We reaffirmed our Neutral recommendation on Chinese offshore
pure play oil and gas exploration and production (E&P)
), on May 9, 2013. Riding on growth in production volumes, the
company reported robust numbers in the first quarter. The company
holds a Zacks Rank #1, which is equivalent to a short-term Strong
CNOOC LTD ADR (CEO): Free Stock Analysis
DAWSON GEOPHYS (DWSN): Free Stock Analysis
EPL OIL&GAS INC (EPL): Free Stock Analysis
SM ENERGY CO (SM): Free Stock Analysis Report
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Headquartered in Hong Kong, CNOOC is one of the three oil
companies in China and among the leading independent oil and gas
E&P companies of the world. The company is a dominant
producer of offshore crude oil and natural gas and engages in the
exploration, development, production as well as sale of crude
oil, natural gas and other petroleum products.
In the first quarter of 2013, CNOOC reported total revenue of
56.18 billion yuan ($8.95 billion), up approximately 14% from the
year-earlier level. The upside came primarily from growth in
CNOOC achieved net production of 93.6 million barrels of oil
equivalent (MMBoe), up approximately 17.3% from the year-ago
level. The growth was mainly attributable to the production
contribution from the acquisition of Nexen Inc, the new oil and
gas projects, the resumption of Penglai 19-3 oil field and the
overseas projects. Overseas production and steady performances by
the already operational oil and gas fields also aided the
CNOOC also has a strong growth profile, exclusivity in the
offshore China region and attractive liquefied natural gas
investments. Also, we are bullish on the company in the near term
owing to its strong revenue growth and significant asset
Over the longer run, however, these positives will likely be
somewhat negated by unpredictable oil and gas prices, which are
inherently volatile and subject to complex market forces.
Realized prices could differ significantly from our estimates,
thereby affecting the company's revenues, earnings and cash flow.
Additionally, the company's future is closely linked with the
successful completion of its growth projects, which in turn,
might be adversely affected by operational hindrances, cost
inflations and overruns and delays in completion.
Other Stocks to Consider
There are other stocks in the sector that also appear rewarding.
EPL Oil & Gas, Inc.
Dawson Geophysical Company
SM Energy Company
), which are expected to perform impressively over the next few
months and carry a Zacks Rank #1 (Strong Buy).