Sinopec to Raise $3.1 Billion in Hong Kong
The China Petroleum and Chemical Corporation, also known as Sinopec is Hong Kong’s dominant refiner. With a recent decline in profits in the refining business they are looking to offset the refining losses with their oil and natural gas production. To expand their company, they are selling 2.85 billion new shares worth up to 24 billion Hong Kong dollars or 3.1 billion in US dollars which accounts for 17% of shares. The new shares offered will be used to fund the business that involves oil and natural gas production. As the country’s most dominant refiner, Sinopec buys oil at international market prices and sold for china market prices. This makes it difficult for Sinopec to make large amounts of profits, during the first nine months of 2012, the company has reported a loss of 15.5 billion dollars but the oil and natural gas production part of the business made enough profits to offset this loss. The booming profits from this part of the business have played a crucial role in the company’s decision to offer more shares to fund business development.
As Hong Kong’s most dominant refiner, it is important for Sinopec to take appropriate measures to ensure that business operations continue. Taking profits from one part of the business to cover losses in another is a good short term approach. With new shares offered, Sinopec should be able to quickly improve the development of their business. Refiners are important part of the everyday operation of the economy.
Written by: Wilson Tang