CNOOC H1-2013 profit rises after Nexen buy

Oil RigCNOOC Ltd

Dear PGM Capital Blog readers,
On August 20, 2013, CNOOC Ltd,  (SEHK: 00883 or NYSE: CEO) reported its H1-2013 financial results.

About the Company:
CNOOC Limited, is a Hong Kong based company, which is listed on the Hong Kong Stock Exchange and is a subsidiary of China National Offshore Oil Corporation.

The company is an investment holding company, that engages in the exploration, development, production, and sale of crude oil, natural gas, and other petroleum products. Its oil and natural gas properties are located primarily in offshore China, which include Bohai Bay, Western South China Sea, Eastern South China Sea, and East China Sea, as well as in Indonesia, Iraq, other regions in Asia, Australia, Nigeria, Uganda, other regions of Africa, Argentina, the United States, Canada, Trinidad and Tobago, and the United Kingdom.

As of December 31, 2012, the company owned net proved reserves of approximately 3.49 billion barrels-of-oil equivalent.

CNOOC acquisition of Canadian Nexen – the biggest ever overseas corporate takeover by a Chinese company – would boost its production by 20 percent and increase its proven reserves by 30 percent.

To win Canadian approvals for the Nexen takeover, CNOOC made a series of commitments like retaining all Nexen staff, pursuing a listing in Toronto and making Calgary the headquarters of its $8 billion North and Central American operations.

H1-2013 Results Highlights:

  • The company’s H1-2013, net profit rose 7.9% to 34.38B yuan (US$5.6B) from 31.87B yuan a year earlier and revenue jumped 17% to 139B yuan from 118.3B, thanks to stronger oil and gas output overseas following the acquisition of Canada’s Nexen.
  • Net crude oil and gas output rose 23% to 198.1M boe, including a 24.8M boe contribution from Nexen; without Nexen, production rose 7.7%.
  • The Company said it is targeting production of 338M-348M boe this year, with Nexen’s production contribution likely to reach 59M boe.
  • The company proposes an H1 dividend of HK$0.25 (US$0.03), up from HK$0.15 a year earlier.
  • The company also said that its integration with Nexen was proceeding smoothly and that CNOOC has been “actively” working on its application for a secondary listing on the Toronto Stock Exchange.


PGM Capital Comments:
As can be seen from below chart, the CNOOC ADR stock (NYSE: CEO), has appreciated with approx. 945% since it went public in april 2001. Its dividend payment increased in the same period form its first dividend payment of USD 0.24 a share per half-year in September 2001 to USD 4.211 a share per half-year in May this year, an increase of its dividend payout of approx. 1,176 percent. (one thousand one hundred and seventy six percent).

CNOOC Ltd all time chart

Based on its business model, Price to Earning ratio of 8.7, Price to Book ratio of 1.74, strong balance sheet and dividend yield of 3.9% we have STRONG BUY rating on the stock.

Before following any investing advice, always take your investment horizon and risk tolerance into consideration and keep in mind that the prices of commodities as well as the stock of their producers and refiners can be very volatile and that sharp corrections may happen in the short term.

Keep also in mind also that we are currently almost at the end of the cooling and driving season on the Northern Hemisphere which will subsequently will lead to decrease in demand for crude oil and its derivates, which may affect the price of crude oil negatively until the beginning of heating season 2013 by end of November.

Yours Sincerely

Eric Panneflek

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