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China isn't Afraid to Invest in Egypt

By Taylor Muckerman and Joel South - Sep 4, 2013 at 1:16PM

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China's growing demand for oil has led companies to rely on acquisitions for growth. One Chinese company is spending in a pretty risky region.

In terms of energy acquisitions, $3.1 billion might not seem like that high of a price tag, but a deal that size was enough to drive Apache's (APA 1.45%) value up over 8% last Friday. For years, Egypt has weighed heavily on this company but for reasons outside of the company's control. Turmoil in the region since the beginning of the Arab Spring has plagued Apache's valuation given that over 25% of the company's revenue came from Egypt prior to this deal. Now, a third of its Egyptian assets will fall under the control of Chinese energy giant, Sinopec (SHI -0.06%)

Deals like this could continue to increase in frequency based on the hunger for greater access to energy resources displayed by the Chinese people. Already, Sinopec has formed joint ventures with Chesapeake Energy (CHKA.Q) and Devon Energy (DVN 1.54%). By reaching outside of the United States to a much riskier locale, it is clear that Sinopec is serious about its plans to spend $60 billion by 2020 on acquisitions. For more on this deal, tune in below.

Joel South has no position in any stocks mentioned. Taylor Muckerman has no position in any stocks mentioned. The Motley Fool owns shares of Apache and Devon Energy and has the following options: long January 2014 $30 calls on Chesapeake Energy. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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Stocks Mentioned

Apache Corporation Stock Quote
Apache Corporation
APA
$32.21 (1.45%) $0.46
Chesapeake Energy Corporation Stock Quote
Chesapeake Energy Corporation
CHKA.Q
Devon Energy Corporation Stock Quote
Devon Energy Corporation
DVN
$57.52 (1.54%) $0.87
Sinopec Shanghai Petrochemical Company Limited Stock Quote
Sinopec Shanghai Petrochemical Company Limited
SHI
$16.06 (-0.06%) $0.01

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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