By all accounts, China's demand for oil will continue to grow at a rapid clip (the country is already the #2 consumer in the world). Of course, there will also be a huge need for oil services.
To this end, CNOOC (NYSE: CEO)'s oil services division, China Oilfield Services Ltd, has agreed to purchase Awilco Offshore for $2.5 billion.
As should be no surprise, China Oilfield's business is ramping, and with Awilco, which is based in Norway, there will be a nice boost. The company posted $203.5 million in revenues last year. What's more, it has seven oil rigs in operation and six being developed.
Thus, in all, China Oilfield's rig fleet will go from 15 to 22, which is certainly a big deal. Basically, there is an extreme shortage right now. More importantly, rigs are likely to produce significant cash flows for the next couple years as daily lease rates can be as much $600,000.
So far in today's trading, CNOOC's shares are down marginally by $0.54 to $170.45.
Tom Taulli is the author of various books, including The Complete M&A Handbook
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