Cnooc Surprises With 6.6% Gain in Profit as Peers Slump

Cnooc Ltd., China’s biggest offshore explorer, reported a 6.6 percent increase in full-year profit, beating the plunge in crude prices that has hit explorers across the world.

Net income rose to 60.2 billion yuan ($9.7 billion), or 1.35 yuan a share, from 56.5 billion yuan, or 1.26 yuan, a year earlier, according to a statement to the Hong Kong stock exchange. The mean profit of 24 analyst estimates compiled by Bloomberg was 52.3 billion yuan. Sales dropped 4 percent to 275 billion yuan.

Brent, a benchmark for half of the world’s crude trading, dropped 48 percent last year, forcing explorers worldwide to pare investment and fire workers. Beijing-based Cnooc beat the downturn by raising oil and gas output and lowering its cost to produce a barrel of oil for the first time since 2010.

“While production volumes were strong, renewed laser-like focus on cost control enabled Cnooc deliver the beat,” Neil Beveridge, a Hong Kong-based analyst at Sanford C. Bernstein, said in an e-mailed note. “This should help restore faith in China’s leading explorers moving forward.”

PetroChina Co., the country’s biggest explorer, reported a 17 percent profit decline in 2014 profit on March 26, while China Petroleum & Chemical Corp. posted a 30 percent slide on March 22.

Lower Costs

Cnooc’s per barrel cost dropped to $42.30 in 2014 from $45.02 per barrel a year earlier, and it lowered exploration, drilling and construction costs by 9 billion yuan, according to a presentation posted to the company’s website.

The explorer’s shares closed 0.6 percent lower to HK$10.50 before the earnings were announced. The stock has dropped 14 percent in the past year, compared with a 12 percent gain in the city’s benchmark Hang Seng Index.

The company’s cost control “measures laid a solid foundation for the company to cope with the low oil price environment,” Chief Executive Li Fanrong said in the statement.

The explorer’s total oil and gas output was 432.5 million barrels in 2014, up from 411.7 million barrels a year earlier.

Cnooc plans to increase production by as much as 15 percent this year, while cutting capital expenditure by as much as 35 percent to 70 billion yuan.

Its Canadian unit, Nexen Energy, said earlier this month that it’s cutting 13 percent of its workforce and getting out of the oil-trading business.

Cnooc is “actively looking” at overseas acquisition opportunities and considering using methods such as asset or share swaps to pay for them, Chairman Wang Yilin said in a briefing in Hong Kong Friday, March 27.

“We can’t only rely on cash for acquisitions and have to work creatively to find other means to buy new assets,” he said.

The company has stopped exploration at its only shale gas project in eastern China’s Anhui province “as the site is not fit for large-scale development,” and it will take a cautious approach in the future, Wang said.

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