China's premier offshore oil company China National Offshore Oil Corp. (CEO) or CNOOC Limited announced that its parent company – CNOOC – has inked two production sharing contracts (PSCs) with SK Innovation Co. Ltd. The company’s share price, however, has been trending downward post announcement and has shown a 0.3% fall.
The PSCs relate to two blocks – 04/20 and 17/03 – located in the Pearl River Mouth Basin in the South China Sea. Spread across a total area of 5,138 square kilometers, Block 04/20 has a water depth of 50–100 meters. Block 17/03 coves a total acreage of 7,686 square kilometers and lies in a water depth of 50–100 meters. CNOOC’s Open Blocks in Offshore China for the year 2012 included both these blocks.
Per the terms of the PSCs, SK will operate both the blocks. The costs required for the exploration operations will, however, be shared by CNOOC and SK in a proportion of 20% and 80% of participating interest, respectively.
The scope of the contract includes 2D seismic data surveys and drilling of exploration wells. During the development phase, CNOOC has the right to participate in about 60% of the working interest in any commercial discoveries in the blocks.
CNOOC will hand over all of its rights and obligations under the above-mentioned PSCs, excluding those relating to CNOOC’s administrative functions, to CNOOC China Limited – a subsidiary of CNOOC Limited – after signing of the contracts.
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 is the only company permitted to conduct exploration and production activities with international oil and gas companies off the shores of China.
CNOOC currently carries a Zacks Rank #4 (Sell). Better-ranked players from the energy sector include InterOil Corp. (IOC), Golar Energy Partners LP (GMLP) and Hallador Energy Co. (HNRG). Each of these stocks sports a Zacks Rank #1 (Strong Buy).
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