China's biggest offshore energy producer, plans to develop new fields, acquire overseas assets and develop unconventional resources such as shale gas to meet output targets.

The energy explorer will start four blocks off the Chinese coast this year, Cnooc said, after posting second-half profit that beat analysts' estimates. It is also “determined” to learn shale-gas technology from its partners and deploy it in China, holder of the world's largest deposits of the fuel, Chairman Wang Yilin told reporters yesterday.

Cnooc, which cut its 2011 production goal after spills shut its biggest field off the coast, plans to boost output by as much as 2.7 percent this year. The company has bid for about $9 billion of overseas assets in the last two years to diversify reserves, including shale-gas acreages in North America.

"The company has to make sure its offshore fields can deliver stable growth this year to meet its annual production target," said Neil Beveridge, a Hong Kong-based analyst at Sanford C. Bernstein & Co. "Investment in shale gas will not generate immediate returns at least before 2015, but Cnooc certainly cannot afford to miss an opportunity of this scale."

Cnooc, which relies on reserves off the Chinese coast for 80 percent of its output, plans to start production at Weizhou 6-9/6-10, Yacheng 13-4, Panyu 4-2/5-1 and Liuhua 4-1, slides on its website yesterday showed. Outside China, the Long Lake oil- sands project in Canada and the Missan oilfield in Iraq will begin contributing to earnings this year, the company said.
The unit of China National Offshore Oil Corp. targets to produce the equivalent of 330 million to 340 million barrels of oil in 2012. Overseas oil production may rise as much as 30 percent this year while domestic output will be stable, Chief Executive Officer Li Fanrong said at the media briefing.

Shares Decline

Cnooc has fallen 16 percent in Hong Kong in the past year, compared with the 11 percent decline in the benchmark Hang Seng Index. The stock dropped 2.4 percent to HK$16.06 as of 9:53 a.m. local time, as crude traded near the lowest close in almost a week in New York.
Second-half profit rose 8.8 percent to 30.9 billion yuan ($4.9 billion), according to calculations made by subtracting first-half earnings from the 2011 net income. That beats the mean estimate of 29.9 billion yuan in a Bloomberg survey of eight analysts. Chief Financial Officer Zhong Hua declined to confirm the derived figure.

Full-year net income climbed 29 percent to a record 70.3 billion yuan as crude prices surged. That outpaced the 2 percent gain by China Petroleum & Chemical Corp., whose refining segment posted an operating loss. Cnooc doesn't process crude. PetroChina Co. reports its earnings today.

Cnooc's growth trailed the 35 percent increase at Exxon Mobil Corp. (XOM) and the 54 percent jump at Royal Dutch Shell Plc.

Oil Prices

Revenue rose 34 percent to 240.9 billion yuan last year as the company's average realized crude price surged 41 percent to $109.75 a barrel, Cnooc said. Production reached about 331 million to 332 million barrels, compared with a reduced goal of 331 million to 341 million, the company said in January.

Cnooc cut its 2011 output goal by as much as 9.3 percent after leaks closed the Penglai 19-3 field and the $7.1 billion purchase of BP Plc (BP/)'s Argentine unit collapsed in November. CEO Li reiterated in January the company's target of boosting production by 6 to 10 percent in the five years ending 2015.

Chinese companies bid more than $24 billion for overseas assets last year to help supply the world's largest energy user. Domestic fuel demand is rising even as the government pares its annual economic growth target to 7.5 percent from 8 percent.

Oil consumption growth may gain 4.9 percent this year, compared with the 4.5 percent increase in 2011, as China adds refining capacity and fills emergency fuel stockpiles, China National Petroleum Corp., the country's biggest energy producer, said in its annual research report released last month.
Shale Gas
Cnooc started exploring for gas found in shale in eastern Anhui province in December, following rivals including Sinopec, as China Petroleum is known.

China has yet to produce shale gas commercially as its explorers struggle to overcome the lack of expertise and difficult geology. Cnooc, seeking drilling knowledge, acquired stakes in U.S. shale-gas acreage from Chesapeake Energy Corp. for a total of $1.65 billion in February 2011 and November 2010.

The Ministry of Land and Resources held the country's first auction of shale-gas explorations rights last year, in which Cnooc participated. Sinopec and Henan Provincial Coal Seam Gas Development & Utilization Co. won. Cnooc will "definitely" join the second round of sale, Chairman Wang said.