Cnooc Revenue Tumbles as Oil Rout Overpowers Output Boost

  • Realized crude oil price dropped 51% to $48.84 a barrel
  • Oil and gas production rose 24% to 127.5 million boe

Cnooc Ltd., China’s biggest offshore oil and gas producer, posted a 32 percent decline in third-quarter sales as a slump in energy prices outpaced a boost in production and a cut in spending.

Revenue from oil and natural gas output was 36.3 billion yuan ($5.7 billion) in the three months ended Sept. 30, the Beijing-based explorer said in a statement to the Hong Kong stock exchange Wednesday. Cnooc doesn’t disclose profits quarterly. The drop in revenue was narrower than the slump in oil prices during the period while the company’s output is on track to reach the high end of its annual target.

“Cnooc has delivered an output beyond most people’s expectations,” Neil Beveridge, an analyst at Sanford C. Bernstein & Co., said by phone from Hong Kong. “Cnooc has performed very well and better than expected” given the drop in oil prices and pressure to control costs, he said.

Brent, the benchmark for more than half of the world’s crude, averaged about $51 a barrel in the third quarter, compared with more than $103 a year ago. Shares of Cnooc, which earns almost all its income from oil and gas production, have dropped 31 percent in the past year as the explorer’s efforts to raise output and cut costs were stymied by crude’s plunge. The Bloomberg Asia Pacific Oil and Gas Index has fallen about 15 percent over the same period.

Rising Output

Realized oil prices during the quarter fell 51 percent from a year ago to $48.84 a barrel, Cnooc said in the statement. Net oil and gas production rose 24 percent to 127.5 million barrels of oil equivalent, compared with 103 million barrels a year ago. The company has produced 367.5 million barrels of oil equivalent in the first three quarters, according to data compiled by Bloomberg, while targeting full-year output of as much as 495 million.

The company made three new discoveries and drilled 14 successful appraisal wells in the quarter while cutting capital spending 44 percent to 14.8 billion yuan, it said in the statement.

“Spending less this year means production at some projects will be affected in 2016 and Cnooc has to live with the reality,” Zhong Hua, the company’s chairman, said on a conference call after the results were released. “There will be less and less room for capital spending cuts down the road as you can only cut your costs to a certain level.”

Cnooc shares declined 2 percent to HK$8.57 before the statement was released. Cnooc’s first-half profit dropped 56 percent to 14.73 billion yuan, the company said in August.

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