Moody's Says Overseas Deals May Increase Cnooc Debt, Raise Operation Risks
Cnooc Ltd.’s debt may rise if China’s biggest offshore oil explorer increases overseas acquisitions following its stake purchase in Chesapeake Energy Corp.’s Eagle Ford project, Moody’s Investors Service said.
“More such acquisitions will not only turn Cnooc from a net-cash status to a net-debt position, they will also raise Cnooc’s operational risks,” Moody’s analysts Renee Lam and Peter Speer wrote in a Weekly Credit Outlook published today.
The $1.08 billion investment in the Texas shale oil and gas project would give Cnooc its first onshore energy asset in the U.S. and the company will pay an additional $1.08 billion in drilling costs. Cnooc will have no difficulty in financing the Eagle Ford deal, announced on Oct. 11, given its $4.7 billion cash balance as of mid-2010, according to the report.
“We do not expect the Chesapeake investment to be the last of Cnooc’s buying overseas given its quest for operational experience via tie-ups with foreign firms, encouragement from the Chinese government, and the company’s strong balance sheet,” the analysts said.
Moody’s said on Oct. 11 that Cnooc’s A1 ratings aren’t immediately affected by the Eagle Ford stake purchase. The ratings company on Oct. 8 put Cnooc and its state-controlled parent on review for a possible upgrade after saying it’s reviewing China’s debt rating.
The country’s third-largest oil company has spent at least $3.8 billion on overseas acquisitions in the past year as China’s energy demand surges. Cnooc’s debt has risen 51 percent to 28.3 billion yuan ($4.3 billion) as of June from December, partly because of its $3.1 billion stake purchase in Bridas Corp. this year, according to Moody’s.
The shares fell 1.8 percent to HK$16.10 in Hong Kong trading as of the midday break, compared with the 1 percent decline in the benchmark Hang Seng Index.
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