Sinopec and China Petrochemical eye separate listings of assets

China Petroleum & Chemical (Sinopec) and its parent company, China Petrochemical Corporation, are both considering separate listings of their assets in the hope of unlocking billions of dollars in shareholder value. A spokesman from Sinopec said that the company has been evaluating different options for restructuring its businesses because some assets could command higher valuations by themselves. The possible spin-offs that are being considered from the parent company include the oilfield services unit; the engineering and construction unit, which builds refineries and fuel stations; and a producer of catalysts which are used in the refineries. Sinopec, on the other hand, is studying the possibility of separately listing its lubricants blending and distribution unit, as well as its fuel retail operations.

Sinopec to finalize list of possible spin-offs

Three months ago, when crude oil hit more than US$100 a barrel, Sinopec’s price-to-earnings ratio trailed that of its rival PetroChina by almost 50%. The sharp drop in oil prices these past two months have allowed Sinopec to rally and the gap between the two had been slashed by half. “We believe the new chairman of Sinopec, Fu Chengyu, is driving a restructuring program that is aimed at unlocking value for shareholders,” said Simon Powell, CLSA head of Asia oil and gas research. Powell added that Sinopec plans to finalize the list of probable spin-offs by the end of the year and disclose these plans in its next annual report. Senior oil and gas analyst at Sanford Bernstein, Neil Beveridge wrote in a report:”While we would like to see Sinopec break itself up into upstream and downstream companies in the same way in which [oil major ConocoPhillips] is pursuing, we think this is highly unlikely to happen.” Upstream companies are involved in oil and gas production, while downstream companies are into refining and distribution. Powell said that it would be difficult for Sinopec to spin off the fuel retail business because investors would be concerned about the price of the fuel that it would sell to its partially divested retail unit. He added that Sinopec’s retail unit could be worth over US$60. The lubricants business is valued at about US$4.5 billion. (October 5, 2011)