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CNOOC earnings 'hit' by lower oil prices

By Xiao Wan (China Daily)
Updated: 2009-10-22 08:51

China's leading offshore oil producer CNOOC Ltd's pretax profit fell 46 percent in the first three quarters year-on-year due to lower crude oil prices this year, the Wall Street Journal reported yesterday, citing an unnamed source.

The company's pretax profit fell to 28.3 billion yuan ($4.15 billion) in the first nine months, said the report, citing an unnamed person familiar with the matter. The company's revenue was 56.2 billion yuan in the same period, it said.

The decline in profit was mainly due to middling crude oil prices this year, said analysts. "CNOOC's business is mainly in upstream sectors -- oil exploration and production. Fluctuating oil prices will have a bigger impact on CNOOC compared with China's two other oil majors PetroChina and Sinopec," said Liu Gu, analyst with Guotai Jun'an Securities.

Liu earlier told China Daily that CNOOC would see a 30-percent fall in profits this year.

Most insiders believe that crude prices will average $80 per barrel at the end of this year. The price rose to a record high of $147 per barrel last July.

Last year, CNOOC's net profit rose 42 percent to 44.4 billion yuan due to growth in production and higher oil and gas prices. The company said in August that net income had dropped by 55 percent in the first half of 2009 to 12.4 billion yuan.

Shares of CNOOC declined the most in almost a month in Hong Kong trading after the Wall Street Journal report. Its shares have advanced 69 percent in Hong Kong this year, compared with the 55-percent gain in the benchmark Hang Seng Index.

Analysts said CNOOC's recent moves meant the company was making efforts to become a more integrated energy company. The company earlier started operating its first giant refinery, the Huizhou oil refinery, in the country.

The Huizhou project is in the Pearl River Delta, one of China's economic powerhouses. CNOOC has been focusing on the region to develop its downstream business, sources with the company told China Daily earlier.

Related readings:  CNOOC receives first shipment of LNG from Qatargas  CNOOC 'eyes' stake in Ghana oilfield  CNOOC may acquire 'large' stakes in Nigerian oil  CNOOC gas field starts production in South China Sea

CNOOC in July won oil product wholesale licenses. With the licenses, the Beijing-based CNOOC will be able to sell products to other oil companies.

Analysts said the new refined oil wholesale licenses would help CNOOC sell products from its Huizhou refinery in southern Guangdong province and from smaller refineries it had acquired previously.

But as CNOOC now plays only a small role in the domestic refined oil market, the move will not have any big impact on China's two oil majors, PetroChina and Sinopec, they said.