Shares in Oil Search surge
Australian Broadcasting Corporation
Broadcast: 17/09/2007
Reporter: Neal Woolrich
Rumours of Chinese interest in another Australian resources company have seen its shares soar today.
Transcript
ANDREW ROBERTSON: Rumours of another Chinese interest in Australian resources companies have seen shares in Oil Search soar today. The company rose nearly 12 per cent on reports it could be the target of a $6 billion takeover from a Beijing-backed energy giant. Oil Search denied the claims, but analysts say the company's proven reserves could make it very attractive. Neal Woolrich reports.
NEAL WOOLRICH: The ink is barely dry on Woodside's $35 billion gas sale to China and now the economic powerhouse is rumoured to have another Australian energy source in its sights. Newspaper reports say the China National Petroleum Corporation and Petro China are considering a $5.9-billion bid for Oil Search. The company says it's had no formal takeover approach from any party, but analysts argue that Oil Search would make an attractive target.
HOWARD ELTON, INERSUISEE: A number of oil and gas companies would be looking at Oil Search as a company that has got some substantial reserves and that is worth doing some real in depth research.
CARLO CAIANI, CAIANI & CO: It's a very good mid-sized oil and gas asset. BHP Billiton, among others, had been looking at it for a while. We're surprised actually it hasn't gone before. It's got production at about 10.5 million barrels of oil equivalent.
NEAL WOOLRICH: The takeover rumours sent Oil Search's share price climbing by 11.5 per cent, and helped Tap Oil gain 5 per cent, and AED more than 3 per cent.
HOWARD ELTON: Oil Search is much more significant in scale than Tap, which has a more modest-sized oil fields in Western Australia, and AED, which is a very niche operator that's just about to start producing in the Timor Sea. They may find more oil, but they're not of the scale at this time, that Oil Search is certainly.
NEAL WOOLRICH: Carlo Caiani says Oil Search is now trading on a price earnings multiple of more than 60, and the rumour of a bid for the company is another sign that the Chinese are willing to overpay for assets.
CARLO CAIANI: I wouldn't say desperate. They're willing to overpay. They import about 50 per cent of their crude oil requirements. That is set to increase over time, and essentially they're going to have to just overpay for assets to secure the energy requirements. It's as simple as that.
NEAL WOOLRICH: A bid could come at the top of the market with some analysts forecasting a fall in commodity prices because of a slowdown in the US economy.
CARLO CAIANI: That will have a far greater effect on the world economy than most people think. We do believe that a number of mineral commodities; copper, zinc; the base metals, nickel will go down quite hard. Iron ore we think will go down whether it's next year or the year after depending on negotiations.
NEAL WOOLRICH: Investors are now pinning their hopes on the US Federal Reserve giving the American economy a much-needed boost. The Federal Open Market Committee meets again tomorrow and is expected to deliver an interest rate cut of at least a 0.25 per cent.