StanChart makes case for PetroChina-BP deal

HONG KONG, June 10 (BestGrowthStock) – A takeover of British energy
giant BP Plc (BP.L: )(BP.N: ) by PetroChina (601857.SS: )(0857.HK: )
makes economic sense and will help transform the Chinese oil
company into a global oil champion, Standard Chartered
(STAN.L: )(2888.HK: ) said in a research note on Thursday.

BP’s plunging share price, which hit a 14-year low in U.S.
trading on Wednesday, has made the British oil company a subject
of takeover talk because of concern over its ability to meet the
mounting costs of the giant Gulf of Mexico oil spill.
[ID:nN08105101]

“With widespread media speculation on a possible takeover of
BP, we examine various scenarios for a PetroChina acquisition,”
Standard Chartered said in the note. “We expect a full dose of
skepticism on this as a real-world proposition, although we argue
for the persuasive economics.”

Standard Chartered said a takeover of BP by PetroChina would
transform China’s biggest oil and gas producer from a low-growth
company into a global oil champion and boost its earnings per
share significantly.

There was also no overlap in assets and PetroChina would pay
less than $7 per boe (barrels of oil equivalent) for BP’s
reserves, which was seen as cost-effective, the bank said, adding
that, in addition, BP’s output would hedge a third of China’s oil
imports.

All these incentives would eventually make it an attractive
exit opportunity for BP’s shareholders, it said.

A combined PetroChina-BP would have oil and gas reserves that
were 73 percent and 187 percent larger, respectively, than
ExxonMobil Corp (XOM.N: ) and Royal Dutch Shell Plc (RDSa.L: ),
Standard Chartered said.

Standard Chartered also highlighted some uncertainties in its
note.

“The key uncertainty is the size of BP’s liability from the
Gulf of Mexico accident, which could go as high as $40 billion.
This should not form a stumbling block, given the limited
short-term impact on cash flow,” it said.

“We expect China would support such a deal, while regulators
in the United States may raise antitrust concerns. While we
cannot rationalise any argument that the deal should be blocked
on grounds of national interest, local politicians may take a
different view.”

Stock Today

(Reporting by Denny Thomas and Lee Chyen Yee; Editing by Chris
Lewis)

StanChart makes case for PetroChina-BP deal