Cnooc Plans New Oil Fields, Acquisitions After Record Profit

Cnooc Ltd. (883), China’s biggest offshore oil producer, plans to start new fields at home and add assets abroad after its fastest output growth boosted annual profit by 85 percent.

“Rapid growth of the company’s production will continue over the next few years,” Chairman Fu Chengyu said yesterday after reporting net income reached a record 54.4 billion yuan ($8.3 billion). Cnooc will tap its cash flow to ramp up exploration and acquire more assets, Fu said in Hong Kong.

Cnooc aims to boost production by as much as 11 percent this year after commencing nine projects in China last year and spending more than $8 billion on overseas assets. The Beijing- based explorer will also gain from crude prices that have risen 29 percent in a year in New York as the global economy recovered.

“I can see production exceeding this year’s target,” Shi Yan, an analyst at UOB-Kay Hian Ltd., said by phone from Shanghai. “With overseas acquisitions, I can see similar levels of increase in output in the coming years.”

Cnooc’s 44 percent output expansion last year helped the company beat Exxon Mobil Corp. (XOM)’s 58 percent profit gain and Royal Dutch Shell Plc’s 61 percent earnings growth. Exxon’s output rose 13 percent, while Shell had an 11 percent increase.

Output may rise to as much as 365 million barrels this year, Cnooc said. The Eagle Ford project in Texas and Bridas Corp. in Argentina, in which the Chinese company bought stakes last year, may deliver production in 2011, Cnooc said in January.

Acquisitions and discoveries helped Cnooc replace 202 percent of its proven oil and gas reserves last year, the highest rate since 2003, according to the earnings statement. Ten new projects are being developed in 2011, the company said.

Ample Cash

The shares rose 51 percent in Hong Kong trading in the past 12 months, compared with the 9.6 percent gain in the benchmark Hang Seng index. Cnooc climbed 2.2 percent to HK$18.84 at 9:35 a.m. local time today.

Cnooc will use its “relatively ample” cash flow for exploration and acquisitions and has “no immediate need” for external funding, Fu told reporters. Cash and cash equivalents rose to 39.6 billion yuan last year from 22.6 billion yuan in 2009, according to the earnings statement.

So far this year, Cnooc has made two acquisitions. It agreed in January to buy 33.3 percent of Chesapeake Energy Corp.’s Niobrara shale-gas project for $570 million. Last month, Bridas, in which the Chinese company has a 50 percent stake, agreed to purchase Exxon’s refinery assets in Argentina.

Cnooc also has assets in Australia, Indonesia, Trinidad and Tobago, and Nigeria.

Overseas Production

Overseas production accounted for 20.1 percent of total output last year, compared with 17.4 percent in 2009, Cnooc said in its earnings statement. By 2015, fields outside China may account for more than 30 percent of overall production, the company said in January.

Acquisitions of overseas assets since the beginning of last year included the $3.1 billion purchase of a 50 percent stake in Bridas. In October, Cnooc said it will buy a 33.3 percent stake in Chesapeake’s Eagle Ford shale project in the largest acquisition of a U.S. oil and gas asset by a Chinese company.

Cnooc’s second-half profit gained 66 percent to 28.4 billion yuan, according to calculations made by subtracting first-half earnings from the 2010 net income. That beats the previous semi-annual record of 27.5 billion yuan in the first half of 2008.

The company didn’t give second-half figures in its earnings statement. Jiang Yongzhi, the Beijing-based spokesman for Cnooc, didn’t reply to three phone calls to his office seeking comment.

Net income may rise to 63.7 billion yuan this year, according to a mean estimate of 17 analysts surveyed by Bloomberg. Twenty out of 29 analysts surveyed rate the shares a “buy.” Five recommend holding the stock.

--John Duce and Wang Ying. With assistance from Chua Baizhen in Beijing. Editors: Ryan Woo, Paul Gordon.

To contact the reporter on this story: John Duce in Hong Kong at +852-2977-2237 or Jduce1@bloomberg.net; Ying Wang in Beijing at +86-10-6649-7562 or ywang30@bloomberg.net

To contact the editor responsible for this story: Amit Prakash at +65-6212-1167 or aprakash1@bloomberg.net.

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