China National Offshore Oil Company (CNOOC) has announced that it will resuscitate its failed IPO plans and go to market in the first quarter of next year. The company will structure its IPO similarly to its previous attempt with new shares equal to 25% of the enlarged share capital being offered to the public. This time, however, the Chinese government will seek to sell some of its shares in the company alongside the new share issue. It is unclear at this stage how large the government's portion of the sale will be.
Speaking at a press briefing to announce CNOOC's 2000 first half results, Chengyu Fu, chief operating officer, confirmed that the IPO would be going ahead next year and not this year, as the IPO market was already too crowded with other Chinese offerings. These include billion dollar offering for Baoshan Iron and Steel, and Sinopec. In addition, Fu neither confirmed nor denied reports that Merrill Lynch has been awarded the underwriting mandate, which was previously held by Salomon Smith Barney. "Merrill Lynch is helping us prepare all the work for the IPO," he said. "We will determine who the underwriters will be some time in the third quarter."
Failure, success
CNOOC's previous attempt to launch its IPO ended in failure last November when the company and its underwriters fell foul of a falling market and general disinterest in old economy oil stocks. However, since then, CNOOC has raised some $460 million through the private placement of shares to strategic investors, such as Hutchison Whampoa, Hongkong Electric, AIA Group companies, CDC Capital Partners, General Enterprise Management Services and the Government of Singapore Investment Corporation.
Those investors now own an undetermined stake in a company that announced a 205% increase in profits in the first half of 2000 over the first half of 1999. This spectacular rise in profits is a result of high global oil prices, increased production by CNOOC and severe cost cutting by the company. "With these on going operational and strategic developments and our careful preparation for listing, we are confident that we will proceed with our IPO in Hong Kong and New York in the first quarter 2001," said Fu. He further predicted that profit growth for the rest of 2000 and 2001 would continue its meteoric rise even if oil prices slipped to $22, saying that it would be "in the region" of the 200% mark achieved this year.
Further developments announced by the company include an increased focus on investor relations (IR) with the establishment of a permanent IR department in the company. Since the completion of the private placement to strategic investors, two seats on the board are reserved for members of the strategic investor group. CNOOC has also announced plans to seek professional management of its huge pension exposure. Chief operating officer Fu confirmed that the company is seeking to establish a lump-sum system for its pensions liabilities rather than the government preferred annuity system.
