China’s largest offshore oil explorer CNOOC Ltd. (CEO) has released its 2010 business strategy and development plan. The company is highly optimistic about its production growth this year. Based on new projects that will come online, CNOOC expects its net production will increase 22%–27% to 275−290 million barrels of oil equivalent (MMboe).
To fund this program, CNOOC has raised its capital budget by 29.5% to $7.93 billion for this year over the estimated capital expenditure of 2009. Of the total capital budget, $4.81 billion is earmarked for the development of oil and gas fields, $1.5 billion for production and $1.47 billion for exploration activities.
Energy demand in China is gaining traction with the country’s economic recovery. While operating costs for the energy sector is moving up, CNOOC continues to implement its low-cost strategy to achieve a competitive cost advantage.
The company said that all of its major projects that are expected to come online this year will be located offshore China. The most notable ones are projects like Jinzhou 25-1 and Bozhong 19-4.
We view CNOOC ADSs favorably, primarily on the basis of company’s solid production growth profile and exclusivity in the offshore China region. With the brighter economic outlook for China than the rest of the world, CNOOC ADSs are expected to maintain their recent impressive performance momentum in the coming days.
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