Fortune Oil To Sell Gas Assets in China

Fortune Oil plc (LSE:FTO) might just have its best deal ever.

In a statement today, the London-listed oil and gas supplier in China agreed to sell its natural gas business in a deal which values the business at US$400 million.

Fortune Oil’s natural gas business is controlled through an 85% interest in the Fortune Gas Investment Holdings (FGIH), giving the company a net of US$340 million for the sale. That’s about £209 million, or approximately 15% more than Fortune Oil’s market value from last Friday’s close, at £181 million.

Shares of Fortune Oil already rose 23.5% since trading opened earlier today to 11.25 pence by 2:00 PM GMT, valuing the company at £218 million following the announcement.

Complementary

China Gas Holdings Limited, a Hong Kong Stock Exchange listed firm, is the buyer of Fortune Oil’s natural gas assets, which includes a coal bed methane project soon to sell gas in 2013, gas pipeline infrastructures in three cities – Beijing, Tianjin, and Chongqing, and in seven other provinces, and compressed natural gas (CNG) and liquefied natural gas (LNG) operations in 200 Chinese cities.

“This transaction allows Fortune Oil to create one of the largest natural gas operators in China,” said Chief Executive, Tee Kiam Poon.

The transaction will be paid by US$200 million in cash and a deferred consideration of another US$200 million, convertible to shares in China Gas, for a maximum of 250 million shares.

China Gas’ move to acquire the assets is part of the said firm’s thrust to take a slice of the growing demand of fuel consumption in the world’s second largest economy. Around the world, Chinese state-owned oil and gas firms have embarked on a shopping spree to quench the demand in domestic energy consumption.

“The Natural Gas Business and China Gas’ gas assets are complementary to one another and the Board believes that a unique opportunity exists for the Company and its associates to become one of the largest shareholders in and be involved in the management of China Gas,” Fortune Oil stated.

Fortune Oil, however, will need approval from its shareholders, as well as from its lenders, whom it borrowed US$180 million on a condition that the company may not relinquish any asset or investments.

The deal, nonetheless, is backed by Fortune Oil’s Board, who controls about 37.85% of the company.

 

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