CNOOC 0883

[winston]

China's CNOOC sees 2009 oil/gas output up 14 to 16 pct on yr - report

BEIJING (XFN-ASIA) - CNOOC Ltd, the country's top offshore oil and gas producer, aims to produce 14 to 16 pct more oil and gas in 2009 than in 2008, the Hong Kong Economic Times reported, citing a company official.

The company had a target of 195 mln to 199 mln barrels of oil equivalent for 2008. CNOOC will officially announce its 2009 strategic review, including output targets and capital expenditure, next Tuesday.

[winston]

CNOOC eyes output rise
Kathy Wang

CNOOC (0883), the Hong Kong- listed flagship of China's largest offshore oil explorer, aims to boost production by as much as 18 percent this year as its ample free cash flow supports expansion despite lower prices for crude.

CNOOC intends to increase production by between 225 million and 231 million barrels of oil equivalent this year, mainly driven by new output from wells in Nigeria and Indonesia.

Last year's output was between 194 million and 196 million barrels.

"Our stringent cost control strategies made us very well positioned in cashflow, which fundamentally supports our growth expenditure requirements, even as some competitive peers are scaling back capital spending and delaying projects," chief financial officer Yang Hua said yesterday.

"Although there was a downward fluctuation of oil prices in the second half last year, we kept our business at a stable pace. We are confident in a continuing production and reserves growth in 2009," chairman Fu Chengyu said.

The offshore oil giant has earmarked US$6.6 billion (HK$51.48 billion) for 10 new projects in 2009. From that amount US$1.1 billion will be allocated for exploration, US$1.1 billion for production, and US$4.4 billion for development. Eight of the 10 projects are in China. The other two are in Nigeria and Indonesia.

The company intends to extend its pipelines by more than 430 percent to 780 kilometers this year.

CNOOC shares dipped 2.8 percent to HK$6.60 in Hong Kong yesterday. Crude for February delivery slid US$3.10 to US$33.50 per barrel on the New York Mercantile Exchange

[winston]

DJ MARKET TALK: Cnooc Set To Fall; Growth Target Challenging-CLSA

0849 [Dow Jones] Cnooc (0883.HK) set to fall after announcing plan to boost 2009 capex by 19% to US$6.76 billion and raise 2009 crude oil/natural gas production 16%-18% on-year, marking contrast to peers' moves to sharply trim budgets "The growth target is ambitious and challenging if oil price continues to spiral lower," says Gordon Kwan at CLSA.

Adds managing costs effectively will be key to deliver above trend growth for 2009, vs normalized long-term oil/gas output growth of 7%-11% per annum. Anticipated overall market weakness, ADRs fall to equivalent of HK$6.27 (down 5.0% vs local close) also set to weigh.

Keeps at Outperform, target HK$7.30, based on 40% NAV discount. Adds, Cnooc's plan positive to earnings outlook of service provider China Oilfield Services Ltd. (2883.HK) with Cnooc starting production from 10 new projects, and over 20 projects under construction in 2009.

[winston]

DJ MARKET TALK:Cnooc Off 2.3% Pre-Mkt; Strategy A Mixed Bag-Daiwa

0944 [Dow Jones] Cnooc (0883.HK) down 2.3% at HK$6.45 at pre-open, as annual strategy preview for 2009 raises concern on earnings outlook, especially with higher-than-expected capex guidance amid current low crude price level.

Daiwa says strategy preview "a mixed bag;" Cnooc had huge hoard of CNY44 billion (cash and cash equivalents) as of end-June 2008, so increased capex shouldn't be a burden. But adds: "we think persistent negative free cash flow may reduce potential M&A opportunities, unless Cnooc raises more cash through debt or equity financing," says Daiwa. Keeps at Underperform, target HK$5.10.

[winston]

DJ MARKET TALK:Cnooc Dn 2.1%;Potential Winner In Next Upcycle-DBS

1108 [Dow Jones] Cnooc (0883.HK) down 2.1% at HK$6.46, as 2009 growth strategy, including higher-than-expected capex, raises concern over earnings outlook. DBS tips earnings risk from possibly weaker-than-expected crude price; also notes contribution from higher output growth will be offset by lower interest income.

But heavy capex plan could make it a potential winner in next upcycle as many global peers' expansion plans have been constrained by credit crunch, says DBS. Tips Cnooc's aggressive capex will support output growth at double-digit levels for next few years, offers it first-mover advantage if crude market recovers sooner-than-expected. Keeps at Hold, target HK$7.77.

