PWW

Portfolio AI Insights

pww.comCNOOC Limited, 2019 Earnings Call, Mar 25, 2020 - SEHK:883

SEHK:883

Unknown Executive [Executives] đź’¬

The "Unknown Executive" made the following announcements and statements during the CNOOC Limited 2019 Annual Results Analyst Conference Call:

  1. Opening Remarks:

    • Welcomed attendees to the CNOOC Limited 2019 Annual Results Analyst Conference Call.
    • Introduced the senior management team present, including:
      • Mr. Wang Dongjin, Chairman of the company.
      • Mr. Xu Keqiang, CEO of the company.
      • Mr. Hu Guangjie, President of the company.
      • Mr. Xie Weizhi, CFO of the company.
    • Mentioned that Mr. Xie Weizhi, the CFO, would present the company’s financial and operating highlights for 2019.
    • Announced that there would be a Q&A session following the presentation.

  2. Closing of Presentation:

    • Thanked Mr. Xie for his presentation.
    • Announced the start of the Q&A session.

  3. During Q&A Session:

    • Thanked Mr. Xie and handed over to the operator for the Q&A session.
    • Gave instructions for the Q&A session, reminding participants to moderate the pace of their questions to allow the interpreter to process them.

  4. Response to Scott Darling's Question:

    • Provided a response to Scott Darling’s question about the company’s production and capital expenditure (CapEx) guidance for 2020.
    • Noted that the original 2020 budget was based on an assumed oil price of $65 per barrel, with a planned CapEx range of RMB 85 billion to RMB 95 billion and a net production target of 525 million barrels.
    • Acknowledged the need to revise production targets and CapEx in light of the current oil price environment and COVID-19 challenges.
    • Mentioned that the company would implement strict controls on CapEx, costs, deflation rates, and staffing levels.
    • Stated that overseas project CapEx would be strictly controlled, and the production mix would be optimized to better manage the business.
    • Noted that the revised production and CapEx targets would be announced after Board approval.

  5. Response to Neil Beveridge's Question:

    • Provided a response to Neil Beveridge’s question about exploration success and the impact of low LNG prices on deepwater projects.
    • Stated that it was too early to release breakeven prices for new discoveries as development plans had not been finalized.
    • Mentioned that the company would continue to use a stress test assuming an oil price of $35 per barrel to ensure the viability of new projects.
    • Noted that the company would aim to ensure that new projects did not increase the current depletion and depreciation rate (DD&A).
    • Addressed the question about the gas and power assets, stating that the company was keeping an eye on the future development of the LNG industry in China and was open to various options, but any significant moves would require regulatory approval and timely disclosure.

  6. Response to Andy Meng's Question:

    • Acknowledged the potential impact of low oil prices on reserve calculations and the reserve life balance.
    • Agreed that the drop in oil prices posed a risk to the reserve balance sheet but emphasized the importance of continuing exploration efforts to find more medium to large-sized oil and gas fields.
    • Confirmed that the company would focus on boosting reserves and monitoring the risk of off-balance sheet reserves due to falling oil prices.

  7. Response to Steve Wong's Question:

    • Addressed concerns about the potential injection of gas and power assets into CNOOC Limited.

    • Reassured investors that the company valued shareholder interests and would only make decisions that added value.

    • Noted that the gas and power group had been profitable and that the low oil price environment could benefit the group by allowing it to purchase resources at lower prices.

    • Clarified that there were no firm plans for the acquisition of gas and power assets from the parent company and that any such move would require independent shareholder approval.

    • Assured that the company would retain a considerable portion of the LNG receiving terminal assets.

    • Emphasized the company’s commitment to countering the impact of low oil prices and its strong position in the Chinese and global markets.

Weizhi Xie [Former Chief Financial Officer] đź’¬

Weizhi Xie, the Former Chief Financial Officer of CNOOC Limited, provided the following information during the 2019 Earnings Call:

  1. Opening Remarks:

    • Acknowledged the global challenges posed by the COVID-19 outbreak and expressed well wishes for safety.
    • Announced that he would cover the operating and financial highlights of the 2019 annual results.

