Nexen deal to give driller new momentum

Updated: 2013-03-23 09:57

By Gao Changxin in Hong Kong (China Daily)

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Offshore driller CNOOC Ltd said its Nexen Inc purchase has received "extremely positive" feedback from both companies' workers and management.

The State-owned oil and gas company completed its $15.1 billion takeover of the Canadian oil and gas company late last month, in the largest overseas acquisition by a Chinese company.

The deal took over a year to complete, as regulators in the US and Canada reviewed whether the acquisition violated their national interests and safety - concerns fueled by CNOOC's State ownership.

CNOOC Chairman Wang Yilin said on Friday that the deal was "full of hardships and twists and turns", but the fact that both US and Canadian regulators approved the purchase shows that the deal is a "purely commercial operation", and that CNOOC is an independent commercial entity.

The deal is expected to give new growth momentum to CNOOC, which is having trouble raising its production.

"We believe that the acquisition of Nexen conforms to our development strategy and will bring long-term benefits to our shareholders," Wang said.

The Nexen purchase is expected to increase CNOOC's total reserve by 30 percent and production by 20 percent.

CNOOC on Friday reported that its 2012 profit dropped 9.3 percent, as rising operation costs and new taxes kicked in amid stagnant production growth.

Per-barrel cost increased 16.8 percent to $35.73, up from $30.58 a year earlier. Around half of the increase is caused by the levy of a resource tax that began in late 2011.

Profit fell to 63.69 billion yuan ($10.25 billion) in 2012, from 70.26 billion yuan in 2011. The figure was slightly below the average 64.86 billion yuan net-profit forecast of 32 analysts polled earlier by Thomson Reuters.

Revenue rose 2.8 percent to 247.63 billion yuan from 240.94 billion yuan.

Production increased just 3.2 percent to 342.4 million barrels, hindered by the 2011 suspension of its Penglai 19-3 field, the company's biggest in China, after an oil leak. The field resumed production earlier this year, but it is unlikely to peak in the near future, the company said.

CNOOC's share in Hong Kong lost about 13 percent last year, amid a 5.8 percent gain in the benchmark Hang Seng Index. On Friday, CNOOC dropped 0.83 percent, or HK$0.12 (1.5 US cents), to HK$14.32, before reporting its earnings. It proposed a final dividend of HK$0.32 per share.

Part of the cost increase last year was due to the driller's stepped-up exploration effort.

A total of 21 new fields were found, 12 in offshore China and nine overseas. Ten new fields are expected to start operating this year, but that helps little in boosting production as most of them start late this year. More than 30 new fields will start operating this year through 2015, which will help realize an average production growth of 4 to 5 percent.