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Analyst Blog

Chinese offshore giant – CNOOC Ltd. (CEO - Analyst Report) reported first-quarter 2013 revenues of 56.18 billion yuan ($8.95 billion), up approximately 14% from the year-earlier level. The upside came primarily from growth in production volume.

Production

China’s dominant producer of offshore crude oil and natural gas, CNOOC achieved net production of 93.6 million barrels of oil equivalent (MMBoe), up approximately 17.3% from the year-ago level. The positive performance 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 increase.

Price Realizations

The company’s average realized oil price decreased 8.7% year over year to $110.29 per barrel. Realized gas price decreased 1.5% to $5.79 per thousand cubic feet (Mcf) from the year-ago level.

Capital Expenditure

CNOOC capital expenditure in the reported quarter was $2.36 billion, representing an increase of 53.5% from a year ago.

During the quarter, CNOOC was busy drilling 6 successful appraisal wells offshore China and it made 5 new discoveries in total. Among these, Penglai 15-2-6/15-2-7/15-2-8D have the potential to be developed into large sized oil and gas fields.

Our Take

We remain optimistic on CNOOC as its 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.

Again, CNOOC completed the acquisition of Canadian energy producer Nexen Inc. for approximately $15.1 billion in cash, in Feb 2013. The company also completed the purchase of a partial working interest in exploration areas 1, 2 and 3A in Uganda.

The company currently carries a Zacks Rank #3 (Hold). However, companies like Harvest Natural Resources Inc. , Lehigh Gas Partners LP and EPL Oil & Gas, Inc. , with a Zacks Rank #1 (Strong Buy), are expected to outperform the market over the next few months.
 

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