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CNOOC reports weaker first half results, slashes dividend by 40%

Published: 10:37 21 Aug 2012 EDT

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China oil and gas heavyweight CNOOC (NYSE:CEO) (HKG:0883) Tuesday reported a weaker profit in its fiscal first half results, on higher costs and lower output.

Shares of the company fell on the news, as CNOOC also said it would cut its dividend by 40 per cent to make room for its $15.1 billion acquisition of Canadian oil firm Nexen Inc. (TSE:NXY). CNOOC said it has decided to pay an interim tax inclusive dividend of 15 Hong Kong cents, or two cents U.S., per share for 2012.

For the first half of the year that ended June 30, CNOOC posted net profit slid to 31.87 billion Yuan, or $5.01 billion, down 19 per cent from 39.34 billion Yuan, or $6.2 billion, a year earlier.

Analysts polled by Thomson Reuters had expected a profit of 34.2 billion Yuan, or $US5.38 billion.

Revenue fell 5.1 per cent to 118.27 billion Yuan, or $18.6 billion, from 124.6 billion Yuan, or $19.6 billion, in the first half of 2011.  

CNOOC said that the declines were mainly due to a sales decrease, and the launch of a nationwide resource tax in China last November.

“During the first half of the year, downward pressure for the world's economic growth was mounting as Europe's debt crisis continued to deepen and international oil prices decreased significantly from a high level,” said CEO Li Fanrong.

“In view of the critical external environment, we will continue to ensure good performance in the different areas of business of the company, strengthening our foundation and striving forward for future development.”

CNOOC said that net oil and gas production reached 160.9 million barrels of oil equivalent (BOE), a decrease of 4.6 per cent from the first half of 2011.

The company said the decline is primarily a result of the shutdown of production of its Penglai 19-3 oilfield, scheduled maintenance, and the disposal of the ONWJ block in Indonesia. 

“By bringing the scheduled new projects on stream, ensuring the good performance of the facilities and equipments, and optimizing the technologies used for production enhancement, we are confident to accomplish our annual production target of 330 to 340 million BOE set by early this year,” said CNOOC in a statement.

Average realized oil price reached $116.91 per barrel in the first half, representing an increase of 8.1 per cent year-over-year, and the average realized natural gas price reached $5.90 per thousand cubic feet, representing an increase of 20 per cent year-over-year.

CNOOC said that oil and gas sales reached 95.66 billion Yuan, or $15.05 billion, “maintaining its strong profitability in the industry." 

But higher all-in costs from January-June at $34.6 per barrel, up 13.1 per cent from the average level in the whole of 2011, partially offset the higher average realized prices for oil and gas. 

In the first half of the year, the company noted that 10 successful discoveries and 18 appraisal wells were made. It said a series of successful appraisal wells proved Penglai 9-1 would become “the biggest oil and gas structure discovered in Bohai area in recent years." 

As well, last month, the company signed an agreement for the acquisition of Nexen. 

“This transaction will make the company a truly global exploration and production company with a balanced resources portfolio and important presences in the world's major oil and gas production areas,” said CNOOC.

Company chairman Wang Yilin said that with rapid developments in the different areas of the company's business and faced with uncertainties of the external environment, CNOOC will pay increasing attention to building its own capabilities. 

"We will strive to build up a strong foundation for the company's ‘A new leap forward’ blueprint and to continue to create value and returns for our shareholders.”

CNOOC’s shares fell 1.21 per cent as at 10:25 a.m. ET, trading at $198.58.

 

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