CNOOC results set to sparkle
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When China's top three oil companies report interim results from this week, offshore producer CNOOC Ltd is set to outperform bigger rivals PetroChina Co and Sinopec Corp.
Driven by its significant oil and gas production combined with much higher realized crude prices, Mirae Asset Securities has estimated an 85 percent jump in CNOOC's net profit while Beijing Gaohua Securities has predicted an 87 percent increase.
Analysts polled by Bloomberg News estimated a 36 percent rise for PetroChina and a 2 percent drop for Sinopec. Both have refining operations, a sector typically vulnerable to price caps in China when crude oil prices soar although the government has eased its control on fuel pricing.
Unlike PetroChina and Sinopec, CNOOC makes all its profit from exploration and production, so it could benefit directly from higher crude prices. The crude prices, which had gained 50 percent in the first half, may rise further on news yesterday that China's economy has surpassed Japan's.
"This could restore confidence in the energy markets that China's long-term oil imports will continue to march higher, boding well for higher oil prices ahead," Mirae analyst Gordon Kwan said.
By starting up new fields and acquiring overseas assets, including a stake in Argentina's Bridas Corp, CNOOC aims to boost output by 28 percent this year, a target much higher than Western majors such as Exxon Mobil and Royal Dutch Shell.
Still, Kwan warned of higher safety costs for CNOOC, which is focusing on safety to prevent potential oil spills in offshore China after the BP drilling tragedy in the United States. "This could dampen the stock prices in the short term," he said.
Sinopec, Asia's biggest refiner that derived 62 percent of its operating income from refining and marketing in 2009, may see its growth from exploration and production offset by a decline in refining in the first half. The weak refining results are due to the high base from the first half of 2009, when crude oil prices were lower and refining margins were higher, a Beijing Gao Hua report said.
CNOOC will unveil first-half earnings on Thursday, Sinopec on Sunday, and PetroChina on August 26.
