Cnooc Limited (600938.SH/00883.HK) reported on April 28 that its first-quarter revenue reached 116.079 billion yuan, an increase of 8.6% year-on-year. Net profit attributable to shareholders was 39.144 billion yuan, up 7.1% from the same period last year.
During the first quarter, the company’s average realized oil price was $75.92 per barrel, rising 4.5% compared to the prior year. The average realized natural gas price was $7.69 per thousand cubic feet, down 1.2% year-on-year. Net production reached 205.1 million barrels of oil equivalent, a record high and an 8.6% increase from a year earlier. Overseas production growth was more significant than domestic output. By product type, liquid petroleum and natural gas production increased by 8.9% and 7.7%, respectively.
The company accelerated the deployment of exploration adjustment wells and capacity construction, with capital expenditures surging 19.1% year-on-year to 33 billion yuan.
Since late February, global oil and gas markets have experienced significant volatility due to conflicts in the Middle East and disruptions to shipping through the Strait of Hormuz, driving a sharp rise in international oil prices. According to Tonghuashun iFind data, the average Brent crude price in the first quarter was $78 per barrel, up 5% year-on-year and 24% quarter-on-quarter. The duration and outcome of Middle Eastern tensions remain uncertain. Even if the Strait of Hormuz reopens, traffic cannot quickly return to normal levels, and severely damaged key energy facilities in the Gulf will take months or even years to repair. As a result, high oil prices are expected to persist.
As a pure upstream oil and gas exploration and development company, Cnooc’s performance is closely tied to oil price movements. With prices remaining elevated, can the company indefinitely increase production to capture more profits? During the earnings conference held on the 28th, investors were most concerned about whether Cnooc would adjust its annual production target and capital expenditure plan.
A company representative stated that the full-year production target remains unchanged at 780–800 million barrels of oil equivalent. Capital expenditure budgets are based on specific projects, and project advancement depends on the company’s development strategy and medium- to long-term oil price forecasts. There are currently no plans to adjust the capital expenditure budget.
When explaining the relationship between selling prices and market prices, a Cnooc financial executive noted that international oil prices were highly volatile in the first quarter due to Middle East tensions. The average Brent futures prices for January, February, and March were $64.73, $69.37, and $98.70 per barrel, respectively. The company’s realized oil price for the quarter was $75.92 per barrel, up 4.5% from $72.65 per barrel in the same period last year, and at a discount of $2.46 per barrel to Brent futures.
Domestic crude sales are priced with reference to Brent spot prices, while overseas sales are linked to international benchmarks such as Brent, Dubai, Oman, and WTI based on the production region. The current premium of spot prices over futures is favorable for the company as a crude producer. Crude sales are generally arranged in advance, with pricing and premiums or discounts determined ahead of time. As a result, March’s Brent spot prices were already reflected in the sales outcomes.
In other words, Cnooc sells its crude at market prices, with specific sales flows determined by market dynamics.
The company stated that as its scale expands, the base required to offset natural decline and achieve actual growth increases each year, leading to more moderate production growth—a common phenomenon for oil and gas companies of a certain size. The 8.6% year-on-year increase in first-quarter net production was mainly attributed to optimizing maintenance schedules and accelerating new well commissioning amid favorable oil prices. For the full year, considering planned shutdowns and uncertainties such as typhoons in the second half, the annual production target remains unchanged.
Scheduled maintenance and other fixed activities must be carried out within the year, whether in the first, second, or third quarter. If not completed earlier, they must be made up later. In addition, uncertainties like typhoons must be fully considered. These factors are key reasons for maintaining the annual production target.
A Cnooc exploration and development executive emphasized that increasing oil and gas field output is not simply a matter of desire; it is directly tied to production methods and the number of wells. First-quarter production grew steadily month by month, rather than surging abruptly after March’s oil price spike. The company manages fields steadily under reasonable production systems to balance current benefits with long-term field lifecycle value. This approach ensures maximum lifecycle profitability and considers both short- and long-term interests. The same management philosophy will apply in the second, third, and fourth quarters.
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