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[Audio Gap]
2018 first quarter review analyst conference call. I'm pleased to present Mr. Xie Weizhi, CFO of the company. In the following 15 minutes, Mr. Xie will give you a presentation on the company's financial and operating highlights in the first quarter of the year. After that, we'll have a Q&A session. Mr. Xie, please begin.
Good morning, ladies and gentlemen. I'm the CFO of the company. When -- I'm in Boston. It's early morning. Thank you for joining us, 2018 first quarter review conference call.
Before we start, let's take a moment to read the disclaimer on Slide 2.
Okay, let's turn to the next slide. First of all, let's review our operating performance in the quarter. Net production was 120.1 million BOE, up 0.8% year-over-year.
On exploration side, we achieved 6 new discoveries and 15 successful appraisal wells.
On the development side, 2 new oilfields come on stream, with other new projects progressed smoothly.
In terms of financial performance, oil and gas sales revenue were CNY 42.54 billion, up 10.8% year-over-year. Respect to capital spending was CNY 9.66 billion, up 11.4% year-over-year. The realized oil price in Q1 was USD 63.5 per barrel, up 23% year-over-year. The realized gas price increased 7.8% to USD 6.47 per thousand cubic feet.
On Slide 4 shows our production breakdown. In the first quarter, our production for China and overseas was 64% and 35%, respectively. Crude liquids and the natural gas represent 82% and 18% of our total production, respectively. The figure was 83% and [ 17% ], respectively. Gas production was a little bit higher than the previous year, mainly due to the deficit of the gas supply in January and in February.
Now please turn to Slide 5. In the first quarter, oil and gas sales revenue increased by 10.8% year-over-year, among which crude and liquids sales increased by 10.6% year-over-year to CNY 38 billion and the natural gas sales revenue increased 12.3% to CNY 4.54 billion.
For the first quarter of 2018, the company's exploration CapEx decreased by 9.5%. Development and the production CapEx increased by 6.5% and 84.5%, respectively, as a result of [ working trend and the schedule ] adjustment.
In terms of realized price, our realized oil price increased 12 -- 23% to USD 63.5 per barrel, which is in line with international oil prices.
Our realized gas price in the first quarter increased 7.8% to USD 6.47 per thousand cubic feet, mainly due to the increase in volume from gasfields of a higher realized gas price.
Page 6 shows the result of our exploration program. In the first quarter, we achieved 40,000 in offshore China, including [ Lufeng 10-2 ], Enping 10-2, Enping 15-2 and the Lufeng 12-3.
Overseas, we made 2 new discoveries in the Stabroek Block, mainly larger -- Ranger and the Pacora. In addition, we complete 15 successful appraisal wells: 14 in offshore China and 1 overseas, respectively.
On Slide 7, we would like to share with you more details on our successful exploration projects in the first quarter. Firstly, in offshore China, we had new discoveries, Enping 10-2 and Enping 15-2, which are located in Enping Sag of Pearl River Mouth Basin.
Discovery wells, Enping 10-2-1 and Enping 15-2-1, encountered oil pay zones with total thickness of about 44 -- 54 meters and 21 meters, respectively. The discoveries are expected to be jointly developed with Enping 15-1 to become a middle-sized oilfield.
Overseas, the Ranger and the Pacora were made at the Stabroek Block offshore Guyana. They represent the sixth and seventh oil discoveries at the block to date. The discoveries further enhance the asset value and lay a solid resources foundation for the future development.
An update of our major new projects for 2018 is summarized on Slide 8, 5 new project on schedule to come on stream within the year. In the first quarter, both Stampede and Weizhou 6-13 oilfield has come on stream. The other 3 new projects progressed smoothly.
Slide 9 shows our HSE performance. Our OSHA statistics were maintained at good levels in the first quarter.
This concludes my introduction of our operational and financial highlights for the first quarter of 2018. And now I'd like to open the call for questions. Thank you.
Thank you, Mr. Xie, and we now begin our Q&A session.
[Operator Instructions] Our first question comes from Andy Meng with Morgan Stanley Hong Kong.
I have 2 questions. So the first one is the CapEx. So if we look at the magnitude of CapEx increase is around 11% overall. I think compared with your 2018, the gross target is still quite low. So can you elaborate a little bit more regarding the CapEx alloc for 2018, whether that you see there's [indiscernible] in the spending or we will -- there could be [indiscernible] effect? The second question is regarding your expected volume. So if we look at your Africa production, I think volume is declining. I want to know a little bit more the reason why the volume is going down. And for the same time, for Canada and the South America, I saw the volume is going up. So we are not aware of the big project on stream in these areas and what's the reason of the volume increase.
[Foreign Language]
[Foreign Language]
Regarding the first question on CapEx, if we do a year-on-year comparison of our CapEx, actually, there is an increase in CapEx comparing with the same period of last year. However, if we look at the overall whole year guidance of CNY 80 billion, we are still falling short of this guidance. Now usually, the pattern is that in the beginning of the year, the progress is slower as compared to the middle part or the later part of the year. And for quarter -- for the first quarter of this year, we were rather fast in our production and development. However, we still are no match of our progress in terms of comparison with the guidance -- on comparison with the expected progress. And then in 2017, we did not complete our total overall CapEx plan because the -- in terms of development and exploration, we fell short of our original expectation and target. So overall speaking, this year so far we are still quite far away from our original expectation and progress. But then in fact, we have -- in terms of engineering investment, we have already made some commitment. And in terms of adjustments, we have already made some engineering investment in the adjustment wells.
