PetroChina seeks $19b in share issue
Anette Jonsson and Eric Ng
Heavily oversubscribed offer seen as means of boosting reserves for further foreign acquisitions
PetroChina, the Hong Kong-listed arm of the mainland's largest oil and gas producer, China National Petroleum Corp (CNPC), has called on investors to raise up to $19.17 billion in fresh capital.
The fund-raising, achieved by the placement for institutional investors of up to 3.19 billion new H shares yesterday, was expected to be used primarily for overseas acquisitions, sources familiar with the deal said, with final details of the offer likely to be released later in New York.
The placement came after oil prices hit another record high of US$70.85 per barrel on Tuesday.
'It's a good time to place new shares as there is a chance the oil price will go up further this winter on supply concerns, which will leave some upside for investors taking part in the placement,' said BOCI analyst Laurence Lau.
'Having extra cash will help PetroChina pursue overseas acquisition opportunities,' he added.
The share offer is set to be Hong Kong's third largest follow-on placement of new shares ever, and met with strong demand from investors, who were said to have subscribed for more than twice the amount available.
A PetroChina spokesman declined to comment, but sources said the company was offering to sell 2.87 billion shares with an over-allotment option of a further 319.7 million shares, at a price of between $5.85 and $6, which represented a discount of 4.7 per cent to 7.1 per cent on Tuesday's closing price of $6.30.
As the shares were sold without the right to a dividend of about 15 cents, the actual discount was only 2.4 per cent to 4.8 per cent.
Parent CNPC would also sell existing shares equal to 10 per cent of the new share offer to meet obligations to the State Pension Fund, the sources said. The sale was being arranged by Goldman Sachs, Citigroup and Deutsche Bank.
PetroChina had US$8.6 billion of cash on hand and a low 11.9 per cent gearing ratio at the end of June, meaning there was no urgency for a cash call. But the company does have continuing and potential projects and acquisitions and may want to bolster its reserves when good financing opportunities arise.
Among these is a first refusal right to buy into PetroKazakhstan, which its parent firm is in the process of acquiring for US$4.18 billion. The market expects PetroChina will buy 50 per cent of PetroKazakhstan, which will then be injected into a planned joint venture between PetroChina and CNPC.
Analysts have also speculated that CNPC may inject its stake in the China-Kazakhstan crude oil pipeline project into the same joint venture. The pipeline, which will run 988km, is estimated to cost US$700 million. The project is a 50-50 joint venture with Kazakhstan's state oil firm KazMunaiGas.
The fact that the long-rumoured share placement had finally taken place was expected to trigger renewed buying interest in the stock, including some covering of short positions, market watchers said. However, some initial selling pressure was possible when trading resumes today, due to the dilution of earnings per share.
'PetroChina has underperformed the oil price and other Asian oil producers recently because of the overhang [from the rumoured placement] and this should enable the stock to trend higher again,' one fund manager explained.
The company's share price has risen 52 per cent this year, but has fallen 15.4 per cent since hitting a high of $7.45 last month.
The shares were suspended from trading yesterday as the placement was being completed.