Things to Know About China’s Cnooc

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  Things to Know About China’s Cnooc 
  Chinese state-controlled energy company
  
  Cnooc made a poorly-timed call on oil prices when it acquired struggling Canadian oil-and-gas producer Nexen in 2013 for $15.1 billion.
  Cnooc has worked for decades to present itself to the world as the most internationally savvy and professionally run of China’s three big oil companies, and an example of what China’s model of state capitalism could achieve abroad. But today it’s roaming in unmapped territory with its bid to turn Nexen around. 
  
  
  Here are five things to know about Cnooc:

   

  1Cnooc is growing

  Cnooc is the smallest of China’s three big state-controlled oil companies, but it has grown quickly through aggressive international expansion and successful drilling offshore China. The company’s net production has risen by one-third since 2010, while revenue has jumped to about 275 billion yuan ($44 billion) last year from 185 billion yuan in 2010.
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• 2But Cnooc remains tiny compared with Chinese peers

  
  
  The Chinese company nonetheless remains far smaller than its peers. Cnooc said it employed 21,000 people globally at the end of 2014. By comparison, PetroChina Co.—the nation’s biggest publicly traded oil company by production volume—had over 500,000.  Cnooc’s far smaller workforce makes it more efficient than China’s other oil-and-gas majors, and industry analysts widely view it as the best-managed of China’s three oil majors.

• 3Cnooc has been caught up in politics

  Cnooc’s state-owned parent company, China National Offshore Oil Corp., has waded into a tense maritime dispute between China and Vietnam in the South China Sea. Last year, a unit of the company dispatched a deepwater drilling rig to waters claimed by both China and Vietnam. The Cnooc rig’s drilling in disputed waters ignited weeks of violent clashes between Chinese and Vietnamese maritime authorities, and raised diplomatic tensions between China and the U.S.

• 4Cnooc has struggled overseas before

  Before Cnooc acquired Nexen, it earlier tried to buy California’s Unocal Corp. back in 2005 with an $18.5 billion offer that would have solidified its foothold in the U.S. energy market. But congressional opposition over Cnooc’s ties to China’s government thwarted the deal, and Unocal was sold to Chevron. The industry widely viewed the failed Cnooc deal as a sign of its relative lack of international experience.

• 5The company now faces big challenges in Canada

  Nearly a decade after the failed bid for Unocal, Cnooc successfully bought Canadian oil-and-gas producer Nexen Inc. for $15.1, marking the biggest overseas deal by a Chinese oil company to date. But the commercial viability of Nexen’s huge oil-sands assets in remote northern Canada are in question following a rout on global oil prices beginning last year. The company declared nearly $700 million in impairment charges last year—largely related to falling asset values in North America and the U.K.’s North Sea—and company analysts say additional impairment losses are possible.