Unassociated Document
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 6-K
 
Report of Foreign Private Issuer
 
Pursuant to Rule 13a-16 or 15d-16
of the Securities Exchange Act of 1934

For the month of August 2012

Commission File Number 1-14966


CNOOC Limited
(Translation of registrant’s name into English)
   
65th Floor
Bank of China Tower
One Garden Road
Central, Hong Kong
(Address of principal executive offices)

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.

Form 20-F      X          Form 40-F ___

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): ____

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): ____

Indicate by check mark whether by furnishing the information contained in this Form, the registrant is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.

Yes ___        No     X   

If "Yes" is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b):  Not applicable

 
 

 
 
 
Signature

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 
     
CNOOC Limited
 
         
         
 
By:
 
/s/ Hua Zhong
 
 
Name:
 
Hua Zhong
 
 
Title:
 
Joint Company Secretary
 
Dated: August 31, 2012
 
 

 
 

 
 

EXHIBIT INDEX

 
Exhibit No. Description
   
99.1
Announcement dated August 31, 2012, entitled “2012 Interim Report”.
99.2
Announcement dated August 31, 2012, entitled “Notification Letter and Request Form for Non-Registered Holders”.
 
 
 
 

 
 
Exhibit 99.1
 
 
 
CONTENTS
 
 
2
CHAIRMAN’S STATEMENT

4
CEO’S STATEMENT

7
KEY FIGURES

8
INTERIM CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

10
INTERIM CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION

12
INTERIM CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

13
INTERIM CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

14
NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

39
REPORT ON REVIEW OF INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

41
OTHER INFORMATION

 
 
1

 
 

 
CHAIRMAN’S STATEMENT

 
Dear Shareholders,

In the first half of the year, the global economic situation was critical, and China’s economic growth encountered challenges. Under this environment, CNOOC Limited followed the blueprint of “A new leap forward” as the guiding principle, actively sought opportunities amidst crisis, and realised steady growth in its different areas of business. We overcame the difficulties including a small decline in production and escalating costs and maintained strong profitability. Our net profit reached RMB 31.87 billion and once again delivered satisfactory results for our shareholders.

To realize the “new leap forward” plan, we continued to focus on our exploration program. During the first half of the year, our efforts achieved encouraging returns in our core area – offshore China. With the successful discoveries and appraisals of the mid-to-large scale oil and gas structures including Penglai 9-1 and Kenli 2-1, we strengthened our resource base for long term growth in offshore China. Our independent exploration activities in deepwater areas in the South China Sea also started to unfold the resource potential in the region. These exploration progresses made in offshore China reinforced our confidence in the sustainable development of the Company.

The Company’s development and production operations in both offshore China and overseas saw many highlights. The performance of the producing oil and gas fields in offshore China was satisfactory through the adoption of production enhancement measures such as infill drilling and new technologies such as thermal recovery of heavy oil. The production volume for overseas projects has been ramping up at a steady pace. These have effectively compensated for the production losses from the shutdown of the Penglai 19-3 oilfield, enabling the Company to maintain a relatively high level of net oil and gas production despite a series of difficulties. The Company will continue to work hard to realize its annual production target.

The Company also achieved new breakthrough in its overseas development. In July, we signed an agreement for the acquisition of Nexen Inc. in Canada. Upon the closing of the transaction, the Company will become a truly global oil and gas exploration and production company with a balanced resources portfolio and important presences in the world’s major oil and gas production areas. At the same time, we will be able to acquire the world-class management team and employees from Nexen and establish a leading international development platform. We are confident that the transaction will be able to create long term value for our shareholders.

In consideration of the capital requirements of the Nexen transaction and to maintain financial flexibility and support the Company’s long-term growth, the board of directors of the Company has decided to pay an interim dividend of HK$0.15 (tax inclusive) per share for 2012.
 
 
 
2

 
 

 
In view of rapid developments in the different areas of the Company’s business and faced by the uncertain and complex external environment, we will put more emphasis on building our own capabilities. Upon the foundation of a relatively effective management system and an internal risk control mechanism, we will continue our effort to ensure safe and environmental-friendly production, to strengthen our risk control and innovative ability in scientific technology and management as well as to build up a pool of talents and employees. We shall enhance our core management, strengthen our development foundation, and continuously raise the Company’s core competitiveness and capability of sustainable development. We will strive to build up a strong foundation for the Company’s “A new leap forward” blueprint and to continue to create value and returns for our shareholders.

 
 
WANG Yilin
Chairman
 
Hong Kong, 21 August 2012
 
 
 
3

 
 

 
CEO’S STATEMENT

Dear Shareholders,

Following the blueprint of “A new leap forward”, CNOOC Limited carried out its various businesses in a steady and orderly manner and achieved stable growth for its results in the first half of 2012.

Review of the first half year
 
During the first half of the year, downward pressure for the world’s economic growth was mounting as Europe’s debt crisis continued to deepen; international oil prices decreased significantly from a high level. Under these circumstances, our entire staff members worked hard to promote the continued development of the Company’s exploration, development and production and other businesses. We continue to maintain good records in perspective of health, safety and environmental protection.

First of all, the Company’s exploration work achieved encouraging results. During the first half of the year, 10 discoveries were made and 18 appraisal wells were successful. Meanwhile, significant progresses were made in different fronts. In the Bohai area, we made four major achievements: firstly, a series of appraisal wells were successful, proving Penglai 9-1 to be the biggest oil and gas structure discovered in Bohai in recent years; secondly, we made a mid-to-large discovery Kenli 2-1, which contains medium to light crude oil; thirdly, the successful appraisal of Qinhuangdao 29-2 East structure was made, extending the original Qinhuangdao 29-2 structure and enlarging its reserve scale; lastly, two new discoveries, Luda 21-2 and Luda 6-2, made in the Liaodong Bay area were both mid-sized discoveries, opening up a new exploration field with ample potentials in this area. In Western South China Sea, breakthrough was once again achieved in the Yinggehai high-temperature high-pressure zone, resulting in the Dongfang 13-2 natural gas discovery.

