(Bloomberg) -- China National Petroleum Corp., the country’s biggest oil and gas producer, plans a backdoor listing of its engineering assets through a Shanghai-listed petrochemical material supplier and processor it controls.
Xinjiang Dushanzi Tianli High & New Tech Co., based in western China’s autonomous Xinjiang region, reached a preliminary agreement with CNPC to buy the producer’s engineering assets, according to a statement filed with the Shanghai stock exchange on Thursday. A final decision hasn’t been made, it said.
CNPC Chairman Wang Yilin said in February the company plans to spin off its oilfield services business amid efforts to become more efficient. The state-run energy giant will be among the first of the nation’s sprawling government-run enterprises to undergo reforms that will transform CNPC into a strategic holding company and no longer manage day-to-day operations of subsidiaries, people with knowledge of the situation said in March.
“The capital markets are very much still closed for sizable energy IPOs due to poor market sentiment,” Gordon Kwan, head of Asia oil and gas research at Nomura Holdings Inc. in Hong Kong said in an e-mail. “Oil prices have almost doubled from the February bottom, but they remain too low for generating profits for oil companies.”
Xinjiang Dushanzi is looking at buying engineering assets from CNPC units including China Petroleum Engineering & Construction Corp. and China HuanQiu Contracting & Engineering Corp., it said in the statement. Shares of Xinjiang Dushanzi were suspended in February.
CNPC rival China Petrochemical Corp. used a similar backdoor-listing strategy to inject oilfield service assets into smaller listed unit Sinopec Yizheng Chemical Fibre Co. in 2014 amid a push by authorities to restructure state-owned companies and allow markets greater sway in resource allocation.
The China Securities Regulatory Commission has approved just 46 initial public offering applications from more than 700 submitted so far this year, according to data from the commission and information compiled by Bloomberg.
To contact the reporter on this story: Aibing Guo in Hong Kong at email@example.com. To contact the editors responsible for this story: Ramsey Al-Rikabi at firstname.lastname@example.org Aaron Clark, Iain Wilson
Copyright 2016 Bloomberg News.
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