Cnooc Falls After Cutting Output Estimate on Bohai Oil Leaks
Cnooc Ltd. (883), China’s largest offshore energy explorer, had its biggest decline in a month in Hong Kong trading after oil leaks at a field operated by partner ConocoPhillips forced the company to cut its output estimate.
The stock fell as much as 9.2 percent, the most since Aug. 9, to HK$13.82 and traded at HK$14.04 at the 12 p.m. local time break. Cnooc has dropped 24 percent this year, outpacing the 14 percent decline in the benchmark Hang Seng Index.
Cnooc, owner of 51 percent of the Penglai 19-3 field in Bohai Bay, said in a statement yesterday that a shutdown ordered by the maritime regulator will cut its output by 40,000 barrels a day, on top of a 22,000 barrel-a-day loss since the leaks started. The Beijing-based company said it will set up a marine ecology fund to “better assume appropriate responsibility.”
“If the site remains closed for the remaining months of the year, Cnooc’s overall oil output will be cut by 1 percent,” said Gordon Kwan, head of regional energy research at Mirae Asset Securities Ltd. in Hong Kong. “Cnooc is on track to miss its annual production goal.”
The leaks at the country’s biggest offshore field have spilled 3,200 barrels of oil and fluids since June and contributed to Cnooc cutting its annual output forecast by as much as 34 million barrels. State-run Xinhua News Agency said yesterday that ConocoPhillips China Inc. is “facing the wrath of the Chinese public” over its failure to stop the leaks.
Chinese authorities on Sept. 2 ordered the unit of Houston- based ConocoPhillips to halt production at its Penglai 19-3 oil field after finding it still has not fully stopped the leaks. An estimated 870 square kilometers (336 square miles) of Bohai Bay is seriously polluted from the spill, according to Xinhua.
The State Oceanic Administration’s finding undercut a report that ConocoPhillips submitted to the regulator on Aug. 31 saying it had sealed off the sources of the leaks. ConocoPhillips “has neither completely screened out the oil spill risks, nor completely sealed the sources of oil leakage,” the regulator said in its statement.
“We are on track to complete the shutdown of the Penglai 19-3 field by today,” said Donna Xue, Beijing-based spokeswoman at ConocoPhillips, said by telephone today. She declined to comment on the ecology fund or Cnooc’s output estimate.
The shutdown will have an impact on production from the field, ConocoPhillips (COP) said in a statement on Sept. 2, without specifying the size of any reduction. The company pumped an average 56,000 barrels of crude a day at the field last year, or about 3 percent of ConocoPhillips’ global output, according to the statement.
The 62,000 barrel-a-day cut in Cnooc’s output is equivalent to 6.9 percent of the company’s average global oil and gas production of 901,369 barrels a day last year. Cnooc on Aug. 24 cut its full-year oil and gas production target to 331 million to 341 million barrels, from a goal of as much as 365 million barrels it set in January. Oil and gas production accounts for 99 percent of its income.
The June leaks at Penglai were China’s worst since July last year by volume. A pipeline explosion at Xingang port in Dalian, Liaoning province, on July 16 last year caused about 1,500 metric tons of oil to spill into the Yellow Sea.
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