In addition, independent deep water exploration progressed smoothly. As planned, we have proceeded with independent drilling in the deep water area in South China Sea, accumulating extensive operation technologies and management experiences. Natural gas discovery was made in the Liuhua 29-2 structure, demonstrating a brighter future for the area’s exploration.

For the first half of the year, the Company’s net oil and gas production reached 160.9 million BOE. Our net production decreased 4.6% year over year (YoY) mainly due to the Penglai 19-3 oilfield, the scheduled shutdown and maintenance, and the disposal of the ONWJ block in Indonesia. By bringing the new projects on stream as scheduled, ensuring the stable operation of the facilities and equipment, and optimizing the technologies for production enhancement, we are confident to accomplish our annual production target of 330-340 million BOE established early this year.


The Company’s average realized oil price reached US$116.91 per barrel, representing an increase of 8.1% YoY; the average realized natural gas price reached US$5.90 per thousand cubic feet, representing an increase of 20.0% YoY. The Company maintained its strong profitability in the industry, with oil and gas sales reached RMB95.66 billion and net profit amounted to RMB31.87 billion. It is worth mentioning that due to rising industry costs and changes in
 
 
 
4

 
 
 
the Company’s assets structure, our all-in cost for the first half of the year was US$34.60 per barrel, representing an increase of 13.1% compared to the whole year of 2011. In order to maintain our competitive cost structure, cost control will continue to be a key aspect for the management of the Company in the future.

Opening up a new horizon for overseas development
 
Since the beginning of the year, the Company has achieved satisfactory development in its overseas business, with overseas oil and gas production increasing significantly. The acquisition of one-third working interest in each of Exploration Area of 1, 2 and 3A in Uganda was also completed on 21 February 2012.

It is more encouraging that an agreement was reached between the Company and Nexen Inc. in Canada in July for the acquisition of the entire common shares and preferred shares of Nexen Inc. for a consideration of US$15.1 billion. The acquisition was consistent with CNOOC Limited’s established value-driven merger and acquisition strategy. The acquisition will not only increase the net proved reserve of the Company by around 30% and its net production by around 20%, but also bring to the Company invaluable experience in the area of unconventional oil and gas resources such as oil sands and shale gas, as well as a high-quality management team and employees.

Through the transaction, we will be able to expand our overseas business and resource base, enhance our presence in Canada, Gulf of Mexico and Nigeria, and enter the resourceful UK North Sea. It will further diversify CNOOC Limited’s growth platform and benefit our long term sustainable growth.

In the meantime, we will continue to enhance the management on our overseas assets and control the risks including the changes of fiscal regimes.

Outlook for the second half of the year
 
For the second half of the year, the world economy will likely to continue to bear the downward pressure and international oil prices are expected to become increasingly volatile. In view of the critical external environment, we will continue to ensure good business performance in different aspects of the Company, strengthening our foundation and striving for stable development.

In practical terms, the Company will focus on the following areas:

Firstly, continue to strengthen the fundamental management and the system of health, safety and environmental protection to ensure safe and environmental-friendly production.

Secondly, commence new projects on schedule, implement production enhancement measures such as infill drilling, and ensure our annual production target be accomplished.

Thirdly, focus on the appraisal of new discoveries made in the first half of the year and continue to implement exploration program.

Fourthly, carry out the follow up work of the transaction with Nexen.
 
 
 
5

 
 

 
Lastly, strengthen core management and focus on cost control and efficiency improvement.

The Company has embarked on a new development platform, establishing a portfolio with combination of independent and PSC operations, shallow water and deep water, domestic and overseas, as well as conventional and unconventional oil and gas resources. In the future, we will continue to enhance our core competitiveness and strive to deliver greater value to our shareholders.

 
 
LI Fanrong
Chief Executive Officer
 

Hong Kong, 21 August 2012

 
 
 
6

 

 

KEY FIGURES
 
   
Six months ended 30 June
 
   
2012
   
2011
 
             
Net profit, million RMB
    31,869       39,343  
Basic earnings per share, RMB
    0.71       0.88  
                 
Total oil and gas sales, million RMB
    95,658       97,030  
Total revenue, million RMB
    118,268       124,568  
                 
Interim dividend per share, HK$(tax inclusive)
    0.15       0.25  
                 
Net Production*
               
 Oil, million barrels
    127.0       133.2  
 Gas, billion cubic feet
    195.7       208.2  
 Total, million BOE
    160.9       168.7  
 
*
Including our interest in equity-accounted investees, which is approximately 8.7 million BOE for the first half of 2012 and approximately 8.8 million BOE for the first half of 2011.

 
 
 
7

 

 

INTERIM CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the six months ended 30 June 2012
(All amounts expressed in millions of Renminbi, except per share data)
 
         
Six months ended 30 June
 
         
2012
   
2011
 
   
Notes
   
(Unaudited)
   
(Unaudited)
 
                   
REVENUE
                 
 Oil and gas sales
    4       95,658       97,030  
 Marketing revenues
    4       21,884       27,110  
 Other income
            726       428  
                         
              118,268       124,568  
                         
                         
EXPENSES
                       
 Operating expenses
            (8,753 )     (7,322 )
 Taxes other than income tax
 
7(ii)
      (8,034 )     (4,864 )
 Exploration expenses
            (4,584 )     (1,538 )
 Depreciation, depletion and amortisation
            (15,172 )     (13,950 )
 Special oil gain levy
    5       (13,639 )     (17,274 )
 Crude oil and product purchases
    4       (21,780 )     (27,026 )
 Selling and administrative expenses
            (1,246 )     (1,204 )
 Others
            (552 )     (603 )
                         
