CNOOC Ltd (883 HK) a.k.a. "China National Offshore Oil Corporation" is one of the largest oil exploration and production companies in Asia. It remains a pure play upstream oil company with a high beta to crude oil prices. Bernstein calls CNOOC "Asia's largest and best managed E&P company... delivering exceptional production growth (with no dilution to equity holders)."
The company's track record is excellent. Production has grown at ~10% CAGR historically (excluding the acquisition of Nexen), and management is guiding for a 6% production CAGR in the years ahead. What's more is that CNOOC has achieved this while maintaining positive free cash flow, enabling the company to maintain a median dividend pay-out ratio of 40% without incurring any debt.
A key part of CNOOC's competitive advantage is that it has a monopoly on exploration under production sharing contracts in offshore China. It is then able to sell this oil domestically at prices tied to Brent, despite differences in crude qualit…
Keep reading with a 7-day free trial
Subscribe to Asian Century Stocks to keep reading this post and get 7 days of free access to the full post archives.