PetroChina, the nation's top oil producer, is to transfer its
stake in an oil trading subsidiary through a connected transaction
with its parent firm China National Petroleum Corporation
(CNPC).
The oil company will transfer 70 percent of its equity interest
in China United Oil to CNPC for a cash consideration of
approximately 1.01 billion yuan, according to a PetroChina
statement to the Hong Kong stock exchange yesterday.
"The move is part of PetroChina's plans to transfer its non-core
business to its parent company. It may be, to some extent, linked
to PetroChina's mainland listing plan," said Han Xuegong, a
consultant with CNPC.
The connected transaction is expected to receive a positive
response from the market as it will boost PetroChina's cash
flow.
According to PetroChina's statement, China United may develop in
a direction inconsistent with PetroChina's overall strategy,
because PetroChina has no substantial control over it.
PetroChina added that it had been gradually transferring its
import and export businesses of crude and refined oil to PetroChina
International, a wholly owned subsidiary of PetroChina.
"By getting rid of non-core businesses, CNPC's listed arm can
concentrate on its core business oil and gas exploration and
production," said Yin Xiaodong, an oil analyst with CITIC
Securities Co.
PetroChina said the net proceeds of the disposal would be used
to further develop its core businesses.
Connected transactions take place between parent companies and
their listed arms to strengthen the latter, Yin said.
CNPC's Han said China United's profitability could benefit
CNPC.
Jiang Jiemin, vice-chairman of PetroChina and president of CNPC,
once said that as Asia's most profitable company, PetroChina should
return to the A-share market to allow mainland investors to benefit
from its stock performance.
"As a red-chip company, PetroChina's A-share listing may be
easier than CNOOC's," Fu Chengyu, chairman of CNOOC Ltd, the Hong
Kong-listed branch of China National Offshore Oil Corp (CNOOC),
told China Daily.
As CNPC is PetroChina's parent firm and the highest applicable
percentage ratio exceeds 2.5 percent, the disposal constitutes a
connected transaction subject to reporting, announcement and
independent shareholder approval requirements.
China United's net income last year rose 3.7 percent to 273
million yuan, Bloomberg reported. Sinochem Corp owns the remaining
30 percent stake in China United.
(China Daily March 20, 2007)