China's primary offshore oil company China National Offshore Oil Corp. (CEO), also known as CNOOC, announced that the Huizhou 25-8 Oilfield has commenced production. Simultaneously, its adjustment project – Xijiang 24-3 Oilfield Xijiang 24-1 District Joint Development Project – has also started production. Huizhou 25-8 Oilfield and Xijiang 24-3 Oilfield Xijiang 24-1 district project is a joint development venture sharing one floating production storage and offloading unit (FPSO).
This project is located in the Pearl River Mouth Basin of the South China Sea with an average water depth of approximately 100 meters. The main production facilities include 2 drilling and production platforms and 29 producing wells. Currently, there are 4 wells producing approximately 6,300 barrels of crude oil per day, and the project is expected to reach peak production of approximately 33,000 barrels daily in 2016.
This is an independent project in which the company holds a 100% equity interest and acts as the operator. The Xijiang 24-3 oilfield started production in Nov 1994. Subsequently, in Jan 2010 the operatorship was transferred to CNOOC.
During the third quarter, CNOOC made one discovery and drilled nine appraisal wells off the coast of China. The company also made a deepwater gas discovery offshore Gabon. Management remains optimistic about its performance, which is reflected through its premium assets portfolio, excellent execution strategy, unique position as a pure oil play and potential transactions in the merger and acquisition space.
Performance in the recently reported third quarter was muted for the company. This was evident from the quarter’s total revenue of 55.06 billion yuan (US$8.9 billion), which was down almost 4% from the year-earlier level. Out of the total revenue, approximately 90% came from oil and liquids sales, which declined 6% to 49.3 billion yuan (US$8 billion). The top line was hurt by lower oil price realizations.
CNOOC currently has a Zacks Rank #4 (Sell), implying that the stock will underperform the broader U.S. equity market over the next one to three months. Better-ranked players in the energy sector include Cheniere Energy Partners LP. (CQP), Murphy USA Inc. (MUSA) and Sandridge Mississippian Trust II (SDR). All these stocks sport a Zacks Rank #1 (Strong Buy).
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