[Foreign Language]
In relation to our production volume in Africa, this is mainly because of [ M130 ] in Nigeria. In fact, actually, it started production but then it is slower than our original plan. So there is a decrease in production volume in that area. For North America and Canada, there's an increase in production volume, mainly because of the Hangingstone project, which only started production at the second half of last year and not the first half of last year. So that's why we saw an increase in production volume this year.
Our next question comes from Lawrence Lau with BOCI Hong Kong.
First, about the production. We noticed that the oil output in Europe actually declined year-over-year in the first quarter 2018. And actually, we also noticed that the 4Q 2017 also low. Could you please explain why it is the case?
[Foreign Language]
[Foreign Language]
So the answer is because in North Sea, we have 2 oilfields, the first one is [ Gulfaks ]. The second one is Golden Eagle. They just continue the natural progression in terms of production volume. And there is no commencement of production in -- of new oilfield, so that's why production volume has come down.
Our next question comes from Scott Darling with JPMorgan Hong Kong.
My first question is, can you make any comments on sort of how costs, OpEx or all-in costs, moved in the first quarter? I mean, are they being flat, up or down? Just some indication would be good. And then my second question is, can you give us any ideas -- the post CapEx, what's your offshore in China field decline rates? So if you spend -- even if you put a little bit of CapEx in, what are Bohai Bay fields naturally on average declining at? Is it 5%, 6%? Have you seen an acceleration over the last few quarters in this?
[Foreign Language]
[Foreign Language]
Are you referring to a decline in CapEx or decline in production? Or what exactly do you mean? Can you elaborate a bit for your second question?
So what I mean is, what is your post-CapEx oil and gas field decline rate in offshore China? And how has that changed over the last couple of years? So I'm guessing, even if you put a little bit of spending -- and I'm guessing your post CapEx decline of offshore China is probably around 6%, have you seen that move up or down or what?
[Foreign Language]
[Foreign Language]
For the first question, if you look at the operating expenses, that is OpEx and also all-in cost for the first quarter, in fact, there isn't any significant change if it is calculated in renminbi, RMB. But then in the first quarter, there is quite big fluctuation in RMB against U.S. dollar. In fact, RMB has appreciated. So if you convert all those costs, OpEx and all-in cost into U.S. dollars, then there is an increase. And so this is mainly because of exchange rate impact.
[Foreign Language]
So for your second question about post-OpEx -- post-CapEx situation. So I am making comments on the overall decline rate, which is usually at around 6%. And in fact, we have been putting in place different measures to offset this natural decline rate, especially in the Bohai Bay area. So this year, we are going to do a better job in terms of water injection into the area so as to lower the decline rate to below 5%.
The next question is from Tom Hilboldt with HSBC Hong Kong.
This is just a quick question about the natural gas production profile. Natural gas production in barrel of oil terms is up in the quarter against last year versus the crude oil being down. Is this a trend in terms of an increasing natural gas mix that you expect to see over the forecast horizon, sort of out to the 2020 period? And can you tell us just in terms of the China gas, are the increases in the China gas partly as a result of the policy to increase natural gas production?
[Foreign Language]
[Foreign Language]
To answer your question, in Q1 -- well, you asked about the ratio between natural gas and oil. So in fact, for last year, our ratio, it's like this: for oil, 83%; gas, 17%. First quarter this year, oil, 82%; gas 18%. So the share of natural gas has risen slightly. However, this is not a fundamental change in the proportion -- or in the ratio. In quarter -- in first quarter this year, especially in January and February, there's a severe [ shortage ] of natural gas. And so for our gasfield, we have actually enhanced production to its maximum volume in order to satisfy the gap in supply or in production of natural gas. Will this become a real trend of an increasing share of natural gas? It would be difficult. We believe that the share of natural gas will slowly rise, but it will not rise very fast.
[Foreign Language]
Our final question comes from Daisy Li with Elephas Investment in China.
[Foreign Language]
[Foreign Language]
The first question is concerning production volume of oil. I can see that the production volume of oil in Mainland China has come down. What are the reasons? And what is the whole year guidance on oil production volume? My second question is about gas price. So on a year-on-year term, gas price has risen 8%. So I would like to know why is that so? And do you have any guidance?
[Foreign Language]
So to answer your question on oil production volume, actually, in the first quarter this year, we saw a slight decline in the production volume of oil. This is because of a natural decline rate in this area, especially in, for example, the Bohai Bay region. For oilfields there, we are doing water injection in order to offset the natural decline rate. Besides, there are also some new projects that are in the building process in Mainland China. So we hope that new production will offset the decline in the existing oilfield. So in fact, in the beginning of the year, we made a strategic guidance on production volume of oil. And according to this guidance, there will be a decline in production volume. So the actual situation is in line with our strategic guidance given in the beginning of the year.
[Foreign Language]
To answer the second question on gas price, well, because as I said just now, in January and February, there was a severe shortage of natural gas. And so actually, supply, as a result, was not sufficient. And so we are actually maximizing our production volume in all of our gasfields. So gasfields with high gas price actually have pulled up the realized gas price for the quarter as a result. Whether or not this trend can be sustainable depends really on the trend of the supply situation. In China, demand for natural gas is very keen, and so we hope that with this strong demand, production can increase, but then the situation won't be as prosperous or won't be as strong as in the first quarter. So overall speaking, the trend will be a positive one.
[Foreign Language]
Thank you, Mr. Xie. Ladies and gentlemen, this concludes today's conference call. Thank you for participating.