Cnooc Revenue Drops as Output Gain Outweighed by Oil Tumble

  • Revenue by offshore explorer drops 31%; capex cut by 39%
  • Company made 3 new discoveries; oil, gas output rises 5.1%

Cnooc Ltd., China’s biggest offshore oil and gas explorer, reported a 31 percent decline in revenue and an increase in output amid a crash in crude prices.

Oil and gas sales dropped to 24.6 billion yuan ($3.8 billion) in the three months ended March 31, the Beijing-based company said in a statement to the Hong Kong stock exchange Thursday. Cnooc, which gets almost all of its income from oil and gas production, doesn’t report quarterly profit. Output rose 5 percent, while capital spending was cut by 39 percent.

"Cnooc looks on track to meet its 2016 output target, with domestic production contributing 66 percent of the total,” said Lu Wang, a Bloomberg Intelligence analyst in Hong Kong. “The company may under-spend its full year capex budget if low oil prices persist.”

Output rose to 124.3 million barrels of oil equivalent from a year earlier, according to the statement. Capital spending during the period dropped to 9.7 billion yuan.

The company said in January that output this year would fall for the first time since 1999 and that capital spending would be capped at 60 billion yuan. Cnooc won’t consider revising its production target higher until after mid-year, Zhong Hua, chief financial officer, said during a conference call Thursday.

Cnooc’s average realized oil price fell 39 percent to $32.54 a barrel in the first quarter. Its realized gas price fell 15 percent to $5.69 per thousand cubic feet. Brent oil, the global benchmark, averaged about $35 a barrel in the first quarter, from about $55 a year ago. Prices hit a 12-year low in January.

The company’s shares in Hong Kong slipped 0.6 percent to close at HK$9.89 before the quarterly figures were released.

New Projects

The company started two new projects during the quarter -- Kenli 10-4 in Bohai Bay and Panyu 11-5 in the South China Sea -- and it made three new discoveries in China. It also drilled four successful appraisal wells in the country and one each in Algeria, Gabon and Brazil.

Cnooc’s annual production overtook China Petroleum & Chemical Corp. in 2015 to become the country’s second-biggest oil and gas producer as the offshore explorer pumped about 496 million barrels of oil equivalent, compared with its state-owned peer’s 472 million barrels. Cnooc’s output may slip to 470 million to 485 million barrels this year as the company takes measures to control operational costs.

The company is in talks with Husky Energy Inc. to resolve a gas sales dispute at the offshore Liwan project, Zhong said Thursday. Husky earlier this week threatened to take legal action if it can’t find a solution with the Chinese state-controlled producer, given its contract guarantees fixed prices for about another three years.

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