                         
              (73,760 )     (73,781 )
                         
                         
PROFIT FROM OPERATING ACTIVITIES
            44,508       50,787  
Interest income
            633       442  
Finance costs
    6       (850 )     (566 )
Exchange (loss)/gain, net
            (356 )     294  
Investment income
            1,037       663  
Share of profits of associates
            156       177  
Share of profits of a joint venture
            54       317  
Non-operating income/(expense), net
            27       (38 )
                         
                         
PROFIT BEFORE TAX
            45,209       52,076  
 Income tax expense
    7(i)       (13,340 )     (12,733 )
                         
                         
PROFIT FOR THE PERIOD ATTRIBUTABLE TO OWNERS OF THE PARENT
            31,869       39,343  
 
 
 
8

 
 
 
         
Six months ended 30 June
 
         
2012
   
2011
 
   
Notes
   
(Unaudited)
   
(Unaudited)
 
                   
OTHER COMPREHENSIVE LOSS
                 
 Exchange differences on translation of foreign operations
          280       (1,752 )
 Net (loss)/gain on available-for-sale financial assets, net of tax
    9       (621 )     1,210  
 Share of other comprehensive (loss)/income of associates
            (1 )     10  
                         
                         
OTHER COMPREHENSIVE LOSS FOR THE PERIOD,
                       
 NET OF TAX
            (342 )     (532 )
                         
                         
TOTAL COMPREHENSIVE INCOME FOR THE PERIOD
                       
 ATTRIBUTABLE TO OWNERS OF THE PARENT
            31,527       38,811  
                         
                         
EARNINGS PER SHARE FOR THE PERIOD ATTRIBUTABLE
                       
 TO ORDINARY EQUITY HOLDERS OF THE PARENT
                       
 Basic (RMB Yuan)
    8       0.71       0.88  
 Diluted (RMB Yuan)
    8       0.71       0.88  
                         
DIVIDEND
                       
 Interim dividend declared (tax inclusive)
    17       5,459       9,287  
 
 
 
 
9

 
 
 
INTERIM CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
30 June 2012
(All amounts expressed in millions of Renminbi)
 
         
30 June
   
31 December
 
         
2012
   
2011
 
   
Notes
   
(Unaudited)
   
(Audited)
 
                   
NON-CURRENT ASSETS
                 
Property, plant and equipment
    10       236,764       220,567  
Intangible assets
    11       949       1,033  
Investments in associates
            2,886       2,822  
Investment in a joint venture
            19,045       20,175  
Available-for-sale financial assets
            6,407       7,365  
Deferred tax assets
            57        
Other non-current assets
            420       379  
                         
                         
Total non-current assets
            266,528       252,341  
                         
                         
CURRENT ASSETS
                       
Inventories and supplies
            5,189       4,380  
Trade receivables
    12       18,241       20,662  
Held-to-maturity financial assets
            1,544       23,467  
Available-for-sale financial assets
            63,317       27,576  
Other current assets
            8,816       7,684  
Time deposits with maturity over three months
    13       36,785       24,476  
Cash and cash equivalents
            13,801       23,678  
                         
                         
Total current assets
            147,693       131,923  
 
 
 
10

 
 
 
         
30 June
   
31 December
 
         
2012
   
2011
 
   
Notes
   
(Unaudited)
   
(Audited)
 
                   
CURRENT LIABILITIES
                 
Loans and borrowings
    15       25,643       19,919  
Trade and accrued payables
    14       19,589       20,424  
Other payables and accrued liabilities
            12,288       22,217  
Taxes payable
            7,372       7,656  
                         
                         
Total current liabilities
            64,892       70,216  
                         
                         
NET CURRENT ASSETS
            82,801       61,707  
                         
                         
TOTAL ASSETS LESS CURRENT LIABILITIES
            349,329       314,048  
                         
                         
NON-CURRENT LIABILITIES
                       
Loans and borrowings
    15       29,347       18,076  
Provision for dismantlement
            26,351       24,964  
Deferred tax liabilities
            5,902       5,488  
Other non-current liabilities
            3,504       2,664  
                         
                         
Total non-current liabilities
            65,104       51,192  
                         
                         
NET ASSETS
            284,225       262,856  
                         
                         
EQUITY
                       
Equity attributable to owners of the parent
                       
 Issued capital
    16       949       949  
 Reserves
            283,276       261,907  
                         
                         
TOTAL EQUITY
            284,225       262,856  
 
 
 
 
11

 


INTERIM CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the six months ended 30 June 2012
(All amounts expressed in millions of Renminbi)
 
   
Equity attributable to owners of the parent
 
         
Share
                                     
         
premium
         
Statutory
                         
         
and capital
   
Cumulative
   
and non-
               
Proposed
       
   
Issued
   
redemption
   
translation
   
distributive
   
Other
   
Retained
   
final
       
   
capital
   
reserve
   
reserve
   
reserves
   
reserves
   
earnings
   
dividend
   
Total
 
                                                 
Balances at 1 January 2011
    949       42,129       (13,361 )     20,000       10,972       145,656       9,421       215,766  
Profit for the period
                                  39,343             39,343  
Other comprehensive loss,
                                                               
 net of tax
                (1,752 )           1,220                   (532 )
                                                                 
Total comprehensive income
                (1,752 )           1,220       39,343             38,811  
2010 final dividend
                                  134       (9,421 )     (9,287 )
Equity-settled share option expenses
                            103                   103  
Appropriation and utilisation
                                                               
 of safety fund, net
                            1                   1  
                                                                 
Balances at 30 June 2011
                                                               
 (Unaudited)
    949       42,129       (15,113 )     20,000       12,296       185,133             245,394  
                                                                 
