Cnooc first-half profit drops 56% on plunging crude prices

AIBING GUO

HONG KONG (Bloomberg) -- Cnooc Ltd., China’s biggest offshore oil and gas explorer, posted a 56% decline in profit for the first half of this year.

Net income dropped to 14.73 billion yuan ($2.3 billion), or 0.33 yuan a share, from 33.59 billion yuan, or 0.75 yuan, a year earlier, the Beijing-based explorer said in a statement to the Hong Kong stock exchange Wednesday. That exceeded the 13.9-billion yuan average of three analyst estimates compiled by Bloomberg.

Cnooc, which depends purely on oil exploration and production for revenue, is most exposed to the oil’s plunge this year and must rely on cost cuts and capital spending curbs to boost profit, said Laban Yu, a Hong Kong-based analyst at Jefferies Group LLC. The strategy paid off last year, when it posted a surprise 6.6% profit increase. Brent crude has averaged about $59/bbl in the first half of the year, down 45% from the same period in 2014. The benchmark for half of the world’s oil this month slipped below $45 for the first time since 2009.

“There isn’t much Cnooc can do to improve earnings prospects in the second half if crude prices fail to rebound,” Yu said before the earnings was released.

Net production in the period rose 14% to 240 MMboe.

“The development of the company in the future will be driven by both production and economic efficiency instead of only by production volume,” Chairman Yang Hua said in the statement. “We will emphasize economic production volume rather than focus solely on production growth.”

Cnooc’s oil and gas sales fell to 77 billion yuan in the first six months from 117 billion yuan a year ago.

Cnooc plans to increase production by as much as 15% this year, while cutting capital expenditure by as much as 35% to 70 billion yuan, the explorer said in February. The company in April reiterated its output target for this year of 475 million to 495 MMboe this year, despite the plunge in crude prices.