Honghua, a Sichuan-based oil-rig maker, plans to raise up to US$350 million from an initial public offering in Hong Kong this year, sources said. The company is the second-largest oil-rig maker in the mainland, according to its website. United States buyout fund Carlyle was a shareholder, sources said. Honghua could not be reached for comment. 'There's a shortage of oil rigs and qualified personnel, so this IPO would be very appealing to investors because oil companies are boosting production and replenishing reserves,' CLSA Asia analyst Gordon Kwan said. Oil equipment makers and service providers are benefiting from continued increasing capital expenditure by oil companies such as Sinopec and PetroChina because profit margins in the business remain high despite a 30 per cent decline in crude prices from last year's peak. Shares of China Oilfield Services, the largest provider of equipment and services to mainland oil companies, have gained 80 per cent since June last year and trade at 22 times forecast earnings for this year. China Oilfield yesterday said shareholders had approved the sale of two billion yuan of domestic bonds to buy new equipment and upgrade existing equipment. The deal requires regulatory approval. In December, chief executive Yuan Guanyu said the company was studying the requirements to sell shares in the domestic market. Sources last month said the firm would raise about 1.6 billion yuan from an A-share listing. Honghua's primary market is China, the world's second-largest energy consumer, where it has put 101 rigs to work, according to its website. Its second-largest market is the US, where it has sold 53 rigs, followed by 10 in Uzbekistan. Last month, the company announced plans to set up a US$30 million oil-drill manufacturing joint venture in Egypt. It will contribute US$15 million. The venture is expected to complete three drills by the end of this year and a total of 53 by 2012. Should Honghua sell a 25 per cent stake through the IPO, the company's market capitalisation would be about HK$12 billion. By comparison, China Oilfield's market value is about HK$22 billion.