CNOOC Sees 1H 2012 Net Profit Slump 19% on Lower O&G Output

China National Offshore Oil Corporation's (CNOOC) posted Tuesday a 19-percent decline in its first-half net profit ended June 30, 2012, as a production halt at Penglai 19-3, the site of a massive oil spill last year, lowered its output.

The company's net profit for 1H 2012 fell to $5.1 billion (CNY31.87 billion) from $6.2 billion (CNY39.34 billion) in the same period last year. CNOOC's revenue for 1H 2012 dropped to $18.6 billion (CNY118.3 billion), down 5 percent from the same period last year. The company's revenue in 1H 2011 was $19.6 billion (CNY124.6 billion).

The company said in its earnings statement that while its oil and gas production for 1H 2012 declined 4.6 percent in 1H 2012 to 160.9 million barrels of oil equivalent (boe) as compared to the same period last year, it is confident that it will be able to meet its production target of 330 to 340 million boe by the end of this year.

CNOOC cited a series of encouraging results in the exploration sector as well as breakthroughs in its overseas development projects as the two reasons which will boost its performance in 2H 2012.

The company announced on August 14, 2012, that it had successfully appraised two offshore wells in the Bohai Sea. The company said in a published statement that the appraisal took place in the Qinhuangdao 29-2 structure, sited in the central and northern part of the Bohai Sea. Qinhuangdao 29-2 lies 89 feet (27 meters) beneath waters. One of the wells, Qinhuangdao 29-2E-4, encountered oil pay zones 717 feet (218 meters) thick, including a 439-feet (134-meter) thick single oil pay zone. Qinhuangdao 29-2E-4 was tested to produce around 6,600 barrels of oil and 4.5 million cubic feet of natural gas per day, creating the highest capacity of clastic rocks in the Bohai Sea.

CNOOC then announced on August 20, 2012, that it made two new exploration discoveries in Luda 6-2 and Lufeng 15-1. Luda 6-2 is located in the LiaodongBay in Bohai with an average water depth of about 101 feet (31 meters). The company has successfully drilled Luda 6-2-4 and Luda 6-2-5 this year and encountered 131 feet to 484 feet (40 meters and 147.6 meters) thick of oil pay zones respectively. The average daily production was tested to be around 850 barrels. Meanwhile, Lufeng 15-1 is located in the Pearl River Mouth Basin with an average water depth of 928 feet (283 meters). Lufeng 15-1-2 drilled in 2012, encountered 87 feet (26.8 meter) thick of oil pay zones and was tested with a daily production of around 800 barrels.

On its overseas developments, CNOOC was referring to its plans to acquire Canadian exploration and production company Nexen. CNOOC revealed on July 24, 2012, that it plans to acquire Nexen for $15.1 billion in cash, a 61 percent premium to Nexen's July 20 closing price of $17.09 (CAD 17.29) earnings per share. The acquisition would be funded in cash and external financing, and is subject to approval by the Chinese, Canadian and U.S. governments and by Nexen shareholders.

A group of Chinese fishermen have sued ConocoPhillips in a U.S court, seeking over $130 million in compensation for the Penglai 19-3 oil spill, Dow Jones Newswires reported on July 4, 2012. The spill in June last year at the offshore Penglai field, jointly developed by ConocoPhillips and CNOOC, allowed more than 3,000 barrels of oil and oil-based mud--used as a lubricant in drilling--to vent into the sea.



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