CNOOC to Increase Output 18% over 3 Years

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Dailytimes Nigeria News

China?s top offshore oil producer CNOOC Ltd said it aims to increase output by 18 per cent over the next three years, after reporting stronger-than-expected 2014 profit on cost cuts and higher production.

Chief Financial Officer , Zhong Hua told reporters at its results briefing that CNOOC, China?s third largest oil company plans to increase output to 513 million barrels of oil equivalent (BOE) in 2017, up more than 18 per cent from 2014.

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 per cent to 70 billion-80 billion yuan, while still trying to raise output by up to 15 per cent 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 reported net profit of 60.2 billion yuan ($9.69 billion) for last year, up 6.5 per cent 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 per cent 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 without giving details.

Wang told reporters that the Chinese company is also looking for overseas acquisition opportunities as part of its long-term expansion strategy, adding that 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 per cent decrease in production costs to $42.3 per BOE last year.

Meanwhile oil and gas output rose 5.1 per cent 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 per cent last year, and had net proven reserves of 4.48 billion BOE at year-end.

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