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CNOOC H1 net falls 55%

(China Daily/Agencies)
Updated: 2009-08-27 08:01

The offshore energy explorer expects net production to grow by more than 15 percent this year. [CFP]

CNOOC Ltd, China's biggest offshore energy explorer, posted first-half profit that exceeded analysts' estimates after oil prices rebounded and the nation's economic recovery spurred demand for fuels.

Net income fell 55 percent to 12.4 billion yuan ($1.82 billion), or 0.28 yuan a share, from 27.5 billion yuan, or 0.61 yuan a share, a year earlier, CNOOC said in a statement to the Hong Kong Stock Exchange yesterday. That's higher than a median estimate of 11.5 billion yuan in a Bloomberg News survey of seven analysts. Sales dropped 42 percent to 40.6 billion yuan.

Crude oil has more than doubled from its February low as the global recession eased, with China's economic growth accelerating to 7.9 percent in the second quarter. Prices still averaged 53 percent less in the first six months than a year earlier, reducing earnings at producers including Royal Dutch Shell Plc and Exxon Mobil Corp.

"CNOOC is seen by investors as a well-run company and one that will do well when the Chinese economy fully recovers," said Gideon Lo, an energy analyst at DBS Vickers in Hong Kong. "The company's performance is tied to demand and the price of oil and we've already seen that crude prices are rising."

The company said it would focus on "cooperation" to boost its overseas output, Fu Chengyu, chairman of CNOOC, told reporters in Hong Kong after the earnings announcement. The company can't make "mass-scale acquisitions" because of the rise of protectionism amid the global slowdown, he said.

Opposition to Chinese investments helped block CNOOC's $18.5 billion bid for Unocal Corp in 2005 and prompted the company to change its acquisition strategy. "CNOOC will acquire stakes in assets rather than buying an entire company," Fu said. "The failure of Unocal has made the company more cautious."

CNOOC said it is bidding for Kosmos Energy's stake in an oil field in Ghana.

"We are participating in the bid," Fu told Reuters. The deal could be worth between $3 billion and $5 billion, according to previous reports.

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The Chinese energy explorer has no intention of acquiring the Repsol unit, he said. "The Repsol talks are only market rumors," Fu said. "The company is not in talks to buy or cooperate with Repsol's unit."

CNOOC's shares have lagged behind the 50 percent gain for China Petroleum & Chemical Corp, Asia's biggest refiner, which posted a fourfold surge in first-half profit after the Chinese government increased State-set gasoline and diesel prices and demand improved. CNOOC didn't benefit from this because its revenue comes almost entirely from oil and gas production.

Oil prices over $60 a barrel are "good" for CNOOC as the cost of production is $20, Fu told reporters after an annual general meeting in May, indicating rising crude prices will help improve the company's earnings performance.

Net production is expected to increase by more than 15 percent this year, Fu said in yesterday's statement.

"The economic recovery is positive for the company's performance," Fu said. "Nevertheless it's our organic growth that will help us ride through the 'winter' quickly."

China's third-largest oil company said in April it planned to boost output to help cushion a likely profit slump this year. Parent China National Offshore Oil Corp will intensify efforts to secure resources overseas in the second half, the company said in a statement on July 27.

The energy explorer and China Petroleum & Chemical Corp said last month they agreed to acquire a 20 percent stake in an offshore block in Angola for $1.3 billion from US oil firm Marathon Oil Corp. About 83 percent of CNOOC's reserves are off the coast of China.