Log in
E-mail
Password
Remember
Forgot password ?
Become a member for free
Sign up
Sign up
New member
Sign up for FREE
New customer
Discover our services
Settings
Settings
Dynamic quotes 
OFFON

MarketScreener Homepage  >  Equities  >  Stock Exchange of Hong Kong  >  CNOOC Limited    0883   HK0883013259

CNOOC LIMITED

(0883)
  Report
SummaryChartsNewsRatingsCalendarCompanyFinancialsConsensusRevisions 
News SummaryMost relevantAll newsPress ReleasesOfficial PublicationsSector newsMarketScreener StrategiesAnalyst Recommendations

Exclusive: Failed Exxon talks left Petrobras stranded for auctions - sources

share with twitter share with LinkedIn share with facebook
share via e-mail
11/09/2019 | 10:14pm EST
FILE PHOTO: Brazil's government hold the pre-salt offshore oil auction in Rio de Janeiro

As the weeks ticked down to Brazil's biggest-ever oil auction, state-run Petrobras held increasingly frantic talks to find potential partners, with the heaviest blow coming when major Exxon Mobil Corp pulled out days before, according to six people familiar with the matter.

While many firms were far from ready to take on enormous signing fees and investments, Exxon came closest but ultimately failed to reach acceptable terms for the blockbuster bidding round, according to four of the sources, who requested anonymity to discuss confidential negotiations.

With that, the state firm formally known as Petroleo Brasileiro SA was left to anchor an embarrassingly empty bidding round on Wednesday with token support from Chinese firms.

The big Brazilian round was the latest offshore auction this year to undershoot expectations, hurt by competition from shale oil and other unconventional sources as well as lower demand forecasts.

Most of the talks to form consortia between Petrobras and other oil firms were and brief and informal, according to the sources. But negotiations with Exxon were relatively advanced, offering the major a large stake in the coveted Buzios oil block until talks fell apart in the last few weeks, sources said.

The ill-fated talks show how even global firms that were seriously interested in the landmark "transfer-of-rights" (TOR) auction on Wednesday could not accept the terms of a required partnership with Petrobras – long seen as a bottleneck to the development of Brazil's most promising deepwater resources.

The proposed Exxon-Petrobras consortium, which would have included the two Chinese state firms that ultimately bought 10% of Buzios block' rights, CNODC and CNOOC, would have given a seal of private-sector approval to the landmark auction.

Instead the lack of major partners revealed how the powerful role of Petrobras in the so-called "pre-salt polygon," along with complicated development terms and expensive signing fees discourage interest, even among majors with large purchasing power, in one of the world's biggest proven oil reserves.

Exxon and Petrobras did not respond to requests for comment.

CNOOC and CNPC did not immediately respond to e-mails sent outside business hours.

DIFFERENCES EMERGE

Much remains unclear as to why the talks did not bear fruit.

One source said the Petrobras and Exxon disagreed over the way billions of dollars would be paid to the Brazilian firm in compensation for prior investments. Others cited differences over how much to invest in platforms to ramp up production.

Exxon was interested in taking over operations at the field, a non-starter for Petrobras, according to one of the sources.

All sources agreed that the complicated nature of the TOR auction played a major role in keeping the talks from reaching the finish line. This has been confirmed by Brazilian authorities to explain why the country failed to catch money from foreign oil companies.

"It's an awful system," Economy Minister Paulo Guedes said on Thursday. "You have to go through many layers of negotiations just to get to the oil."

Due to an agreement signed between Petrobras and the Brazilian government in 2010, the state firm already has rights to develop up to 5 billion barrels of oil in the TOR area. The Wednesday auction concerned oil in the TOR area in excess of what Petrobras had already been promised.

As a result, any winning member of a consortium would have needed to bang out a complex deal reconciling itself with the existing claims of Petrobras in the region. Brazil's government would then have needed to approve the deal.

WEAK COMPETITION

In the end, the state-run company was nearly alone in submitting minimum bids for two of the four areas in the TOR bidding round, which officials hoped would cement Brazil's ascendance as Latin America's undisputed oil powerhouse.

Petrobras won Itapu, the smallest block up for grabs, with a solo offer. Sepia and Atapu, the second and third largest blocks respectively, received no bids.

Had the government sold off all areas, it would have reaped some 106.5 billion reais ($25.8 billion) in signing bonuses. Instead Brazil got just under 70 billion reais.

