December 3, 2001; CNOOC Limited Has Preferred Position Offshore China

Two events the past week reinforce our enthusiasm for our latest recommendation (see Stock Idea: CNOOC Limited - China Energy Growth Limited).  At its meeting in New York, Phillips (soon to be ConocoPhillips) reminded analysts that the company's large discovery offshore China was one of its most important sources of future earnings.  The company has a 49% interest in 800 million barrels recoverable and the reserves are still climbing.  We add that the other 51% is held by CNOOC.

Also last week, the Kerr-McGee/Newfield Exploration/Ultra group announced a discovery offshore China.  The press release made no mention of CNOOC probably because the Chinese company need not assert its 51% ownership until it knows drilling has been successful.

Investors who like the China exploration prospects of international companies should like the exploration prospects of CNOOC.  The international companies are assuming similar political risk as are the investors in CNOOC.  The latter has a preferred business risk in that it need not pay for unsuccessful exploration.  Finally, the valuation risk and financial risk of CNOOC is as low as practically any of the international companies.