Calendar An icon of a desk calendar. Cancel An icon of a circle with a diagonal line across. Caret An icon of a block arrow pointing to the right. Email An icon of a paper envelope. Facebook An icon of the Facebook "f" mark. Google An icon of the Google "G" mark. Linked In An icon of the Linked In "in" mark. Logout An icon representing logout. Profile An icon that resembles human head and shoulders. Telephone An icon of a traditional telephone receiver. Tick An icon of a tick mark. Is Public An icon of a human eye and eyelashes. Is Not Public An icon of a human eye and eyelashes with a diagonal line through it. Pause Icon A two-lined pause icon for stopping interactions. Quote Mark A opening quote mark. Quote Mark A closing quote mark. Arrow An icon of an arrow. Folder An icon of a paper folder. Breaking An icon of an exclamation mark on a circular background. Camera An icon of a digital camera. Caret An icon of a caret arrow. Clock An icon of a clock face. Close An icon of the an X shape. Close Icon An icon used to represent where to interact to collapse or dismiss a component Comment An icon of a speech bubble. Comments An icon of a speech bubble, denoting user comments. Ellipsis An icon of 3 horizontal dots. Envelope An icon of a paper envelope. Facebook An icon of a facebook f logo. Camera An icon of a digital camera. Home An icon of a house. Instagram An icon of the Instagram logo. LinkedIn An icon of the LinkedIn logo. Magnifying Glass An icon of a magnifying glass. Search Icon A magnifying glass icon that is used to represent the function of searching. Menu An icon of 3 horizontal lines. Hamburger Menu Icon An icon used to represent a collapsed menu. Next An icon of an arrow pointing to the right. Notice An explanation mark centred inside a circle. Previous An icon of an arrow pointing to the left. Rating An icon of a star. Tag An icon of a tag. Twitter An icon of the Twitter logo. Video Camera An icon of a video camera shape. Speech Bubble Icon A icon displaying a speech bubble WhatsApp An icon of the WhatsApp logo. Information An icon of an information logo. Plus A mathematical 'plus' symbol. Duration An icon indicating Time. Success Tick An icon of a green tick. Success Tick Timeout An icon of a greyed out success tick. Loading Spinner An icon of a loading spinner.

COSL benefits as China offshore capex surges

COSL from company website

China Oilfield Services Limited (COSL) is expected to have another solid year in 2021 as offshore capital spending is set to surge to record levels in China.

The state-backed oilfield services provider’s revenue will likely expand by 20% to between 30 billion yuan and 35 billion yuan ($5 billion) as China National Offshore Oil Corp. (CNOOC) will boost exploration and production capital spending by 20% year-on-year in 2021. This will translate to stronger top-line growth for COSL, reckon analysts at investment house Bernstein.

While CNOOC’s exploration and production spend is still below peak levels, domestic capital spending is at a record high, which benefits COSL, reported Bernstein.

Although, rig utilisation guidance, provided on 4 February, appears conservative, said the analysts. COSL added three jack-up rigs while semi-subs will fall by three, which will keep the total rig count flat at 54. Jack-up utilisation will average 80% in 2021, which is flat from 2020. Semi-sub utilisation will however fall from 64% in 2020 to 48% in 2021. “Utilisations could rise with several project bids still in progress. Management commented that operations have not been impacted by U.S. sanctions,” said Bernstein.

“Rig rates will not likely experience a major recovery given high competition and weak demand in international market. Oilfield services remain oversupplied. While a mix shift to domestic market could help rig rates, management noted international market continues to lag oil price recovery and lower semi-sub operations will offset. COSL expects continued tailwinds from cost improvements and R&D. Margins will continue to improve with lower subcontracting costs and continued efficiency gains from last year. Cash flows are expected to remain positive for 2021 with lower capex of 4.3 billion yuan (-10% y-o-y),” added the investment house.

“COSL will see 20% revenue growth from step up in CNOOC’s capital spending and focus on domestic exploration and development. While pricing environment remains challenging, COSL will benefit from higher operating leverage to growth and better cost efficiency. However, with stock price already up 25% over past week, we believe the revisions are largely reflected in the market. We prefer CNOOC at current valuations which has more leverage to oil price,” said Bernstein.

COSL is one of the leading integrated oilfield services providers in the Asian offshore market. COSL’s four main services divisions — geophysical services, drilling services, well services, and marine and transportation services — cover the exploration, development, and production phases of the oil and gas industry.

Recommended for you

More from Energy Voice

Latest Posts