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I AGREE
13 Jan 2011
Hong Kong, January 13, 2011 -- Moody's Investors Service has assigned a Aa3 senior unsecured rating
to the proposed USD notes, to be issued by CNOOC Finance (2011)
Limited and guaranteed by CNOOC Ltd.
Moody's has also affirmed CNOOC Ltd's Aa3 issuer rating.
The ratings outlook is stable.
The proceeds from the notes issuance will be used for general corporate
purposes.
RATINGS RATIONALE
"CNOOC Ltd's rating is supported by its dominant position
in the Chinese offshore oil & gas sector as well as its substantial
reserves, proven exploration and production track record,
and its solid financial profile," says Kai Hu, Moody's
lead analyst for CNOOC Ltd.
"CNOOC Ltd achieved over 100% growth in revenue and net profit
in the first half of 2010, as a result of the recovery in oil prices
and a 40% increase in production volume," says Hu.
The rating is constrained by CNOOC Ltd's acquisition strategy and
large capex. The additional debt incurred for a series of cross-border
acquisitions in 2010 has weakened its debt/reserve metrics for a standalone
A2 rating.
"However, the impact is partially mitigated by the expected
reserves derived from the acquisitions over time," says Kai.
"Moody's also expects that CNOOC will maintain strong liquidity,
given its massive cash and short-term investment holdings,
as well as its good access to the domestic banking system."
Moody's will continue to monitor CNOOC Ltd's reserves and
acquisition strategy and the potential impact on its credit profile.
CNOOC Ltd's Aa3 rating further incorporates a two-notch uplift,
reflecting the high level of support from its parent, China National
Offshore Oil Corporation (Aa3/STA), which is directly owned by China's
State Council.
This support is based on the premise that CNOOC contributes significantly
towards its parent's assets, and also plays a critical role in the
oil and gas sector in China.
The stable outlook reflects the expectation of positive production and
reserve replacement, as well as the continued high level of support
from its parent.
The stable outlook also assumes that the company will continue its disciplined
financial management and execute its reserve acquisition strategy progressively.
Moody's sees limited upside potential in CNOOC Ltd's standalone credit
profile given the company's high reinvestment risk and sizeable upcoming
capex.
The rating would be downgraded if there is material deterioration in the
company's business and financial profile -- the result
of much higher leverage (due to further large reserve acquisitions),
or higher reinvestment risk.
A rating downgrade of its parent, which is not very likely in the
near term given the stable rating outlook, will also trigger a rating
downgrade of CNOOC Ltd.
The last rating action with respect to CNOOC Ltd and China National Offshore
Oil Corporation was on November 11, 2010, when both ratings
were upgraded to Aa3 from A1 with a stable outlook, as a result
of the sovereign rating upgrade on the Peoples Republic of China.
The principal methodology used in this rating was Independent Exploration
and Production (E&P) Industry published in December 2008.
CNOOC Ltd, headquartered in Hong Kong, is an oil and gas exploration
and production company with operations mainly concentrated in offshore
China. It is 64%-owned by China National Offshore
Oil Corp.
China National Offshore Oil Corp is an integrated Chinese energy company
that is wholly owned by China's State Council and ultimately the PRC.
The company has substantial interests in its listed subsidiaries,
which are engaged in exploration and production and providing oil services,
in addition to interests in other downstream businesses, including
refining and petrochemicals.
REGULATORY DISCLOSURES
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parties involved in the ratings, public information, and confidential
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Hong Kong
Kai Hu
Vice President - Senior Analyst
Corporate Finance Group
Moody's Investors Service Hong Kong Ltd.
JOURNALISTS: (852) 3758 -1350
SUBSCRIBERS: (852) 3551-3077
Hong Kong
Gary Lau
MD - Corporate Finance
Corporate Finance Group
Moody's Investors Service Hong Kong Ltd.
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Moody's assigns Aa3 rating to CNOOC Ltd's proposed notes
No Related Data.
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