China Oil Exec Dismayed Over U.S. Reaction to Unocal Bid...

washingtonpost.com ^ | Wednesday, July 6, 2005 | Peter S. Goodman

[crushelits]

BEIJING, July 6 -- The chairman of CNOOC Ltd., the Chinese energy firm embroiled in a thorny campaign to purchase the
U.S. oil company Unocal Corp., voiced dismay on Wednesday over what he called "overreaction" from Washington by those portraying the deal as a threat to fair trade and U.S. national security.

In an interview with The Washington Post at CNOOC's headquarters in Beijing, Chairman Fu Chengyu said critics of his company's bid for Unocal were guilty of viewing China through an outdated lens by failing to appreciate how economic reforms have forced Chinese companies to adopt market principles and focus on profitability.

"They don't understand what has happened in China in the last 20 years," said Fu, speaking fluent if halting English. "Most of the concerns are related to politics and not the commercial side. I didn't expect that so many people would be so sensitive to this. We are following a system that was set up by Western leading companies, especially the United States. We are walking along a path that they paved, so we thought, 'This is natural.' " But Fu expressed confidence that CNOOC would eventually convince critics that its acquisition poses no menace.

"Our board has made the decision that we have to win this bid," he said.

As CNOOC continues its pursuit of Unocal, the conflict has become symbolic of the struggle by the United States to adjust to the implications of China's growing force in the global economy. Since CNOOC stunned markets last month with its unsolicited offer for Unocal, seeking to trump a lower bid from the U.S. oil giant Chevron Corp., a vocal segment of Congress has assailed the deal as a provocation in an already tense trade relationship between China and the United States.

[carl in alaska]

I'm not sure Unocal is worth $18.5 billion based on their proved reserves of oil and gas. But the amount of additional oil and gas that's likely to be discovered on their leased acreage is much harder to estimate. Chevron and CNOOC may believe that there's much more oil & gas to be found in Unocal's properties, and if that turns out to be correct then Unocal could be worth $25 billion. That kind of information isn't readily available in SEC reports, so I can't estimate how much more oil & gas will be found. But I have a high regard for Chevron's management, so there's probably a substantial amount of undiscovered "black gold" on Unocal's properties.

[curiosity]

Interesting. Is Citicorp a separate entity?

Citicorp merged with Travelers to form Citigroup a few years back.

Maybe the Saudi prince had a large stake before the merger. You can check by looking up old proxy statements.

You can get them online at www.sec.gov.

[curiosity]

I'm not sure Unocal is worth $18.5 billion based on their proved reserves of oil and gas.

I agree. No oil company is valued based on proven reserves alone. You've got to take into account potential reserves, as well as the other businesses the company operates in. Stock market investors generally do that. And no, you cant estimate the value of potential reserves from SEC filings alone, but there are other sources, like the US Geological Survey.

The stock market definitely thinks Chevron is overpaying. They announced their bid on April 4. On that day stock opened at $59.08. It closed at 56.74. The next day it continued to drop to 55.44. That's a drop of 6.6% in just 2 days of trading, right after an announcment. That's no statistical fluke.

Obviously investors think the original bid was too high. And now Chevron wants an even higher bid? Bad news for Chevron shareholders.

[airborne]

And in other news.......

A Chinese military official says Beijing will use nuclear weapons against the U.S. if the Americans attack the Asian nation in a fight over Taiwan.

"If the Americans draw their missiles and position-guided ammunition on to the target zone on China's territory, I think we will have to respond with nuclear weapons," Zhu Chenghu, a major general in the People's Liberation Army, said at an official briefing, according to the Financial Times.

Yeah, let's keep selling them the rope they'll use to hang us with.