The Pakistan government scrapped the sale of a 10% stake in Oil & Gas Development on Saturday after investors only purchased about half the shares on offer.
The government currently owns 75% of Oil & Gas and aimed to sell up to 323 million global depository receipts, or about 7.5% of the free-float, in the secondary share sale, at a fixed price of PRs216 per share. It initially sought to raise $816 million but the total value of the block shrunk as a result of a 17% decline in the share price since mid-September.
But of the 323 million shares on offer, investors only subscribed to about half of that after the book building process, leading the government to shelve the share sale until market conditions improve, according to a statement on the Cabinet Committee on Privatisation (CCOP)'s website.
Finance Minister Ishaq Dar chaired a weekend meeting via video conference from Dubai, noting that it was not feasible to go ahead with the divestment plan now and should wait until global markets improve.
He also said that Pakistan's economy had the "resilience to go through this difficult phase and there was no need to go ahead with the deal in an unfavourable atmosphere."
The company's profits fell 16% year-on-year to PRs28.3 billion ($275.9 million) in the quarter ended September 30. In a statement, Oil & Gas blamed higher operating expenses at its development and production units, as well as increased spending on exploration activities.
In addition, oil prices fell to a three-year low last Tuesday after Saudi Arabia unexpectedly cut prices for crude sold to the US.
The divestment of the company, which explores and develops oil and natural gas properties in Pakistan, would have been Pakistan's second equity deal this year after it sold its entire stake in United Bank in a block trade in June. And barring a few small follow-ons, these share sales are the country's first equity deals since Habib Bank's $134 million initial public offering in August 2007.
The Oil & Gas divestment is the latest effort in the government's privatisation drive. Failure to offload the stake will be seen as a blow to Pakistan's attempts at kick-starting its economic revival plan.
Citi and Bank of America Merrill Lynch are handling the international tranche, while local bank KASB Group is focused on the domestic orders.