CNOOC considers sale of shares in Shanghai amid US sanctions

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HONG KONG – CNOOC, one of three state-owned oil and gas conglomerates, is considering registering on the mainland under pressure from US authorities to withdraw from New York.

The company announced on Sunday evening that it would issue up to 2.6 billion new shares, representing about 5.5% of the enlarged share capital, and planned to raise 35 billion yuan ($ 5.4 billion). He intends to use the funds to develop oil and gas fields, mainly in ongoing projects in Guyana and the South China Sea.

The sale of shares could become the second biggest new listing on the continent this year, behind China Telecom last month and ahead of China Three Gorges Renewables (Group) in June.

CNOOC stock rose 5.1% on Monday in Hong Kong, bringing the year’s gains to nearly 20%. Shares of its two state-owned peers also climbed in Shanghai, fueled by rising oil prices. PetroChina is up 50% and China Petroleum & Chemical, better known as Sinopec, 11% so far this year.

In a statement, CNOOC said its board of directors has resolved the issue of new yuan-denominated shares to be listed on the Shanghai Stock Exchange, pending approval from its existing shareholders and regulators. The company, already listed in Hong Kong, has called a shareholder vote for October 26. She did not disclose the scheduled listing date.

Based on Monday’s close in Hong Kong, the shares expected to be offered in Shanghai will be worth the equivalent of 21 billion yuan. However, the pricing mechanism in mainland China is structurally different from the rest of the world, including Hong Kong.

CNOOC’s listing status on the New York Stock Exchange is currently under review. An executive order issued by then US President Donald Trump late last year barred US residents and businesses from investing in certain Chinese companies known to have ties to the country’s military.

The three Chinese state-owned telecommunications operators, which were also blacklisted by Washington, were kicked out by the NYSE in May.

China Telecom went public in Shanghai last month, while China Mobile is preparing to follow suit by the end of the year, according to Chairman Yang Jie. China Unicom already has a listed subsidiary in Shanghai.

China Telecom shares closed at 4.31 yuan, 5% below the issue price, despite its state-owned parent company announcing on Tuesday that it would buy 4 billion yuan of shares.

The CNOOC, in its Sunday statement, did not comment on the NYSE delisting process. He said a mainland listing was aimed at allowing the company to access the mainland’s capital market through equity financing, which “will expand the company’s fundraising channels,” among other reasons cited. .

“Given CNOOC’s plentiful cash flow, raising capital is probably not the only goal of this A-share listing,” Toby Shek, analyst at Citigroup in Hong Kong, said Monday in a note to investors. “We believe one of the main reasons for the show is to expand CNOOC’s domestic investor in order to mitigate the impact of US sanctions.”

The company had 83.5 billion yuan in cash and short-term deposits at the end of June, according to its documents.

China has played a decisive role in laying the groundwork for the so-called homecoming lists. CNOOC, similar to China Mobile, is a so-called red chip company, a state-owned enterprise incorporated outside the mainland with a main listing in Hong Kong. They have a different set of regulatory hurdles to overcome before they get to the Shanghai Stock Exchange.

CNOOC CEO Xu Keqiang told reporters in a mid-term earnings conference call on August 19 that his company’s status as a red chip was a “political restriction for us to list A shares. at the moment, and we are monitoring policy developments closely. “

Xu then added that if the conditions are met, he wants the company to go public on the mainland “in order to reward domestic investors with our excellent performance.”

Mainland Chinese investors are not allowed to freely invest abroad, including Hong Kong.

CNOOC reported net profit of 33.3 billion yuan in the first six months of the year, more than three-fold jump from the previous year thanks to soaring oil prices.

Benchmark Brent crude oil futures are currently at $ 78 a barrel, down from less than $ 30 at the start of last year. Goldman Sachs raised its year-end forecast to $ 90 from $ 80 on Sunday, citing a larger-than-expected current deficit in global oil supply and demand.

CNOOC also revealed on Thursday that it had started production at a 100% -owned oil field on the Bohai Sea in northern China, which is expected to reach a daily peak of 11,000 barrels of crude by ‘next year.


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