Chinese oil giant Sinopec eyes Chesapeake assets: report

Chinese oil giant China Petrochemical Corp, better known as Sinopec, is planning to bid for billions of dollars worth of assets of Chesapeake Energy, the second- largest natural-gas producer in the US, the Financial Times today reported, citing people familiar with the move.
Fu Chengyu, the newly-appointed head of Sinopec, was this week in Oklahoma, where Chesapeake is based, in connection with conducting due diligence on Chesapeake assets, said the paper.

Along with other natural gas companies in the US, Chesapeake has been hit hard by falling natural gas prices. Its stock has declined by 29 per cent this year after a 14 per cent fall in 2011.

Facing cash shortfall of several billion dollars due to low gas prices, the company has curtailed drilling in some of its fields, and said early this year that it would shut production in some gas fields.

Chesapeake prospered during the shale gas boom in the US and went on an acquisition spree of unexplored shale gas fields. The company has good natural gas shale acreages in the Barnett in Texas, and the Haynesville in Louisiana and Arkansas, which together make for almost half its total output.

The company's second-largest investor, activist billionaire Carl Icahn with a 7.6-per cent stake, had late last month successfully nominated two of his nominees to the company's board.

He has been urging the company to scale back its investment plans and sell non-core assets in order to strengthen its finances.