Unaudited revenue also up 59% to 48.5b yuan on rising oil prices

CNOOC Limited, China's largest offshore energy producer, said its first quarter production increased 26.6 percent to 85.2 million barrels of oil equivalent compared with the same period last year.

The rise in production, together with higher energy prices on the back of domestic demand, boosted CNOOC's first quarter unaudited revenue by 59.1 percent to 48.51 billion yuan ($7.45 billion). During the period, the average realized oil price increased 32.7 percent to $99.98 per barrel and the average realized gas price was $4.81 per thousand cubic feet, up 8.6 percent.

According to calculations made by Reuters, China's oil demand in March increased 10.9 percent year-on-year. China now trails only the US in oil consumption. According to the US Energy Information Administration, China's whopping energy appetite will account for about 40 percent of newly-added world demand this year. Oil-hungry China will lift up oil consumption by another 600,000 barrels per day this year, while demand from the US will drive consumption by another 130,000 per day.

"We are very confident that we will achieve our target this year, since the first quarter has proved to be a very solid start in terms of production and new project development," Chief Financial Officer Zhong Hua said in a conference call on Wednesday, adding that the Jinzhou 25-1 project, one of its four new projects this year, started production in the first quarter.

In March, the company set its 2011 production target at 355 million to 365 million barrels of oil equivalent, up 8 percent to 11 percent from a year ago.

The company said April 22 that due to malfunction caused by rough sea conditions, the operations of four oilfields in Bohai Bay were shut down. According to CNOOC's statement, total capacity of the affected oilfields is 39,000 barrels per day.

Zhong said the company is actively seeking ways to resume production but cannot give a detailed timetable at this stage. Production at Bohai Bay accounted for 57 percent of its total crude output in the first quarter.

Laurence Lau, an analyst at BOC International, wrote in a research note that he estimates that the affected capacity is equal to 4 percent of CNOOC's 2011 forecast output. A similar incident happened in late 2009 and it took about six months to fix, according to Lau.

In January, the company purchased a 33.3 percent interest in Chesapeake's Niobrara project with $570 million in cash. In March, CNOOC agreed to acquire a one-third stake in three exploration areas in Uganda from Tullow Oil, a deal worth around $1.47 billion. The transaction is expected to be completed in the first half of this year. In 2010, the company entered into South America and the Middle East.

"We are happy to see the growth of our overseas assets, which will significantly expand our scope for development in long run," Chief Executive Yang Hua said in the 2010 annual result statement.

Overseas production accounted for 20.1 percent of total output last year, compared to 17.4 percent in 2009, according to the company's 2010 financial statement.

CNOOC's shares closed at HK$19.6 on Wednesday, down 0.51 percent. The benchmark Hang Seng Index closed at 23892, down 0.48 percent.

China Daily

(HK Edition 04/28/2011 page3)