China's dominant producer of offshore crude oil and natural gas,
) first half 2012 net profit decreased 19% year over year to 31.869
billion yuan (US$5.04 billion), or 0.71 yuan per share ($11.23 per
ADS), due to rising costs and lower output (exchange rate: 1.00
yuan = US$0.1581, 1 ADS = 100 shares).
Total revenue in the period was 118.27 billion yuan (US$18.70
billion), down 5.1% from the year-earlier level. Oil and gas sales
were 95.66 billion yuan ($15.12 billion), down 1.4%.
CNOOC achieved net production of 160.9 million barrels of oil
equivalent (MMBoe), down approximately 4.6% from the year-ago
level. Of the total production, almost 79% was oil and liquids and
the remaining 21% constituted natural gas. This underperformance
was related to the overhaul of Penglai 19-3 oilfield production at
Bohai, the scheduled maintenance and the divestiture of the ONWJ
block in Indonesia.
The company's gas volume dropped nearly 6% to 195.7 billion cubic
feet (Bcf) from the year-ago level of 208.2 Bcf, while its liquid
production fell nearly 4.7% year over year to 127 million barrels
in the six-month period.
The company's all-in cost for the first six months of 2012 was
$34.60 per barrel, signifying a rise of 13.1% from the prior-year
The company's average realized oil price increased 8.1% year over
year to $116.91 per barrel, while its realized gas price increased
nearly 20% to $5.90 per thousand cubic feet (Mcf) from the year-ago
level of $4.92 per Mcf.
CNOOC spent US $3,867 million as capital expenditure, representing
an increase of 71.9% from the year-ago level.
It was a busy first half for CNOOC with 10 new finds and 18
successful appraisal well drillings offshore China. The Qinhuangdao
29-2, Luda 21-2 as well as Luda 6-2 at Bohai,
Penglai 9-1 and Dongfang 13-2 were among them.
We remain optimistic on CNOOC as we believe the company's
performance reflects its premium assets portfolio, excellent
execution strategy, unique position as a pure oil play and
potential transactions in the merger and acquisition space.
During the first half, the company made significant developments in
its scheduled project agenda. CNOOC has cut a deal to purchase
Canadian energy producer
) for approximately $15.1 billion in cash. Should the deal go
through, it will be China's biggest foreign takeover so far,
reflecting the international land grab trend among the country's
The company made significant exploration development during the
first half of 2012, mainly by gaining a mid to large sized new oil
discovery and successful appraisal of a large oilfield in Bohai.
CNOOC also expects 4 new projects to come online in offshore China
in 2012. Based on the company's rich resource base, CNOOC has
created a solid foundation for future growth.
However, weak half yearly volume - owing to the deferral of
production of Penglai 19-3 oilfield in Bohai Bay, expiry of Madura
as well as sale of ONWJ in Indonesia - remains our concerns. The
Penglai 19-3 field remains operated by U.S. major
) and the company has not yet received the government nod to reopen
the oilfield in eastern China's Bohai Bay.
Despite weak volumes, CNOOC believes that it will be able to attain
a production target of 330-340 mm boe in 2012 on the back of
various organic and inorganic ventures.
We maintain our long-term Neutral rating on CNOOC ADRs. The company
currently holds a Zacks #3 Rank, equivalent to a short-term Hold
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