*Vows cost cuts
29 March 2015, HONG KONG – China’s top offshore oil producer CNOOC Ltd said on Friday it aims to boost output by 18 percent over the next three years, after reporting stronger-than-expected 2014 profit on cost cuts and higher production.
CNOOC, China’s third largest oil company, plans to boost output to 513 million barrels of oil equivalent (BOE) in 2017, up more than 18 percent from 2014, chief financial officer Zhong Hua told reporters at its results briefing.
But cost cuts will also be a top priority as it braces for long-term oil price weakness. Last month, CNOOC said it planned to slash 2015 capital spending by 26-35 percent to 70 billion-80 billion yuan, while still trying to raise output by up to 15 percent to 495 million BOE.
“The company… has sensed the pinch of the ‘cold winter’,” CNOOC’s chairman Wang Yilin said in the firm’s earnings filing. “In 2015, we may face even more severe environment for our exploration and development.”
CNOOC on Friday reported net profit of 60.2 billion yuan ($9.69 billion) for last year, up 6.5 percent year on year, as cost cuts, lower tax payment and higher output helped offset the slide in global oil prices. That beat a consensus forecast of 52.3 billion yuan from 23 analysts polled by Thomson Reuters.
The clampdown on CNOOC’s costs echoes moves by Chinese oil majors PetroChina and Sinopec Corp. Oil prices have skidded about 50 percent since June, and a government-led probe into graft in the state sector has added to pressure to rein in spending.
Earlier this month, Calgary-based producer Nexen, which CNOOC acquired for $15.1 billion in cash in 2013, said it will cut about 400 jobs in North America and Britain in response to plunging oil prices.
Some analysts say CNOOC overpaid for Nexen as it had underestimated the risks of monetizing the landlocked oil sands and shale gas assets in Canada that account for the bulk of Nexen’s proven and probable reserves.
CNOOC sold some ageing conventional natural gas assets in Canada last year, and took an asset impairment of 4.1 billion yuan in 2014 on some of its projects in Canada, Gulf of Mexico and Britain, Zhong said. He did not give details.
The Chinese company is also looking for overseas acquisition opportunities as part of its long-term expansion strategy, Wang told reporters. But it will be more flexible in making acquisitions, such as using shares instead of cash only.
CNOOC attributed its 2014 profit rise in part to a 6 percent decrease in production costs to $42.3 per BOE last year.
Meanwhile oil and gas output rose 5.1 percent year on year to 432 million BOE in 2014, as more than 10 new projects commenced production. These included Liwan 3-1, the first major deepwater gas field in offshore China.
CNOOC said it achieved a reserve replacement ratio of 112 percent last year, and had net proven reserves of 4.48 billion BOE at year-end.
($1 = 6.2138 Chinese yuan renminbi)
*Charlie Zhu; Chyenyee Lee and Meg Shen; Editing by Miral Fahmy, Kenneth Maxwell and David Evans – Reuters