CNOOC Lowers Output Targets, Extending Reserves Life but Hurting Our Fair Value Estimate
We cut our fair value estimate on CNOOC to HKD 8.20 (USD 105 per ADR) from HKD 9.40 (USD 121), following the firm's reduction in production targets, accompanied by higher capital expenditure. Although we think the higher capital expenditure should eventually lead to increased output, the company is likely keen to build up its reserves life, which has fallen to less than nine years. The strategy is positive for the longer term but will dampen cash flows for the next few years in the absence of a ...Cnooc is an investment holding company. Through its subsidiaries, Co. is principally engaged in the exploration, development, production and sale of crude oil, natural gas and other petroleum products in offsore of the People's Republic of China. Co.'s core operation areas are Bohai, Western South China Sea, Eastern South China Sea and East China Sea in offshore China. Co. has oil and gas assets in Asia, Africa, North America, South America, Oceania and Europe. As of Dec 31 2016, net proved reserves for oil, gas, and synthetic oil were 2,015.4 million barrels, 7,486.1 billion cubic feet, and 7,486.1 million barrels, respectively.
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