CNOOC outperforms with 7.9pc gain

Mainland oil giant's first-half result in sharp contrast with newly acquired Canadian unit

PUBLISHED : Tuesday, 20 August, 2013, 8:14pm
UPDATED : Wednesday, 21 August, 2013, 3:43am

CNOOC, the country's dominant offshore oil and gas producer, says investors should give Nexen more time to judge the merit of its acquisition, after the Canadian unit posted a sharp fall in interim profit, in contrast to better-than-expected gains at CNOOC, excluding the unit.

"We are not too worried about Nexen's short-term performance," chairman Wang Yilin said. "It takes a long time to strengthen Nexen's management and realise its value in technology innovation."

Nexen posted a net profit of C$33.4 million (HK$250 million) for the first half, down 88 per cent from C$280 million a year ago.

Chief executive Li Fanrong said this was due mainly to costs related to its acquisition, and no asset impairment was recorded.

Nexen's result contrasted with CNOOC's 7.9 per cent profit growth to 34.4 billion yuan (HK$43.5 billion).

Sanford C Bernstein senior analyst Neil Beveridge said Nexen's profit drop could have been caused by the booking of much of the financing costs related to the acquisition to manage tax exposure. He also noted Nexen's Canadian operation remained in the red.

A 45 per cent year-on-year rise in operating cash flow of CNOOC including Nexen suggested strong contribution from Nexen, Beveridge said.

He attributed CNOOC's better-than-expected profit to lower-than-expected operating costs and higher-than-anticipated output from its offshore China fields.

Turnover grew 17.5 per cent to 139 billion yuan, on the back of a 23.1 per cent rise in oil and gas output to 198.1 million barrels of oil equivalent (boe).

Excluding contribution from Nexen, output grew 7.7 per cent to 173.3 million boe. Average oil selling price fell 10.9 per cent and that for natural gas slid 3.7 per cent.

The board declared an interim dividend of 25 HK cents per share, up from 15 HK cents in the year-earlier period.

CNOOC has maintained its output target of 338 million to 348 million boe for the full year, excluding Nexen, and expects Nexen to contribute 59 million boe for the 10 months after its acquisition in February.

Meanwhile, sister firm China Oilfield Services' chief executive Li Yong said the firm's budget on equipment and facilities to expand future service capacity for this year could rise to six billion to seven billion yuan, from four billion to five billion yuan planned earlier this year.

"This is due to smoother progress of projects and stronger-than-expected demand," Li said.

The company reported on Monday a 32.6 per cent rise in first-half net profit to 3.18 billion yuan on higher drilling rates and greater volume of more complicated deep sea operations.