CNOOC to acquire Nigerian concessions

China's CNOOC Ltd. says it has signed a definitive agreement with South Atlantic Petroleum Ltd. to acquire a 45% working interest in offshore OML 130 in Nigeria for $2.268 billion cash.

Offshore staff

(West Africa) - China's CNOOC Ltd. says it has signed a definitive agreement with South Atlantic Petroleum Ltd. (SAPETRO) to acquire a 45% working interest in offshore oil mining license, OML 130, in Nigeria for $2.268 billion cash, subject to adjustments.

OML 130 is covered by both a production sharing agreement (PSA) and a production sharing contract (PSC), each of which governs a 50% interest in OML 130.

SAPETRO is currently the sole contractor and 100% interest holder in the PSC.

Under the agreement, CNOOC will be acquiring a 90% interest in the PSC and hence, a 45% working interest in OML 130.

Located in Nigeria, one of the world's largest crude oil exporters, the Niger Delta region is one of the world's most prolific oil and gas basins, says CNOOC.

OML 130 covers an area of approximately 500 sq mi in the Niger Delta and is a deepwater block with water depths ranging around 1,100 m to 1,800 m.

OML 130 contains the Akpo field, which was discovered in 2000. Besides Akpo, OML 130 contains three other significant discoveries: Egina, Egina South, and Preowei.

The block also contains a range of further exploration prospects.

Akpo's proven plus probable (P50) liquid recoverable volumes have been estimated by Total, the operator of OML 130, to be approximately 600 MMbbl, with potential for additional P50 recoverable oil in excess of 500 MMbbl for the whole OML130 area.

Akpo is expected to come onstream by the end of 2008 and reach peak production shortly after that.

Total production is expected to increase sharply when Egina, Egina South, and Preowei will come online.

At a price of approximately $4.6/boe (multiple calculated based on the P50 recoverable volumes of Akpo and other additional volumes in the OML 130 area), the acquisition is on highly attractive terms also when compared to other recent world-scale upstream transactions.

Commenting on the acquisition, CNOOC Chairman and CEO, Fu Chengyu said, "The purchase of this interest in OML 130 helps CNOOC gain access to an oil and gas field of huge interest and upside potential, located in one of the world's largest oil and gas basins.

"With one of the leading deepwater experts as the operator of the field, we have every confidence for the fast and efficient production of oil."

"This transaction is perfectly aligned with CNOOC's long- term strategy of achieving growth through the exploration and development of offshore fields and achieving geographic diversification of the company's portfolio."

The transaction is expected to close in the first half of 2006, and is conditional on, amongst others, Nigerian National Petroleum Corp. and Chinese government approval.

01/10/06

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