Balances at 1 January 2012
    949       42,129       (17,187 )     20,000       10,282       196,541       10,142       262,856  
Profit for the period
                                  31,869             31,869  
Other comprehensive loss,
                                                               
 net of tax
                280             (622 )                 (342 )
                                                                 
Total comprehensive income
                280             (622 )     31,869             31,527  
2011 final dividend
                                  (49 )     (10,142 )     (10,191 )
Equity-settled share option expenses
                            33                   33  
                                                                 
Balances at 30 June 2012
                                                               
 (Unaudited)
    949       42,129       (16,907 )     20,000       9,693       228,361             284,225  
 
 
 
 
12

 
 
 
INTERIM CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
For the six months ended 30 June 2012
(All amounts expressed in millions of Renminbi)
 
   
Six months ended 30 June
 
   
2012
   
2011
 
   
(Unaudited)
   
(Unaudited)
 
             
Net cash generated from operating activities
    36,240       50,534  
Net cash used in investing activities
    (51,845 )     (56,360 )
Net cash generated from financing activities
    5,707       1,791  
                 
                 
Net decrease in cash and cash equivalents
    (9,898 )     (4,035 )
                 
Cash and cash equivalents at beginning of period
    23,678       27,287  
                 
Effect of foreign exchange rate changes, net
    21       (230 )
                 
                 
Cash and cash equivalents at end of period
    13,801       23,022  
 
 
 
 
13

 
 
 
NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
30 June 2012
(All amounts expressed in millions of Renminbi, except number of shares and unless otherwise stated)

1.
ORGANISATION AND PRINCIPAL ACTIVITIES
 
CNOOC Limited (the “Company”) was incorporated in the Hong Kong Special Administrative Region (“Hong Kong”) of the People’s Republic of China (the “PRC”) on 20 August 1999 to hold the interests in certain entities whereby creating a group comprising the Company and its subsidiaries (hereinafter collectively referred to as the “Group”). During the six months ended 30 June 2012, the Group was principally engaged in the exploration, development, production and sales of crude oil, natural gas and other petroleum products.
 
The registered office address of the Company is 65/F, Bank of China Tower, 1 Garden Road, Hong Kong.
 
In the opinion of directors of the Company (the “Directors”), the parent and the ultimate holding company of the Company is China National Offshore Oil Corporation (“CNOOC”), a company established in the PRC.
 
As at 30 June 2012, the Company had direct or indirect interests in the following principal subsidiaries, joint venture and associates:
 
Name of entity
Place and date of
establishment
Nominal value of  ordinary
shares issued and paid-up/
registered capital
Percentage
of equity
attributable to
the Group
Principal activities
Directly held subsidiaries:
CNOOC China Limited
 
Tianjin, PRC
15 September 1999
RMB20 billion
 
100%
 
Offshore petroleum exploration,
development, production and
sales in the PRC
China Offshore Oil (Singapore) International Pte Ltd
Singapore
14 May 1993
SG$3 million
 
100%
 
Sales and marketing of petroleum products outside the PRC
CNOOC International Limited
British Virgin Islands
23 August 1999
US$20,000,000,002
 
100%
 
Investment holding
 
OOGC America, Inc.
 
State of Delaware, United States of America
28 August 1997
US$1,000
 
100%
 
Investment holding
 
CNOOC Finance
(2002) Limited**
British Virgin Islands
24 January 2002
US$1,000
 
100%
 
Bond issuance
 
CNOOC Finance
(2003) Limited
British Virgin Islands
2 April 2003
US$1,000
 
100%
 
Bond issuance
 
 
 
 
14

 
 
 
Name of entity
Place and date of
establishment
Nominal value of  ordinary
shares issued and paid-up/
registered capital
Percentage
of equity
attributable to
the Group
Principal activities
Directly held subsidiaries (continued):
CNOOC Finance (2011) Limited
British Virgin Islands
31 December 2010
US$1,000
 
100%
 
Bond issuance
 
CNOOC Finance (2012) Limited***
British Virgin Islands
10 April 2012
US$1,000
 
100%
 
Bond issuance
 
Indirectly held subsidiaries*:
CNOOC Deepwater Development Limited
 
Zhuhai, PRC
1 March 2010
RMB 1 billion
 
100%
 
Deepwater and low-grade oil and gas fields exploration, development, and oil and gas production, sales in the PRC
CNOOC Southeast Asia Limited
Bermuda
16 May 1997
US$12,000
 
100%
 
Investment holding
 
CNOOC SES Ltd.
 
Labuan, F.T.,
Malaysia
27 March 2002
US$1
 
100%
 
Petroleum exploration,
development and production in Indonesia
CNOOC Muturi Limited
 
Isle of Man
8 February 1996
US$7,780,770
 
100%
 
Petroleum exploration,
development and production in Indonesia
CNOOC NWS Private Limited
 
Singapore
8 October 2002
SG$2
 
100%
 
Offshore petroleum exploration,
development and production in Australia
CNOOC Exploration & Production Nigeria Limited
Nigeria
6 January 2006
Naira10 million
 
100%
 
Petroleum exploration, development and production in Africa
 
CNOOC Iraq Limited
 
British Virgin
Islands
15 October 2010
US$1
 
100%
 
Providing services of petroleum exploration and development in oilfield of the Republic of Iraq

 
 
15

 
 
 

 
Name of entity
Place and date of
establishment
Nominal value of  ordinary
shares issued and paid-up/
registered capital
Percentage
of equity
attributable to
the Group
Principal activities
Indirectly held subsidiaries* (continued):
CNOOC Canada Inc.
 
