Chinese oil giant makes successful share offering

Ulhas Joglekar ulhasj at
Sun Feb 25 18:24:53 MST 2001

23 February 2001

Chinese oil giant makes successful share offering
HONG KONG: In a share offering that may portend well for other Chinese state
firms, China's third-largest oil company raised US $1.26 billion - after
cutting the price of a deal that collapsed last year.
CNOOC Ltd., an offshore oil producer, says it will use the money to increase
its operating efficiency and boost its already rapidly expanding output.
"This is very constructive for China. There are lots of Chinese companies
planning to approach the markets," said Andy Xie, chief economist at Morgan
Stanley Dean Witter in Hong Kong.
In 2000, China raised about US $20 billion through sales of shares in
state-owned companies to overseas investors. The cash is needed to help
finance a complete overhaul of inefficient state industries and refit
antiquated plants with modern technology and equipment.
"Going through the stock markets is the only way out. And this is good
because then the companies have to conform to global standards," Xie said.
Huge petrochemical and telecoms firms and banks are among other sectors
expected to follow CNOOC's lead with offerings of their own.
CNOOC's IPO drew a strong response from both institutional investors and the
public, who oversubscribed the offer by several times, according to
underwriters. One significant minority stakeholder will be Shell Eastern
(Pte) Ltd., a subsidiary of the Royal Dutch-Shell Group of Cos.
The shares to be traded in New York and Hong Kong represent a 20 per cent
stake in CNOOC.
The IPO's success follows CNOOC's embarrassing failure in October 1999 to
sell shares an an attempt to raise US $2.5 billion from overseas investors.
The current offering was viewed as more realistically priced and was well
received by investors who have shown a renewed interest in buying equity in
fast-growing China.
The shares begin trading Tuesday in New York and Wednesday in Hong Kong.
China Petroleum & Chemical Corp., or Sinopec, successfully raised about US $
3.4 billion in October and PetroChina Co. garnered about US $2.89 billion in
Analysts view CNOOC as one of China's stronger prospects. Set up by the
government in 1982 to explore for offshore oil, often in cooperation with
foreign oil groups, the Beijing-based company has cut its staff from more
than 27,000 to 21,000 - which analysts call significant progress.
"CNOOC is one of the good ones. It has lots of experience working with
foreign companies. It's relatively progressive," said Bob Broadfoot, whose
Economic and Political Risk Consultancy works closely with Chinese energy
CNOOC was producing about 240,000 barrels of oil daily by late 2000 - more
than double its output from five years earlier - and says it hopes to boost
the figure by 15 per cent a year as it taps further into its proven
The company has oil reserves of 1.3 billion barrels of crude oil scattered
in offshore fields in the Bohai, to the north, in the East China Sea and in
the South China Sea.
With two-thirds of its reserves still undeveloped, CNOOC anticipates growth
much higher than the 2 per cent to 3 per cent seen by international oil
Broadfoot said he expected CNOOC to put proceeds from the IPO to good use in
expanding the company and improving efficiency.
That is not necessarily the case for all state firms looking to raise money
overseas, some of which view international markets as just another source of
easy cash after decades of relying on state finance.
"Having a successful flotation doesn't cut it. It's how they use the money
that counts," Broadfoot said. (AP)
 For reprint rights:Times Syndication Service

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