Cnooc Profit Declines on Capital Spending, Slowing OutputBenjamin Haas and Aibing Guo
Cnooc Ltd. reported lower 2012 profits that missed analyst estimates, as China’s biggest offshore oil producer spent more to revive output growth, an effort underscored by its $15.1 billion takeover of Canadian oil producer Nexen Inc.
Net income fell to 63.7 billion yuan ($10.3 billion) from 70.3 billion yuan in 2011, the company said in Hong Kong stock exchange filing yesterday. That compared with the 65.3 billion yuan mean of 29 analyst estimates compiled by Bloomberg. Sales climbed 2.8 percent to 247.6 billion yuan.
Cnooc’s purchase of Nexen, China’s largest foreign acquisition, will be a platform for future growth, Chief Executive Officer Li Fanrong said at a press conference in Hong Kong. The company, which operates in Canada’s oil sands, the North Sea and offshore West Africa, will add 20 percent to Cnooc’s production and 30 percent to reserves.
The deal cleared the final regulatory hurdle last month after Cnooc relinquished operating control of rigs in the Gulf of Mexico. Li said that Chinese companies will increasingly win foreign acceptance.
“State-owned companies like us have no difference with western companies in terms of business operations,” Li said. “China’s state-owned enterprises will be more and more welcomed by the host countries of natural resources.”
The Nexen transaction, which closed Feb. 25, spurred the Canadian government to say future acquisitions in oil sands by state-owned foreign companies would be rejected barring “exceptional circumstances.” Cnooc’s previous attempt to gain control of U.S. oil and gas assets failed, as the company abandoned its bid for Unocal Corp. in 2005 after facing political opposition in Washington.
The company will release its plan for integrating with Nexen in the second half of 2013, Chief Financial Officer Zhong Hua said.
Cnooc’s largest domestic offshore field, Penglai 19-3, was shut because of a spill in 2011, hindering production growth. The field resumed operating this year. The Beijing-based company will increase expenditure on drilling new wells and exploring for resources by 52 percent in 2013 from 43 percent in the previous period to boost output.
“The company will continue its efforts to control costs, enhance profitability and create greater value for our shareholders,” CEO Li said in the statement. This year Cnooc will promote “oil and gas exploration in shallow water, deep water, overseas and unconventional fields, and will push ahead the project pipeline for 24 new projects under construction.”
Cnooc’s replacement of its oil and gas reserves in 2012 was “the strongest in over a decade,” said Neil Beveridge, a Hong Kong-based analyst at Sanford C. Bernstein & Co. in an e-mail.
The shares dropped 13 percent in the past year in Hong Kong trading, compared with a 5.8 percent gain in the benchmark Hang Seng Index. Beijing-based Cnooc fell 0.8 percent to close at HK$14.32 yesterday, before the earnings announcement.
The company’s average realized oil price rose 0.7 percent to $110.5 a barrel. Cnooc doesn’t process crude like state-owned peer PetroChina Co., whose refining business posted a 43.5 billion-yuan operating loss last year, hurt by price controls.
China Petroleum & Chemical Corp., Asia’s biggest refiner and the listed unit of China Petrochemical Corp., will report its 2012 earnings on March 24.
Cnooc expects to increase production by as much as 2.1 percent this year to 348 million barrels of oil equivalent, the company said in January. New projects off the Chinese coast helped produce about 341 million to 343 million barrels last year, meeting the 335 million to 345 million barrel forecast announced in October.
Ten new offshore projects in China will start in 2013 and capital spending will rise to between $12 billion and $14 billion, the company said in January.
Cnooc’s capital expenditure plan will secure the company’s 6 percent to 10 percent production growth target for 2011 to 2015, CFO Zhong said yesterday. CEO Li said that most of the new wells planned won’t be online before the end of the year.
Oil consumption growth may gain 4.8 percent this year to 514 million tons (3.8 billion barrels) as China adds refining capacity and fills emergency fuel stockpiles, China National Petroleum Corp., the country’s biggest energy producer and the parent of PetroChina, said in its annual research report released in January.