State-owned oil and gas producer China National Offshore Oil Corporation (CNOOC) reported a drop in its revenues for the first quarter of the year. The company attributed the decrease to the spread of the coronavirus pandemic in China, the decrease in global oil demand, and the global oil price drop following the oil price wars between Russia and Saudi Arabia.
For the first three months of the year, the company generated total revenues of 41.58 billion yuan or roughly $5.89 billion, a 2.83 billion yuan drop when compared to its revenues reported over the same period last year. In its attempt to offset the global price drop, CNOOC increased its oil output during the three months by 9.5 percent to 131.5 million barrels of oil equivalent.
The average prices for the oil it had sold over the period decreased by 19.3 percent to around $49.03 per barrel. Its average natural gas price had also dropped by 7.3 percent to $6.38 per thousand cubic feet. The listed unit of the largest producer of offshore oil and gas in China attributed the drop in its natural gas prices to the dip in prices of the resource in North America.
To mitigate the further impact of the economic downturn and the continued spread of the coronavirus pandemic, CNOOC announced that will be imposing stricter cost management in the coming quarters. CNOOC CEO, Xu Keqiang, had also stated that the company would be paying closer attention to its cash flow moving forward to ensure its long-term stability.
CNOOC revealed that it will be reducing its 2020 production and spending guidance in light of the global market downturn. One of the main focuses of its strategy will be its US Shale and Canada oil sands operations. In a released statement last week, the company stated that it would lower its planned CAPEX and production guidance as part of its proactive measures to ensure its stability amid the turbulent oil market.
As part of the measures, the Chinese oil and gas giant plans to reduce its spending in its US share patch and Canadian oil sands assets. Operations in its North American assets will reportedly be kept at a minimum level. During a teleconference, CNOOC chief financial officer, Xie Weizhi, warned that layoffs will be unavoidable as the company dials down its operations abroad.
CNOOC is the latest major oil producer to reduce spending in US shale amid the economic downturn. This has greatly affected shale operations in the US as major companies such as Chevron and Exxon scramble to cut spending, production, and their exposure to the Permian.
