New projects boost CNOOC output but revenues slip on low oil prices

Chinese oil and gas company CNOOC saw an increase in its quarterly output driven by new project startups in China and the contribution from new international projects. However, CNOOC’s quarterly revenues decreased due to lower oil and gas prices.

Appomattox; Source: Shell

According to its report on Wednesday, CNOOC achieved a total net production of 131.5 million barrels of oil equivalent (BOE) for the first quarter of 2020, representing an increase of 9.5 per cent year-over-year (YoY).

Production from China increased by 9.7 per cent YoY to 87.1 million BOE, mainly attributable to the start of new projects and the acquisition of China United Coalbed Methane Corporation Limited.

Overseas production increased by 9 per cent YoY to 44.5 million BOE, mainly due to production contribution from new projects including Egina oilfield in Nigeria and Appomattox oilfield in the U.S. Gulf of Mexico where CNOOC is a partner.

For the new projects planned this year, Liza oilfield phase 1 in Guyana came on stream ahead of schedule in December 2019, and other projects progressed as scheduled.

During the period, the company made two new discoveries and drilled 21 successful appraisal wells.

In offshore China, Kenli 6-1 oil and gas bearing structure was successfully appraised and became the first large-sized oilfield in Laibei lower uplift, which further proved the huge exploration potential of the Neogene lithologic reservoir in Laizhou Bay.

In Guyana, the 16th new discovery of Uaru was made in the Stabroek block.

Oil & gas prices

For the first quarter of 2020, the company’s average realised oil price decreased by 19.3 per cent YoY to $49.03 per barrel, which was in line with the trend of international oil prices.

The company’s average realised gas price was $6.38 per thousand cubic feet, decreased by 7.3 per cent YoY, primarily due to the declined gas price in North America.

The unaudited oil and gas sales revenue of the company reached approximately RMB 39.95 billion ($5.6 billion) during the period, down 5.5 per cent YoY.

This was mainly due to the combined effect of lower realised oil price and increased oil and gas sales volume.

Chopping capex & output target

The company’s capital expenditure reached approximately RMB 16.9 billion ($2.4 billion) for the first quarter of 2020, up 20.1 per cent YoY, as a result of the increased workloads.

Under the current low oil price environment, the company has adjusted its operating strategy and implemented a more prudent investment decision to ensure its long-term sustainable development.

The company has reduced its annual net production target for 2020 from 520-530 million BOE to 505-515 million BOE and total capital expenditures for 2020 from RMB 85-95 billion to RMB 75-85 billion.

Xu Keqiang, CNOOC CEO, said, “The global oil and gas market was facing an unprecedented situation in the first quarter of 2020 as impacted by the COVID-19 pandemic and sharp drop of international oil prices“.

Keqiang added: “For the rest of the year, we will continue to implement more stringent cost controls, and further strengthen our cash flow management“.