What is your view on the temptation of high oil prices? China National Offshore Oil Corporation (CNOOC) executives: No one knows how long high oil prices will last. We will stick to a low-cost strategy.

“We cannot control oil prices, but we can manage costs. By controlling costs, the company’s competitive advantage can be sustained,” said Huang Yongzhang, Vice Chairman, Executive Director, CEO, and President of China National Offshore Oil Corporation (CNOOC) during the 2025 annual performance meeting held on March 26. He noted that geopolitical risks have intensified oil price fluctuations and increased uncertainty in the international energy landscape. Cyclical ups and downs are the norm in the industry, and the key to coping with cycles lies in a company’s internal capabilities.

CNOOC is China’s largest offshore crude oil and natural gas producer. Compared to integrated companies like China National Petroleum Corporation (CNPC) and China Petroleum & Chemical Corporation (Sinopec), CNOOC, as a pure upstream oil and gas exploration and development company, has its performance more closely tied to oil price fluctuations. Since the military strikes by the U.S. and Israel on Iran at the end of February, the situation in the Middle East has remained tense, and international oil prices have remained high; currently, the global benchmark Brent crude oil futures main contract is still close to $110 per barrel, nearly 50% higher than before the conflict. As a beneficiary of high oil prices, CNOOC’s A shares and H shares have seen a cumulative increase of about 15% since early March, according to calculations by The Paper.

CNOOC’s Senior Vice President and Chief Financial Officer Mu Xiuping stated at the performance meeting that the recent volatility in oil prices has been significant. The company’s oil prices are linked to international benchmark oil types, and “the company’s sales oil prices are usually settled a month in advance. The recent rise in international oil prices is overall beneficial for the company, and as it is accounted for, it will gradually be reflected in the company’s performance.”

Will oil companies quickly increase production in response to high oil prices?

“Whether the recent price increase will impact our capital expenditures this year or in the future depends on the overall situation’s development. Currently, the situation remains uncertain; how long can oil prices stay at these high levels? No one can answer that,” said Yan Hongtao, Senior Vice President of CNOOC. He added that the company will continue to monitor and assess the overall situation to determine the next steps for specific work. For now, they will continue to progress steadily according to the usual rhythm, established objectives, and workload.

The annual report released that day showed that despite Brent crude oil prices declining by 14.6% year-on-year, CNOOC achieved an operating income of 398.22 billion yuan in 2025, a decrease of 5.3% year-on-year; net profit attributable to the parent company’s shareholders was 122.08 billion yuan, down 11.5% year-on-year, with the profit decline being less than the drop in oil prices, as increased reserves and production and improved efficiency partially offset the adverse effects of falling oil prices. The main cost per barrel of oil was $27.90, a year-on-year decrease of 2.2%. Last year, CNOOC’s oil and gas reserves and production both reached historical highs, with year-on-year growth rates of 7%, entirely from internal growth.

The Paper noted that compared to the similar oil price in 2021, CNOOC’s profitability significantly improved last year: with Brent crude oil prices decreasing by 3.8%, the company’s net production increased by 35.7% compared to 2021, and the main cost per barrel decreased by 5.4%, leading to a 73.7% increase in net profit attributable to the parent company.

Huang Yongzhang emphasized that CNOOC adheres to a resource-centric and low-cost strategy. “As an E&P (Exploration and Production) company, reserves are the most crucial foundation for sustainable growth. The company maintains a relatively high level of exploration investment each year, and internationally we actively seek quality resources to solidify our reserve base.” He stated that production is vital, and increasing production can dilute many costs. Besides management, the company is also enhancing cost control through technological improvements, such as unmanned platforms and AI+, to maintain its cost advantage in the industry.

“Increasing reserves and production is always the core business,” Yan Hongtao revealed. CNOOC’s 14th Five-Year Plan is still being formulated, and specific data has not yet been released, but both oil and gas production are expected to see significant increases.

He also mentioned that looking ahead to long-term growth targets for reserves and production, CNOOC has intensified its acquisition of overseas exploration blocks in the past couple of years. “We currently have a certain cash flow. If it weren’t for the recent escalation in the Middle East situation, international oil prices would be at a low, which is more favorable for finding ideal overseas asset acquisition opportunities.”

The annual report showed that CNOOC’s net cash inflow from operations has exceeded 200 billion yuan for four consecutive years, with free cash flow reaching 97.4 billion yuan; the debt-to-asset ratio at the end of the period was 26.7%, and the capital debt ratio fell to 8.0%; the full-year dividend payout ratio for 2025 is set at 45%.

(Source: The Paper)