HONG KONG-China Petroleum and Chemical Corporation, the state-owned oil and refining giant better known as Sinopec, is selling new shares worth up to 24 billion Hong Kong dollars, or $3.1 billion.
In what ranks as one of Asia’s biggest equity deals so far this year, Sinopec said only that it would use the new funds for ‘‘general corporate purposes’’ to fund ‘‘business development.’’
Sinopec in recent years has been seeking to acquire oil and gas fields and other production assets â€" often from its state-owned parent company, the China Petrochemical Corporation â€" in an attempt to offset continuing losses from its traditional refining business.
That strategic shift is being carried out by the company’s chairman, Fu Chengyu, who in his previous role as head of the offshore oil producr Cnooc launched an unsuccessful bid in 2005 to acquire the American oil company Unocal. Sinopec’s board said in a statement Monday it had given Mr. Fu ‘‘full authority’’ to decided on issues related to the current fundraising.
Sinopec plays a unique and sometimes difficult role in China’s heavily regulated energy industry. As the country’s dominant refiner, it must buy oil at international market prices to refine into products like gasoline, diesel fuel and kerosene, which are then sold within China at state-directed prices.
The company reported an operating loss of 15.5 billion renminbi, or $2.5 billion, on its refining business in the first nine months of last year. Despite this, Sinopec booked an overall net profit of 42.83 billion renminbi, as gains from oil and gas production offset refining losses.
Sinopec’s shares fell 7 percent in morning trading in Hong Kong on Tuesday to 8.68 dollars apiece. That remained above the 8.45 dollars per share issue price for th! e new shares. The stock had closed at 9.34 dollars on Monday, before the share sale was announced.
Sinopec is selling up to 2.85 billion new so-called H shares to unnamed investors in Hong Kong, representing 17 percent of its H shares already issued and 3.2 percent of its total share capital. Its stock also trades onshore, as so-called A shares on the Shanghai market, which is largely closed to foreign investors.
Goldman Sachs is the bookrunner on the share sale.