The following day, Petrobras was also almost completely alone when bidding for the largest of five oil blocks offered at the country's sixth pre-salt bidding round, the Aram area. China's CNODC again accompanied the state-run company by committing to a 20% stake.

The results of both rounds were widely seen as a disappointment, as no private firms placed bids for fields that are known to hold billions of barrels of untapped crude.

Economy Minister Guedes told Reuters on Friday that the week's auctions were a "condemnation" of the production-sharing system Brazil uses in the pre-salt polygon, adding that the country needs to shift toward a concession model.

Following the results, Brazilian Mines and Energy Minister Bento Albuquerque said the government had learned a lesson, and would adjust the rules of any future auction. That could involve lowering the minimum signing bonuses required from bidders, among other parameters, he said.

"We're evaluating the whole process, and we're certain that we're going to correct it," Albuquerque told Reuters.

For a graphic on Brazil's TOR auction:

https://graphics.reuters.com/BRAZIL-OIL/0100B2JV1WF/oil-blocks.jpg

(Reporting by Marta Nogueira and Gram Slattery in Rio de Janeiro and Ron Bousso in London; Additional reporting by Marianna Parraga and Rodrigo Viga Gaier in Rio de Janeiro, Jennifer Hiller in Houston and Aizhu Chen in Singapore; Editing by Marguerita Choy)

By Marta Nogueira, Gram Slattery and Ron Bousso

Stocks mentioned in the article
ChangeLast1st jan.
CNOOC LIMITED 0.00% 12.34 End-of-day quote.-4.78%
EXXON MOBIL CORPORATION -0.46% 60.65 Delayed Quote.-13.08%
PETRÓLEO BRASILEIRO S.A. - PETROBRAS -0.94% 29.42 End-of-day quote.-2.68%
share with twitter share with LinkedIn share with facebook
share via e-mail
Latest news on CNOOC LIMITED
02/13Virus outbreak knocks four Asia-bound LNG tankers off course - sources
RE
02/12CNOOC LIMITED : Announces Bozhong 34-9 Oilfield Commences Production
AQ
02/10EXPLAINER : Companies consider force majeure as coronavirus spreads
RE
02/10Indonesia's PGN says first gas shipment to China delayed amid virus outbreak
RE
02/07Free-falling LNG prices wreak havoc on trade amid coronavirus fears
RE
02/06China's biggest liquefied gas importer suspends some contracts as virus sprea..
RE
02/06CNOOC : Declares Force Majeure on LNG Deliveries From Suppliers, Reuters Reports
DJ
02/05Coronavirus paralyses short-term oil, gas sales into China
RE
02/05IMF lowers Uganda growth projection, cites oil investment delays
RE
02/03Ahead of Guyana presidential election, group revives debate over Exxon's deal
RE
More news
Financials (CNY)
Sales 2019 225 B
EBIT 2019 81 593 M
Net income 2019 58 292 M
Debt 2019 111 B
Yield 2019 5,55%
P/E ratio 2019 8,55x
P/E ratio 2020 8,36x
EV / Sales2019 2,69x
EV / Sales2020 2,56x
Capitalization 496 B
Chart CNOOC LIMITED
Duration : Period :
CNOOC Limited Technical Analysis Chart | MarketScreener
Full-screen chart
Technical analysis trends CNOOC LIMITED
Short TermMid-TermLong Term
TrendsBearishNeutralNeutral
Income Statement Evolution
Consensus
Sell
Buy
Mean consensus BUY
Number of Analysts 17
Average target price 14,45  CNY
Last Close Price 11,10  CNY
Spread / Highest target 44,6%
Spread / Average Target 30,1%
Spread / Lowest Target 15,0%
EPS Revisions
Managers
NameTitle
Ke Qiang Xu President, CEO & Executive Director
Dong Jin Wang Chairman
Wei Zhi Xie Chief Financial Officer
Sung Hong Chiu Independent Non-Executive Director
Juen Yee Lau Independent Non-Executive Director
Sector and Competitors
1st jan.Capitalization (M$)
CNOOC LIMITED-4.78%70 935
CONOCOPHILLIPS-9.86%63 595
EOG RESOURCES INC.-10.55%43 586
OCCIDENTAL PETROLEUM CORPORATION0.95%37 162
CANADIAN NATURAL RESOURCES LIMITED-7.60%34 764
PIONEER NATURAL RESOURCES-8.02%23 063