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Bloomberg: PetroChina May Raise $5.6 Billion in Shanghai Listing (Update5): today overtook Royal Dutch Shell Plc as world’s second-largest oil company

By Ying Lou

June 20 (Bloomberg) — PetroChina Co. is planning the nation’s biggest share sale this year to raise as much as $5.6 billion in Shanghai for overseas acquisitions, increased oil drilling and refinery construction.

The company today overtook Royal Dutch Shell Plc as the world’s second-largest oil company by market value, behind Exxon Mobil Corp., after announcing the plan to list on the Chinese mainland for the first time. As many as 4 billion shares will be sold, Beijing-based PetroChina said in a statement.

The oil producer is tapping an equity market that has doubled in value in the past six months, making it Asia’s most expensive. PetroChina, whose Hong Kong shares have risen ninefold since an April 2000 initial public offering, plans to spend 40 billion yuan ($5.3 billion) developing the country’s biggest oil discovery in almost half a century.

“PetroChina is one of the best companies in China,” said Agnes Deng, who helps manage $3.5 billion at Standard Life Investments Asia in Hong Kong, including PetroChina shares. “It’s got solid fundamentals.” Chinese shares trade at 48 times earnings, compared with 17 times for Hong Kong’s Hang Seng Index, that’s why “people get so excited by companies like PetroChina going back to an A-share listing.”

Shares of PetroChina today rose as much as 8.2 percent to HK$12.08, and reached HK$11.94 at the midday break, poised for a record close. PetroChina, which trades at 15 times earnings, is valued at $274 billion after today’s gains, compared with $257 billion for Shell and $484 billion for Exxon Mobil.

Record Profit

PetroChina reported a fifth year of record profit at 142 billion yuan for 2006 as it produced more oil and gas than ever before to meet China’s rising demand. The company plans to boost spending on exploration and development by 25 percent this year to 185.7 billion yuan, it said in March, exceeding the $21 billion capital budget of Exxon Mobil.

The 4 billion shares that would be sold in Shanghai were worth 43 billion yuan based on their closing price in Hong Kong on June 18, prior to a market holiday. The sale would eclipse the 38.9 billion yuan ($5 billion) raised by Ping An Insurance (Group) Co., China’s second-biggest insurer, which listed on the Shanghai exchange on March 1.

Mainland-China based investors, barred from investing directly in Hong Kong-traded shares, have called for the nation’s most profitable companies to list on domestic stock exchanges.

`Political, Economical’

“Selling A shares is politically and economically necessary for PetroChina,” said Liu Yang, who helps manage $3 billion at Atlantis Investment Management Ltd. in Hong Kong, including PetroChina shares.

China Construction Bank Corp. and China Cosco Holdings Co., operator of Asia’s largest container line, are among Hong Kong- listed Chinese companies tapping investor demand in Shanghai.

China Cosco said today it raised 15 billion yuan in a Shanghai stock sale to buy new ships. The company sold 1.78 billion shares at 8.48 yuan each, the top end of its price range, on June 18, it said in a statement to the Shanghai stock exchange today. The sale was the fourth biggest approved in China this year, according to data compiled by Bloomberg.

China Construction Bank said last week it may sell 9 billion shares in Shanghai, potentially raising $5.5 billion.

PetroChina’s plan will “establish a new financing platform” and provide funds required for development, the company, Asia’s most profitable, said in the statement. The sale requires regulatory approval and an extraordinary general meeting on Aug. 10 for shareholders to vote on the plan, PetroChina said, without giving details on pricing.

Buffett Scores

PetroChina started trading on the Hong Kong stock exchange in April 2000 at HK$1.21 and its American depositary receipts were listed on the New York stock exchange in the same month.

Billionaire investor Warren Buffett on May 5 rejected calls to sell Berkshire Hathaway Inc.’s stake in PetroChina. Campaigners have criticized parent China National Petroleum Corp.’s investments in Sudan, whose government has been accused by the U.S. of genocide. Berkshire, PetroChina’s largest shareholder after the parent, paid $488 million for its PetroChina stake, according to regulatory filings. It soared sevenfold in value through Dec. 31.

The Jidong Nanpu field may hold more than 1 billion metric tons of oil, PetroChina said on May 3. The field off the nation’s northeast coast will help to lower dependence on imported crude in the world’s fastest-growing major economy.

Gas Discovery

PetroChina has yet to make a formal announcement about a natural gas discovery in Longgang in Sichuan province. Production from the field could reach 4 billion cubic meters by 2010, the China Securities Journal reported May 28. The field has reserves of at least 500 billion cubic meters, the newspaper said. That means the deposit is more than 10 times China’s annual demand.

“As a company heavily based on resources, PetroChina needs additional funding to acquire more assets,” said Liu of Atlantis Investment. “Part of the proceeds will be used to develop its new oil and gas discoveries.”

To contact the reporter on this story: Ying Lou in Hong Kong at [email protected]

Last Updated: June 20, 2007 01:44 EDT

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