Chinese oil company CNOOC (CEO)
provides investors with investment exposure to both the energy markets and the Chinese stock market. Recently, the company has been looking at global opportunities to maintain its production growth goals.
CNOOC Limited is the publicly traded subsidiary of the government-owned China National Offshore Oil Corporation. CNOOC generates revenues from its own energy exploration and production activities, plus the company receives a share of the revenues generated by non-Chinese oil companies with operations off the shores of China.
The shared revenue stream gives CNOOC a high rate of cash flow in relation to capital expenditures. Negatives on the company are the possibility of declining production from the offshore China fields, forcing the company to expand its operations to other countries.
For the first half of 2011, CNOOC reported a 45 percent increase in revenues on 40 percent higher realized oil prices, averaging $108 per barrel for oil and $4.92 per thousand cubic feet (MCF) for natural gas. The earnings press release noted operating cost was just $7 per barrel. Net income came in at 40 percent of revenue for the half year.
The shorter third quarter financial press release noted a year-over-year revenue gain of 24 percent on average prices of $112 for oil and $5.18 per MCF for gas. The press release also stated production was down 9 percent year-over-year and capital expenditures were 28 percent higher.
Successes and failures
Recent acquisitions away from China include the purchase of one-third of a U.S. gas project from Chesapeake Energy (CHK)
and the outright purchase of Opti Canada, an oil sands production company. However, a $7 billion bid for BP (BP)
assets in Argentina fell through due to restrictions put in place by the Argentine government.
CNOOC pay an attractive dividend twice a year, with record dates in May and August. The share price mirrors the Hong Kong stock market more than it follows the results of the other large global energy companies. This disconnect may at times allow investors to pick up shares of a large cap energy company at a discount to the overall energy market. Thirty-one international analysts follow the stock, with a current consensus rating of hold.
The company reports next on March 23.
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