CNOOC Ltd. (CEO - Free Report) encountered a production hitch at an offshore field in Indonesia, 20 kilometers (12 miles) off Jakarta, following a fire that broke out in an oil storage tanker, Lentera Bangsa.
Although China’s dominant producer of offshore crude oil and natural gas managed to control the fire with ease, the generator is yet to be functional. Workers are constantly spraying water and foam on the vessel in an attempt to begin operations as the earliest. Four people were reported to have been wounded in the episode, with one being immediately transferred to a hospital in Jakarta.
The company had a daily production loss of 15,000 barrels at its southeast Sumatra block, where CNOOC holds the operational interest of 65.5%, along with its co-partners INPEX Sumatra, KNOC Sumatra, Orchad Energy Sumatra, Paladin Indonesia, Paladin UK and Paladin Resources. Crude oil production is estimated at 48,000 barrels per day and gas at 1.56 million cubic feet per day at the block.
CNOOC is one of the three oil companies in China and one of the largest independent oil and gas exploration and production companies of the world. CNOOC achieved a meaningful increase in total revenue in the first half of the year and we believe it will be further augmented by significant capital injection for upstream activities in the next five years. The company also stated 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.
We remain positive on CNOOC as we believe its performance reflects its premium assets portfolio, excellent execution strategy, unique position as a pure oil player and potential transactions in the merger and acquisition space. While we continue to be positive on the long-term growth options for CNOOC, offshore China, deepwater and unconventional, the loss of production momentum and absence of catalysts make us less bullish on the near term. We continue to maintain our Neutral recommendation on CNOOC, which competes with China Petroleum & Chemical Corp. (SNP - Free Report) .