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PetroChina Offers US$2.44 b in Stock

PetroChina, the nation's biggest oil company, plans to sell as much as HK$19 billion (US$2.44 billion) of stock as it increases spending globally to meet soaring demand in the country.

The company and its parent are offering 3.16 billion shares at between HK$5.85 (75 US cents) and HK$6 each (77 US cents), according to an e-mail to investors.

The discount to Tuesday's HK$6.30 (81 US cents) close is as much as 7 percent.

Chairman Chen Geng is acquiring overseas fields, including the US$4.18 billion purchase last week of PetroKazakhstan Inc by the Beijing-based company's parent.

PetroChina is offering stock after its shares rose almost five-fold since they were listed in April 2000 because of record-high oil prices and demand in the world's second-biggest market.

"Oil prices keep going up," said Stella Lau, who helps manage US$1.3 billion at East Asia Asset Management in Hong Kong, including PetroChina shares.

"The market has the appetite for PetroChina's new shares and can absorb them."

China's oil companies are expanding overseas as local fields are failing to meet domestic demand, which more than doubled in a decade to about 6.75 million barrels a day, according to an estimate by the International Energy Agency.

China National Petroleum outbid Oil & Natural Gas Corp, India's biggest oil producer, which also pursued PetroKazakhstan.

Oil in New York has jumped 68 percent from a year ago and reached US$70.85 a barrel on Tuesday, the highest since the trading began in 1983.

The stock has advanced 61 percent in the past year, reaching a record HK$7.45 (95 US cents) on August 2.

PetroChina confirmed the share sale in a statement on its website, giving no details for the reason.

The shares were suspended from trading in Hong Kong and spokespersons in Hong Kong and Beijing declined to comment.

Goldman Sachs Group Inc, Citigroup Inc and Deutsche Bank AG are arranging the sale.

"The question is what PetroChina is going to do with the money," said Chris Wong, who helps manage about US$15 billion in Asian assets at Aberdeen International Asset Management in Singapore, including PetroChina stock.

"What PetroChina is doing would dilute the earnings-per-share of the stock, so unless they have specific use for the money that would enhance EPS, the share price would fall."

Wong said Aberdeen has been offered the new shares, and has until the end of today to decide whether to buy them.

"If we are not clear as to the whole situation, we are not going to touch them," he said.

PetroChina will issue 2.877 billion new shares in the offer and China National Petroleum Corp, the company's parent, will sell 287.7 million existing shares, the e-mail said. PetroChina may sell an additional 351.6 million shares, including 319.68 million new shares, it said.

The number of shares to be sold will be equivalent to a maximum of 20 percent of PetroChina's existing share capital, the company said.

Berkshire Hathaway Inc, controlled by 74-year-old billionaire Warren Buffett, owns 1.3 percent of PetroChina's shares, according to data compiled by Bloomberg. China National Petroleum holds 90 percent of PetroChina's capital.

China National Petroleum said on August 22 that it agreed to buy Calgary-based PetroKazakhstan.

On June 10, PetroChina had said it plans to form a 50-50 venture with the parent by the end of this year for long-term overseas expansion and managing all foreign assets in nine countries, including three major oil and gas fields and a pipeline in Kazakhstan.

Analysts from brokerages including Merrill Lynch & Co and Credit Suisse First Boston have said in separate reports since last week the parent may inject PetroKazakhstan's assets into a venture with PetroChina at a later stage.

(China Daily September 1, 2005)

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