Oil leaks and overseas deal delay prompt producer to lower target

Hong Kong - CNOOC Ltd, China's biggest offshore oil explorer, will start new oilfields and stabilize production after crude spills and a delay in completing an overseas acquisition forced the company to cut its annual output target.

CNOOC reported a record half-year profit on Wednesday and reduced its full-year output estimate by as much as 9.3 percent because oil leaks disrupted operations at China's biggest offshore field, Penglai 19-3, and unit Bridas Corp fell behind schedule for completing the acquisition of a $7.1 billion stake in Pan American Energy LLC.

"Their focus in the second half is really to continue stable production and to restart the Penglai output as soon as possible," said Neil Beveridge, a senior analyst at Sanford C. Bernstein & Co in Hong Kong. "Also, if they can complete the Pan American deal before the end of the year."

CNOOC has declined 21 percent in Hong Kong trading this year, outpacing the 14 percent drop in the benchmark Hang Seng Index.

Net income grew 51 percent to a record 39.34 billion yuan ($6.2 billion) in the first half, beating analyst estimates, after crude prices rose and CNOOC increased output by 13 percent to meet demand in the world's fastest-growing major economy.

Revenue gained 51 percent to 124.6 billion yuan, while output rose to the equivalent of 168.7 million barrels of oil.

The Chinese energy explorer cut its annual output target to somewhere between 331 million and 341 million barrels, from a goal of as much as 365 million barrels that it had set in January. Oil and natural gas production accounts for 99 percent of its income.

CNOOC and partner ConocoPhillips Co halted two platforms at Penglai 19-3 in Bohai Bay on July 13, following two spills in June. Operator Conoco said on Aug 17 it had resumed partial production.

Starting up fields off the eastern coast would help offset the Penglai crude output loss of 22,000 barrels a day, about 3 percent of CNOOC's oil and natural gas production last year.

The Weizhou 11-2 and Lufeng 13-2 fields in the South China Sea are scheduled to begin operations in the second half, CNOOC said.

"The revised target is certainly achievable," said Brynjar Eirik Bustnes, the Hong Kong-based head of Asia-Pacific oil and gas research at JPMorgan Chase & Co. "They're talking about two to three new fields starting. They need those just to maintain production at the current level."

Bridas, an oil company controlled by CNOOC and Argentina's billionaire Bulgheroni family, agreed in November to acquire the 60-percent stake it doesn't already own of Pan American Energy from BP Plc.

The deal, which was due to be completed by June 30, is subject to government and regulatory approvals, CNOOC said on Wednesday.

Approvals may be delayed until after Argentina votes in a presidential election in October, Yang Hua, CNOOC's chief executive officer, told reporters in Hong Kong on Wednesday.

"We certainly hope the deal can go through as early as possible, but we have to be patient and wait for the Argentine government to sort out their issues first," Yang said.

BP expects the deal to be completed this year, said Robert Wine, the company's London-based spokesman.

Bloomberg News