George Wang in Wall Street Journal: Chinese Company Makes a Complicated Play for Texas Oil Fields

11/06/2015

Texas oil fields owned by two private equity-backed energy producers will end up in the hands of a Chinese conglomerate through a complicated series of transactions.

U.S. energy companies are shedding assets amid depressed energy prices, and Chinese companies may be willing buyers as they seek new energy resources. But the deal for oil fields in the Permian Basin owned by Tall City Exploration LLC and Plymouth Petroleum LLC, announced in October, stands out for its multistep structure even among cross-border transactions, which are often complex ...

George Wang, a lawyer with Haynes and Boone LLP who advises foreign buyers, said depressed oil and gas prices have made U.S. energy assets attractive to foreign buyers but they have to overcome federal regulatory hurdles that their U.S. counterparts don’t face. Such hurdles partly explain why some deals have complex structures, he said.

“In cross-border transactions, you often see structures that work around various issues such as regulation and tax,” said Mr. Wang, who isn’t involved in the Texas deal and has no knowledge of it.

Foreign acquisitions of U.S. assets seen as having national security considerations are sometimes reviewed by the Committee on Foreign Investment in the United States. Yantai said in the filing that Ningbo’s acquisition of the oil fields has been approved by CFIUS.

However, a spokeswoman at Yantai Xinchao’s headquarters in China said the company’s transaction with Ningbo doesn’t have to apply for CFIUS’s approval because the deal is structured between two Chinese entities. She said that Yantai and Ningbo are still negotiating the terms of the deal.

A spokeswoman for the U.S. Treasury Department, which serves as the chair of CFIUS, declined to comment beyond a statement that read, in part, “information filed with CFIUS may not be disclosed by CFIUS to the public.”

Mr. Wang, the attorney, said filing with CFIUS is voluntary and can involve any transaction in which foreign buyers acquire control of U.S. assets.

“But control can be defined with a very low threshold,” said Mr. Wang. “It’s a very case-by-case analysis.”

Excerpted from the Wall Street Journal Risk & Compliance Journal. To read the full article, please click here (subscription required).

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