UPDATE:ConocoPhillips To Sell Syncrude Stake To Sinopec For $4.65 Billion

ConocoPhillips (COP) has agreed to sell its stake in the Syncrude oil sands project in Canada to China Petroleum & Chemical Corp. (SNP, 0386.HK) for $4.65 billion--a sign that China's national oil companies have secured a strong foothold in one of the world's most important crude sources.

The deal marks the biggest energy investment of a Chinese government-backed company in North America and it underscores China's increasingly assertive strategy to secure energy resources around the world. The country's rapid growth and emerging middle class has made it the top automobile market in the world, surpassing the U.S. earlier this year, and its state-backed oil companies have been acquiring both oil and gas reserves and storage globally.

Just last month, Cnooc Ltd. (0883.HK), China's top offshore oil explorer, said it agreed to pay $3.1 billion in cash for a stake in one of the largest Argentine oil exploration companies. Last year, Cnooc bought stakes in the U.S. Gulf of Mexico from Statoil. The Chinese companies' successful bids stand in stark contrast to Cnooc's 2005 attempt to buy Unocal, which the company abandoned after it sparked stiff resistance from U.S. lawmakers.

The move by Sinopec, as the international arm of China Petroleum and Chemical Corp. is known, further strengthens China's presence in Alberta's oilsands, a rich oil-producing area that has enabled Canada to become the largest exporter of crude to the U.S. In February, PetroChina purchased a stake in an Athabasca oil Sands Corp. (ATH.T) project for C$1.9 billion.

Syncrude is the largest Canadian oil-sands project, and produced an average of 280,000 barrels per day last year, or about 10% of Canada's oil production. It's a joint venture operated by Canadian Oil Sands Trust (COSWF, COS.UN.T), Imperial Oil Ltd. (IMO, IMO.T), Suncor Energy Inc. (SU, SU.T), ConocoPhillips (COP), Nexen Inc. (NXY, NXY.T), Murphy Oil Corp. (MUR) and Mocal Energy, a unit of Japan's Nippon Oil Corp. (5020.TO). ConocoPhillips owns the third-largest stake at 9.03%.

The deal increases ConocoPhillips' credibility with investors that it will be able to obtain $10 billion from its asset sale, which was announced early this year as part of a restructuring plan to shore up its finances. The deal price almost doubles the best estimates analysts had for Conoco's Syncrude stake, according to Fadel Gheit, an analyst with Oppenheimer & Co. Inc.

"This is a very strong start," Gheit said. "Conoco beat everybody's expectations."

ConocoPhillips, the third-largest U.S. oil company by market value after ExxonMobil Corp. (XOM) and Chevron Corp. (CVX), said in March that most of the asset sales are expected in the second half of the year.

ConocoPhillips has been the hardest hit among U.S. major oil companies, as it amassed more debt and was more exposed than others to the drop in natural gas prices, which hit a seven-year low in 2009.

The transaction to sell the stake to Sinopec is expected to close in the third quarter once Canadian and Chinese government approvals are obtained. Sinopec is Asia's largest refiner by capacity and has been a bit acquisitive lately, as it agreed last month to acquire deep-water oil assets in Angola, its first acquisition of overseas upstream assets.

ConocoPhillips' shares were recently up 1.0% to $55.90, while Sinopec's American depositary shares were down 0.7% to $85.30.

-By Isabel Ordonez, Dow Jones Newswires; 713-547-9208; [e-mail]

(John Kell contributed to this article.)