NextFin News - Cnooc Ltd., China’s largest offshore oil and gas producer, reported a significant rebound in first-quarter earnings as escalating geopolitical tensions in the Middle East drove crude prices to their highest levels in over a year. The state-backed major announced on Tuesday that net income rose to 38.2 billion yuan ($5.27 billion) for the three months ended March 31, a 16% increase from the same period last year. The results mark a sharp reversal from the profit contraction seen in 2025, when a slump in global energy prices outweighed the company’s record-breaking production volumes.
The profit surge was underpinned by a dramatic shift in the global energy landscape following the outbreak of direct conflict between Israel and Iran earlier this year. Brent crude, the international benchmark, was trading at $104.22 per barrel on Tuesday, reflecting a risk premium that has remained stubbornly high as markets price in potential disruptions to Strait of Hormuz shipping lanes. For Cnooc, which maintains the lowest lifting costs among China’s "Big Three" oil majors, the combination of triple-digit oil prices and continued output expansion has created a highly lucrative operating environment.
Neil Beveridge, a senior analyst at Sanford C. Bernstein who has long maintained an outperform rating on the stock, noted that Cnooc remains the purest play on high oil prices among global majors due to its aggressive production growth and disciplined cost structure. According to Beveridge, the company’s ability to deliver double-digit earnings growth while peers struggle with maturing assets is a testament to its successful exploration in the South China Sea and Guyana. However, Beveridge’s bullish stance is not universally shared; some analysts at Citigroup have cautioned that the current price levels are "artificial," driven more by geopolitical fear than underlying demand fundamentals, suggesting that a de-escalation in the Middle East could rapidly erode these gains.
Revenue for the quarter climbed 12% to 118.4 billion yuan, supported by a 7.5% year-on-year increase in net production. The company has been a primary beneficiary of the U.S. President Trump administration’s focus on global energy security, which has inadvertently tightened global supply through renewed sanctions on Iranian exports. While Cnooc has historically faced scrutiny over its operations in disputed waters, its strategic importance to Beijing’s energy self-sufficiency goals has shielded it from the broader domestic economic slowdown affecting China’s refining and industrial sectors.
The sustainability of this profit momentum remains tethered to the volatile security situation in the Persian Gulf. While Cnooc has raised its full-year production target to a range of 780 million to 800 million barrels of oil equivalent, the risk of a global economic cooling remains a significant headwind. If the U.S. Federal Reserve maintains its restrictive monetary policy to combat energy-driven inflation, the resulting demand destruction could eventually cap the rally in crude prices. For now, however, the "war premium" is providing a substantial windfall for the offshore specialist, allowing it to fund an ambitious transition toward deep-water gas projects and offshore wind integration.
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