CNOOC Q1 output jumps on Nexen buy; may miss 5-year growth target

Written by Reuters | Hong Kong | Updated: Apr 23 2014, 02:08am hrs
CNOOC Ltd on Tuesday posted a 15.5 percent rise in first quarter output mainly due to its purchase of Canadian firm Nexen last year, but China's top offshore oil and gas producer could still miss its 2011-2015 annual organic production target as it struggles with ageing domestic oil fields.

Total net output rose to 108.1 million barrels of oil equivalents (boe) in the first three months of this year, the company said in a filing with the Hong Kong bourse.

Excluding the contribution from Nexen, which CNOOC bought for $15.1 billion last February, production was largely flat at 88.8 million boe. Earlier this year, CNOOC said it was aiming to increase its output, excluding the contribution from Nexen, by up to 4.3 percent this year.

CNOOC has been struggling to boost production growth over the past few years as its existing major oilfields age. Last year, CNOOC missed for the third year in a row the annual production growth target of 6 to 10 percent it set for the 2011-2015 period.

"I don't think it can, just do the calculations," said an analyst at a Hong Kong-based investment house, when asked whether CNOOC can meet the annual target for the five-year period this year. The analyst declined to be named as he was not authorised to speak to the media.

Reuters calculations show that CNOOC would need to increase its own production, excluding Nexen, by around 20 percent year- on-year in 2015 to achieve its five-year growth target.


Like many other oil companies, CNOOC is also under pressure to control costs.

"While we should see an uptick in production as we head into second half of 2014 on seven new start-ups, the outlook for earnings growth remains unclear given rising costs and flat oil prices," Neil Beveridge, analyst with Bernstein Research, wrote in a note to clients.

In a bid to boost production, CNOOC earlier this year said it would increase by up to a third its annual capital spending budget for 2014 to almost $20 billion. It also said it would get 20 projects under construction this year and expects up to 10 more projects to come onstream.

"All new projects are progressing as scheduled," Chief Financial Officer Zhong Hua told a results briefing.

Total capital expenditure in the first quarter surged almost 30 percent to 19.31 billion yuan ($3.10 billion) from the year-ago period, Zhong said, adding that the capital spending plan for the whole year remained unchanged.

Revenue rose 6.9 percent year-on-year to 59.15 billion yuan ($9.50 billion) in the first quarter as realised oil prices dipped 5.1 percent to $104.63 per barrel, the company said. CNOOC does not report quarterly profit figures.

CNOOC last month posted a worse-than-expected 11.4 percent slide in its 2013 net profit amid flagging production growth, rising costs and weakening crude prices.

CNOOC shares closed up 0.47 percent ahead of the results announcement. The stock was one of the worst performers among major exploration and production companies globally in 2013 due to worries about its output growth outlook and the premium it paid to acquire Nexen.