(CEO) CNOOC Finds Gas in Yinggehai

Chinese offshore giant CNOOC Ltd. (CEO) has made another breakthrough in the high temperature and high-pressure natural gas reservoir in Yinggehai Basin.

The new discovery made in Dongfang (DF) 13-2 is situated in the north of central sag in Yinggehai Basin of Western South China Sea. The successful evaluation of the middle formation of the DF 13-1 gas field in 2010 has resulted in this new discovery.

The new find at DF 13-2 struck gas pay zones in a water depth of 65 meters, having a total thickness of 35 meters and a well depth of 3,168 meters. In the course of the trial, the well flowed at an average rate of 42.4 million cubic feet of natural gas per day. CNOOC’s new strike at Yinggehai Basin goes to confirm the exploration prospects of the area.

Further, given the abundance of natural gas reserves, Chinese energy explorers are in the quest for shale technology and expertise. This has facilitated stake purchases in overseas fields.

In this context, it is noteworthy to mention that CNOOC Limited’s parent company China National Offshore Oil Corporation entered into a production sharing agreement with a Chinese unit of Eni SpA (E) – Eni China B.V. to explore the deep water Block 30/27 in South China Sea.

Recently, the also company announced the successful appraisal of the Penglai (PL) 9-1, which was discovered in 2010. The formation was found to contain abundant hydrocarbon and the evaluation established PL9-1 as a large oilfield.

These efforts by the company to expand its portfolio and hence shareholders value, will prove beneficial over the long term. However, CNOOC’s future prospects are closely linked with the successful completion of its growth projects, which in turn, might be adversely affected by operational hindrances, cost inflation and overruns and delays in completion.

Per the Zacks Consensus Estimate, earnings per share for 2012 and 2013 are $25.89 and $27.66, respectively. This implies a growth of 8.1% in 2012 and 6.8% in 2013.

CNOOC holds a Zacks #3 Rank, which is equivalent to a Hold rating for a period of one to three months. Longer term, we maintain a Neutral rating on the stock. The company faces considerable threat from its competitor China Petroleum & Chemical Corp (SNP).

CNOOC LTD ADR (CEO): Free Stock Analysis Report

ENI SPA-ADR (E): Free Stock Analysis Report

CHINA PETRO&CHM (SNP): Free Stock Analysis Report

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