IPO CNOOC Shanghai Targets $5+ Billion

Key Insights

• CNOOC targets $5.1 billion IPO.
• Shanghai Stock Exchange listing needed.
• Upstream oil and gas production increase targeted.

Chinese offshore drilling giant CNOOC is expected to raise around $5.1 billion in its upcoming Shanghai IPO. The Chinese company was delisted from the NYSE due to a Trump era executive order. On Tuesday, investors will be able to subscribe to around an 32.3 billion yuan (US$5.1 billion) initial public offering (IPO), which entails the sale of 2.6 billion shares, which is 5.5% of its CNOOC’s total share capital at 10.8 yuan.

CNOOC has still the option to exercise the green-shoe option, which allows underwriters to allocate an additional 15 percent of shares at the same offering price for 30 days after the date of listing. If taking this route, CNOOC could increase the number of shares on sale to 2.99 billion, around 6.28 percent of total share capital.

In a filing today at the Shanghai Stock Exchange, the company is slated to trade its stock under the code 600938. The company, like other Chinese companies, were hit after that American depository receipts were delisted from exchanges in the United States. According to the Trump Administration, the Chinese companies were accused of alleged links with the Chinese military.

Delisted from NYSE by Trump executive order

CNOOC was delisted from the New York Stock Exchange in November last year. CNOOC now wants to take advantage of the mainstream interest in Chinese companies at present, as shown by China Mobile, which in its debut on January 5 2022 raised around US$8.8 billion in China’s biggest IPO in a decade. CNOOC was put by an executive order of US president Trump on a blacklist in January 2021 for allegedly intimidating neighboring countries in the South China Sea.

The company already has indicated that will use the main revenues of the IPO to be invest and fund existing and future oil and gas field development projects. At the same time, some of the revenues will be used to supplement working capital. In 2021 CNOOC reported a profit of CNY70.3 billion ($11 billion), which is more than two-and-a-half time increase from profits in 2020. In its report, CNOOC also stated that revenues jumped by 58.4% to CNY246.1 billion ($38.7 billion).

The company’s crude oil and natural gas increased by 8.5% in 2021 to 573 million barrels of oil equivalent. CNOOC already has stated that for Q1 2022 that profits will increase by around 89% to CNY28 billion ($4.4 billion), with revenues to hit CNY83 billion.

Sale of UK North Sea Assets?

The last weeks CNOOC has already been in the news, as reports emerged that CNOOC UK is assessing the option to sell its UK North Sea portfolio.  The coming weeks a possible sale is looming, with assets expected to be valued at around $3 billion. The Chinese operate one of the UK’s largest offshore field, the Buzzard oil field, with a 43.2% stake. At same time, it is operator of the Golden Eagle field, with a 36.5% holding, while holding stakes in the Scott, Telford and Rochelle fields. Possible interested parties are expected to come from China, but possibly several UK parties will be vying for them too.

CNOOC also has reiterated that it will not be leaving Russia, after the latter’s invasion of Ukraine. In a statement made by CNOOC the company said that it will be staying in the under-construction Russian Arctic LNG 2 project. Some officials however have been indicating that ongoing Russian military moves and international sanctions on the Putin regime are being assessed, leaving a U-turn decision still to be possible.

CNOOC owns a 10% stake in the 19.8 million mt/year Arctic LNG 2 project. French oil and gas major Total already has reported not to provide capital anymore to the project, but Chinese and Japanese partners are still sticking to all. Arctic LNG 2 is expected to come onstream in 2023. Last February Russian oil giant Novatek stated that the project was hitting the 78% completion mark. The provisional startup schedule is 2023 for the first train, 2024 for the second and 2025 for the third.

Capital expenditure targets production increase

For 2022 CNOOC has set a capital expenditure of Yuan 90 billion-100 billion ($14.19 billion-$15.75 billion). The company is targeting 5%-6% annual growth in production and reach 2 million boepd by 2025. At present, the Chinese target 1.64 million-1.67 million boepd (600 million-610 million boe) in 2022, up 5.6% from the actual output of 1.57 million boepd in 2021.