
approximately US$18.5 billion and represents a premium for Unocal's
shareholders of approximately US$1.5 billion over the value of
Chevron Corporation's ("Chevron") offer based on Chevron's closing
price on NYSE on 21 June 2005. In a letter sent to the Chairman of
Unocal, CNOOC Limited Chairman and Chief Executive Officer, Mr. Fu
Chengyu stressed that the approach is friendly and the company is
seeking a consensual transaction with Unocal. This proposal is
being submitted in accordance with the sale process initiated by
Unocal. CNOOC Limited believes that the combined company would have
a leading position in the Asian energy market and an expanded role
in the development of China's liquefied natural gas (LNG) market.
The combination is expected to more than double CNOOC Limited's oil
and gas production and increase its reserves by nearly 80% to
approximately four billion barrels of oil equivalent. Approximately
70% of Unocal's current proved oil and gas reserves are in Asia and
the Caspian region. It is expected that the merged company would
also have an improved oil and gas balance, with total reserves of
approximately 53% oil and 47%(1) natural gas. The transaction is
expected to be EPS and cash flow per share accretive in the first
full year after completion. CNOOC Limited anticipates that it will
maintain a strong, investment-grade credit rating. Mr. Fu Chengyu,
CNOOC Limited Chairman and Chief Executive Officer, said: "This
friendly, all-cash proposal is a superior offer for Unocal
shareholders. The deal is fully financed, subject to customary
closing conditions, and priced in line with market values for
comparable businesses. We hope to be able to enter into a dialogue
with Unocal soon and reach agreement on a consensual transaction."
"For our shareholders, there is a strong business rationale for the
combination, as CNOOC Limited and Unocal would form one of the
leading international E&P companies and become one of the
premier players in the Asian energy market. It would rebalance our
portfolio to include more natural gas reserves and strengthen our
regional presence by combining with Unocal's complementary Asian
asset base. I am confident that the merger will increase
shareholder value." Mr. Fu added, "We also expect this transaction
to be accretive and that we will maintain a strong,
investment-grade credit rating." Commitments concerning Unocal's
U.S. assets CNOOC Limited is committed to fully integrating
Unocal's strong management team and workforce into the combined
company. The transaction will not adversely affect the U.S. oil and
gas market since Unocal's U.S. oil and gas production will continue
to be sold in the U.S. Unocal's U.S. oil and gas production
accounts for less than 1% of total U.S. oil and gas consumption. In
connection with this offer, CNOOC Limited has provided the
following assurances: * CNOOC Limited is willing to continue
Unocal's practice of selling and marketing all or substantially all
of the oil and gas produced from Unocal's U.S. properties in U.S.
markets. * CNOOC Limited will seek to retain substantially all
Unocal employees, including those in the U.S. This is in contrast
to the existing Chevron proposal where Chevron has already
announced plans to extract hundreds of millions of dollars of cost
savings from the merger annually, including from employee layoffs.
