China’s largest offshore oil explorer CNOOC Ltd. (CEO) has signed an agreement with Venezuelan state oil company PDVSA for joint development of oil and gas reserves in the Latin American country. The company will help Venezuela to develop the Boyaca 3 oil block in the Orinoco belt, a large heavy-crude basin in eastern Venezuela.

In terms of production and reserve growth, CNOOC has a very impressive track record. When the company was listed in 2001, its reserves and production were only 1,790 MMBOE (million barrels of oil equivalent) and 261,400 BOE/d (barrels of oil equivalent per day), respectively. By year-end 2008, these figures had reached 2,515 MMBOE and 530,728 BOE/d, representing significant growth over the eight-year period.

Additionally, with more than half of its proved reserve base undeveloped (approximately 59.9% as of Dec 31, 2008), CNOOC has a detailed line-up of development projects that should help sustain a positive production growth.

CNOOC’s upstream activities are gaining momentum with an expectation of a double digit volume growth. The latest in this case is a production sharing contract with BG International Limited for Block 63/16, located in the Qiong Dong Nan basin in Western South China Sea.

Favorable prospects for the resumption of China’s economic growth, coupled with the company’s positive production-growth profile, exclusivity in the offshore China region and lucrative LNG investments account for our continued positive view of the stock.

Zacks Investment Research

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