OREANDA-NEWS. October 02, 2014. Oil and gas giant China Petrochemical Corp has announced its second asset injection deal in a week, injecting its oil machinery business into its Shenzhen-listed drilling equipment and chemicals manufacturing unit, Kingdream, for 1.6 billion yuan (HKD2 billion).

Kingdream had agreed to buy all of China Petrochemical's Sinopec Petroleum Engineering Machinery unit, Kingdream said in a filing to the Shenzhen stock exchange. "Upon completion of the deal, Kingdream's product line will expand from drill bits to a wider array of products used in both onshore and offshore oil and gas drilling and transportation," Kingdream said. "It will improve our product structure and expand our sales, profit and capacity to cope with market risks." Sinopec Petroleum Engineering Machinery makes machines used in drilling and fracturing underground formations to release oil and gas, as well as steel pipes used to transport them. Kingdream plans to issue 120 million new shares to raise no more than 1.8 billion yuan to pay for the acquisition.

The deal forms part of China Petrochemical's state enterprise reform, which will subject more of its assets to investors' scrutiny and add pressure for it to improve its profitability. China Petrochemical announced on Friday that it was injecting 24 billion yuan of oilfield services operations into Hong Kong and Shanghai-listed Sinopec Yizheng Chemical Fibre. Yizheng will sell all of its chemical production assets to China Petrochemical's listed flagship, China Petroleum & Chemical.

Kingdream's first-half net profit tumbled 85 per cent year on year to 7.9 million yuan as lower domestic exploration expenditure cut demand for its mainstay product, cone drilling bits. The firm forecast net profit would rise to 136.3 million yuan this year and 170.2 million yuan next year from 67.1 million yuan last year.