[winston]

DJ MARKET TALK: Cnooc Off 2.7%; Guoco Tips 2009 Pft To Fall 23.3%

1436 [Dow Jones] Cnooc (0883.HK) down 2.7% at HK$6.42, but may remain under pressure near-term as stock 2nd heaviest short-selling target with HK$136.78 million midday, after announcing 2009 strategy plan including 19% boost to capex to US$6.76 billion.

Plan hasn't been welcomed by investors as crude price remains at low level. Guoco Capital tips Cnooc's net profit to decline 23.3% to CNY33.3 billion in 2009, as crude price unlikely to exceed $50/barrel in 1Q09 amid recession in Japan, Europe, U.S. Assumes 1Q average crude at $45/barrel. Keeps at Sell, target HK$6.00. One-month low of HK$6.33 set to act as support.

[winston]

20090116 Macquarie CNOOC
The best exposure to oil price gains

Event
We have revised our earnings forecasts to take account of actual crude prices in 2008 and changes to our oil price forecast for 2009 onwards.

Impact
Earnings downgrade: The result is a 7% downgrade to 2008 earnings and a much greater 26% cut in our forecast earnings for 2009 when the full impact of lower crude prices works through. Our 2010 forecast for earnings is cut by 4%.

Cashflow estimates are reduced by similar amounts but CNOOC should still maintain a net cash position at the end of each year.

Our forecast dividend for 2009 has been cut from HK$0.32/sh to HK$0.30/sh, but 2010 is left unchanged at HK$0.32/sh.

Price catalyst
12-month price target: HK$10.50 based on a Sum of Parts methodology.

Catalyst: Recovery in crude oil prices.

Action and recommendation
Despite these cuts to earnings, CNOOC is still in a very strong position to maintain a strong exploration and development program. This should allow the company to maintain a good reserve replacement record and provide the base for future production growth.

The reduction in cashflows means a cut to our DCF valuation from HK$11.50/sh to HK$10.50/sh based on a US$92/bbl long-tem oil price. We maintain that the current share price reflects a long-term oil price closer to US$45/bbl. We maintain our Outperform recommendation as the target price still provides 56% potential upside.

[winston]

DJ MARKET TALK:Cnooc Off 3.6%;Higher Valuation Unjustified -Guoco

1549 [Dow Jones] Cnooc (0883.HK) down 3.6% at HK$7.28, as easing crude price likely an overhang on stock. Guoco Capital says based on assumption for WTI crude oil price at $100/bbl in 2008 and unchanged $65/bbl in 2009 (year-to-date WTI crude at $44/bbl, but tips recovery in 2H on improved global economy to boost oil price sharply), tips Cnooc's net profit to grow 39% on-year in 2008, but down 23% in 2009; implies counter trading at 2008 P/E of 6.9X, 2009 P/E of 8.9X, which higher vs 6X-8X for oil companies during recession periods.

Notes higher P/E multiple for Cnooc looks unjustified and will not be sustainable. Keeps at Sell, target HK$6.00. Early low of HK$7.17 as immediate support

[winston]

DJ MARKET TALK: GS Keeps Cnooc At Neutral Despite Gas Discovery

1019 [Dow Jones] STOCK CALL: Goldman Sachs keeps Cnooc (0883.HK) at Neutral, despite latest deepwater gas discovery at Liwan 3-1 by project partner Husky Energy (HSE.T); target price also remains at HK$5.90.

Says appraisal success is encouraging, but "it is still too early to discuss project economics and reserve size." Husky earlier says reserves at Liwan could reach 6 trillion cubic feet. Cnooc remains Goldman's top pick among Chinese oil stocks, but says current valuation of 14.2X 2009 P/E is no longer compelling, vs supermajors also at 14.2X. Stock +1.2% at HK$6.86.

[winston]

DJ MARKET TALK: Nomura Cuts Cnooc Target;Lower Oil Price Forecast

1433 [Dow Jones] STOCK CALL: Cnooc (0883.HK) +1.6% at HK$6.91 midday in modest volume, outperforming PetroChina (0857.HK), Sinopec (0386.HK), as pure upstream play benefits from oil price rebound; immediate resistance eyed at psychological HK$7.00.

Nomura lowers FY09-10 earnings forecasts by 27%, 16% to CNY20.0 billion, CNY26.8 billion respectively, mainly due to lower oil price assumptions; cuts target price to HK$6.50 from HK$7.00, keeps Neutral call.

Says current valuations "appear stretched" at 12.6X P/E historical average of 9.6X; thinks recent outperformance likely due to market's positive outlook of "an eventual rebound in crude oil prices," net cash position. Still, warns there could be downside risks if market turns bearish, based on oil fundamentals