Canada
15 January 1999
281,749,526 common shares without a par
value
100%
 
Oil sands exploration, development and production in Canada
CNOOC Uganda Ltd
 (note 3)
Uganda
11 May 2010
1,000,000 Uganda
Shilling
100%
 
Petroleum exploration,
development and production in Africa
Joint venture:
Bridas Corporation
 
British Virgin Islands
15 September 1993
US$102,325,582
 
50%
 
Investment holding
 
Associates:
Shanghai Petroleum Corporation Limited
Shanghai, PRC
7 September 1992
RMB900 million
 
30%
 
Offshore petroleum exploration,
development, production and sales in the PRC
CNOOC Finance Corporation Limited
 
Beijing, PRC
14 June 2002
RMB1,415 million
 
31.8%
 
Provision of deposit, transfer, settlement, loan, discounting
and other financing services to CNOOC and its member entities
Northern Cross (Yukon) Limited
 
Yukon, Canada
19 September 1994
22,691,705 common shares without a par
value
60%
 
Petroleum exploration, development and production in Canada

*
All subsidiaries are indirectly held through CNOOC International Limited, except CNOOC Deepwater Development Limited which is indirectly held through CNOOC China Limited.

**
The guarantee notes issued by CNOOC Finance (2002) Limited were repaid in March 2012 (note 15), and CNOOC Finance (2002) Limited was subsequently dissolved on 27 July 2012.

***
CNOOC Finance (2012) Limited was incorporated on 10 April 2012, for issuing guaranteed notes (note 15).

The above table lists the subsidiaries, joint venture and associates of the Company which, in the opinion of the Directors, principally affected the results for the period or formed a substantial portion of the total assets of the Group. To give details of other subsidiaries would, in the opinion of the Directors, result in particulars of excessive length.
 
 
 
16

 
 
 
2.
BASIS OF PREPARATION AND ACCOUNTING POLICIES
 
Basis of preparation
 
The interim condensed consolidated financial statements for the six months ended 30 June 2012 have been prepared in accordance with International Accounting Standards 34 (“IAS 34”) and Hong Kong Accounting Standards 34 (“HKAS 34”) Interim Financial Reporting.

The interim condensed consolidated financial statements do not include all the information and disclosures required in the annual financial statements, and should be read in conjunction with the Group’s annual financial statements as at 31 December 2011.

Significant accounting policies
 
The accounting policies adopted in the preparation of the interim condensed consolidated financial statements are consistent with those followed in the preparation of the Group’s annual financial statements for the year ended 31 December 2011. The adoption of new standards and interpretations as of 1 January 2012 does not have any material impact on the accounting policy, interim financial position or performance of the Group.

Improvements to IFRSs/HKFRSs
 
The IASB/HKICPA has issued improvements to IFRSs/HKFRSs which set out amendments to a number of IFRSs/HKFRSs primarily with a view to remove inconsistencies and clarify wording. The adoption of those amendments upon their effective dates did not have any material impact on the accounting policies, interim financial position or performance of the Group.

3.
ACQUISITIONS AND OTHER VENTURE
 
On 29 March 2011, CNOOC Uganda Ltd, a wholly-owned subsidiary of CNOOC International Limited, entered into a sales and purchase agreement with Tullow Uganda Limited and Tullow Uganda Operations Pty Ltd., wholly-owned subsidiaries of Tullow Oil Plc., to acquire a one-third working interest in Uganda Exploration Areas 1, 2 and 3A (the “Uganda Assets”) for an initial cash consideration of US$1.467 billion. The acquisition of the Uganda Assets was completed on 21 February 2012. Together with the related price adjustment, the cash consideration mentioned above has been recorded as acquisition costs of oil and gas properties.

4.
OIL AND GAS SALES AND MARKETING REVENUES
 
Oil and gas sales represent the invoiced value of sales of oil and gas attributable to the interests of the Group, net of royalties and the government share oil that is lifted and sold on behalf of the government. Revenue from the sale of oil is recognised when the significant risks and rewards of ownership have been transferred, which is when title passes to the customer. Revenue from the production of oil and gas in which the Group has a joint interest with other producers is recognised based on the Group’s working interest and the terms of the relevant production sharing contracts. Differences between production sold and the Group’s share of production are not significant.
 
 
 
17

 

 
Marketing revenues principally represent the sales of oil and gas purchased from the foreign partners under the production sharing contracts and revenues from the trading of oil and gas through the Company’s subsidiaries. The marketing cost of the oil and gas sold is included in “Crude oil and product purchases” in the interim condensed consolidated statement of comprehensive income.

5.
SPECIAL OIL GAIN LEVY
 
In 2006, a Special Oil Gain Levy (“SOG Levy”) was imposed by the Ministry of Finance of the PRC (“MOF”) at the progressive rates from 20% to 40% on the portion of the monthly weighted average sales price of the crude oil lifted in the PRC exceeding US$40 per barrel. MOF has decided to increase the threshold of the SOG Levy to US$55, with effect from 1 November 2011. Notwithstanding this adjustment, the SOG Levy continues to have five levels and should be calculated and charged according to the progressive and valorem rates on the excess amounts. The SOG Levy paid can be claimed as a deductible expense for corporate income tax purposes and is calculated based on the actual volume of the crude oil entitled.

6.
FINANCE COSTS
 
Accretion expenses of approximately RMB647 million relating to the provision for dismantlement liabilities have been recognised in the interim condensed consolidated statement of comprehensive income for the six months ended 30 June 2012 (six months ended 30 June 2011: approximately RMB421 million).

7.
TAX
 
 
(i)
Income tax
 
The Company and its subsidiaries are subject, on an entity basis, to income taxes on profits arising in or derived from the tax jurisdictions in which the entities of the Group are domiciled and operate. The Company is subject to profits tax at a rate of 16.5% (2011: 16.5%) on profits arising in or derived from Hong Kong, which is qualified as a foreign tax credit to offset the PRC corporate income tax starting from 1 January 2008.

