Shareholders of CNOOC Ltd (中國海洋石油), China's third-largest oil company, defeated a plan that would have given its state-owned parent more control over overseas acquisitions.
The plan to end the publicly traded unit's priority right to make takeovers for the group was opposed by 59 percent of independent shareholders at a Dec. 31 meeting in Hong Kong, the company said in a statement yesterday. CNOOC's board proposed that the parent make the riskier investments for the group, reducing the influence of minority shareholders on its expansion strategy.
Shareholder rights activist David Webb campaigned for investors to defend their right to profit from all the company's overseas projects as set out under the terms of CNOOC's 2001 initial public offering. China has sought to meet increased oil demand by buying fields in countries including Kazakhstan, Indonesia and the Sudan.
"I can see David Webb's perspective but on the other hand the outcome will make it very difficult to acquire oil and gas deals overseas," said Fooy Choy Peng, the Hong Kong-based assistant director of China research at UOB-Kay Hian Ltd. "For some of these deals, government contacts are very important."
CNOOC last year withdrew an US$18.5 billion bid for Unocal Corp, citing opposition from US lawmakers. CNOOC's shares fell 1 percent to HK$5.20 at the 12:30pm lunchtime break in Hong Kong yesterday.
Freeing the parent, China National Offshore Oil Corp, from the restrictions would reduce opportunities for the Hong Kong-traded unit, shareholder activist Webb said on Dec. 15.
Under the Dec. 31 proposal that was rejected by minorities, the parent company would have to get the approval of the unit's board for any overseas acquisition.
"It is far too important to delegate the approval process to a board which is controlled by the parent," Webb said in an interview today. Webb, a director of the Hong Kong stock exchange and publisher of Webb-site.com, said he owns a "token" 50 CNOOC shares.
China's government-run oil companies have been competing for overseas reserves as the nation's demand more than doubled in a decade. CNOOC's shareholders have benefited from the parent's undertaking when the company went public in Hong Kong in 2001 to offer all takeover opportunities to the listed company first, Webb said.
"It would be acceptable if the parent company wishes to be released from the non-compete clause on an individual project where minority shareholders have to approve that," he said. "This makes the group structure cleaner."