China's primary offshore oil company China National Offshore Oil Corp. (CEO), also known as CNOOC, reported a natural gas discovery with its Lingshui 25-1-1 exploration well drilled in the northeast part of Ledong Sag in the Qiongdongnan basin of the South China Sea. The well’s average water depth is about 980 meters.
The discovery follows the Lingshui 17-2 discovery in the same basin in first-quarter 2014. The two discoveries have not only established the exploration potential of the structural and lithologic trap in the central Canyon channel of Lingshui Sag but also validate the superior exploration prospects in the deepwater area of the Qiongdongnan basin.
The well was drilled and completed at a depth of 4,000 meters and encountered an oil and gas pay zone with a total thickness of 73 meters. On testing, the well produced at rates of 35.6 million cubic feet per day (MMcfd) of gas and 395 barrels per day (b/d) of oil.
CNOOC is one of the three leading oil companies in China and one of the largest independent oil and gas exploration and production companies of the world. It is China’s dominant producer of offshore crude oil and natural gas and engages in the exploration, development, production, and sale of crude oil, natural gas, and other petroleum products. CNOOC Ltd. is the only company permitted to conduct exploration and production activities with international oil and gas companies off the shores of China.
We remain positive on CNOOC’s performance, which reflects its premium assets portfolio, excellent execution strategy, unique position as a pure oil player and potential transactions in the merger and acquisition space.
CNOOC’s growth profile should get a boost over the next 3 to 5 years from numerous development projects offshore China, international growth from recent acquisitions, and intensive exploration and development programs with its partners.
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 in 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 last 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 holds a Zacks Rank #5 (Strong Sell). However, there are better-ranked stocks in the oil and gas sector such as Spectra Energy Partners LP (SEP), Exterran Holdings, Inc. (EXH) and Seadrill Partners LLC (SDLP). Each of these holds a Zacks Rank #1 (Strong Buy).
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