Russia and China Oil Giants Raise Billions in New Capital

For starters, these notes and bonds are only geared toward large investors and institutions. These are generally considered to be 144A private placements and are not registered securities with the Securities and Exchange Commission. Translation: possibly low or no liquidity.

China Petroleum & Chemical Corp. (NYSE: SNP) led the charge on Thursday by selling some $3.5 billion in notes. The deal was sold in 4 tranches and we have heard that the yield spread tightened up considerably due to demand. This is the largest oil refiner in China and investors are feeling confident that it will be there to pay its bills in the years ahead. The offering was $750 million in three-year notes, $1 billion in five-year notes, $1.25 billion in 10-year notes and $500 million in 30-year notes.

Lukoil is the Russian oil and gas raised $3 billion via a dual note offering from the company’s financial unit. The five-year portion was for $1.5 billion, and the 10-year part of the offering was also $1.5 billion.

We do not yet have the pricing finalized from Sinopec, but the spreads were said to be  just over 100 basis points above Treasury yields. That would put the 30-year offering at 4% or just under. Sinopec offered its notes out at less than 3.5% for its 5-year note and just above 4.5% for its 10-year offering.

International oil giants have to be paying close attention to these offerings. With Chinese and Russian oil giants raising billions in new capital at low yields for this long, then we would expect yet more private placements to come down the pipe from large international oil giants.