CNOOC plans to cut spending, reduce production

China National Offshore Oil Corporation (CNOOC) informed on Monday it will be reducing its capital expenditure for 2016 that will be no more than RMB 60 billion ($9.1B).

Of that amount, the capital expenditures for exploration, development and production will account for around 19%, 64% and 13% respectively. CNOOC’s capex for 2015 was in range of RMB 70 billion to 80 billion.

The company expects to achieve the whole-year targets by cost control and efficiency enhancement despite the lower capital expenditure, CNOOC said on Tuesday.

Zhong Hua, CFO of the company, commented: “In response to the continued challenge posed by low oil prices, we will maintain prudent financial policy and further strengthen cost-control measures in order to make steady progress in the overall business, including exploration, development and production.”

The company’s net production target for 2016 is in the range of 470-485 million barrels of oil equivalent (BOE), of which approximately 66% and 34% are produced in China and overseas respectively. The net production targets set for 2017 and 2018 are around 484 and 502 million BOE respectively. The estimated net production for 2015 was approximately 495 million BOE.

According to the company, there will be four new projects coming on stream in 2016, including the Kenli 10-4, Panyu 11-5, Weizhou 6-9/6-10 oilfield comprehensive adjustment and Enping 18-1. Currently, nearly 20 projects are under construction.

Within the year, CNOOC says it is planning to drill around 115 exploration wells and acquire approximately 10 thousand kilometers of 2D seismic data as well as approximately 14 thousand square kilometers of 3D seismic data.

Li Fanrong, CEO of the company, commented: “Faced with an increasingly complicated operating environment in 2016, the Company will fully utilize market mechanisms and combine innovations in technology and management in order to reduce costs and enhance efficiency. In addition, the Company will ensure an appropriate balance between short-term returns and long-term growth to promote a steady and healthy development.”

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