CNOOC/China oil: asset sales and dividends will add to gains

All hope that the U.S. may cancel plans to write off more Chinese companies is unjustified, says Gary Gensler. The chairman of the Securities and Exchange Commission made this clear this week.

It’s too late for China’s major oil and gas producer CNOOC, which left the New York Stock Exchange in October. U.S. officials have previously seen the CNOOC as a threat to national security. The Hong Kong-listed researcher plans to raise $ 5.5 billion by registering a return home in Shanghai next month, just as high oil prices are boosting profits. But the growing risks mean investors need to be careful.

The timing of CNOOC may seem right. It expects first-quarter earnings to increase 89% from a year earlier. Last year, higher output and rising oil and gas prices had already tripled its net profit to $ 70 billion ($ 11 billion). The share price soared by 40% within four months.

However, a delay in the expected dividend allotment for 2021, due to listing-related restrictions, knocked the stock down 3.4% on Thursday. This may not be the end of it.

CNOOC needs the money to fund eight oil and gas fields projects. But the driller also plans to continue to invest heavily in its expensive new renewable segment, focusing on marine wind energy. Capital expenditures, which have already risen by a fifth since 2019 to $ 89 billion last year, are expected to continue to expand at this rate until 2024. Meanwhile, production costs have risen more than a tenth per barrel last year compared to 2020.

Additional potential risks lie in part in Russia’s Arctic LNG 2 natural gas project. Increasing U.S. sanctions could affect all of Russia’s offshore oil projects.

One positive catalyst can come from its property sales. CNOOC is reportedly considering selling its North Sea portfolio in the UK, including Buzzard Field, for a total value of up to $ 3 billion. The oil fields, which include one of the most producer fields in the UK, could spark a bidding war.

At least until details of this sale in the North Sea come up, investors should remain cautious about CNOOC shares.

CNOOC/China oil: asset sales and dividends will add to gains Source link CNOOC/China oil: asset sales and dividends will add to gains

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