Sinopec buying Canada's Daylight Energy for $2.1 billion

(Reuters) - A unit of China's state-owned China Petroleum & Chemical Corp (Sinopec) is buying Canadian oil and gas explorer Daylight Energy Ltd for C$2.2 billion ($2.1 billion) in cash, underscoring China's continuing efforts to secure energy supplies to support its fast-growing economy.

Chinese buyers have stepped up their overseas acquisitions for energy assets, making use of depressed stock prices and a difficult fundraising environment.

Shares in Sinopec <0857.HK>, Asia's biggest refiner, fell more than 5 percent in Hong Kong on Monday, underperforming the benchmark Hang Seng stock exchange <.HSI> down 1.4 percent.

China's outbound deals in energy and mining so far this year totaled $26 billion, compared with $32.3 billion same period last year, according to Thomson Reuters data.

In July, China's top offshore oil producer, CNOOC Ltd <0883.HK> agreed to buy struggling Opti Canada Inc for $34 million and $2 billion in debt and late last month, China's Minmetals Resources Ltd <1208.HK> agreed to buy Africa-focused copper miner Anvil Mining for $1.28 billion.

Just last week, Hanlong Mining agreed to raise its bid for Sundance Resources to $1.5 billion.

Sinopec is paying C$10.08 per share for Calgary, Alberta-based Daylight, more than double the closing price of C$4.59 on Friday. That works out to a 43.6 percent premium over the 60-day weighted average trading price.

"This deal highlights the firm's interest to expand globally, especially in the area of Canadian oil sands which remain undervalued amid the recent oil price declines," said Gordon Kwan, head of energy research at Mirae Asset Securities. But he said the deal is too small to grow reserves for Sinopec.

Sinopec International Petroleum Corp is a unit of Sinopec and undertakes overseas investments and operations in the upstream oil and gas sector.

OVERSEAS PUSH

The purchase "recognizes the highly attractive asset portfolio and exceptional team that we have assembled at Daylight," Daylight's chief executive officer, Anthony Lambert, said in a statement.

Under Beijing's guiding hand, China's big state-owned enterprises have been increasingly looking to expand overseas. State energy firms in particular, have the responsibility to secure adequate natural resources, ample enough to satisfy growing demand in the world's biggest energy consumer.

China announced it would cut retail ceiling prices for gasoline and diesel by about 3 percent from Sunday, reducing prices from record highs at a time when headline inflation eased from a three-year peak. The price cut would leave the refining departments of state-run oil firm Sinopec Corp <0386.HK> and PetroChina <0857.HK> in the red.

A combination of falling oil prices and debt levels has hit Canadian oil and gas shares in recent months as investors fret that growth prospects are shriveling. Daylight's shares have lost about 55 percent of their value this year, compared with a 25 percent decline in Canada's energy sub-index <.SPTTEN>

REGULATORY HURDLES

The transaction would mark the latest energy sector deal between China and Canada, but this deal could be large enough to face review under the Investment Canada Act, which must determine if foreign purchases of domestic firms are of net benefit to Canada.

Just under a year ago the government vetoed BHP Billiton's $38 billion offer for Saskatchewan-based Potash Corp , only the second such veto under the legislation. The move prompted concerns among international investors that Canada was not "open for business."

Still, the energy sector is considered less concentrated than the strategic potash sector, and previous foreign takeovers of domestic energy firms have gone ahead. Sinopec already owns a stake in the huge Syncrude Canada oilsands venture.

Daylight said it expects the deal, which is subject to shareholder approval, to close before the end of the year.

Canaccord Genuity Corp is the financial advisor to Daylight, while CIBC World Markets is also advising Daylight's board. Barclays Capital is advising SIPC.

(Reporting by Lewis Krauskopf and Nadia Damouni in New York and Janet Guttsman in Toronto; Editing by Diane Craft, Denny Thomas and Matt Driskill)

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