Chairman's Statement

Dear Shareholders,  
The world is now experiencing unprecedented changes that have not been seen for centuries. In 2019, the global economic growth was weak with a significant increase in instability and risks. The energy industry entered into a period of deep corrections. Oil supply and demand are still unbalanced, and international oil prices hovered at a low level. Brent crude oil price recorded a significant decline year-over-year, and the petroleum and petrochemical industries continued to face escalating risks and increasing challenges.

Faced with these challenges, we focused on long-term growth. In early 2019, we set medium- to long-term goals to increase oil and gas reserves and production, bringing the Company back on track of production growth. During the year, CNOOC Limited adhered to the high-quality development philosophy and exerted excellent organizational and management capabilities in business operation. A number of the Company’s operation indicators reached a record level since listing, delivering satisfactory results to the shareholders.

Focusing on oil and gas exploration, development and production, the growth of reserves and production has always been our primary goal. In 2019, CNOOC Limited continued to strengthen its exploration and development efforts, and the workload reached a record high. A total of 23 commercial discoveries were made, and 30 oil and gas bearing structures were successfully appraised. The appraisal of Bozhong 19-6 condensate gas fields in offshore China continued to achieve remarkable results, with newly-added proved in-place volume of nearly 200 million cubic metres of oil equivalent. Additionally, five new discoveries were made in Stabroek block of Guyana, in which recoverable resources have been accumulated to more than 8.0 billion BOE. The annual reserve replacement ratio reached 144%, and the reserve life remained stable at a level above 10 years, which further consolidated the resource foundation for future development. Net production for the year reached a record-breaking 506.5 million BOE. At the same time, we continued to optimise our investment management. Capital expenditure budget implemented well within the years, which fully supported our exploration and development activities.

Parallel to growing reserves and production, the Company also attaches great importance to cost control. With the advancement of long-term mechanisms for quality and efficiency enhancement, the idea of emphasising on economic benefits has been ingrained within the Company. In 2019, all-in cost was US$29.78 per BOE, representing a six-year consecutive decline and we maintained our cost competitiveness; operating cost decreased to US$7.39 per BOE, representing the best performance in recent years.

In 2019, CNOOC Limited’s production growth and effective cost control led to better profitability with revenues and net profit rising significantly, despite more than 10% drop in international oil prices. Oil and gas sales reached RMB197.17 billion, and net profit reached RMB61.05 billion.

While achieving outstanding results, we continued to reward our shareholders. The Board of Directors has recommended the payment of a final dividend of HK$0.45 per share (tax inclusive) for 2019.

Following the trend of low-carbon development in the global energy industry, CNOOC Limited has stepped up its efforts in the development of clean energy, and actively promoted the development and construction of key natural gas projects. Among them, Lingshui 17-2 gas fields have fully entered the development phase, while Bozhong 19-6 condensate gas field pilot development project will commence production in 2020. The establishment of CNOOC Renewable Energy Co. Ltd. marks our entering into the renewable and clean offshore wind power business. The acquisition of CUCBM will enable us to fully exploit our advantages in oil and gas development technology and management, and integrate the development of offshore and onshore, conventional and unconventional oil and gas development to further expand the Company’s growth potential.

In 2019, the Company made satisfactory progress in its overseas development. We continued to promote resource integration and strengthen our management capabilities. After years of unremitting efforts, CNOOC Limited has preliminarily established a global oil and gas asset portfolio management framework and further bolstered the management capabilities of our global business.

Technological innovation is the cornerstone of CNOOC Limited’s future development. In 2019, we continued to pursue innovative development, and achieved new breakthroughs in multiple key scientific and technological projects. The Company won the “First Prize” of China’s National Science and Technology Progress Award for its “Theory and major discoveries for large-scale integrated condensate gas field exploration in the deep layer of Bohai Bay Basin” project. This will serve as a strong technical foundation for realising the potential of resources in Bohai and supporting the Company’s medium- to long-term sustainable development. CNOOC Limited has also made great efforts in promoting digital and smart transformation, with progresses in the construction of smart oilfields, unmanned offshore platforms and onshore power utilisation, etc.

While focusing on oil and gas exploration and development, CNOOC Limited has always put safety and environmental protection first. We continued to promote a culture of safety and stepped up the implementation of responsibilities on safety production for all employees. We also strengthened our emergency response capabilities and maintained a sound record of safety and environmental protection throughout the year.

In 2019, CNOOC Limited’s corporate governance and operational capabilities were once again recognised by the market. The Company ranked 126th in Forbes’ Global 2000 List , up 32 places from 2018. Meanwhile, we were also honoured as, among others, one of the “Best Investment Value Award for Listed Companies” in the China Securities Golden Bauhinia Award and the “Most Honored Company” by Institutional Investor.

Our past achievements motivate us to move forward. In 2020, we will continue to enhance our efforts in exploration and development, strengthen the exploration in new areas and frontiers, consolidate our resources base, supporting future sustainable growth.

We will continue to strengthen cost management, hold tight to quality and efficiency enhancement, adopt cost control through the entire life cycle of oil and gas exploration, development and production, and continue to maintain our cost competitive advantages.

Talents are the core competitiveness of the Company’s future development. We will vigorously expand a pool of high-quality management personnel, specialised technical professionals and international talents to lay a solid base for the Company’s sustainable development.

In the new year, we will strive for continued improvement in safety and environmental protection management, and implement a series of safety production policies and measures to ensure safety production.

In 2019, Mr. Yang Hua resigned as the Chairman of the Board and Non-executive Director of the Company, Mr. Yuan Guangyu retired from the roles of Chief Executive Officer and Executive Director, and Mr. Xu Keqiang was appointed as the Chief Executive Officer. On behalf of the Board, I would like to thank Mr. Yang Hua and Mr. Yuan Guangyu for their contributions to the Company’s development, and extend my congratulations to Mr. Xu Keqiang.

When you are reading this report, the world is combating the COVID-19 pandemic. China and global economies are facing further headwinds during the pandemic. International oil price also plunged and is expected to hover at a low level in the near future. Despite market uncertainty, I would like to assure all our shareholders that CNOOC Limited is making every effort to carry out its business thanks to the Chinese government’s strong and effective responses in dealing with the pandemic. We will closely monitor changes in the external environment and the movement of international oil prices, implement more stringent cost controls and more prudent investment decisions, strengthen cash flow management, overcome the impact of the pandemic and maintain the Company’s long- term sustainable development.

As we stand at a new starting point and embark on our new journey, we will forge ahead despite all obstacles, make every effort to promote the development to be a world-class energy company and bring high-quality development to a new level.

Wang Dongjin    
Hong Kong, 25 March 2020

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