March 28, 2012 / 9:21 AM / 7 years ago

RPT-UPDATE 2-CNOOC posts record profit, eyes on deepwater

* CNOOC struggling to grow production and control costs

* To focus on unconventional assets such as deepwater

* Eyeing more overseas acquisitions, shale technology

By Charlie Zhu and Alison Lui HONG KONG, March 28 (Reuters) - China’s top offshore oil producer, CNOOC Ltd, posted a 29 percent rise in 2011 net profit, matching forecasts and hitting a record, on soaring crude oil prices and despite flat output caused by an oil spill.

But like many other oil producers around the world, CNOOC is struggling to grow its production and cut costs this year as it moves further into the more costly development of unconventional resources such as deepwater hydrocarbon in South China Sea and Gulf of Mexico.

“In the years to come, deepwater will become the important battlefield of the company’s exploration activities, as well as one of the important sources for reserve and production growth,” CNOOC chairman Wang Yilin said in the company’s annual report.

CNOOC posted net profit of 70.26 billion yuan ($11 billion) for 2011, compared with 54.41 billion yuan for the previous year. The result was in line with a consensus forecast of 69.5 billion yuan from 33 analysts polled by Thomson Reuters I/B/E/S.

“We expect CNOOC earnings may be slightly lower this year than 2011 as crude prices will likely be flat year-on-year, and production growth limited and we see costs increase,” said Neil Beveridge, analyst at Sanford C. Bernstein.

In 2011, the company’s average realised crude oil price amounted to $109.75 per barrel and its average realised natural gas price reached $5.15 per thousand cubic feet, representing an increase of 40.8 percent and 14.7 percent, respectively.

Unlike peers PetroChina Co Ltd and China Petroleum & Chemical Corp, or Sinopec as it is known, , CNOOC’s profit comes solely from exploration and production, making it a key beneficiary of high crude oil prices.

HIGHER COST, FLAT OUTPUT

CNOOC aims to produce 330-340 million barrels of oil equivalents (BOE) this year, little changed from 331.8 million BOE in 2011.

“Costs are expected to continue to rise and the developments of unconventional oil and gas resources are expected to continue to attract interests,” CNOOC said in a statement.

The company’s all-in cost - including operating cost, tax, depreciation and other charges - reached $30.58 per BOE in 2011, an increase of 25 percent year on year. Its capital expenditure will reach $9.3-11 billion this year, compared with $6.42 billion in 2011 and $5.07 billion the previous year.

CNOOC reiterated its output growth target of compound annual growth of 6-10 percent in 2011-2015, partly by focusing on unconventional resources, like oil sands and shale gas.

CNOOC’s 2011 output was hit hard by an oil spill at its Penglai 19-3 field in eastern China’s Bohai bay, which resulted in total production losses of 5.9 million BOE last year.

CNOOC’s president and chief executive, Li Fanrong, said in January that the oilfield, co-owned and operated by ConocoPhillips, should resume production this year. But CNOOC executives declined to comment on Wednesday.

Valued at about $95 billion, CNOOC shares tumbled 26 percent in 2011 partly because of the oil spill, underperforming PetroChina’s 4.8 percent loss, and Sinopec’s 9.8 percent gain in Hong Kong in the same period.

Li said CNOOC should see higher overseas output this year and the company should buy more reserves if opportunities arise. Its reserve replacement ratio reached 158 percent last year.

Overseas production accounted for 21 percent of CNOOC’s total net output in 2011, compared with 20 percent in 2010.

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