China National Offshore Oil (TSX:CNU) is an upstream company specializing in oil and natural gas exploration, development, and production. It is the dominant oil and natural gas producer in offshore China, and in terms of reserves and production, is one of the largest independent oil and natural gas exploration and production companies in the world.
The company has a price-to-earnings ratio of 18.48, a price-to-book ratio of 1.58, and market capitalization of $93.8 billion. Debt is very sparingly used, as evidenced by a debt-to-equity ratio of just 0.34. The company has excellent performance metrics with a return on equity of 13.9%.
As of the end of 2018, the company owned proved reserves of approximately 4.96 billion barrels of oil equivalent (BOE), including approximately 0.37 billion BOE in the company’s equity method investees. The company achieved a total net oil and gas production of 1,301,438 BOE per day.
In offshore China, the company engages in oil and natural gas exploration, development, and production in Bohai, South China Sea, and the East China Sea, either independently or in cooperation with foreign partners through production sharing contracts (PSCs). As of the end of 2018, approximately 56.5% of the company’s net proven reserves and 64.9% of net production were derived from offshore China.
In the company’s independent operations, CNOOC has been adding to company reserves and production mainly through independent exploration and development in offshore China. At the end of 2018, approximately 85% of the company’s net proved reserves and approximately 78% of the company’s net production in offshore China were derived from independent projects.
In the company’s PSC operations, CNOOC has the exclusive right to explore and develop oil and natural gas in offshore China in cooperation with foreign partners through PSCs. CNOOC’s overseas assets account for over 50% of the company’s total assets. With a diversified portfolio of high-quality assets, the company is an active participant in a number of world-class oil and gas projects and is regarded as a leading industry player.
Currently, the company holds interests in oil and natural gas blocks in Indonesia, Australia, Nigeria, Uganda, Argentina, the U.S., Canada, the United Kingdom, Brazil, Guyana, and various other countries. As of the end of 2018, approximately 43.5% of the company’s net proven reserves were derived from overseas.
In 2018, the company achieved production and business targets, despite having faced a number of challenges. The company adhered to a value-driven exploration philosophy, targeted mid- to large-sized oil and gas discoveries with enhanced efforts in exploration. 17 new discoveries were made, and 17 successful appraisals of oil and gas structures were achieved.
The production target was met with a net production of 475 million BOE. Notwithstanding the pressure of rebounding oil prices and rising costs, all-in costs per BOE decreased for five consecutive years to $30.39. The company maintained a healthy financial position with net profit of $52.7 billion for the year. Meanwhile, the company’s performance in the areas of health, safety, and environmental protection remained stable.
CNOOC’s dominant position in the global oil and gas industry makes it an excellent stock to hold over the long term.
