CNOOC Limited

Reported cash flow was up 6% to over $700 million, despite a 6% decrease in realized prices. Netbacks were almost $45 per BOE, and Una Power said realized price fell $6 quarter-over-quarter while netback declined by only $1. Management did not provide a quarterly revenue or EPS figure on the call. On production, Nexen said it met guidance and came at the midpoint of its range; Usan averaged about 100,000 barrels per day gross, Buzzard outperformed expectations, and Long Lake was lower in April but improved to over 35,000 barrels a day in May and June. Looking ahead, Q3 cash flow is expected to dip due to planned turnarounds, while Q4 could be quite strong; the company also reiterated full-year production guidance and said the shale gas JV closing should occur before the end of July, generating over $800 million of cash.

Kevin Reinhart emphasized four priorities: cash flow, meeting production guidance, advancing Long Lake, and building future growth in the Gulf of Mexico. His tone was constructive and confident, but measured, especially on Usan where he said the lower-than-expected well performance appears to be a completion issue rather than a reservoir problem. He also highlighted operational improvements at Buzzard, faster steam circulation at Long Lake, and what he called a very exciting unfolding exploration story at Appomattox.

Una Power said cash flow rose 6% despite a 6% drop in realized prices, driven mainly by high-margin Usan barrels. She noted netbacks were almost $45 per BOE and that inventory at quarter-end included 700,000 barrels in the U.K. and 190,000 barrels in Nigeria, which will flow through future quarters. She also pointed to more than $70 million of year-to-date cash flow from West Coast pipeline capacity, said net income fell due to dry hole costs on the unsuccessful Kakuna well, and guided to softer Q3 cash flow because of scheduled turnaround activity.

Analysts focused on Buzzard reliability, Long Lake ramp-up, Usan well performance, and the timeline for a Gulf of Mexico development decision. Management said Buzzard efficiency was helped by better cross-team communication and operating the facility less aggressively, and it wants efficiency in the 90% range. On Usan, management repeatedly said the shortfall versus expectations appears tied to completion technique, not reservoir quality, and that it is assessing whether remedial work is economic; it also said full design rates are still too early to call, with production likely volatile as more wells are drilled and gas injection resumes. For Appomattox, Kevin Reinhart said development planning is already underway and the company is driving toward a sanctioning date sometime in 2014, while exploration/appraisal drilling will continue in parallel.