CNOOC Commences BZ 19-4 - Analyst Blog

The largest offshore oil company in China, CNOOC Ltd. (CEO), announced the commencement of its Bozhong (BZ) 19-4 (shallow formation) oil field production in the Bohai Bay, as part of its planned agenda for 2010.
 
Located in the southeastern part of Bohai Bay, BZ 19-4 oil field was jointly developed by CNOOC Ltd. and Chevron Corp. (CVX). The company with its 83.8% interest in the joint venture is the operator while Chevron is the minor partner.
 
With an average water depth of about 21 meters and located approximately 7 kilometers northwest of BZ 25-1, the BZ 19-4 oilfield is expected to exceed the production level of 15,600 barrels per day within the year.
 
CNOOC also highlighted that the BZ 19-4 oil field’s development and production operations depend largely on BZ 25-1/25-1S oilfield facilities.
 
Located in the northeastern part of China, Bohai Bay is a shallow-water facility with a depth of 10 to 30 meters and acts as an important oil and gas producing platform for the company along with exploration and development. At year-end 2009, the net proved reserves in this region reached 1,159 million barrels of oil equivalent (MMBoe), accounting for 43.6% of the company’s total.
 
CNOOC has a strong growth profile, exclusivity in offshore China and attractive liquefied natural gas investments. The start-up of the BZ 19-4 oil field is reflective of the company’s sound operating potential to improve production.
 
However, we remain skeptical about the performance of the stock with an upswing in the company’s cost pattern and low returns from foreign endeavors. Consequently, we maintain our Underperform recommendation for the stock.