On Jan 14, 2013, we upgraded the Chinese energy giant
) to Outperform. The company's premium assets portfolio,
excellent execution strategy, unique position as a pure oil
player and potential transactions in the merger and acquisition
space are the key drivers of its growth.
CNOOC LTD ADR (CEO): Free Stock Analysis
NEXEN INC (NXY): Free Stock Analysis Report
ROYAL DTCH SH-B (RDS.B): Free Stock Analysis
SUNOCO LOGISTIC (SXL): Free Stock Analysis
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Why the Upgrade?
The Chinese company believes that it will be able to maintain a
6-10% compound annual production growth rate over the next five
years backed by various organic and inorganic measures.
CNOOC has made significant progress in its scheduled project
agenda. The recent successful oil fields commissioned include the
Panyu 4-2/5-1 oilfield adjustment project, the Panyu 4-2/5-1
oilfield project, Weizhou 11-2 and Weizhou 6-9/6-10 − in two
different plays in China. These projects bear evidence to its
constant efforts to upgrade its portfolio and enhance shareholder
During the third quarter of 2012, the company made 8 successful
appraisals. The company confirmed Kenli 9-1 as a mid-sized (with
30-50 million tons of oil in place) and Dongfang 13-2 as a
large-sized gas discovery (holding about 30-80 billion cubic
meters of gas in place) in west South China Sea. Both fields will
take 3-5 years to come online.
Further, CNOOC's purchase of
) for approximately $15.1 billion in cash received approval by
the Minister of Industry, Canada, in December 2012.The deal will
enhance CNOOC's proven reserves by 30% and will help it to expand
its holdings in Canada. Moreover, the purchase of Nexen will make
CNOOC the operator of the largest oil field in the U.K. and the
biggest contributor to Forties Blend crude − Buzzard.
The National Development and Reform Commission of China's
approval of the development plan for Penglai 19-3 in December
2012 is an indication of the early commencement of operations on
the field that is expected to augment the company's earnings
Other Stocks to Consider
Besides CNOOC, other stocks in the oil and gas sector that are
currently performing well include
Sunoco Logistics Partners L.P.
Royal Dutch Shell Plc
). Both companies carry a Zacks Rank #1 (Strong Buy).