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Sinochem enters Permian Basin shale via $1.7B agreement with Pioneer Natural Resources; 40% ownership plus funding for Pioneer

31 January 2013

Sinochem Group signed a definitive agreement with Pioneer Natural Resources Company whereby Sinochem Petroleum USA LLC, a wholly-owned subsidiary of Sinochem Group, will purchase a 40% undivided interest in approximately 207,000 net oil and natural gas leasehold acres held by Pioneer in the southern Midland Basin Wolfcamp play, part of the larger Permian Basin.

Under the agreement, Sinochem will acquire approximately 82,800 net acres of leasehold with development rights for all Wolfcamp and deeper horizons. Consideration for the sale includes $500 million in cash at closing, subject to adjustment. In addition, Sinochem has agreed to fund 75% of Pioneer’s share of drilling and completion costs until an additional $1.2 billion has been funded. Closing of the transaction is expected in the second quarter of 2013 subject to customary governmental approvals.

The highly concentrated assets are located in the heart of the horizontal Wolfcamp Shale play within the Spraberry Trend in the Midland Basin. The Wolfcamp Shale provides predictable geology, underpinned by abundant well control from thousands of vertical penetrations. More than 400 industry horizontal Wolfcamp Shale wells have been spud to-date, and over 35 active horizontal rigs highlight the potential of multiple target zones within the Wolfcamp horizon. Pioneer, as operator, will conduct all leasing, drilling, completion, operations, and marketing activities within the joint interest area.

Tudor, Pickering, Holt & Co. Securities, Inc. and Mayer Brown LLP acted as financial advisor and legal adviser to Sinochem respectively on the transaction.

Pioneer Natural Resources Company is an independent oil and gas exploration and production company, headquartered in Dallas, Texas, with operations in the United States.

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Comments

This is good.

This may increase oil production (which is a 2 edged sword), but more of those evil profits will now flow to China.

We are learning from the GOM coast refinery greed; now if we can just sell the refineries to China also.

And from my many years of buying multi-viscosity oil for my cars, I think I can safely say that $1.7B for 83,000 oil and natural gas acres in the southern Midland Basin Wolfcamp play in the larger Permian Basin, is a bit too much.

In the last 5 years alone, USA had a trade deficit of $3035B (worldwide) and $1402B with China.

This recent purchase represents only 1/825 of the trade deficit with China in the last five years and is in fact a very very small purchase for China.

A lot more could come, as done in Canada's Oil and Gas (over $55B) to date with a lot more to come?

It is a very small purchase for China - but they get the oil at wholesale prices.

They will make money selling us our own oil.

This is going on in the Gulf of Mexico too - after all, Obama gave Petrobras some wonderful leases in the GOM & promised to be their best customer. So they are going to sell us our own oil AND with presidential cheerleading.

The wind has changed direction and may keep blowing the same way for many years or decades to come? With most of the wealth progressively going to the 3% and soon to the 1%, the remaining 97% to 99% will have to compete with 3+B people in Asia. It may not be as bright a future for our middle and lower classes or our 99% but our 1% to 3% will do very well?

Money has no color or borders. It will go wherever it can be multiplied the fastest, i.e. for NG/SG, shales, junk foods and cleaner (mandated) energy sources in USA, for Tar sands, NG/SG, pipelines and natural resources in Canada and Russia, for R & D, ship building and lower cost mass manufacturing in Asia etc .

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