Sinopec Oilfield Services targets logging and downhole tools firms, could consider selling non-core assets - IR manager
Sinopec Oilfield Services [SHA:600871; HKG:1033], the integrated Chinese oilfield engineering and services provider, seeks high-quality acquisition opportunities due to the downturn in the oil and gas industry, Investor Relations Manager Rong Liming said. The company might also consider selling some non-core assets in the future.
The CNY 63.2bn (USD 9.76bn) market cap group is seeking to acquire logging, mud-logging and downhole tools companies. It is especially interested in the R&D capabilities of potential targets rather than their size or IRR, Rong said.
Several potential targets are located in the US, but there are also acquisition opportunities in China and other overseas countries, he added, without specifying companies.
Potential M&A expenditure is not included in Sinopec Oilfield Services' estimated CNY 3.45 bn (USD 532.8m) capex for 2016. The company has not allocated a precise M&A budget but it has ample access to the equity or debt markets to fund acquisitions, Rong said.
Sinopec Oilfield Services is working on M&A projects with several investment banks - especially Western players including Rothschild and Deutsche Bank - and uses Haiwen & Partners and Herbert Smith Freehills as legal advisors. It welcomes pitches from other M&A advisors, Rong said.
The company will meet investors in a non-deal roadshow organized by Morgan Stanley tomorrow (1 April) in Hong Kong. Next week, it will send two teams to talk to investors in Tokyo and Singapore. The meetings were arranged by Nomura and Deutsche Bank, respectively, Rong said. It appointed PR Asia as PR.
Mergers among the largest Chinese oilfield services companies and their parent companies - Sinopec, CNPC and CNOOC - are unlikely, Rong said. However, such companies will, however, undergo internal reorganizations through M&A activity, he commented.
This year, Sinopec Oilfield Services will merge second-level subsidiaries, reducing the number from 12 to 10, while it expects to reduce the number of its 70 third-level subsidiaries by 25%, Rong said. The company might also axe or sell non-core businesses such as catering companies, he added.
According to a company presentation, major peers and competitors include Schlumberger [NYSE:SLB], Halliburton [NYSE:HAL], Baker Hughes [NYSE:BHI], Weatherford [NYSE:WFT] and China Oilfield Services (COSL), a subsidiary of Chinese state-owned CNOOC.
Sinopec Oilfield Services is the second largest onshore oilfield services player after CNPC's oilfield services business, which CNPC plans to spin off and list, as reported.
Sinopec Oilfield Services was spun off from Sinopec in 2014, while CNOOC took China Oilfield Services public in 2002, according to press reports.
In 2015, Sinopec Oilfield Services generated operating revenues of CNY 89.73bn and net profit of CNY 240m, compared to operating revenues of CNY 78.99bn and net profit of CNY 2.4bn a year before, according to a company presentation