SHANGHAI Aug 21 Shipbuilder China Rongsheng
Heavy Industries has snapped up a majority interest in
a company searching for oil in Kyrgyzstan, marking a move into
oil exploration amid headwinds in its core shipbuilding
China's largest private shipbuilder, which expects to post
a significantly higher first-half loss when it reports results
next week, has suffered from a drastic slump in orders amid a
global shipping downturn. It also diversified into building
drilling rigs, used in oil exploration, in 2013.
Rongsheng said on Thursday it had, through a subsidiary,
bought a 60 percent share in New Continental Oil & Gas Co. Ltd
for HK$ 2.184 billion ($281.82 million). New Continental,
together with Kyrgyzstan's national oil company, operates four
oilfields in the country.
In the announcement, which came after Hong Kong markets
shut, Rongsheng said it will finance the deal by issuing 1.4
billion shares at a premium of 12.23 percent to its Thursday
closing share price of HK$ 1.39 per share.
"Given the relatively adverse market conditions for
shipbuilding industry for the time being, the acquisition can
assist the group in diversifying operations and broadening its
source of revenue," Rongsheng said in the statement.
"The company expects to realise a dramatic increase of oil
output through upgrade and consolidation of the existing
exploration technology and thereby to generate steady operating
cash flows," it said.
The oilfields, in the Central Asian country of Kyrgyzstan
that borders China, sit adjacent to the Fergana Valley where
Rongsheng said a recent third-party reserve survey had found
abundant oil and gas resources. The geological reserve of crude
oil in such oilfields amounted to 276 million tons in aggregate,
the firm said.
Rongsheng last year appealed to the government for financial
help. In March it agreed with banks to extend loans and other
(1 US dollar = 7.7496 Hong Kong dollar)
(Reporting by Brenda Goh; Editing by Muralikumar Anantharaman)