Roc Oil Co, an Australian oil and gas explorer and producer, has agreed to pay Apache Corp US$260 million for a 24.5 per cent stake in two producing oil fields in China's Bohai Bay to more than double its output.

Roc will make the investment in the Zhaodong permit by buying all the shares of the Houston-based company's Apache China Corporation LDC unit, Roc said yesterday in a statement to the Australian Stock Exchange.

The purchase will boost Sydney- based Roc's output to 12,000 barrels a day from 4,500, it said.

The two fields in the Zhaodong permit, which is operated by PetroChina Co, have remaining proved and probable reserves of about 61 million barrels.

The permit, in which New SXL-China LLC has a stake, includes a third field due to start production in 2008 and appraisal and exploration prospects.

"At first glance this acquisition looks a positive step forward; it looks like a good asset with some real exploration potential attached to it," said Brendan Fitzpatrick, an oil and gas analyst at Aegis Equities Research Pty in Sydney.

"It seems a little expensive just on the proven reserves, but I think it's also the potential you need to include in the assessment."

Shares in Roc rose 10 cents, or 2.6 per cent, to A$3.90 on the exchange, outpacing a gain of 1.8 per cent in the exchange's benchmark energy index.

Roc's share of the reserves in the field will be 15 million barrels, equating to an acquisition cost of US$17.33 a barrel, which Chief Executive Officer John Doran described as "fair value" in a telephone interview.

The company, which has no debt, will fund the investment through a 12-month loan from Commonwealth Bank of Australia.

"The benefit will come from the upside, which we think is significant," Doran said from Beijing.

"What we've acquired here is not so much a block but a wonderful working petroleum system, which has delivered in spades for Apache and its partners over the last few years and we believe will continue to deliver over and above the proven and probable reserves," he added.

Apache produced 457,000 barrels a day of oil equivalent in the three months that ended on March 31, and in April agreed to buy 18 oil and gas fields in the Gulf of Mexico's shallow waters from BP Plc for US$1.3 billion.

The acquisition of the Zhaodong stake will double Roc's proven and probable oil reserves to 30 million barrels.

"For Apache, with its US$20 billion market capitalization and 2 billion barrels of proved reserves, the asset may have become less material," Doran said in the statement.

"For Roc, a much smaller company, the transaction will provide a substantial boost to its reserve and production trajectory."

Roc has been exploring for oil in China since 2002 and in May said it made a discovery in the Beibu Gulf off China's southwest coast.

The acquisition will help Roc in its appraisal and potential development of that discovery, Doran said.

PetroChina, the nation's biggest oil company, owns 51 per cent of the Zhaodong permit, while New XCL-China LLC, a unit of Lafayette, Louisiana-based XCL Ltd, owns 24.5 per cent.

Roc will take over as operator of the permit from Apache.

Source: China Daily