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China’s Biggest Offshore Producer Posts First-Ever Half-Year Loss

Chinese oil worker

China’s biggest offshore oil and gas producer Cnooc Ltd (NYSE:CEO) reported on Wednesday its first-ever net loss for a half-year, of US$1.16 billion (7.74 billion yuan), on the back of hefty impairment charges and low crude prices.

Analysts had anticipated Cnooc to post a loss of US$1.2 billion, and the company itself had said it expected a loss for the first half this year.

For the first half of 2015, Cnooc had reported a net profit of US$2.2 billion (14.7 billion yuan).

This first half-year, however, Cnooc swallowed a US$1.56-billion (10.359 billion yuan) impairment and provision charge, most of which, according to chairman Yang Hua, resulted from Canadian oil sands assets, Bloomberg reports. Nevertheless, the low prices and the relatively high production costs would not dampen Cnooc’s confidence in its oil sands investments, the manager said in a briefing.

In January to June, Cnooc reported an all-in cost per barrel of oil equivalent (boe) down by 15.5 percent on the year to US$34.86. Capital expenditure was slashed by 33.3 percent.

The company’s production from offshore China increased 2.4 percent with production from new projects, while overseas output declined 2.9 percent, mostly due to the shut down of oil sands projects in Canada, following incidents and forest wild fires, Cnooc said. The group, however, kept its full-year target to produce 470 million-485 million barrels.

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Despite the hefty half-year loss, Cnooc declared an interim dividend of US $0.02 (HK$0.12) per share, tax inclusive.

Analysts have recently said that Chinese oil companies may use dividend payouts in a bid to calm the fears of investors on the heels of the drop in energy prices.

“At current oil prices, China’s big oil companies have basically nothing but reasonable dividend payouts to keep current investors and attract new ones,” Tian Miao, an analyst at North Square Blue Oak Ltd, said.

China International Capital Corp. and Morgan Stanley had projected that Cnooc might consider a special dividend for investors.

By Tsvetana Paraskova for Oilprice.com

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