China Oilfield Services shares dip marginally after fund-raising
Shares of China Oilfield Services (COSL), the nation's dominant offshore oil and gas drilling services provider, gained slightly after it raised HK$5.8 billion via a share sale to bolster its war chest for expansion.
They closed up 0.4 per cent at HK$23 after falling as much as 2.4 per cent. The Hang Seng Index gained 1.2 per cent. COSL sold 276.27 million new shares at HK$21.30 each, or a 7 per cent discount to its closing price of HK$22.90 on Tuesday.
The fact that its share price did not fall despite the share sale discount reflects investors' optimism on its profit growth prospects after the fundraising exercise. Still, analysts are divided over the outlook for the industry.
"We remain cautious on the outlook of COSL as we believe the supply and demand outlook has become unfavourable to global drillers, and international [drilling rates are] likely to see a moderate decline in 2014 and potentially a steep decline in 2015," Sanford C. Bernstein senior analyst Neil Beveridge wrote in a note. "Adding capacity at the peak of the cycle is a risky move and incremental returns could be sub-optimal."
Gordon Kwan, head of regional oil and gas research at Nomura Securities, quoted COSL chief financial officer Li Feilong as telling an analysts conference call yesterday that the firm does not rule out buying second-hand drilling rigs to meet customers' urgent demand, adding that new opportunities in Mexico arose after the nation recently opened up to foreign investment in exploration and development.
COSL last October raised its capital budget for capacity expansion from up to five billion yuan to between seven billion and eight billion yuan.