Kunlun Energy shares surge after asset deal

Shares of Kunlun Energy Co hit a seven-month high in Hong Kong on Tuesday after its parent PetroChina Co said it was selling its entire holding in PetroChina Kunlun Gas to Kunlun Energy for 14.8 billion yuan ($2.28 billion).

Following the announcement, Kunlun Energy shares jumped by about 3 percent to 6.86 yuan on the Hong Kong Stock Exchange.

China National Petroleum Corp, also known as PetroChina, had formed two companies－Kunlun Energy and PetroChina Kunlun Gas－to expand its natural gas business in China. It controlled 58.3 percent of Kunlun Energy and 100 percent of PetroChina Kunlun Gas.

PetroChina has transferred its liquefied natural gas business and pipeline assets to Kunlun Energy, making it the sole distributor of LNG for commercial purposes. PetroChina Kunlun Gas, on the other hand, distributes fuel to households in more than 100 cities.

However, the State-owned enterprise, the country's biggest oil and gas producer, started to consolidate its natural gas sector recently as there were overlaps and internal competition in several businesses.

The takeover will help create a unified natural gas operator and retailer and help compete effectively against private rivals like China Gas Holdings Ltd, experts said.

"The move will strengthen the company's natural gas business and reduce operating costs," said Liu Yijun, a professor at China Petroleum University.

During the first three quarters of this year, PetroChina's profits from the natural gas and pipeline sector rose by 175 percent to 25.4 billion yuan over the same period in 2014.

He said that the surge in commercial natural gas prices was responsible for the profits.

In November, PetroChina said it was selling a 50 percent stake in its subsidiary Trans-Asia Gas Pipeline for 15.5 billion yuan to bolster its finances amid weak oil and gas prices.