Not so fast

Looks like Exxon’s Jubilee bid isn’t a done deal yet, with talk of a counterbid from China’s CNOOC and discontent within the Ghanaian government and national oil company.

China National Offshore Oil Corp. is in advanced talks with the Ghana National Petroleum Corp. to make a rival bid challenging Exxon Mobil Corp.'s $4 billion offer for a stake in a giant oil discovery off of West Africa, said people familiar with the matter.

A GNPC-Cnooc bid, which one person said "will be competitive to what Exxon has offered," reflects both the Chinese government's desire to secure access to more of the world's oil and the Ghanaian government's to be a larger participant in the discovery, known as Jubilee.

News of the Exxon agreement infuriated the Ghanaian government and GNPC, which had been trying to negotiate to increase its 13.8% stake in the field. "I don't see the Exxon-Kosmos deal as done," said GNPC chief executive Thomas Manu said in an interview this weekend. The Ghanaian oil minister also expressed his unhappiness with not being notified that Kosmos had made a deal with Exxon and said he believed the country had the right to block the offer.

Kosmos thinks it can sell to anyone, but even with Ghana attempting to hold itself to a higher level of sophistication and investor friendliness, it would be unwise to count out the host government so soon. (That said, Blackstone and Warburg will probably still make out like bandits.)

This is also getting boringly repetitive, but China is really leaving no stone unturned in its quest to secure resources in Africa, Guinea being the latest target (or beneficiary, depending on how you view it and whose interests you're rooting for).

Blackstone and Warburg win big with oil

Raw commodities are far from the ideal private equity play - heavy value exposure to volatile commodity prices and seemingly little competitive advantage in either deal flow or operations. But a brave few have tried, and in at least one case succeeded:

Warburg Pincus and Blackstone Capital Partners are set to make a four times return on their investment in West African oil company Kosmos after oil giant ExxonMobil agreed to acquire Kosmos’ stake in Ghana’s Jubilee oil field for $4bn, according to reports.

I checked the Warburg Pincus website and found that:

Warburg Pincus led the company’s initial $300 million equity financing in 2004, and also led a $500 million follow-on equity financing in 2008.

I then checked the news for when in 2008 (makes a big difference!), and it was in June, or basically when oil prices were well above $100/bbl and racing towards $150. So it's not as if Blackstone and Warburg simply bet on and nailed the commodity cycle - it seems their add-on investment came at the peak. It seems the bet was more on the management team and their track record, which is impressive. That said, I doubt we see too many more of these deals - with the recent levels of commodity volatility, most major PE firms are shying away from direct commodity price exposure and looking for more indirect ways to get exposure to the overall volume and price growth.