Citic Resources stake raises HK$1.7b

PUBLISHED : Saturday, 10 February, 2007, 12:00am
UPDATED : Saturday, 10 February, 2007, 12:00am

Energy and metals trading company poised to buy parent's 50 per cent holding in Kazakhstan oil firm

Citic Resources Holdings has raised HK$1.72 billion from a share sale to bolster its war chest, as it is poised to buy half of its parent company's stake in an oil firm operating in Kazakhstan, according to sources.

The energy and metals trading and mining subsidiary of China International Trust & Investment Corp (Citic Group), one of the nation's largest conglomerates, sold 700 million new shares yesterday or 16.2 per cent of the company's existing share capital.

The offer attracted orders 23 times the shares available by early last night, sources said.

It was priced at HK$2.46, the high end of the HK$2.33 to $2.46 indicative range. The range represented a 5 to 10 per cent discount to the close of HK$2.59 on Thursday, when it surged 11.64 per cent.

Of the 700 million shares, 570 million were sold to institutional investors internationally.

The remaining 130 million shares were sold to Citic Group to help reduce dilution of the parent's stake which will fall to 54.61 per cent from 60.47 per cent.

Fund managers said the information sheet distributed by the book-runners did not indicate the use of proceeds. Citic Resources declined to comment, as did joint book-runners UBS and Citigroup.

Sources said Citic Resources planned to exercise an option in the second quarter to pay US$955 million for half of its parent's 100 per cent stake in Canada's Nations Energy which the parent bought in December for US$1.91 billion.

Citic Resources had HK$1.78 billion of cash on June 30. Source said it planned to finance the acquisition by both debt and shares sales.

'Although this may indicate strong demand for the shares, they are quite expensive relative to the other listed Chinese oil majors,' a fund manager said.

Citic Resources last traded at 44.6 times last year's estimated profit compared with nine to 11 times for PetroChina, Sinopec Corp and CNOOC.

Citigroup forecasts Citic Resources shares to fall to 13.6 times this year's earnings and 9.8 times next year's earnings, assuming the acquisition is completed this year, although the deal may see its debt-to-equity ratio jump to 216 per cent this year from 39 per cent last year.

Nations Energy's crown jewel is a 97.6 per cent stake in Karazhanbasmunai which holds the exclusive rights until 2020 to develop southwestern Kazakhstan's Karazhanbas oil and gas field.

The field has more than 340 million barrels of proven oil reserves and a daily output of about 50,000 barrels and is estimated by oil consultancy Wood Mackenzie to grow to 75,000 barrels a day in two years, according to a UBS research report.

Kazakhstan's national oil firm Kazmunaigaz, which was granted an option to buy the other half of Nations Energy as a condition for the Kazakhstan government to approve Citic Group's acquisition, earlier said it would exercise the option by the middle of the year.

Kazakhstan's government legislated in 2005 to give itself the right to pre-empt any sale of the nation's oil and gas assets.

Citic Group was negotiating with Kazmunaigaz's management on the composition of Nations Energy's board although Citic Group was expected to gain management control, sources said.

Citic Group had agreed to provide guarantee for up to 10 years on a US$805 million loan Kazmunaigaz planned to obtain to fund its acquisition of the Nations Energy stake, Kazakhstan media reported.