China National Offshore Oil Corporation, the parent of CNOOC Ltd. (CEO), plans to invest approximately $151 billion in the next five years to increase production volumes, according to China Business News. The state-controlled oil explorer will mainly invest in offshore projects to boost its overseas operations. The company is eyeing its cash flow and capital markets for funding this huge investment.
CNOOC agreed last year to pay more than $8 billion for overseas assets to help meet requirement in the world’s fastest-growing major economy. Its domestic production exceeded 51 million tons last year. However, production from international operations was not in that tune. The news agency said that the company plans to produce 50 million tons equivalent of oil and gas from overseas fields by 2020.
The recent upswing in CNOOC’s performance reflects its solid balance sheet, premium assets portfolio, excellent execution strategy, unique position as a pure oil player and potential transactions in the merger and acquisition space.
We view CNOOC’s recent acquisition of Eagle Ford Shale acreages from Chesapeake Energy (CHK) as a long-term growth strategy; the return metric of this deal is more attractive than the company’s earlier acquisition of stake from Bridas Energy. In a favorable oil price environment, the Chinese offshore giant performs brilliantly both in terms of production growth and cost control measures.
CNOOC Ltd. won the “Energy Company of the Year” designation in 2010, the highest honor bestowed by Platts Global Energy Awards. In addition, Platts also selected the company as the “Energy Producer of the Year”. Our current recommendation for CNOOC is Outperform with the Zacks #2 Rank (Buy).
CNOOC LTD ADR (CEO): Free Stock Analysis Report
CHESAPEAKE ENGY (CHK): Free Stock Analysis Report
Zacks Investment Research
