Abu Dhabi shares fall to two-month low
Monday, 3 May 2010
NEW YORK, May 2 (Reuters): Chinese oil company MIE Holdings Corp shares are set to be priced higher than rivals, but the firm depends heavily on its relationship with a big state customer, making its planned initial public offering a risky investment.
Chief Executive Ruilin Zhang, a politically connected former PetroChina employee, his brother-in-law Jiangwei Zhao, senior vice president, and a company that the two own, Far East Energy Ltd, currently own more than 64 percent of MIE.
They will be the largest sellers, after the company itself, in the roughly $225 million deal next week.
The influence of the majority owners is manifest. Zhang has in the past taken out several interest-free, unsecured loans from MIE for personal and Far East Energy investments. MIE, an oil and gas exploration, development, and production company, has also given millions of yuan worth of business to a company that is majority-owned by Zhang's wife and brother-in-law.
The company sells all of its oil to PetroChina, which is 86 per cent owned by state-owned China National Petroleum Corp (CNPC).
MIE puts in funds and takes on the risk of exploration and development of new oilfields in China, but access to land, permits and export rights all hinge on its relationship with PetroChina.
Moreover, under the terms of its contract with PetroChina, everything purchased, installed and built eventually becomes the property of PetroChina.
"A contractor that's totally exposed to one end customer is inherently risky," said Nick Einhorn, a research analyst with Connecticut-based Renais-sance Capital.
MIE's representatives in Beijing declined to comment. Several calls to CNPC officials dealing with PetroChina and MIE's US offices were not answered.
Zhang, 38, who is also the company's chairman, started out in the late '80s as an oilfields worker and technician for PetroChina. He currently serves as a member of the Songyuan Committee of the National People's Congress of the PRC. Zhao, 37, who is also vice chairman, formerly worked for PetroChina, too.
Private equity affiliate TPG Star Energy Ltd, which owns nearly 18 per cent of the company, is selling a portion of its stake after holding it for less than a year.
Funds affiliated with the Chinese government, which currently own about 3 per cent of the company, are also selling a portion of their shares.
Analysts said the high number of insider sales could trouble investors -- especially TPG's quick turnover of shares.
"It could raise some eyebrows," Einhorn said.
Chief Executive Ruilin Zhang, a politically connected former PetroChina employee, his brother-in-law Jiangwei Zhao, senior vice president, and a company that the two own, Far East Energy Ltd, currently own more than 64 percent of MIE.
They will be the largest sellers, after the company itself, in the roughly $225 million deal next week.
The influence of the majority owners is manifest. Zhang has in the past taken out several interest-free, unsecured loans from MIE for personal and Far East Energy investments. MIE, an oil and gas exploration, development, and production company, has also given millions of yuan worth of business to a company that is majority-owned by Zhang's wife and brother-in-law.
The company sells all of its oil to PetroChina, which is 86 per cent owned by state-owned China National Petroleum Corp (CNPC).
MIE puts in funds and takes on the risk of exploration and development of new oilfields in China, but access to land, permits and export rights all hinge on its relationship with PetroChina.
Moreover, under the terms of its contract with PetroChina, everything purchased, installed and built eventually becomes the property of PetroChina.
"A contractor that's totally exposed to one end customer is inherently risky," said Nick Einhorn, a research analyst with Connecticut-based Renais-sance Capital.
MIE's representatives in Beijing declined to comment. Several calls to CNPC officials dealing with PetroChina and MIE's US offices were not answered.
Zhang, 38, who is also the company's chairman, started out in the late '80s as an oilfields worker and technician for PetroChina. He currently serves as a member of the Songyuan Committee of the National People's Congress of the PRC. Zhao, 37, who is also vice chairman, formerly worked for PetroChina, too.
Private equity affiliate TPG Star Energy Ltd, which owns nearly 18 per cent of the company, is selling a portion of its stake after holding it for less than a year.
Funds affiliated with the Chinese government, which currently own about 3 per cent of the company, are also selling a portion of their shares.
Analysts said the high number of insider sales could trouble investors -- especially TPG's quick turnover of shares.
"It could raise some eyebrows," Einhorn said.