This undated photo shows a CNOOC Ltd floating production, storage and off-loading vessel approaching a CNOOC facility in the Bohai Sea. The nation's largest offshore oil and gas producer said Thursday its first-half net profit more than doubled year-on-year. Ding Jianzhou / Imaginechina via Bloomberg News

Offshore oil producer offers an interim dividend of HK$0.21/share

CNOOC Ltd, the largest offshore oil and gas producer in China, beat market estimates by doubling its interim net profit on strong production growth and higher oil prices.

Net profit for the first half ended June surged 109.6 percent to 25.99 billion yuan from 12.4 billion yuan a year earlier as revenue more than doubled to 83.2 billion yuan from 40.6 billion. The company declared an interim dividend of HK$0.21, up from HK$0.20 a year earlier.

The oil explorer, with five new discoveries and five successful appraisals made so far this year, achieved a record production of 149 million barrels of oil equivalent during the period, representing a 40.8 percent growth year-on-year.

The international crude oil price maintained an upward trend in the first half, averaging around $78 per barrel, which was 52 percent higher from the same period last year. In parallel, CNOOC realized an average oil price of $76.59 per barrel, up 55.2 percent year-on-year.

Looking into the second half of the year, further good news could be expected from the company, according to Ida Cheng, an analyst with Phillip Securities.

"We think oil price reached its low point in late May this year, and any price below $67 per barrel is not likely," she said in a research note.

"As the crude price bounces back, CNOOC will show stronger performance as well," Cheng added.

CNOOC targets a full year output of 290 million barrels of oil equivalent. With production of several new projects in the pipeline, the company's whole-year goal remains deliverable, some analysts said.

Apart from its established core areas of exploration and production, including the country's continental shelf and the South China Sea, the company is also counting on overseas exploration for its long-term growth.

CNOOC acquired 50 percent interest in Bridas this May, which will help the company expand its production by about 16.8 million barrels a year on average.

Future merger and acquisitions will be conducive to the company's medium- and long-term growth, CNOOC said in a statement accompanying its interim results.

Despite the second-best interim profit ever, the rising cost of oil exploration and production remains a great challenge to the company's profitability.

"Even though we have led the industry in terms of profitability in recent years, our cost is undoubtedly under upward pressure," the company said in the statement.

Along with its earnings report, the company announced that CEO Fu Chengyu will resign from the post and be replaced by President and CFO Yang Hua. "I'm glad we were able to locate an ideal successor, Yang Hua, who has devoted himself to CNOOC Ltd for more than 20 years and has proven himself a robust operator in the toughest circumstances," said Fu in a statement, who will remain chairman of the board.

Li Fanrong, a non-executive director, will replace Yang as president.

China Daily

(HK Edition 08/20/2010 page3)