Sat, Oct 08, 2005 page12

• HK regulator rebukes CNOOC

  OPENNESS The Hong Kong Stock Exchange issued a public criticism of the Chinese oil giant for selective disclosure of company data and laxity in consulting shareholders

  • AP
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  Chinese state-controlled oil giant CNOOC Ltd (中國海洋石油) has been criticized by the Hong Kong Stock Exchange for selective disclosure of information and failing to seek the required shareholder approval for some deals.

  Thursday's official censure, a rare public rebuke to a major public company, was an embarrassment for CNOOC, the listed arm of China National Offshore Oil Corp and one of China's best-known companies thanks to its failed bid earlier this year to acquire California-based oil and gas producer Unocal Corp.

  The regulator's decision is particularly noteworthy as CNOOC has long been praised for the relative transparency and professionalism of its management compared with other Chinese state firms.

  In a statement late Thursday, the listing committee of the stock exchange said that on two occasions CNOOC's chief financial officer gave analysts information about the company's finances that wasn't contained in its published statements.

  In October 2002, he made an estimate of the company's profit, and on July 2003 he said the company was likely to pay a special dividend. On both occasions CNOOC had to publish clarifications after the information appeared in analyst reports and press articles.

  "There is nothing more corrosive of market confidence than the feeling that some investors are excluded from an inner circle of privileged counter-parties," Richard Williams, head of listing at the stock exchange, said in a statement.

  "The timely and accurate flow of information to all shareholders and investors is of vital importance," he said.

  Reacting to the censure, CNOOC said in a statement yesterday that it regretted the imposition of a censure, adding: "Although the Company has issued statements to address the matters after the events, we once again offer our apology."

  CNOOC said it had observed the principles of transparency and corporate governance since its listing in 2001.

  "We vow to maintain utmost honesty and openness in listening to the opinion and advice made by the public and regulatory bodies, and strive to achieve further enhancement," it said.

  "We will be more cautious in disclosing corporate information and continue our proactive communications with the public," said CNOOC.

  The exchange also declared that CNOOC had breached listing rules by failing to seek prior shareholder approval for transactions with CNOOC Finance Corp, a unit of its parent company. CNOOC and its sister companies deposit much of their revenue with CNOOC Finance, which essentially acts as the treasury department for the group.

  CNOOC sought and received shareholder approval in April last year to continue placing those deposits with CNOOC Finance, rather than with a commercial bank. But the exchange said it should also have asked for approval for the deposits it had made between June 2002 and March last year, which totaled as much as 6.6 billion yuan (US$815.6 million), or 17 percent of CNOOC's assets.

  "The case is another example of the granting of financial assistance by a listed issuer to a connected party over a lengthy period of time without proper approval," Williams said.

  "Such conduct prejudices the interests of independent shareholders," he said.

  The last firm censured by the stock exchange for selective disclosure was Tingyi (Cayman Islands) Holding Corp (頂益控股). The exchange criticized the firm in January for actions in July 2000 and March 2001.
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