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Cnooc Considers Dollar Bond Issue

Cnooc Considers $5 Billion of Bonds in Record-Matching Offering
Cnooc Ltd. last sold dollar bonds in April last year, raising $2 billion via an offer of securities due May 2022 and May 2042. Photographer: Nelson Ching/Bloomberg

Cnooc Ltd., China’s biggest offshore energy explorer, is considering a sale of dollar-denominated bonds, five people familiar with the matter said.

The company may raise about $5 billion in the offering, two of the people said, asking not to be identified because the terms aren’t set. A borrowing that large would match the biggest note sale in the U.S. currency in Asia outside Japan, according to data compiled by Bloomberg. Beijing-based Cnooc may begin marketing the securities to investors as early as this quarter, one of the people said.

China Petroleum & Chemical Corp. led record dollar bond sales last month by oil and gas companies in Asia’s biggest economy as falling borrowing costs aided overseas expansion. Issuance in the region climbed to a three-month high of $19 billion, Bloomberg-compiled figures show. Sinopec, as Asia’s biggest refiner is known, and China National Petroleum Corp., the country’s largest oil producer, raised a combined $5.5 billion, according to the data.

A Beijing-based spokeswoman at Cnooc who declined to be identified said the company has no comment on the matter when contacted yesterday.

Ten new offshore projects in China will start in 2013 and capital spending will rise to between $12 billion and $14 billion, Cnooc said in January. This will help secure targeted production growth of 6 percent to 10 percent for 2011-2015, Chief Financial Officer Zhong Hua said on March 22.

The company completed the $15.1 billion purchase of Canadian energy producer Nexen Inc., its largest overseas acquisition, earlier this year.

Prior Sale

Cnooc last sold dollar bonds in April last year, raising $2 billion via an offer of securities due May 2022 and May 2042. Sinopec’s $3.5 billion sale on April 18 is currently the second-largest in Asia outside of Japan, after a $5 billion offering from Hutchison Whampoa Ltd. in November 2003. CNPC borrowed $2 billion on April 9 in three tranches which each had record-low coupons.

Average yields for oil and gas businesses in the region fell 18 basis points to 4.31 percent in April, the most in seven months, according to JPMorgan Chase & Co. indexes. That compares with 4.69 percent for all corporates in the region.

Chinese firms pay an average 419 basis points more than U.S. Treasuries for dollar-denominated debt, according to the JPMorgan data. That’s down from a high last year of 749 basis points in January. Asian issuers pay an average 285 basis points, the data show.

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