  2. Overview of 2019 Achievements:

    • Exploration Successes:
      • 23 new discoveries and 30 oil and gas structures successfully appraised.
      • Breakthroughs in offshore China and overseas exploration.
      • Reserve replacement ratio reached 144% and reserve life remained stable at 10.2 years.
    • Production and Projects:
      • Multiple projects came online ahead of schedule.
      • Over 20 new projects under construction, with new production hitting a record high of 506.5 million BOE.
    • Cost Efficiency:
      • All-in cost per BOE decreased to USD 29.78, down 2% year-on-year.
    • Financial Performance:
      • New net profit increased significantly to RMB 61.05 billion, up 15.9% year-on-year.
      • Capital expenditure (CapEx) spending amounted to RMB 79.6 billion.
      • Proposed a final dividend of HKD 0.45 per share, tax inclusive.
    • Health, Safety, and Environment (HSE):
      • Maintained stable HSE performance.

  3. Summary of 2019 Annual Results:

    • Production:
      • Crude and liquids production amounted to 410.5 million barrels.
      • Natural gas production amounted to 561.3 billion cubic feet.
    • Realized Prices:
      • Realized oil price was USD 63.34 per barrel, down 5.8% year-on-year.
      • Realized gas price was USD 6.27 per 1,000 cubic feet, down 2.2% year-on-year.
    • Oil and Gas Sales Revenue:
      • RMB 197.2 billion, up 5.7% year-on-year.

  4. Operating Results and Highlights:

    • Exploration Activities:
      • Drilled a total of 94 wildcats and 145 appraisal wells.
      • Made significant discoveries in offshore China and overseas, including 17 discoveries in offshore China and 6 in Guyana and the UK North Sea.
    • Appraisal of Bozhong 19-6 Condensate Gas Field:
      • Added nearly 200 million cubic meters of oil equivalent of proved in-place volume.
    • Other Discoveries:
      • Kenli 6-1 expected to be a large-size oil field.
      • Luda 25-1 encountered a high-volume oil flow and is expected to be a mid-size oil field.
    • Deepwater Exploration:
      • Successful drilling of Yongle 8-3-1 marked a major progress in the exploration of the deepwater area in the Eastern Qiongdongnan Basin, South China Sea.
    • Rolling Exploration:
      • Accelerated conversion from reserve to production.

  5. Proved Reserves:

    • Total proved reserves at the year-end hit a record high, exceeding 5 billion BOE for the first time.
    • Reserve replacement ratio reached 144%.

  6. Production Performance:

    • Total production volume of 506.5 million BOE, exceeding the annual production target.
    • Net production number was a record high since the company's establishment.
    • Production breakdown by regions: China (326.4 million BOE) and overseas (180 million BOE).

  7. Development and Production Efforts:

    • Promoted Water Injection Year Program to reduce decline rates and improve recovery rates.
    • Increased workload and production volume of infill drilling wells.
    • Integrated development and appraisal led to reserve growth.
    • Improved engineering efficiency.

  8. Financial Performance and Analysis:

    • Profit and Loss Key Figures:
      • Net profit rose significantly to RMB 61 billion, mainly due to increased sales volume.
    • Balance Sheet:
      • Total assets were RMB 757.7 billion, including property, plant, and equipment (PP&E) of RMB 440.6 billion and other financial assets of RMB 114.5 billion.
      • Equity increased by RMB 28.3 billion, and gearing ratio was 26%.
    • Cash Flow:
      • Free cash flow reached RMB 38.5 billion.
    • Capital Expenditure:
      • Amounted to RMB 79.6 billion in 2019, supporting reserve and production growth.
    • Cost Reduction:
      • All-in cost was USD 29.78 per BOE, a decrease of 2% from 2018.
      • Operating expenses (OpEx) per BOE were USD 7.39, down 8.4% year-on-year.
      • Depreciation, depletion, and amortization (DD&A) per BOE were USD 16.87, slightly up year-on-year.

  9. Dividend:

    • Proposed a year-end dividend of HKD 0.45 per share, tax inclusive.
    • Represents a dividend yield of 7.3% and a payout ratio of 51.3%.

  10. Response to Future Challenges:

    • COVID-19 and Oil Price Impact:
      • Will closely monitor the trend of the international crude oil market and macroeconomic environment.
      • Timely formulate and take countermeasures to minimize the effect of the events.
    • Strategies:

      • Focus on high-quality development and profitable reserves and production.

      • Control investment pace and adhere to stringent cost control.

      • Maintain healthy cash flow.

Feedback