Cnooc rises as crude reserves boost investor appeal
HONG KONG (Bloomberg) -- Cnooc Ltd.’s wider disclosure about its reserve base and a higher-than-expected dividend is turning more analysts positive on the company. Shares jumped the most in almost four months.
The more-detailed look at the reserves of China’s biggest offshore oil and gas explorer released during its earnings presentation Thursday is a positive sign for the company’s long-term outlook, according to Morgan Stanley, Sanford C. Bernstein & Co. and China International Capital Corp. Analysts at JPMorgan Chase & Co., Macquarie Group Ltd. and CICC upgraded the stock.
Cnooc rose 3.9% to HK$9.24, the biggest gain since Dec. 1, at the close in Hong Kong on Friday. The city’s benchmark Hang Seng Index gained 0.1%.
“This new information will alleviate investors’ concerns on Cnooc’s relatively low reserve life, which we see as a material long-term positive catalyst,” Andy Meng at Morgan Stanley wrote in note to clients. “Generous dividend payout, promising reserve outlook and impressive cost control makes us like Cnooc more post 2016 results announcement.”
The company previously took a conservative approach to reserves booking under guidelines required by the U.S. Securities and Exchange Commission, according to analysts at Bernstein. On Thursday, it provided the first look under Society of Petroleum Engineers standards, which shows reserves may be at least twice as big, Neil Beveridge, head of Asia-Pacific oil and gas research at Bernstein in Hong Kong, wrote in a note to clients.
Laban Yu at Jefferies Group LLC in Hong Kong in a research note expressed skepticism about the reserves disclosure, saying that more information is needed. The company’s long-term future depends on overseas discoveries and acquisitions, he wrote.
Though Cnooc reported its worst-ever annual results, it was able to eke out a profit due to bigger income tax credits, cost cutting and a recovery in oil prices. Net income dropped to 637 million yuan ($92.5 million), including 12.2 billion yuan of impairments, it said in a statement to the Hong Kong stock exchange Thursday. It issued a HK$0.23 dividend, compared with a forecast for HK$0.17 in data compiled by Bloomberg.
