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CNOOC Limited Achieves Increase of 51.4% in Net Profit in H1 2011

On August 24, CNOOC Limited announced its interim results as of June 30, 2011.

The company's total net oil and gas production amounted to 168.7 million barrels of oil equivalent (BOE), representing an increase of 12.9% year-on-year (YOY). This is mainly attributed to: firstly, the new oilfields and development wells which continued to introduce new momentum to the company's production; secondly, production contributions from newly acquired projects since 2010; and thirdly, the composite decline rate of producing oil and gas fields which has remained low through comprehensive adjustment measures.

Meanwhile, international oil prices fluctuated sharply, although generally, it sustained at a high level. Having benefited from this, the company's realized oil price reached US$108.16/barrel, 40.8% higher than that of the same period last year. The company's realized gas price was US$4.92/mcf, increasing 15.5% YOY.

Due to stable oil and gas production growth, as well as higher realized prices, the company's oil and gas sales revenue for the first half of the year surged 45.0% YOY to RMB97.03 billion. Despite escalating prices of oilfield services and raw materials, the company's production cost has remained at a low level mainly due to cost savings and efficiency enhancement. The seasonality factor has also lowered the production cost. During the first half of 2011, its operating cost was down 3.8% from 2010 average of US$7.28 to US$7.00 per barrel. The company recorded net profit of RMB39.34 billion, representing a significant increase of 51.4% YOY.

In the area of exploration, the company made 6 new discoveries and 18 successful appraisal wells. The first commercial discovery of Wushi 17-2 was made in Wushi Sag in the Western South China Sea. In terms of rolling exploration, two new discoveries Qinhuangdao 33-2 and Qinhuangdao 33-3 were made following the discovery of Qinhuangdao 33-1 South last year in the Shijiutuo uplift area.

Since the beginning of the year, the company has further expanded its investments in shale oil and gas play and oil sands of North America, through the acquisition of a 33.3% interest in Chesapeake's Niobrara project and the acquisition of OPTI Canada Inc. In addition, we successfully acquired a one-third interest held by Tullow Oil in each of Exploration Areas 1, 2 and 3A in Uganda.

The company has kept a good track record on health, safety and environmental protection (HSE) since established more than a decade ago. However, the oil spill incident of Penglai 19-3, an oilfield operated under production sharing contract in Bohai Bay, posed HSE challenges to the company. This incident has made certain impact on the marine environment. Being a responsible energy company, CNOOC Limited will continue to urge and assist ConocoPhillips China Inc., the operator of the Penglai 19-3 oilfield, to complete the cleanup work in a timely manner and to minimize the impact on the marine environment.

In addition, due to the combination of the progress of acquisition project and the impact from the oil spill incident, the company reset its annual production target at 331-341 million BOE.

Mr. Wang Yilin, Chairman of the company said, "The outstanding results for the first half of 2011 demonstrated our operating and management capabilities. At the same time, we faced a challenge posed by the oil spill incident occurred at Penglai 19-3 oilfield and we felt deeply sorry about it. The company has already started performing inspection on the major facilities, equipments and production operations of all our oilfields, and reinforcing our risk management measures, to avoid similar incidents happening in the future."

Mr. Yang Hua, Chief Executive Officer of the company commented, "Since the beginning of the year, the company has increased its investments in unconventional energy through the acquisition of shale oil and gas and oil sands projects, building an important resource base for the future. Year 2011 is a year of steady growth for the company. In the second half of the year, the company will continue to progress steadily to lay a solid foundation for the company's long term development."

In the first half of the year, the company's basic earnings per share reached RMB0.88. In order to share our outstanding results with shareholders, the board has declared an interim dividend of HK$ 0.25 per share (tax inclusive).

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