CHINA Oilfield Services Ltd has agreed to buy Norway's Awilco Offshore ASA for about US$2.5 billion to expand capacity and widen its footprint overseas.

Beijing-based COSL, a unit of China National Offshore Oil Corp, said yesterday it will pay 12.7 billion kroner (US$2.49 billion), or 85 kroner a share for Oslo-listed Awilco.

The offer represented a 19-percent premium over Awilco's Friday close. Awilco surged 17 percent yesterday to a record 83.5 kroner after the announcement. COSL was suspended from trading in Hong Kong and Shanghai pending the announcement.

COSL's chief financial officer Zhong Hua said that as COSL's vision is to become a competitive international oilfield services company in 2010, this goal cannot be met only by organic growth. "We will continue to pursue acquisition targets," Zhong said.

The purchase will increase COSL's drilling-rig fleet in Asia and Europe to 22 from 15 as well as add management expertise and technology to the Chinese company.

The Awilco deal would mark the first overseas acquisition for COSL which failed to buy Russia's STU, a unit of TNK-BP, at the final stage in deal worth just over US$10 million earlier this year.

The bid could boost COSL's earnings per share by 11 percent and 19 percent in 2008 and 2009 respectively, and cut COSL's average fleet age to 14 years from 20 years by 2011, giving it the ability to compete for deepwater projects, said Gordon Kwan, an analyst at brokerage CLSA.

Market services

It also offers COSL the opportunity to market its non-drilling services, such as marine transport and seismic mapping to Awilco's existing customers like BP, Statoil and Repsol, Kwan added.

The purchase came amid the robust demand offshore China for oil and gas exploration in an era of record oil prices.

"With North Sea drilling activities falling, merger deals could be a win-win scenario between some European firms and COSL," the brokerage said in May.