The Company is regarded as a Chinese Resident Enterprise (as defined in the “Enterprise Income Tax Law of the People’s Republic of China”) by the State Administration of Taxation of the PRC. As a result, the Company is subject to the PRC corporate income tax at the rate of 25% starting from 1 January 2008.

The Company’s subsidiary in Mainland China, CNOOC China Limited, is a wholly-owned foreign enterprise. It is subject to corporate income tax at the rate of 25% under the prevailing tax rules and regulations.

Subsidiaries of the Group domiciled outside the PRC are subject to income tax at rates ranging from 10% to 56%.
 
 
 
18

 
 

 
 
(ii)
Other taxes
 
  The Company’s PRC subsidiaries pay the following other taxes and dues:

 
Production taxes at the rate of 5% on independent production and production under production sharing contracts;

 
Resource taxes at the rate of 5% (reduced tax rates may apply to specific products and fields) on the oil and gas sales revenue (excluding production taxes) derived by oil and gas fields under production sharing contracts signed after 1 November 2011 and independent offshore oil and gas fields starting from 1 November 2011, which replaced the royalties for oil and gas fields, except for those under production sharing contracts signed before 1 November 2011 which will be subject to related resource taxes requirement after the expiration of such production sharing contracts;

 
Mineral resource compensation at the temporary rate of 1% on the oil and gas sales revenue derived by oil and gas fields under production sharing contracts signed after 1 November 2011 and independent offshore oil and gas fields starting from 1 November 2011;

 
Export tariffs at the rate of 5% on the export value of petroleum oil;

 
Business tax at rates of 3% to 5% on other income;

 
City construction tax at the rate of 1% or 7% on the actual paid production taxes and business tax;

 
Educational surcharge at the rate of 3% on the actual paid production taxes and business tax; and

 
Local educational surcharge at the rate of 2% on the actual paid production taxes and business tax.

In addition, other taxes paid and payable by the Company’s non-PRC subsidiaries include royalty as well as taxes levied on petroleum-related income, profit, budgeted operating and capital expenditures.
 
 
 
19

 
 

 
8.
EARNINGS PER SHARE
 
   
Six months ended 30 June
 
   
2012
   
2011
 
   
(Unaudited)
   
(Unaudited)
 
             
Earnings:
           
 Profit for the period attributable to
           
  ordinary equity holders for the basic and
           
  diluted earnings per share calculation
    31,869       39,343  
                 
Number of shares:
               
 Number of ordinary shares issued at
               
  the beginning of the period, excluding
               
  repurchased but not cancelled shares
    44,646,305,984       44,669,199,984  
                 
 Weighted average number of ordinary shares for
               
  the purpose of basic earnings per share
    44,646,305,984       44,669,199,984  
                 
 Effect of dilutive potential ordinary shares under
               
  the share option schemes
    161,740,031       220,916,382  
                 
 Weighted average number of ordinary shares for
               
  the purpose of diluted earnings per share
    44,808,046,015       44,890,116,366  
                 
                 
Earnings per share – Basic (RMB Yuan)
    0.71       0.88  
                 
                 
– Diluted (RMB Yuan)
    0.71       0.88  
 

9.
NET (LOSS)/GAIN ON AVAILABLE-FOR-SALE FINANCIAL ASSETS, NET OF TAX
 
   
Six months ended 30 June
 
   
2012
   
2011
 
   
(Unaudited)
   
(Unaudited)
 
             
Available-for-sale financial assets:
           
Comprehensive income arising during the period
    9       1,870  
Less: Reclassification adjustment for net
               
   gain included in the investment income
    (509 )     (660 )
Less: Income tax effect
    (121 )      
                 
      (621 )     1,210  
 
 
 
 
20

 

 
The comprehensive income of the Group’s available-for-sale investments was derived from investment of corporate wealth management products, liquidity funds and the investment in the equity securities of MEG Energy Corporation.

10.
PROPERTY, PLANT AND EQUIPMENT
 
During the six months ended 30 June 2012, additions to the Group’s property, plant and equipment, including the property, plant and equipment acquired in acquisitions, amounted to approximately RMB32,474 million (six months ended 30 June 2011: approximately RMB25,044 million).

The interest of the Group in the North West Shelf (“NWS”) Project in Australia has been collateralised to the other partners of the project as security for certain of the Group’s liabilities relating to the project.

Included in the current period’s additions was an amount of approximately RMB684 million (six months ended 30 June 2011: approximately RMB456 million) in respect of interest capitalised in property, plant and equipment.

11.
INTANGIBLE ASSETS
 
The intangible assets of the Company comprise software, gas processing rights of the NWS Project. The computer software is amortised over their respective useful lives on the straight-line basis. The intangible asset regarding the gas processing rights has been amortised upon the commencement of commercial production of the liquefied natural gas using the unit-of-production method.

12.
TRADE RECEIVABLES
 
The credit terms of the Group are generally within 30 days after the delivery of oil and gas, except for new customers, where payment in advance is normally required. Trade receivables are non-interest-bearing.

As at 30 June 2012 and 31 December 2011, substantially all the trade receivables were aged within 30 days. All customers have a good repayment history and no receivables are past due.

13.
TIME DEPOSITS WITH MATURITY OVER THREE MONTHS
 
Included in the time deposit is a deposit of RMB8.88 billion placed by CNOOC China Limited, a wholly-owned subsidiary of the Company, with the Bank of China to secure loans of US$1.37 billion (note 15) granted by the Bank of China.


14.
TRADE AND ACCRUED PAYABLES
 
As at 30 June 2012 and 31 December 2011, substantially all the trade and accrued payables were aged within six months. The trade and accrued payables are non-interest-bearing.
 
