On Tuesday September 16, 2005, China Oilfield eyes Asian acquisitions to boost scale But high oil prices, buyout frenzy are obstacles, CNOOC's sister firm says September 16 is the 259th day of the year (260th in leap years). ... 2005 is a common year starting on Saturday of the Gregorian calendar and is the current year. ...

China Oilfield Services (COSL) is seeking acquisition targets in South-east Asia, the Middle East and Central Asia, to bolster its operating scale and technical competencies. But high oil prices and a speculative investment environment have made agreements difficult to come by, company secretary Chen Weidong told the South China Morning Post.

The sister company of dominant offshore oil producer CNOOC is particularly interested in companies operating in Indonesia, Malaysia and the Caspian Sea. CNOOC Ltd. ...

'Our main acquisition objective is to raise market share and expand our overseas management capability,' Mr Chen said. 'We are also interested in buying small companies with specialised technology to enhance our core competencies, and will consider becoming strategic investors in companies going public.'

COSL's overseas revenue surged 133 per cent year on year in the first half to 209.8 million yuan, driven by demand for its services in Indonesia, West Africa and the Middle East.

With crude prices more than doubling in the past two years, a speculative merger and acquisition frenzy has gripped the oil services market.

'The higher the oil price, the more people there are looking to buy (oil) companies,' Mr Chen said. 'Targets are few relative to the number of people who want to buy.'

He added that COSL had been trumped in a recent acquisition bid but would not give more details.

Although COSL lacks the technical expertise to operate in water more than 500 metres deep, the company will seek joint-venture opportunities with deepwater exploration firms rather than try to acquire them.

'Those with patented technologies tend to be in the United States,' Mr Chen said. 'They normally do not want to sell out but may welcome us as a (minority) shareholder.'

Globally, the number of listed players in the oilfield services sector is just over 100, with a combined market capitalisation of about US$250 billion. The top five account for 40 per cent of the industry's market capitalisation.

According to Mr Chen, US firms tend to be the most expensive with enterprise values running two to three times book values, compared with one or less in Europe and Asia.

COSL claims a 95 per cent share of China's market for offshore drilling services, 70 per cent of the marine support and transportation market, 60 per cent of the well survey services market and more than 50 per cent of the seismic data collection market.

Globally, about 15 per cent of oil companies' capital expenditure goes to exploration, 35 per cent to field development and 50 per cent to production.

'In China, the development expenditure accounts for the bulk of spending,' Mr Chen said. 'Offshore, China has just started to enter its peak production stage and we have to prepare for the market change.'

Last week, COSL posted a 22.7 per cent year-on-year rise in interim net profit to 555.9 million yuan. (S$115 million).