CNOOC Ltd, China's biggest offshore oil producer, said its first-quarter sales rose 62 percent as oil prices surged and crude production increased.

Revenue in the three months ending March 31 climbed to 24 billion yuan ($3.4 billion), the Beijing-based company said in a statement on its website yesterday. Crude production gained 3.7 percent to 392,722 barrels a day.

Benchmark oil prices in New York have gained 82 percent in the past year and touched a record $119.93 a barrel yesterday. CNOOC plans to increase capital spending 44 percent this year to expand oil and gas production by as much as 18 percent and benefit from rising energy demand in the world's fastest-growing major economy.

"CNOOC's first quarter was characterized by steady production growth, strong revenue growth and exciting exploration discoveries," Chairman Fu Chengyu said in the statement. "Such impressive results reveal a good start for the year 2008."

CNOOC rose 5 percent to close at HK$13.92 in Hong Kong trading. The stock has gained 4.8 percent this year, compared with a 7.7 percent drop in the benchmark Hang Seng Index.

The price CNOOC received for its crude oil surged 69 percent to $88.76 a barrel in the first quarter from a year earlier. The price of its natural gas climbed 14 percent to $3.65 every 1,000 cubic feet.

Oil, gas output

Crude oil and gas production from fields including overseas areas rose 5 percent to the equivalent of 496,753 barrels of oil a day, CNOOC said. Gas output gained 9.3 percent to 601 million cubic feet a day.

CNOOC's crude and gas production from offshore fields within China gained 6.3 percent. Overseas oil production fell 19 percent to 20,593 barrels a day in the first quarter from a year earlier. Gas output from fields outside China jumped 6 percent to 188 million cubic feet a day, CNOOC said.

The decline in overseas output is mainly because of a drop in its Indonesian production, Yang said. CNOOC operates and owns 65.5 percent of a field in Southeast Sumatra, whose crude production may fall 12 percent this year as the field matures, Dody Hidayat, deputy of production at Indonesia's oil and gas regulator BPMigas, said in January.

Windfall tax

CNOOC is also in talks with the authorities on revisions to the windfall tax, which producers pay on crude sold at above $40 a barrel, Chief Financial Officer Yang Hua told reporters yesterday, without giving details.

Its windfall tax payments in the first quarter will be higher than a year earlier under the current formula, he said.

China Petroleum & Chemical Corp, Asia's biggest refiner, said yesterday that taxes increased sixfold on crude sold at more than $40 a barrel in the first three months as the price of oil rose to a record.

CNOOC's capital expenditure in the first quarter was little changed at 6.1 billion yuan from 6.3 billion yuan a year earlier, CNOOC said. Exploration spending rose 42 percent to 1.37 billion yuan from 958.9 million yuan.

The company's costs will rise because of surging raw material and labor charges, Yang said.

Costs rise

Net income rose 1.3 percent in 2007 to 31.3 billion yuan, the slowest pace since 2002, because of rising costs and flat production growth, CNOOC said last month.

The company aims to produce the equivalent of between 195 million and 199 million barrels of oil this year, CNOOC said in January. Output in 2007 reached the equivalent of 171 million barrels of oil.

The company is "confident" of meeting this year's output target, Yang said. Most of its projects are due to start operating beginning this quarter, he said.

The oil explorer plans to more than double production at the Bohai Bay field in Northeast China to more than 27 million metric tons a year, or about 542,000 barrels a day, in five to six years, Vice-President Chen Bi said on Oct 12.

CNOOC had said in its annual report that the acquisition cost of an oil field in Nigeria may be revised based on the final results of a tax audit conducted by the African country's authorities.

The tax office in Nigeria last year conducted an audit on South Atlantic Petroleum Ltd, which sold CNOOC a 45 percent stake in the OML 130 field, and disagreed with the filings made for the transaction, CNOOC said.

The Hong Kong-listed oil producer is "confident" of settling the dispute, Yang said, without giving details.

Bloomberg

(HK Edition 04/29/2008 page2)