CNOOC Surges in Shanghai Debut; Chinese Oil Giant to Leave US, UK Projects

The headquarters building of China National Offshore Oil Corp. (CNOOC) in Beijing, on July 29, 2016. (STR/AFP via Getty Images)

China National Offshore Oil Corporation, or CNOOC, soared as much as 44 percent in its debut on the Shanghai Stock Exchange on April 21.

After hitting the daily upper limit, trading was suspended amid enormous fluctuation. The stock pared its gains to end the session up 28 percent.

Investors jumped at the first opportunity to gain exposure to skyrocketing crude oil and natural gas prices, allowing the Chinese energy giant to raise $4.41 billion and become the nation’s 11th-largest public stock offering. Traders have been looking for alternatives to China’s state-owned PetroChina and China Petroleum & Chemical Corp. (Sinopec), which operate refining facilities and sell fuel.

Brent crude, the international benchmark for oil prices, is up 37 percent year-to-date, trading at about $107 per barrel on London’s ICE Futures exchange.

China’s biggest offshore driller for oil and gas was delisted by the New York Stock Exchange after U.S. sanctions in October 2021. Its mainland debut was the world’s fourth-largest so far in 2022.

Logos of China National Offshore Oil Corp. (CNOOC) are displayed at a news conference on the company's interim results in Hong Kong, on March 23, 2017. (Bobby Yip/Reuters)

“We will take this opportunity to make full use of domestic and overseas financing channels to promote the high-quality and sustainable development of the company,” Chairman Wang Dongjin said in a statement.

Can CNOOC sustain the momentum?

It has been a challenging year for initial public offerings (IPOs). About one-third of the roughly 100 companies listed this year in Shanghai and Shenzhen slumped below their IPO price, according to data compiled by East Money Information. Additional figures put together by Bloomberg noted that about two-thirds of IPOs that raised at least $100 million with issuance slipped below their offer price.

Market analysts have been bullish on the stock, forecasting an increasing market capitalization for China’s chief offshore oil and gas producer over the next several years.

“CNOOC represents historic investment opportunities due to high oil prices, low valuation, and consistent high dividend yields,” Chen Shuxian, an analyst at Cinda Securities, wrote in a research note.

But as CNOOC’s debut captures business headlines, market experts have monitored other recent corporate developments.

CNOOC Flees the West?

CNOOC is reportedly planning to withdraw from operations in the United States, Canada, and the United Kingdom over concerns that Chinese assets could become targets of Western sanctions, industry sources told Reuters. At the same time, the energy firm is seeking to purchase new assets in Latin America and Africa, while also emphasizing the development of potentially lucrative projects in Brazil, Guyana, and Uganda.

The Chinse energy giant controls considerable stakes in several crucial assets, including immense Canadian oil sand projects, fields in the North Sea, and operations in the Gulf of Mexico. However, CNOOC is looking at selling “marginal and hard to manage” assets in those foreign markets, senior industry sources say.

In March, it was reported that CNOOC had hired Bank of America to launch a formal sale of its North Sea assets, possibly raising more than $3 billion. That follows less than a decade after acquiring Canadian producer Nexen for $15 billion because of its assets in the sea, which is situated between the UK, Norway, Denmark, and Germany. The acquisition was the firm’s largest foreign takeover at the time.

Critics argue that CNOOC’s primary objective was to determine the public’s comfort with a Chinese entity attaining operational responsibility for key oil and gas ventures in a Western nation.

Overall, this is part of CNOOC’s recent decision to initiate a global portfolio review. In its prospectus prior to the latest IPO, the company noted that it would be unable to “predict if the company or its affiliates and partners will be affected by U.S. sanctions in the future, if policies change.”

The United States has reiterated its position that China could endure repercussions if it were found to be assisting Russia in averting sanctions. Beijing has refused to condemn Moscow’s invasion of Ukraine, choosing to maintain its strategic trade relationship with the Kremlin.

In 2020, then-President Donald Trump and his administration focused on multiple Chinese companies that the United States alleged were owned or controlled by the nation’s military.

Wang recently confirmed that it would be premature for CNOOC to talk about new investments in Russia, noting that the company will decide what to do as the Ukraine–Russia conflict evolves.

There had been speculation that CNOOC would increase its presence in the Eastern European market after the likes of BP and Shell divested from Russia. CNOOC currently possesses a 10 percent stake in a liquefied natural gas (LNG) venture in the Russian Arctic.

Shell is reportedly discussing with several Chinese energy firms, including CNOOC, to sell its 27.5 percent position in a vast Russian LNG project called Sakhalin-2.