Goldman Sachs revises its position on the offshore oil giant but investors ignore concerns over future growth
A Goldman Sachs report has sent a chill down the spines of fund managers with big positions in stock market darling CNOOC, which has given investors an impressive 94.11 per cent return on its initial public offering price in just over two years.
Departing from its own previous bullish forecasts and most of its peers, Goldman poured cold water on the growth story of China's third-largest oil producer which dominates the offshore market.
In a May 26 report, the brokerage slashed its target year-end price on the red chip by 7 per cent to $10, and downgraded its rating to 'underperform'.
Its main arguments for the revision included an expected increase in future oil and gas exploration, production and development costs, and declining exploration productivity and success rates.
This is a shocking development for CNOOC, which investors have lauded for its slim and efficient workforce, low-cost structure and an expected 15 per cent average annual production growth rate between 2000 and 2005. What triggered Goldman's change of heart was its scrutiny of CNOOC's F-20 filing last year with the Securities and Exchange Commission in New York, where it is also listed.
