CNOOC eyes opportunities to optimize its global asset profile for sustainable growth: CFO

China's offshore oil giant CNOOC is looking for opportunities to optimize its global asset profile to leverage its strengths for sustainable development, CFO Xie Weizhi said during the company Q1 results call on April 28.

This comes amid several market analysts saying that the current high oil prices offer a good window for CNOOC to shake off its low margin assets, including those in North America and the North Sea.

"As an oil company, we are looking for opportunities to add to the oil and gas assets that we specialize in, and remove the those we are not good at to optimize our asset portfolio," Xie said.

"We don't have any plan to exit from any specific region, and we need a global layout to sustain our exploration and development business," Xie said.

He added all of CNOOC's assets overseas are operating as usual without any impact from the Russia-Ukraine war.

The company's strategy has changed from the early 2010s, when Chinese oil and gas giants were scrambling for acquisitions globally with one the main purposes being gaining technologies for unconventional project exploration and development. China's net-zero target also requires state-run companies to reshape their business layout, analysts said.

Unconventional assets

"As the oil prices have stayed high recently, it is good timing for CNOOC to get rid of some of the loss-making assets that they do not specialize in, such as the unconventional ones that were acquired at high prices," a Hong Kong-based analyst said.

CNOOC's oil and gas output registered a strong year-on-year increase of 9.7% to hit 1.68 million boe/d in Q1, exceeding its targeted upper limit for production of 1.67 million boe/d in 2022, according to the company's quarterly result.

The company's overseas oil output fell 3.4% year on year to 34.4 million barrels, while gas fell 0.9% to 41.8 Bcf despite prices surging amid the Russia-Ukraine war in the first three months.

Oil and gas output from North America fell 5.8% year on year to 12.9 million boe in Q1 despite it accounting for about 19.5% of CNOOC's total reserves and 9.1% of production to be the company's top overseas contributor.

CNOOC -- which specializes in offshore assets -- bought Nexen for about $15.1 billion in early 2013 in one of the largest overseas acquisitions by a Chinese company to own 100% working interest in four oil sand projects in Canada.

These projects include Long Lake, which had sustained several accidents, and seen high costs and lower crude prices until recently. In 2021, when oil prices recovered, CNOOC drilled adjustment wells and put the Long Lake Southwest project into production to boost output to 39,000 b/d from the whole project.

CNOOC also holds 27% and 12% interest in Eagle Ford and Rockies, respectively, which are two onshore shale oil and gas projects in the US. In 2021, Eagle Ford and Rockies projects saw decreased drilling activity due to the pandemic, with net production of 37,000 boe/d and 8,000 boe/d, respectively, according to their annual reports.

In Europe, CNOOC holds interests in oil and gas fields in the North Sea, including 43.21% interest in Buzzard oilfield and 36.5% in Golden Eagle. It also holds a 10% equity interest in Arctic LNG 2 LLC in Russia.

Although the Buzzard Phase II commenced production in November 2021, its output from Europe fell 4.4% on the year to 4.3 million boe in Q1.

Sources of future growth

CNOOC's offshore assets in South America, led by Stabroek block in Guyana and Brazilian Libra and Buzlos Surplus projects, have been identified as important sources of future reserve and production growth for the company.

CNOOC holds a 25% interest in the Stabroek block, the recoverable resources in which exceed 10 billion boe, with the total production expected to reach 800,000 boe/d in 2025.

In February, CNOOC put the phase II of Liza oilfield in Stabroek block into production ahead of schedule, expecting peak production of 220,000 boe/d.

The launch helped the company's oil and gas production from South America to rise 28.8% on the year to reach 9.4 million boe or 104,444 boe/d in Q1.

However, compared to overseas assets, CNOOC focuses more on domestic production which accounts for 72% of its total output.

In January-March, the company's domestic oil and gas production rose 15.4% year on year to 1.21 million boe/d, with output from the flagship Bohai block rising 10% to hit 557,777 boe/d.

The strong production growth coupled with surging realized prices -- oil rose 65% on the year to $97.47/b and gas grew 24.4% to $8.35/Mcf -- meant that CNOOC's net profit rose 131.7% to Yuan 34.3 billion ($5.2 billion) in Q1.

CNOOC spent Yuan 16.9 billion in Q1, and increase of 5.4% year on year but still below the annual capital expenditure target of Yuan 90-100 billion.

The company completed its initial public offering on the Shanghai Stock Exchange on April 21 after being delisted from the New York Stock Exchange in October 2021 under a Trump-era executive order.

CNOOC's operation result

CNOOC's crude oil output (Unit: million barrels)

CNOOC's gas output (Unit: Bcf)

Source: Company Q1 report