Nations Energy Company Ltd.

October 25, 2006 20:10 ET

CITIC to Acquire the Kazakhstan Oil Assets of Nations Energy

CALGARY, ALBERTA--(CCNMatthews - Oct. 25, 2006) - CITIC Group ("CITIC") of Beijing entered into an agreement with Nations Energy Company Ltd ("Nations Energy") of Calgary, Canada on October 25, 2006 to acquire the Kazakhstan oil assets of Nations Energy for an aggregate consideration of US$1.91 billion before adjustment for cash and debt.

Nations Energy's 94.6% subsidiary, JSC Karazhanbasmunai, a joint stock company formed under the laws of Kazakhstan, holds 100% of the mineral rights until 2020 to develop the Karazhanbas Oil and Gas Field in Mangistau Oblast, Kazakhstan with proved reserves in excess of 340 million barrels of oil and current production of over 50,000 barrels of oil per day. Nations Energy's Kazakhstan oil assets also include a 100% interest in two other Kazakhstan entities: Argymak Trans Service LLP which provides transportation services; and Tulpar Munai Services LLP which provides well drilling, workover and training services to JSC Karazhanbasmunai.

Completion of the proposed transaction is planned for December 2006. Nations Energy's Board of Directors has received a fairness opinion from Credit Suisse that the transaction is fair from a financial point of view to Nations Energy and its securityholders.

Under the agreement, the proposed acquisition will be effected as a purchase of all the shares of Nations Energy pursuant to a court approved arrangement under the Business Corporations Act (Alberta) Canada. As part of the arrangement Nations Energy will transfer its non-Kazakhstan assets to a new Alberta corporation to be owned by existing Nations Energy shareholders who elect to be shareholders in the divested business.

The proposed transaction is subject to the approval by the shareholders of Nations Energy, the approval of the Alberta courts, certain approvals of certain Government authorities of the Republic of Kazakhstan, the waiver of the pre-emptive rights of the Government of Kazakhstan and the satisfaction of other conditions precedent.

CITIC has entered into an agreement with the major shareholder of Nations Energy, Ecolo Investments Limited ("Ecolo"), whereby Ecolo has agreed to vote its approximate 76% fully diluted interests in Nations Energy in favour of the proposed transaction unless Nations Energy receives a written proposal of a transaction that the Board of Directors of Nations Energy determine, in the exercise of their fiduciary duties, to be superior to that of CITIC. CITIC would be entitled to a fee of US$50 million in the event Nations Energy terminated the arrangement agreement to pursue a superior proposal.

Nations Energy Director David G. Wilson said "We believe this is a fair price for Nations Energy shareholders and optionholders and our Board of Directors has unanimously agreed to recommend this transaction to our securityholders."

Zhang Jijing, Director & Assistant President of CITIC Group stated "the proposed acquisition is an important element in the execution of CITIC's oil and gas strategy and is expected to provide CITIC with a proven base for its overseas energy business expansion strategy in one of Central Asia's most dynamic and successful oil producing countries, a stable country with a highly-rated and fast growing economy. This is an excellent platform for CITIC's further diversified investment and business cooperation in Kazakhstan."

Mr. Zhang added "CITIC will perform its responsibilities as a good corporate citizen of Kazakhstan with respect for the rules and regulations and local culture and traditions in Kazakhstan. CITIC is committed to business development in Kazakhstan on a long term basis and a strategy that will also contribute to local communities. With support from all levels of the Kazakhstan Government and the cooperation of Nations Energy's loyal and well-qualified workforce, customers, suppliers and partners in Kazakhstan, CITIC is confident it can successfully continue to develop the Karazhanbas field to contribute to the continuing growth and economic development of Kazakhstan. After completion of the proposed acquisition of the Nations Energy Kazakhstan assets, CITIC is planning to undertake a feasibility study for the construction of a medium size oil refinery in the Mangistau Oblast region, as well as to seek strategic Kazakh partners and cooperation for further expanding its businesses in areas such as energy and resources, industrial projects, construction and financing of public/industrial infrastructures."

CITIC's acquisition of Nations Energy was advised by:

ANZ Investment Bank - Financial Adviser

Stikeman Elliott LLP - Lead Legal Adviser

Denton Wilde Sapte - Legal Adviser - Kazakhstan

Nations Energy was advised by:

Credit Suisse - Financial Adviser

Macleod Dixon LLP - Legal Adviser - Canada and Kazakhstan

About CITIC:

CITIC, established on 4 October 1979 and headquartered in Beijing, is one of the largest diversified investment groups in China and a trans-national conglomerate with operations throughout Asia, Australia, North and South Americas, Africa, and Middle East. CITIC has over 40 subsidiary companies including seven public companies listed on Hong Kong, New York and Australian stock exchanges. With total assets in excess of US$100 billion and 70,000 employees by the end of 2005, CITIC's main business operations include financial services, energy and resources, manufacturing, international contracting for engineering and construction, property development, telecommunications, investment in infrastructure and transportation, and international trade.

CITIC has been successfully conducting business in the Central Asian region for over a decade, including constructing the Kungrad Soda Ash Plant Project in Uzbekistan and supplying railway coaches to the Turkmenistan Railway Authority.

About Nations Energy:

Nations Energy is a corporation formed, in April 1996, under the laws of Alberta, Canada. In May 1997, it successfully negotiated the privatization of JSC Karazhanbasmunai. Since taking over the management and operations of Karazhanbasmunai, Nations Energy has been successful in increasing production from 12,500 bbls a day at the time of privatization to over 50,000 bbls of oil per day today.

In addition to Kazakhstan, Nations Energy has operations in Azerbaijan, Indonesia and California. These operations will be divested to a new company.

Contact Information

  • CITIC Group
    Mr. Zhang Jijing
    Director & Assistant President
    Nations Energy Company Ltd.
    David Wilson
    Executive Vice President
    Nations Energy Company Ltd.
    Philip Hirschler
    General Counsel