| Beijing has given China's third-largest oil company
CNOOC a written endorsement of its exclusive right to enter into
production-sharing contracts with foreign oil firms on offshore
finds, according to fund managers.
That would mean CNOOC effectively has a written guarantee that
it will be able to participate in all offshore oil exploration
involving foreign petroleum giants.
However, at least one analyst said it was likely that the
exclusive right would expire within five years of China's entry
into the World Trade Organization.
Fund managers were told by CNOOC's management yesterday in Hong
Kong at its first day of a road show for a planned global share
offering and listing that it had received a written statement from
the government on January 19 stating the right.
The official endorsement is an extension of the same right held
by its parent China National Offshore Oil Corp.
All foreign oil companies are required under mainland law to
hand up to 51% stakes in all successful offshore oil finds to
CNOOC's parent via production-sharing contracts, according to a
research report by underwriter Credit Lyonnais Securities Asia.
The parent has agreed to transfer all these contracts to CNOOC.
A Morgan Stanley Dean Witter regional energy analyst said
exclusivity of CNOOC's offshore rights probably would disappear
within five years of China's entry into the WTO, as onshore oil
producing rivals China Petroleum & Chemical Corp (Sinopec) and
PetroChina were likely to be granted the same rights.
While CNOOC accounts for more than 90% of China's offshore oil
production, it does not have a monopoly in the country's sector.
Small rival Sinopec National Star has several natural gas
fields in the East China Sea and Bohai Bay off the north-east
China coast.
Listed Sinopec China's second-largest oil firm has an option to
acquire Sinopec National Star from parent Sinopec Group.
Some fund managers seemed less than eager to subscribe to
CNOOC's planned 1.64 billion shares in its initial public
offering.
"The company's quality is not bad but people tend to want
to buy the upside of the oil cycle, not when it's going
down," said RBC Investment Management (Asia) chief investment
officer Philip Chiu Sai-tong.
The offer has been priced between HK$5.19 and HK$6.47,
representing a price-to-earnings ratio of at least 4.07 to 5.07 on
last year's earnings comparable with Sinopec and PetroChina's
ratios.
However, some brokerages have forecast CNOOC's net profits to
decline by about 30% this year due to sliding oil prices.
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