China Oilfield to buy Awilco for $2.5 bln

By Michael Flaherty and Judy Hua

HONG KONG (Reuters) - China's largest offshore oil services group on Monday agreed to buy Norwegian peer Awilco Offshore (AWO.OL: Quote, Profile, Research) for around $2.5 billion to increase its drilling capacity and tap overseas markets.

China Oilfield Services Ltd (2883.HK: Quote, Profile, Research) (601808.SS: Quote, Profile, Research), an arm of China's top offshore oil and gas producer CNOOC, will pay 85 crowns per share for the Oslo-based company in what will be the fourth-largest cross-border acquisition by a Chinese company in the oil and gas sector, according to Thomson Reuters.

The price is an 18.7 percent premium over Awilco's July 4 closing price and 42 percent above where it traded before May 30, when Awilco said a third party had expressed an interest.

Awilco shares jumped 16.6 percent to a record high 83.50 crowns, but eased back to 82.10 crowns by 1129 GMT. China Oilfield shares were suspended. Analysts said that Awilco traded below the bid price merely because of the cost of holding the stock until the deal is cleared in a few months.

Buying Awilco expands China Oilfield's overseas operations, which accounted for just 18 percent of the state-run company's revenue last year. China Oilfield's sales rose 42 percent last year to 9.01 billion yuan ($1.3 billion).

Awilco brought in $203.5 million in revenues last year.

"China Oilfield has $1 billion cash in hand. Its biggest problem has been there is no acquisition targets," said BOCI analyst Lawrence Lau. "Awilco has new rigs coming on stream over the next two years, which will benefit China Oilfield."

The deal allows China Oilfield to bring the number of drilling rigs it owns to 22 from 15, with operations in Europe and Asia. It also gives it access to international management expertise and technology.