China's Haimo seals US shale gas stake

2012-10-29

Lanzhou Haimo Technologies Co said on Friday that its subsidiary Haimo Oil & Gas LLC will buy a 14.29-percent stake in Houston-based Carrizo Oil & Gas's Niobrara shale oil and gas assets in Colorado for $27.5 million.

Under the agreement signed between Haimo and Carrizo, the Chinese company will acquire around 6,000 acres located primarily in Weld and Adams Counties in Colorado as well as associated infrastructure, including oil and gas wells, according to a statement filed to the Shanghai Stock Exchange.

Carrizo, which holds approximately 60,000 acres in the Niobrara basin, currently produces 1,850 barrels of oil-equivalent per day.

The deal is expected to reap bumper returns for Haimo. The project's annual sales should reach $35.55 million over its first eight years, bringing net profits of $10.74 million to investors every year, according to the company's feasibility report.

Haimo's announcement came after China's land and resources authorities said on Thursday that 83 companies had bid on exploration rights for 20 shale gas blocks in a recent auction.

China is aiming to produce 6.5 billion cubic meters of shale gas by 2015. An estimated 400 to 600 billion yuan will be spent to drill 20,000 shale gas wells by 2020, according to the National Development and Reform Commission, the country's top economic planer.

Haimo's shares jumped 6.97 percent to open at 13.2 yuan on Friday.

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