[ET Net News Agency, 26 March 2020] S&P Global Ratings said today that CNOOC Ltd.'s
(00883) plan to significantly cut its capital expenditure (capex) and production in 2020
shows management's willingness to adjust to the oil price slide.
This is consistent with the credit rating agency's view that the issuer will be flexible
in its budgeting in response to crude prices. Over the longer term, S&P expects CNOOC Ltd.
will comply with central government policy that national oil companies continuously
increase spending to enhance the nation's energy security.
Though the company's 2020 production could come below S&P's forecast of 510 million
barrels of oil equivalent (boe), its capex may fall below the agency's current assumption
for a 10% cut to the original target.
Management did not give specific figures at yesterday's results briefing as the plan was
pending board approval. Their original 2020 target of 525 million boe of oil and gas
production, involving RMB85 billion-RMB95 billion in capex, assumed an oil price of US$65
per barrel. Brent last traded at US$27 per barrel.
The rating on CNOOC Ltd. (A+/Stable/--) is intact given the ample rating buffer of the
company and its parent company, China National Offshore Oil Corp.
CNOOC declared a record high final dividend of HK$0.45 per share, for a full-year
dividend of HK$0.78 per share. Management wants to maintain a competitive dividend among
the exploration and production companies, so long as it is able to meet capex targets.
S&P believes the dividend for 2020 will likely fall in line with declining operating
cash flow, and that CNOOC Ltd. will now focus on cash management. (KL)