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Abney Associates Drilling For Success With CnoocBy Expert Author: Rick Abney
It has been a busy and profitable year so far for China’s largest offshore oil and gas exploration company Cnooc Ltd after they exceed analyst’s forecasts to post an increase in profits of 7.9 percent for the first half of the year. The increase comes at a welcome time for the company as they continue to optimize the profitability of their latest of many recent acquisitions, the formerly Canadian oil company Nexen.
One reason offered for the higher than expected profit increase, is that Nexen operations, the most costly to operate of Cnooc’s holdings accounted for only 0.5 percent of the total profit for their Chinese owners. Despite the $15.1 purchase price Cnooc paid for the company, they do not rely on it for generating revenues at this stage.
“A lot of people miscalculated what Cnooc’s intentions were for Nexen, they simply saw the price paid and assumed there must be some immediate need for it. For the Chinese company the thinking behind the purchase was all long term. Even by increasing their short term operating costs by 22 percent with the purchase, market conditions were more than agreeable to them profiting now and keeping the Nexen reserves out of the hands of competitors,” explained James Carter, Senior Vice President of Mergers and Acquisitions at Abney Associates.
The announcement of the better than expected profits come at a time that finds oil and gas producers doing better in the market than at the beginning of the year, with most analysts agreeing that overall the outlook for the sector will continue to improve through 2014, especially in light of reduced production from the North Sea due to major overhaul and maintenance of infrastructure. Cnooc’s ROI for the year now stands at 5.6 percent and is expected to increase steadily over the remainder of the year.
Abney Associates’ Senior Vice President of Mergers and Acquisitions James Carter said, “The biggest disservice an investor can do themselves is to chase high risk, immediate reward situations in the oil and gas sector. The best outcomes are found over the medium to long term and Cnooc exemplifies how a company should approach this. They are performing well right now and have made all the necessary steps to insure that they continue to do so in the future, we shall continue to advise our clients within this sector, it is wise to hold a well-diversified portfolio balancing and assessing your individual risk when constructing a portfolio with Abney Associates.”
Abney Associates are a Hong Kong based company that provides a range of financial services to individual clients, portfolio companies, corporate investors and entrepreneurs who wish to take unbiased financial advice. Abney Associates are primarily a team of financial specialists who pride themselves on having a high level of expertise and vast experience for diligently monitoring any positive or negative developments to companies currently listed on exchanges globally, especially those that may affect client investment interests. This is done in order to ensure the financial advice given is factually correct and delivered in an effective way.
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