 
 
21

 
 

 
15.
LOANS AND BORROWINGS
 
 
Current
 
           
30 June
               
31 December
       
     
 
   
2012
               
2011
       
 
Effective interest
       
(Unaudited)
               
(Audited)
       
 
rate and final
 
Bank
   
Notes/
         
Bank
   
Notes/
       
 
maturity
 
loan
   
Bonds
   
Total
   
loan
   
Bonds
   
Total
 
                                       
Short-term loans and borrowings
                                     
 General loan
 LIBOR+0.6% to 1.5%
                                   
 
 per annum with maturity
                                   
 
 within one year
    24,160             24,160       16,193             16,193  
                                                   
                                                   
        24,160             24,160       16,193             16,193  
                                                   
                                                   
Loans and borrowings
                                                 
 due within one year
                                                 
 For Tangguh LNG Project*****
LIBOR+0.23% to 0.38%
                                               
 
 per annum with maturity
                                               
 
 within one year
    220             220       207             207  
                                                   
 For Nigeria OML130 Project
LIBOR+4% per annum
                                               
 
 with maturity within
                                               
 
 one year
                      369             369  
                                                   
 Finance (2002)*
                              3,150       3,150  
                                                   
                                                   
 Finance (2003)**
            1,263       1,263                    
                                                   
                                                   
        220       1,263       1,483       576       3,150       3,726  
                                                   
                                                   
        24,380       1,263       25,643       16,769       3,150       19,919  
 
 
 
 
22

 
 
 
 
Non-current
 
             
30 June
               
31 December
       
           
2012
               
2011
       
 
Effective interest
       
(Unaudited)
               
(Audited)
       
 
rate and final
 
Bank
   
Notes/
         
Bank
   
Notes/
       
 
maturity
 
loan
   
Bonds
   
Total
   
loan
   
Bonds
   
Total
 
                                       
For Tangguh LNG Project*****
LIBOR+0.23% to 0.38%
                                   
 
 per annum with
                                   
 
 maturity through 2021
    2,460             2,460       2,562             2,562  
                                                   
Finance (2003)**
            1,853       1,853             3,102       3,102  
                                                   
Finance (2011)***
            12,467       12,467             12,412       12,412  
                                                   
Finance (2012)****
            12,567       12,567                    
                                                   
        2,460       26,887       29,347       2,562       15,514       18,076  
 
As at 30 June 2012, except for general loans of US$1.37 billion secured by time deposits (note 13), all the bank loans of the Group were unsecured. None of the outstanding borrowings was guaranteed by CNOOC.

 
*
The principal amount of US$500 million of 6.375% guaranteed notes due in 2012 was issued by CNOOC Finance (2002) Limited, a wholly-owned subsidiary of the Company. The obligations of CNOOC Finance (2002) Limited in respect of the notes were unconditionally and irrevocably guaranteed by the Company, and were repaid in March 2012.

 
**
The principal amount of US$200 million of 4.125% guaranteed notes due in 2013 and the principal amount of US$300 million of 5.500% guaranteed notes due in 2033 were issued by CNOOC Finance (2003) Limited, a wholly-owned subsidiary of the Company. The obligations of CNOOC Finance (2003) Limited in respect of the notes are unconditionally and irrevocably guaranteed by the Company.

 
***
The principal amount of US$1,500 million of 4.25% guaranteed notes due in 2021 and the principal amount of US$500 million of 5.75% guaranteed notes due in 2041 were issued by CNOOC Finance (2011) Limited, a wholly-owned subsidiary of the Company. The obligations of CNOOC Finance (2011) Limited in respect of the notes are unconditionally and irrevocably guaranteed by the Company.

 
****
The principal amount of US$1,500 million of 3.875% guaranteed notes due in 2022 and the principal amount of US$500 million of 5.000% guaranteed notes due in 2042 were issued by CNOOC Finance (2012) Limited, a wholly-owned subsidiary of the Company. The obligations of CNOOC Finance (2012) Limited in respect of the notes are unconditionally and irrevocably guaranteed by the Company.

 
*****
The amount represented the Group’s share of utilised bank loans in Tangguh Liquified Natural Gas Project (the “Tangguh LNG Project”).
 
 
 
23

 
 

 
 
The Company delivered a guarantee dated 29 October 2007 in favour of Mizuho Corporate Bank, Ltd., which acts as the facility agent for and on behalf of various international commercial banks under a US$884 million commercial loan agreement dated 29 October 2007 in connection with the Tangguh LNG Project in Indonesia. The Company guarantees the payment obligations of the trustee borrower under the subject loan agreement and is subject to a maximum cap of approximately US$164,888,000. Together with the loan agreement dated 31 July 2006 with a maximum cap of approximately US$487,862,000, the total maximum guarantee cap is US$652,750,000.

 
An agreement in respect of the sale of a 3.05691% interest of the Company in the Tangguh LNG Project to Talisman Energy Inc. (“Talisman”) for a consideration of US$212.5 million became effective on 1 January 2008. The transaction was completed through the equity transfer of an indirect subsidiary of the Company. The Company through its subsidiary continues to hold a 13.89997% interest in the Tangguh LNG Project after the sale.

 
In addition, a letter of credit agreement was signed between the Company and Talisman with the execution of the aforesaid agreement. Accordingly, Talisman has delivered valid and unexpired standby letters of credit with the amount of US$120 million to the Company (as the beneficiary) as a counter-guarantee to offset the exposure of the Company’s guarantee for the aforesaid interest of 3.05691% in respect of the Tangguh LNG Project financing.

There was no default of principal, interest or redemption terms of the loans and borrowings during the period.

