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CNOOC's (CEO) 2018 Earnings & Sales Up Y/Y, Reserves Grow

Zacks Equity Research

CNOOC Limited CEO recently announced 2018 annual results. The company’s basic earnings per share in full-year 2018 were RMB1.18, reflecting a 113% increase from the 2017 level. Net profit from operations surged from RMB24.7 billion in 2017 to 52.7 billion in 2018.

Oil and gas sales revenues in full-year 2018 were RMB185.9 billion, 22.4% higher than the year-ago level of 151.9 billion. The upside can be attributed to increased production and rise in price realizations.

CNOOC Limited Price, Consensus and EPS Surprise

CNOOC Limited Price, Consensus and EPS Surprise | CNOOC Limited Quote

Production Rise

In 2018, CNOOC’s net production was 475 million barrels of oil equivalent (MMBoe), up marginally from the year-ago level of 470.2 MMBoe. The production figure was within the 470-480 MMBoe production target that was set at the beginning of the year. Of the total production, 65% came from China and overseas contributed the rest. While total crude and liquids production fell 1.3% through 2018 to 383.5 million barrels, natural gas output increased 12% during the period to 530.2 billion cubic feet.

Increased Price Realizations

The company’s average realized oil price increased 27.7% year over year to $67.22 per barrel. Realized gas price increased 9.8% from the year-ago level to $6.41 per thousand cubic feet.

Decreasing All-in Cost

During 2018, the company managed to reduce all-in cost to $30.39 per Boe, 6.6% lower than 2017 levels. The decline was primarily observed in DD&A expenses. Notably, the company has decreased all-in cost per Boe for five years in a row.

Capital Expenditure Hike

In 2018, CNOOC’s capital expenditure was RMB62.6 billion, higher than the 2017 level of RMB50.1 billion. For exploration, development and production purposes, the company used RMB12.3 billion, RMB37.4 billion and RMB12.4 billion, respectively.

Reserves Growth

In 2018, the company’s reserve replacement ratio was 126%. At the end of 2018, its net proved reserves grew to a historic high of 4.96 billion Boe. Moreover, the company’s reserve life has been extended to 10.5 years.

Upbeat Guidance

The company expects 2019 capital expenditure in the range of RMB70-80 billion. Production for full-year 2019 is anticipated in the 480-490 MMBoe band. Through 2019, CNOOC expects its reserve replacement ratio to be 120%. It expects six new projects to come online in 2019.

Our Take

We remain optimistic on CNOOC as its performance is reflective of its premium asset portfolio, excellent execution strategy and unique position as a pure oil play. During the year, CNOOC made 17 commercial discoveries, and successfully completed the appraisal of 17 oil and gas structures. The company has more than 20 new projects under construction, of which six are expected to come on stream this year.

Zacks Rank and Other Stocks to Consider

CNOOC currently holds a Zacks Rank #2 (Buy). Investors interested in the energy sector can opt for other top-ranked stocks as given below:

Denver, CO-based Antero Resources Corporation AR is an upstream energy company. Its top line for 2019 is expected to increase 11.8% year over year. The stock currently has a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Rio de Janeiro, Brazil-based Petróleo Brasileiro S.A. or Petrobras PBR is an integrated energy company. Its top line for 2019 is expected to increase 9.1% year over year. The stock currently has a Zacks Rank #2.

El Dorado, AR-based Murphy Oil Corporation MUR is an exploration and production company. For 2019, its bottom line, which has witnessed three upside revisions over the past 60 days, is expected to grow 7.9% year over year. The company currently holds a Zacks Rank #2.

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