* CNOOC Limited hopes and will endeavor to persuade members of
Unocal's executive and operational management to join the
management team of the combined company. * CNOOC Limited will
accept and agree to the terms of Unocal's recent FTC settlement
relating to its patent rights in reformulated gasoline. * CNOOC
Limited is confident that it will obtain Exon-Florio approval. To
this end, CNOOC Limited is willing to divest or take other actions
with respect to any of Unocal's non-E&P assets in North America
to the extent such divestitures and actions would not give rise to
a material adverse effect on Unocal, including considering special
management arrangements for Unocal's U.S. non-controlling, minority
pipeline interests and its storage assets. Financing structure The
financing is structured to ensure that the company will retain a
strong balance sheet and maintain future financial flexibility. The
transaction will be financed from the following sources: * CNOOC
Limited's cash resources of more than US$3 billion; * Bridge loans
provided by Goldman Sachs and JPMorgan totaling US$3 billion, which
are expected to be replaced by permanent debt financing in the form
of bonds at or shortly after completion; * Bridge loans provided by
Industrial and Commercial Bank of China (ICBC) in the amount of
US$6 billion, which are expected to be replaced by permanent debt
financing in the form of term loans at or shortly after completion;
* A long-term, subordinated loan provided by CNOOC Limited's
majority shareholder, China National Offshore Oil Corporation, of
US$4.5 billion, which is expected to receive significant equity
credit for credit ratings purposes; and * A subordinated bridge
loan provided by CNOOC Limited's majority shareholder of US$2.5
billion, which is expected to be refinanced with equity within two
years. CNOOC Limited has received commitment letters from each of
Goldman Sachs, JPMorgan, ICBC and CNOOC Limited's majority
shareholder for the financing noted above. Strengths and
opportunities CNOOC Limited believes that the merged group would
benefit greatly from the companies' complementary strengths. *
Platform for growth: This combination is expected to more than
double CNOOC Limited's production and increase reserves by nearly
80%. CNOOC Limited believes that Unocal has an attractive portfolio
of development projects with a substantial growth profile. * An
Asia-focused energy company: Both companies are already primarily
Asian businesses -- together they will be a leader in one of the
fastest growing regions in the world. It is estimated that 85% of
the combined reserves of the companies are located in Asia and the
Caspian region. * A leading regional gas business: Sixty percent of
Unocal's reserves are natural gas (mostly in Asia). CNOOC Limited
currently has 35% of its reserves in gas; it is estimated that the
combined company will have a more balanced portfolio with reserves
of 53% oil and 47%(2) natural gas. CNOOC Limited believes that an
improved oil and gas balance will reduce its exposure to commodity
price cyclicality. CNOOC Limited believes that China's LNG market
potential will allow it to accelerate the exploration and
development of gas resources and position it as a long-term
supplier to the Bontang LNG plant. This is an important part of the
environmental drive to promote cleaner burning fuels. * Optimizing
investment programs: CNOOC Limited expects to generate considerable
synergies from the optimization of the combined exploration and
capital investment programs of the two companies. * Proven
management and world-class technical expertise: CNOOC Limited
believes that Unocal has an excellent operational management team,
and CNOOC Limited can also draw on Unocal's deepwater drilling and
production expertise. Advisors CNOOC Limited is advised by Goldman
Sachs (Asia) L.L.C. and J.P. Morgan Securities (Asia Pacific) Ltd.
N M Rothschild & Sons (Hong Kong) Limited also assisted the
board's non-executive directors in their review of the transaction.
More information about the transaction can be found through CNOOC's
website (http://www.cnoocltd.com/) and through CNOOC's transaction
microsite (http://www.transactioninfo.com/cnooc). Conference Call
Information: 10 a.m. HKT / 10 p.m. EDT Investor and Analyst Call
CNOOC Limited will host a conference call on June 23, 2005 at 10
a.m. HKT/ 10 p.m. EDT to discuss the proposal. The slides will be
available on CNOOC Limited's website 10 minutes prior to the start
of the event. To access this conference call, please use the
following numbers: United States: (800) 475-3716 International:
(719) 457-2728 North China: 10-800-712-0336 South China:
10-800-120-0336 Singapore: 800-1203236 Hong Kong: 800-908710 11
a.m. HKT / 11 p.m EDT English Media Call A conference call for
English-speaking media will be held today at 11 a.m. HKT / 11 p.m.