16.
ISSUED CAPITAL
 
               
Issued
 
   
Number
   
Share
   
share capital
 
Shares
 
of shares
   
capital
   
equivalent of
 
         
HK$ million
   
RMB million
 
                   
Authorised:
                 
 Ordinary shares of HK$0.02 each
                 
  as at 30 June 2012 and
                 
  31 December 2011
    75,000,000,000       1,500        
                       
                       
Issued and fully paid:
                     
 Ordinary shares of HK$0.02 each
                     
  as at 1 January 2011
    44,669,199,984       893       949  
                         
                         
Share repurchased and cancelled in 2011*
    (10,019,000 )            
                         
                         
As at 31 December 2011 (audited)
    44,659,180,984       893       949  
                         
                         
Share repurchased and cancelled in 2012*
    (12,875,000 )            
                         
                         
As at 30 June 2012 (unaudited)
    44,646,305,984       893       949  
 
 
*
During the year of 2011, the Company purchased 22,894,000 of its shares with an aggregate cash payment of HK$315,016,715 on The Stock Exchange of Hong Kong Limited (the “HKSE”). 10,019,000 shares had been cancelled by the Company by 31 December 2011 and the remaining 12,875,000 shares were cancelled on 10 January 2012.
 
 
 
24

 
 
 
17.
DIVIDEND
 
On 21 August 2012, the board of Directors (the “Board”) declared an interim dividend of HK$0.15 (tax inclusive) per share (six months ended 30 June 2011: HK$0.25 (tax inclusive) per share), totalling approximately HK$6,697 million (tax inclusive) (equivalent to approximately RMB5,459 million (tax inclusive)) (six months ended 30 June 2011: approximately RMB9,287 million (tax inclusive)), based on the number of issued shares as at 30 June 2012.

Pursuant to the “Enterprise Income Tax Law of the People’s Republic of China” and related laws and regulations, the Company is regarded as a Chinese resident enterprise, and thus is required to withhold corporate income tax at the rate of 10% when it distributes dividends to its non-resident enterprise (as defined in the “Enterprise Income Tax Law of the People’s Republic of China”) shareholders, with effect from the distribution of the 2008 final dividend. In respect of all shareholders whose names appear on the Company’s register of members and who are not individuals (including HKSCC Nominees Limited, corporate nominees or trustees such as securities companies, banks, and other entities or organizations, which are all considered as non-resident enterprise shareholders), the Company will distribute the dividend after deducting corporate income tax of 10%.

18.
SHARE OPTION SCHEMES
 
The Company has adopted the following four share option schemes:

 
(i)
Pre-Global Offering Share Option Scheme (as defined in the Other Information section);

 
(ii)
2001 Share Option Scheme (as defined in the Other Information section);

 
(iii)
2002 Share Option Scheme (as defined in the Other Information section); and

 
(iv)
2005 Share Option Scheme (as defined in the Other Information section).

Details of these share option schemes are disclosed in the Other Information section in the interim report.
 
 
 
25

 
 

 
During the six months ended 30 June 2012, the movements in the options granted under all of the above share option schemes were as follows:
 
         
Weighted
 
         
average
 
   
Number of
   
exercise
 
   
share options
   
price
 
         
HK$
 
             
Outstanding as at 1 January 2012
    420,960,900       9.56  
Granted during the period
           
Exercised during the period
           
Forfeited during the period
    (6,026,000 )     10.89  
                 
                 
Outstanding as at 30 June 2012
    414,934,900       9.54  
                 
                 
Exercisable as at 30 June 2012
    383,227,000       9.28  
 
No share options had been cancelled during the six months ended 30 June 2012.

As at 30 June 2012, the share options outstanding under these share option schemes represented approximately 0.93% of the Company’s shares in issue as at that date (31 December 2011: 0.94%).

Other than those disclosed in these interim condensed consolidated financial statements, no right to subscribe for equity or debt securities of the Company was granted by the Company to, nor have any such rights been exercised by, any other person during the six months ended 30 June 2012.

The assumptions on which the option pricing model is based represent the subjective estimation of the Directors as to the circumstances existing at the time the options were granted.

19.
RELATED PARTY TRANSACTIONS
 
As disclosed in note 1, the Company is a subsidiary of CNOOC, which is a state-owned enterprise subject to the control of the State Council of the PRC. The State Council of the PRC directly and indirectly controls a significant number of state-owned entities and organizations.

As the Group is controlled by CNOOC, transactions with CNOOC, its subsidiaries and associates (the “CNOOC Group”) are disclosed as related party transactions. The Company entered into a comprehensive framework agreement with CNOOC on 1 November 2010 for the provision (1) by the Group to CNOOC Group and (2) by CNOOC Group to the Group, of a range of products and services which may be required and requested from time to time by either party and/or its associates in respect of the continuing connected transactions. The term of the comprehensive framework agreement is for a period of three years from 1 January 2011. The continuing connected transactions and relevant annual caps were approved by the independent shareholders of the Company on 24 November 2010. The approved related party/continuing
 
 
 
26

 
 
 
connected transactions are as follows:

 
1.
Provision of exploration, oil and gas development, oil and gas production as well as marketing, management and ancillary services by CNOOC Group to the Group:

 
a)
Provision of exploration and support services

 
b)
Provision of oil and gas development and support services

 
c)
Provision of oil and gas production and support services

 
d)
Provision of marketing, management and ancillary services

 
e)
FPSO vessel leases

 
2.
Provision of management, technical, facilities and ancillary services, including the supply of materials by the Group to CNOOC Group; and

 
3.
Sales of petroleum and natural gas products by the Group to CNOOC Group:

 
a)
Sales of petroleum and natural gas products (other than long term sales of natural gas and liquefied natural gas)

 
b)
Long term sales of natural gas and liquefied natural gas

 
Pricing principles
 
The related party/continuing connected transactions referred to in paragraphs 1(a) to 1(d) above provided by CNOOC Group to the Group and paragraph 2 above provided by the Group to CNOOC Group are based on negotiations with CNOOC Group on normal commercial terms, or on terms no less favourable than those available to the Group from independent third parties, under prevailing local market conditions, including considerations such as volume of sales, length of contracts, package of services, overall customer relationship and other market factors.