"Few companies represent the bargain pricing of Chinese stocks more than China National O?shore Oil Company (NYSE: CEO), known as CNOOC." says Jim Trippon.
The editor of The China Stock Digest adds, "Unlike most beaten-down Chinese oil and gas companies, CNOOC has been expanding operations, petroleum deliveries and pro?tability by leaps and bounds."
"CNOOC is China’s third largest oil company and has been an outstanding performer in many ways. But stock prices have also been shadowed by worries that the government might dump a portion of its 70% holding in the company, thereby diluted shareholder value.
“The recently announced government initiative to buy rather than sell shares in state-owned enterprises has calmed many of those fears.
"CNOOC announced in August that its ?rst half pro?ts surged an astonishing 89% to $4 billion, more than triple the earnings growth of Exxon Mobil and Royal Dutch Shell Plc.
"Importantly, CNOOC does not have any re?neries. Chinese oil companies with re?ning operations have been crippled by government caps on pump prices.
"CNOOC conducts oil and natural gas exploration, development and production activities off Chinese shores. It also holds several important equity interests in properties in Australia, Canada, Nigeria, Morocco and Myanmar.
"Here’s one thing that makes CNOOC such an interesting play. Under Chinese government-regulated production sharing contracts, CNOOC has the sole right to acquire up to 51% of any successful discovery in offshore China made by foreign partners.
"There has also been excitement in the region since the discovery of oil off the coast of Cambodia by Chevron. CNOOC is presently negotiating terms of an exploration agreement with the Cambodian government.
"Indonesia is also signing new production sharing contracts with global energy ?rms including CNOOC. And, Vietnam’s Prime Minister has given the go-ahead for joint exploration in the Gulf of Tonkin with CNOOC and the Vietnam Petroleum Company.
"The firm ranks as one of Indonesia’s biggest offshore oil exploration companies. The Indonesian government has signed a contract with CNOOC for the exploration of a territory in central Sumatra.
"We have no concern about declining demand for oil in China, nor do we foresee a price collapse on world or Chinese markets. As long as CNOOC continues to explore aggressively, we have every reason to believe that its reserves and its sales will continue to increase.
"We believe that shares are currently bargain priced with a P/E multiple of only 9.11. Another round of increases in world oil prices will bene?t the company because CNOOC does now have to purchase or re?ne cruse oil at world prices."
