You see, just across the Pacific, China is feverishly catching up to –and overtaking – the US for top spot on a number of key economic indicators.
The Chinese are now:
- the world’s second largest economy
- the world’s largest exporter
- the world’s second largest importer
- the world’s largest consumer of energy
- and the world’s second largest consumer of oil
With the way our economy is going, I wouldn’t be surprised if they surpass us in EVERY category within a decade.
But with all of their success, what is next for Asia’s economic powerhouse?
Gunning For Top Spot
All three of China’s state-owned oil companies have been making ambitious moves around the globe and are growing at a rapid pace.
China National Offshore Oil Corp., or CNOOC is China’s largest producer of offshore crude oil and natural gas and ranks as the 34th largest independent oil and gas exploration and production company in the world.
As of 31 December 2011, the company owned net proved reserves of approximately 3.19 billion BOE, and its average daily net production was 909,000 BOE.
China Petroleum & Chemical Corp., or Sinopec, is China’s second largest oil and gas company, churning out over 880,000 barrels of crude daily not to mention over 1.4 billion cubic feet per day of natural gas.
And not to be outdone, China National Petroleum Corp. or PetroChina has recently overtaken supermajor Exxon Mobil as the world’s largest publicly traded oil producer – pumping out an astonishing 2.4 million barrels per day.
And this trend looks to continue for the foreseeable future. Why?
Because China is already the world’s largest energy consumer, and the Chinese economy continues to grow at a rapid pace.
This insatiable thirst for energy has forced the government to do everything it can to secure the resources it needs right now and for the future.
So taking a page from rivals such as Exxon, these Chinese companies have been VERY aggressive in snatching up foreign oil and gas assets – quickly building up giant war chests through minority JV’s and M&A’s on properties beyond China’s borders.
(And keep in mind, they pay cash – with full backing from their biggest shareholder, the Chinese government. Imagine having Beijing as your sugar daddy…)
Sinopec announced in April that it shelled out US$2.44 billion to buy 1/3 equity of Devon Energy’s five shale gas blocks in the US.
CNOOC recently closed on a cash purchase of 1/3 of Tullow Oil’s Uganda assets, which was worth approximately US$1.47 billion.
And these deals don’t even include the billions spent acquiring major positions in the Canadian Oil Sands and other red-hot plays.
According to Market Watch, “In 2011, the total mergers and acquisition value of China’s three biggest oil companies–CNPC, Sinopec, and China National Offshore Oil Corp.– reached about $20 billion.”
To say that China is on a full-fledge mission to become the most powerful country in the world is an understatement.
But don’t go run out and buy PetroChina, CNOOC, or Sinopec just yet.
Every dollar these companies earn is thrown into the next major asset purchase, spelling virtually no profits for investors.
And because they’re essentially state-owned entities, Chinese companies are notorious for overspending on exploration, development, and mergers and acquisitions – often OVERPAYING just to outbid their rivals.
In fact, PetroChina’s share price is virtually the same as it was five years ago despite all of their major acquisitions in that time span. Sinopec is a third of what it was worth back in 2007.
No, the best way to play the market is not to buy Chinese companies at all.
If you would like to profit from China’s seemingly endless buying spree then you must identify the next takeover target and take a position before any money trades hands.
Here at Top Stock Millionaire, we’ve identified the most promising companies that are likely to become prime takeover targets for Chinese oil majors in the near future.
for Top Stock Millionaire