SEOUL - Samsung Engineering Co Ltd said it was planning a $1.1 billion rights issue after a record quarterly operating loss on oil and gas projects in the Middle East, wiping out nearly a fifth of its market value. Citing a “lack of preparation and capability” for handling large, complex projects, the construction arm of South Korea’s biggest conglomerate booked a 1.5 trillion won ($1.3 billion) operating loss in the third quarter and also flagged the sale of its headquarters building. While much of South Korea’s construction industry has been hit by declining margins in the Middle East, Samsung Engineering is more exposed than rivals as most of its revenue comes from overseas projects. Samsung Engineering had won some project contracts at cut-throat prices over rivals including gas and oil facilities at the Shaybah oil field in Saudi Arabia, analysts said. A slide in oil prices has also squeezed investment by oil producers in the Middle East, eating into project margins. “On-the-ground realities were unexpected and market conditions have changed drastically,” said Lee Kwang-soo, analyst at Mirae Asset Securities, adding that the firm had pursued orders aggressively after a change in management five years ago. Its stock plunged 19 percent on Thursday, leaving the company with a market value of just $910 million. At one stage the stock fell as much as 24 percent, taking it near a 10-year low marked in August when ugly earnings from domestic shipbuilders hit sentiment for construction order-based shares. Samsung Engineering said proceeds of the rights issue, to be completed by end-March, would be used to bolster financial stability as would the planned sale of its headquarters, which has a book value of 350 billion won. Baik Jae-yer, a fund manager at Korea Investment Management who holds Samsung Engineering shares, said investors would need to see proof that the company is restructuring before participating in the rights issue. Shipbuilder Samsung Heavy Industries last year proposed a $2.5 billion takeover of Samsung Engineering - part of the Samsung Group’s efforts to simplify its ownership structure as it prepares for a transfer of power from its elderly chief to his heirs. But the deal was abandoned in the face of investor demands for a share buyback. A Samsung Engineering spokesman said on Thursday the firm still has no plans for a merger with Samsung Heavy. Samsung Heavy representatives could not immediately be reached, but the company said this year it would not attempt the merger again. Shares in Samsung SDI, which owns 13.1 percent of Samsung Engineering, fell 5 percent on Thursday. ($1 = 1,138.7000 won)