Glencore Xstrata Buys Oil and Gas Group Caracal for $1.35 Billion

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Researched by Industrial Info Resources (Sugar Land, Texas)--The world's largest commodities trader, Glencore Xstrata (LSE:GLEN) (Baar, Switzerland), has acquired oil producer Caracal Energy (LSE:CRCL) (Calgary, Canada) for $1.35 billion in cash, just hours after selling its copper mine in Las Bambas, Peru, to a Chinese consortium. Caracal's business is focused on the African nation Chad.

Caracal's proposed merger with TransGlobe Energy Corporation (NASDAQ:TGA) (Toronto, Ontario) has been terminated, and Caracal paid a termination fee of $9.25 million to TransGlobe. Last month, Caracal agreed to buy TransGlobe Energy for about $635 million in stock.

Glencore Xstrata has been Caracal's joint venture partner for its acreage in Chad since it farmed into the acreage in 2012. Glencore acquired a 33.3% interest in three oil fields and a 25% stake in two other fields in Chad from Caracal in 2012, for a total of $331 million.

A Caracal shareholder meeting in early June is expected to approve the deal, with closing expected soon after. Glencore representatives said that the acquisition is not subject to financing conditions or due diligence, and is not subject to the approval of the government of Chad.

Glencore has been seeking to expand its energy production business, which includes fields in Equatorial Guinea. "The Chad assets have only recently come on-stream and were in the ramp-up phase toward plateau production in 2017, so it still needs deficit spending on capital expenditures," said David Mirzal, an analyst at Societe Generale based in London. "The key risk to the project was reservoir performance, and Glencore must be satisfied with the initial 6 million production rates to be prepared to increase its stake. Glencore is paying little for the exploration potential, for which it was scheduled to commence a drilling programme later this month."

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