One of the most prominent oil field redevelopments in Santa Barbara County is set to be acquired by a Chinese jewelry firm.
Houston-based ERG Resources confirmed to the Business Times that it is set to be acquired by Beijing-based Goldleaf Jewelry Co., a jewelry firm that also has gold mining investments. The deal is worth at least $665 million, according to Bloomberg News.
In 2010, ERG acquired acreage in the Cat Canyon oil field southeast of Santa Maria that had been shuttered since the 1980s. The company has re-drilled 277 existing wells and has obtained permits for about 100 new wells, bringing the field’s production to between 3,000 and 4,000 barrels of oil a day. In total, the company has 7,800 gross acres at Cat Canyon and 10,000 gross acres at the Casmalia field southwest of Santa Maria. It divested all of its Texas and Louisiana holdings in 2011.
China-based Goldleaf will raise about $940 million from no more than 10 investors, according to securities filings from the Shenzen Stock Exchange reported by Bloomberg. ERG is a closely held private corporation, but Bloomberg reported that it has $350 million in debt at more than 10 percent annual interest and that its profits will improve if it pays off the high-interest loans with capital from Goldleaf. The deal would still need approval from both U.S. and Chinese regulators and would give the Beijing firm a 95 percent stake in ERG.
John Deacon, an ERG spokesman, said the acquisition is chiefly a financial transaction. ERG’s leadership is not expected to change, and there should be no effect on Santa Barbara County operations.
“[Goldleaf] does not have a United States operating company. We really do not anticipate that there will be any impact to our employees or contractors. We’re just going to keep obtaining permits, drilling wells and hopefully increasing production here in Santa Barbara County,” Deacon told the Business Times. “We were looking for an equity partner, and the Goldleaf corporation came in and had the best opportunity.”
ERG uses steam to stimulate its wells. The cash infusion comes amid an energy investment boom in the Tri-Counties. Earlier this year, Santa Maria Energy said it plans to spend $114 million in Santa Barbara County as it pursues its $1.2 billion in oil reserves and more than 7,700 potential drilling locations.