CNOOC Limited (CEO), China’s dominant producer of offshore crude oil and natural gas, reported its first-half 2014 interim results yesterday. Net profit decreased 2.3% year over year to 33.59 billion yuan (US$5.47 billion), or 0.75 yuan per share, mainly due to higher costs.
Oil and gas sales were 117.1 billion yuan ($19.1 billion), up 5.7% year over year.
Production
In the first half of 2014, CNOOC recorded net production of 211.6 million barrels of oil equivalent (MMBoe), up approximately 6.8% from the year-ago level. The improvement was mainly attributable to the production contribution from the acquisition of Nexen Inc, the new oil and gas fields, production efficiency of Buzzard oilfield in the U.K. North Sea and ramp-up of activities at Long Lake oil sands projects. Nexen contributed 36.3 MMBoe of the production output. 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 increased 2.0% year over year to $106.30 per barrel. Realized gas price rose 13.5% to $6.44 per thousand cubic feet (Mcf) from the year-ago level.
Our Take
We remain optimistic about 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.
The company in the first half of 2014 made 9 discoveries and announced 23 successful appraisal wells offshore China.
CNOOC currently holds a Zacks Rank #2 (Buy). Investors interested in the same sector could consider stocks like Weatherford International plc (WFT), Sanchez Energy Corp (SN) and Sunoco Logistics Partners L.P (SXL). All of these have a Zacks Rank #1 (Strong Buy) and are expected to outperform the market over the next few months.
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