Analysts like CNOOC despite net slip

CNOOC , the mainland's largest offshore oil and gas producer, said interim earnings tumbled 10.6 percent as global oil prices softened in the second half of last year and the first half this year.

But analysts remain upbeat on the outlook for CNOOC, based on a rebound in crude oil prices and discovery of a large oilfield in Bohai Bay.

Net profit to June 30 was 14.55 billion yuan (HK$15.02 billion), compared with 16.28 billion yuan the same time last year. Turnover fell 12.7 percent to 42.22 billion yuan from 48.34 billion yuan. The oil giant declared an interim dividend of 13 HK cents per share, up 8.3 percent from 12 HK cents.

CNOOC is the only one among the three oil giants to report weak bottom line, as it is purely an upstream business.

For the first six months, PetroChina (0857) and Sinopec (0386) reported growth of 1.42 percent and 65 percent respectively.

CNOOC's net oil and gas production jumped 4.5 percent to 85.4 million barrels of oil equivalent.

However, a 5.8 percent drop in realized oil price to US$58.80 (HK$458.64) a barrel was offset by a 1.3 percent climb in gas prices. Realized gas price was US$3.21 per thousand cubic feet.

"The Liuhua 11-1 oilfield successfully resumed production on June 27," chief financial officer and executive vice chairman Yang Hua said yesterday. "Production is back to previous levels at 23,000 barrels a day."

Operations at the oilfield were suspended in May last year after damage caused by typhoon Chanchu. Infrastructure has been repaired and production has begun, CNOOC said.

But CNOOC did not raise its annual production target of 162 million to 170 million BOE this year. "Southern China could be hit by more typhoons, and that could again impact our production," chairman and chief executive officer Fu Chengyu said.

Also, tighter supply of resources, oilfields suspended for inspections and maintenance as well as a sharp decline in capacity at old oilfields could negatively impact production. "From current operations, I am confident we can achieve the production target," Fu said.

CNOOC said it made seven oil and gas discoveries in the first half, including Jinzhou 25-1 oil field on the northern shore of Bohai Bay, which contains abundant reserves of light crude.

Three exploratory wells have been drilled, Yang said.

"Other wells in Bohai Bay have a daily production of 600 to 700 barrels of oil, and ours are over 2,000 barrels a day. "I think it is an amazing discovery," Fu said, adding that the recovery rate of the fields, which contain higher-price light crude oil, must be above 40 percent. He would not disclose estimated reserves in the field.