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Bloomberg: PetroChina Shareholders Approve Shanghai Stock Sale (Update1)

EXTRACT: Five years of record profit have helped the Beijing- based producer overtake BP Plc, Royal Dutch Shell Plc and OAO Gazprom to rank second only to Exxon among oil companies.

By Ying Lou

Aug. 10 (Bloomberg) — PetroChina Co. shareholders approved a $5.6 billion Shanghai stock sale, agreeing to a plan that will enable China’s largest oil producer to close in on Exxon Mobil Corp. as the world’s biggest company by market value.

The proposal to sell as many as 4 billion yuan-denominated A shares was agreed at a meeting in Beijing today. The stock sale will be priced “so that everyone can afford it,” company Chairman Jiang Jiemin said.

PetroChina, traded in Hong Kong and New York since 2000, will sell shares to mainland Chinese investors for the first time, tapping the world’s best-performing equity market this year. The oil producer’s stock may surge in Shanghai, where shares trade at almost 50 times earnings, compared with about 16 in Hong Kong.

“We could see PetroChina’s A-share double on debut, fetching a $500 billion market cap, easily eclipsing Exxon Mobil as the world’s most valuable firm,” Gordon Kwan, head of China energy research at CLSA Ltd., said in e-mailed comments on Aug. 8.

PetroChina’s market value stood at $241 billion as of today’s close, ranking the company fifth by market value globally. Five years of record profit have helped the Beijing- based producer overtake BP Plc, Royal Dutch Shell Plc and OAO Gazprom to rank second only to Exxon among oil companies.

PetroChina has about 12 percent of its stock publicly traded in Hong Kong and New York. The 88 percent stake owned by parent China National Petroleum Corp. will be valued at the price of the Shanghai-traded stock after the listing.

`Ahead of Global Peers’

“Depending on the market reaction, PetroChina’s A-share price could jump on debut and bring its market capitalization ahead of global peers,” Grace Liu, an oil analyst at Guotai Junan Securities Ltd., said Aug. 8.

China’s largest oil company will use some of the share-sale funds to expand crude reserves that are already larger than Exxon’s. PetroChina increased oil and gas output by 3.7 percent in the first half, outpacing growth at the U.S. producer along with Shell and Chevron Corp., as it supplied the world’s fastest- growing major economy.

PetroChina plans to spend 40 billion yuan ($5.3 billion) developing the Jidong Nanpu field, the country’s biggest discovery in almost half a century. Total spending may jump 24 percent to $24.5 billion this year, PetroChina said in March. That’s higher than Exxon or Europe’s two largest oil companies, Shell and BP.

Selling 4 billion shares would raise $5.6 billion if priced at yesterday’s close. The sale requires the China Securities Regulatory Commission’s approval.

Industrial & Commercial Bank

Industrial & Commercial Bank of China Ltd., a bank with twin mainland and Hong Kong listings, this week became the world’s fourth-largest company by market value. The company trades at 25 times earnings in Hong Kong and 37 times in Shanghai.

Shares of China Petroleum & Chemical Corp., or Sinopec, trade at 24 times earnings in Shanghai, twice their valuation in Hong Kong.

PetroChina hired UBS AG to arrange the transaction, together with China International Capital Corp. and Citic Securities Co., three people with direct knowledge of the decision said in June.

The parent’s stake is “a little big,” while the public float available to investors is “a little small,” Jiang told reporters at today’s meeting.

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

Warren Buffett

Billionaire investor Warren Buffett is an important shareholder who has supported the company, Jiang said.

Buffett, who recently pared his stake in the Chinese oil producer, is unlikely to “dramatically” reduce his holding, the largest in PetroChina after its parent. His sale of some shares in July was “about profit,” Jiang said.

Buffett’s Berkshire Hathaway Inc. bought a PetroChina stake for $488 million in 2003 that had soared sevenfold in value by Dec. 31, according to regulatory filings.

In May, Buffett rejected calls to sell the stake as campaigners continued to criticize China National’s investments in Sudan, whose government has been accused by the U.S. of genocide.

Buffett sold 16.8 million PetroChina shares on July 12 at an average price of HK$12.441. The stock closed at a record HK$12.44 on July 9 and reached its highest intraday level of HK$12.60 on July 13.

PetroChina had “good results” in the first six or seven months of this year, Jiang said.

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

Last Updated: August 10, 2007 07:27 EDT

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