Hong Kong shares in China National Offshore Oil Corp Limited (CNOOC) yesterday
rose as much as 5.5 percent reflecting investor relief that the
Chinese oil firm had scrapped its bid to buy US oil and gas
producer Unocal.
CNOOC shares yesterday surged by as much as 30 HK cents (3.8 US
cents) to HK$5.80 (74 US cents) at its peak. They closed at HK$5.55
(71 US cents), a gain of 5 HK cents (0.64 US cents), or 0.9
percent.
At yesterday's close, CNOOC stock had risen 32 percent since the
start of the year.
Industry analysts close to CNOOC said the share rise was largely
due to its withdrawal from bidding rivalry with US oil producer
Chevron for Unocal. The withdrawal has put an end to investor
concerns that the Hong Kong-listed oil giant might overpay to
outbid Chevron.
The country's third largest oil and gas producer, CNOOC dropped
its US$18.5 billion all-cash bid for Unocal amid mounting political
opposition from some US lawmakers on Tuesday. That left Chevron the
sole bidder for the ninth largest oil and gas producer in the
United States.
"The investors are happy about CNOOC's decision, because they
thought the all-cash offer might be too costly. Scrapping the bid
will surely clear up the uncertainty in the Chinese oil company's
finances and operations relating to the proposed acquisition," said
Laurence Lau, a senior analyst with the Bank of China (BOC) Hong
Kong Limited.
Lau said that in the long-term, CNOOC's decision to pull out of
the race will mean the firm can focus more on its core business,
boosting investor confidence in the company.
Liu Gu, a senior energy analyst with Guotai Jun'an Securities
(Hong Kong) Ltd, told China Daily that whilst CNOOC's
withdrawal will lead to rising shares in the short term, in the
long run, the decision means that the chance to expand its global
business has been lost.
However, according to BOC's Lau, the Chinese oil company has
actively sought possible acquisition opportunities across the
globe. The failure to buy Unocal, whose Asian gas assets are very
attractive to CNOOC, may push the oil giant towards other
acquisition opportunities.
More Chinese enterprises have ventured out in search of overseas
acquisitions in recent years.
Zhang Wenkui, deputy director of the Enterprises Economy
Research Institute of the Development Research Center of the State
Council, said CNOOC's bid for Unocal could provide valuable
experience for other Chinese enterprises which also have overseas
acquisition plans.
A more prudent attitude should be adopted by the Chinese
enterprises when making bids for overseas energy enterprises, Zhang
said.
In seeking international energy cooperation, China should use
more market measures such as trade and futures. Acquisition of
overseas enterprises is not the only or the best way, Zhang
added.
According to analysts in China, CNOOC had suffered losses from
its investment in the preparation phase and will suffer possible
losses in profit sharing as a result of disclosing its development
strategy during the bidding process.
However, a CNOOC insider said the company's withdrawal from the
Unocal bid would not have much effect on its future development
strategy.
(China Daily, Xinhua News Agency August 4, 2005)