Cnooc to Raise Output, Even as Oil Plunge Spurs Spending Cut

Cnooc Ltd. plans to increase production by as much as 15 percent this year even as crude’s plunge oil compels China’s biggest offshore oil and gas producer to cut spending.

The explorer will produce 475 million to 495 million barrels of oil equivalent in 2015, it said in a statement to the Hong Kong stock exchange today. Output last year was about 432 million barrels. The Beijing-based company expects to produce 509 million barrels of oil equivalent in 2016 and 513 million the following year.

Cnooc will cut capital spending by 26 percent to 35 percent to between 70 billion yuan ($11 billion) and 80 billion yuan this year. Brent, a benchmark for more than half of the world’s crude trading, dropped 48 percent in the past year, forcing the world’s oil companies to rein in investments and costs.

“In response to challenges from falling oil prices, we will control our costs and drive for the effective implementation of our capital expenditure plan,” Chief Financial Officer Zhong Hua said today at a press conference in Hong Kong.

Cnooc shares rose 3.5 percent to HK$10.64 at the close in Hong Kong. The stock has declined 7.8 percent in the past year, compared with a 15 percent gain in the benchmark Hang Seng Index.

As many as seven new projects have begun or will start this year, the company said in a separate statement. These include Jinzhou 9-3, which is already operational. Two other projects in China’s Bohai Bay are expected to reach peak production of a combined 66,000 barrels of oil equivalent a day, Cnooc said, without giving a timeline.

Cnooc’s output dropped 1 percent in 2011 and increased 3.4 percent in 2012, according to data compiled by Bloomberg. Its 2013 production, excluding its acquisition of Canada's Nexen Energy, increased as much as 3.8 percent to 351 million barrels, according to Bloomberg calculations. Its 2014 target was 435 million to 442 million barrels.

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