CNOOC to raise capital spending amid oil recovery
HONG KONG: CNOOC Ltd plans to raise capital spending to the highest since 2014 and has revised upward its oil and gas output targets for this year as China’s biggest offshore producer recovers from crude’s crash.
The Beijing-based explorer sees capital expenditure (capex) at 70 billion to 80 billion yuan (US$11.1bil to US$12.7bil) for 2018, it said in a statement to the Hong Kong stock exchange.
It raised its production target to between 470 million and 480 million barrels of oil equivalent, poised for the first increase in three years.
CNOOC’s cost cuts and efficiency, as well as the quality of its overseas projects in the pipeline from Africa to the Gulf of Mexico and South America, have been contrasted by analysts with its bigger, slower state-owned rivals PetroChina Co and Sinopec, officially known as China Petroleum & Chemical Corp.
“The new output guidance should provide investors some confidence on the growth perspective going forward,” Tian Miao, a Beijingbased analyst at Everbright Sun Hung Kai Co, said by phone.
“The only risk at the moment is the oil price. CNOOC’s plan can only function well at a relatively higher price level.”
Investors are now looking to a possible reserves upgrade, driven by its 25% share in the Exxon Mobil Corp-operated Stabroek block offshore Guyana. CNOOC is expected to announce revised reserves in its annual results, which typically come late March. The company said in a presentation online that reserve life is “expected to see significant increase” as it brings on Stabroek’s Liza field and Libra in Brazil, as well as re-booking reserves from the Long Lake oil sands project in Canada.
CNOOC is most exposed among China’s big three oil companies to a rebound in crude prices as its lack of refining capacity leaves almost all its revenue from exploration and production. Global benchmark crude Brent in 2017 averaged almost US$55 per barrel, up 21% from the previous year. Prices have averaged about US$69 a barrel so far this year.
Net income for 2017 will jump 50-fold to almost 32 billion yuan, according to the mean of 22 analyst estimates compiled by Bloomberg.
The 2018 output target announced yesterday is higher than its year-ago projection of 455 million to 465 million barrels of oil equivalent. CNOOC produced 469 million barrels of oil equivalent in 2017 (about 1.28 million barrels a day), the second year of declines, it said.
CNOOC’s production may advance by almost 20% to 562 million barrels of oil equivalent by 2021 thanks to strong growth in overseas projects, Neil Beveridge, a senior analyst at Sanford C. Bernstein & Co in Hong Kong, wrote in a Jan 23 research note.
“If CNOOC can deliver on growth projects, the company will transform into a truly global Chinese E&P for the first time,” Beveridge wrote.
Shares closed down 0.8% at HK$12.08 before the statement was published, pacing losses on the city’s benchmark Hang Seng Index.
Other details from the 2018 strategy preview include:
> Capital spending in 2017 estimated to total 50 billion yuan, little changed from the previous year.
> About 49% of this year’s spending will be focused overseas.
> Production this year will be split 81% oil, 19% gas.
> Five new projects will come online, including the Stampede oil field in the US and the Dongfang 13-2 gas field offshore China.
> Plans to drill 132 exploration wells. Net production in 2019 and 2020 is forecast to be about 485 million barrels and 500 million barrels of oil equivalent, respectively — Bloomberg