EDT at the following numbers: United States: (800) 500-0311
International: (719) 457-2698 North China: 10-800-120-0045 South
China: 10-800-712-0045 Singapore: 800-1203236 Hong Kong: 800-908707
11:30 a.m. HKT / 11:30 EDT Chinese Media Call A conference call for
Chinese-speaking media will be held today at 11:30 a.m. HKT / 11:30
p.m. EDT at the following numbers: United States: (800) 500-0311
International: (719) 457-2698 North China: 10-800-120-0045 South
China: 10-800-712-0045 Singapore: 800-1203236 Hong Kong: 800-908707
Contacts: Investor Xiao Zongwei 86 10 8452 1646 CNOOC Limited
(Beijing) Media Hong Kong: Tim Payne or Ray Bashford 852 3512 5000
Brunswick Group Beijing: Caroline Jinqing Cai 86 10 8580 5203
Brunswick Group New York: Steve Lipin or Michael Buckley 212 333
3810 Brunswick Group Washington, D.C.: Mark Palmer 202 419 3557
Public Strategies, Inc Notes to Editors: CNOOC LIMITED --
BACKGROUND CNOOC Limited (the "Company", together with its
subsidiaries, the "Group"), was listed on the New York Stock
Exchange ("NYSE") (code: CEO) and The Stock Exchange of Hong Kong
Limited ("HKSE") (code: 0883) on 27 and 28 February 2001,
respectively. The Company was admitted as a constituent stock of
the Hang Seng Index in July 2001. The Group is China's largest
producer of offshore crude oil and natural gas and one of the
largest independent oil and gas exploration and production
companies in the world. The Company mainly engages in offshore oil
and natural gas exploration, development, production and sales. The
Company has four major oil production areas offshore China which
are Bohai Bay, Western South China Sea, Eastern South China Sea and
East China Sea. It is the largest offshore crude producer in
Indonesia. The Group also has certain upstream assets in regions
such as Australia. As at 31 December 2004, the Company owned net
proved reserves of approximately 2.2 billion barrels-of-oil
equivalent and its annual daily average net production was 382,513
barrels-of-oil equivalent per day. The Group had 2,524 employees
and total assets of approximately RMB 94.1 billion. Important
Notice: This document contains statements about expected future
events and financial results that are forward-looking and subject
to risks and uncertainties. For those statements, we claim the
protection of the safe harbor for forward-looking statements
contained in the Private Securities Litigation Reform Act of 1995.
The following important factors could affect future results and
could cause those results to differ materially from those expressed
in the forward-looking statements: whether a transaction with
Unocal will occur and the terms and conditions of any such
transaction; the extent and timing of our ability to realize
synergies from the transaction; the effect of the transaction on
employees, customers and other persons that have a material
commercial relationship with CNOOC Limited or Unocal and our
ability to maximize the value of those relationships; the
possibility that the anticipated benefits from the acquisition
cannot be fully realized; the possibility that costs or
difficulties related to the integration of Unocal operations will
be greater than expected; the impact of competition; the parties'
ability to obtain required regulatory and other approvals in
connection with the transaction; and other risk factors relating to
our industry as detailed from time to time in each of CNOOC
Limited's and Unocal's reports filed with the SEC. In addition,
future results could also differ materially from those expressed in
the forward-looking statements. You should not place undue reliance
on these forward-looking statements, which speak only as of the
date of this press release. Unless legally required, CNOOC Limited
undertakes no obligation to update publicly any forward-looking
statements, whether as a result of new information, future events
or otherwise. 1. All reserves data as at December 31, 2004 and all
production data for the year ending December 31, 2004, as published
in CNOOC Limited's and Unocal's 2004 financial statements. 2. All
reserves data as at December 31, 2004 and all production data for
the year ending December 31, 2004, as published in CNOOC Limited's
and Unocal's 2004 financial statements. DATASOURCE: CNOOC Limited
CONTACT: Investors: Xiao Zongwei of CNOOC Limited (Beijing),
+86-10-8452-1646; or Media: Hong Kong: Tim Payne or Ray Bashford of
Brunswick Group, +1-852-3512-5000; or Beijing: Caroline Jinqing Cai
of Brunswick Group, +86-10-8580-5203; or New York: Steve Lipin or
Michael Buckley, both of Brunswick Group, +1-212-333-3810
Washington, D.C.: Mark Palmer of Public Strategies, Inc.,
+1-202-419-3557, all for CNOOC Limited Web site:
http://www.cnoocltd.com/ http://www.transactioninfo.com/cnooc
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