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 March 2014

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: March 31, 2014

 
 

 
 
 
EXHIBIT INDEX
 
Exhibit No.
Description
Exhibit 99.1
Announcement dated March 28, 2014, entitled “2013 Annual Results Announcement”.
Exhibit 99.2
Press Release dated March 28, 2014, entitled “Production and Reserve Volumes Hit Another Record High Major Operational Indicators Met Targets”.
Exhibit 99.3
Announcement dated March 28, 2014, entitled “Inside Information Announcement”.
 
 
 
 

 
 
Exhibit 99.1
 
Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this announcement, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this announcement.

(Incorporated in Hong Kong with limited liability under the Companies Ordinance)
(Stock Code: 00883)

2013 Annual Results Announcement


CHAIRMAN’S STATEMENT

Dear shareholders,

In 2013, amid complex economic conditions on both domestic and global fronts, the Company continued to carry forward its business operations under its “New Leap Forward” strategic roadmap and achieved notable results and significant progress in exploration, development and production, and international development.

In recent years, the Company has continuously expanded its investment in exploration and achieved satisfactory results, with new discoveries being made every year and reserve addition maintained at high levels. In 2013, the Company maintained a high success rate in mature exploration areas, and made major breakthroughs in new areas, sustaining the growth momentum of our reserves in recent years and providing support for our future production growth.

Following a few years of steady growth and engineering preparation, the Company has reached another peak in its project construction and start-up activities. From the beginning of 2013, the Company has commenced production of eight new projects and successfully exceeded its production target for the year.

2013 was a crucial year for the Company’s overseas business development. With the completion of the Nexen acquisition, the proportion of the Company’s overseas assets has significantly increased and now become a significant part of the total assets. The overseas projects also had a greater impact on the Company’s business performance. We continued to make progress on the integration of Nexen while further defining the guiding principles and overall roadmap for our overseas business development to focus on “management innovation and economic benefits”. We will leverage on our integration with Nexen to actively promote overseas business development and achieve our strategic goals.
 
1

 
 
In 2013, the Company was awarded the Platinum Award for “2013 Excellence in Management and Corporate Governance” by The Asset, as well as the “Corporate Governance Recognition Award-Asia’s Icon on Corporate Governance” and “2013 Best CSR” by Corporate Governance Asia. These accolades reflect the market’s recognition of the Company’s sound corporate governance, as well as our commitment to social responsibility.

In view of the Company’s sound financial position, the Board has recommended a final dividend of HK$0.32 per share (tax inclusive) for the year 2013.

Following a rapid growth period over the last few years, the Company has embarked on a new phase of its development: we are now at a leading position among the world’s oil and gas exploration and production companies in terms of reserves and production; we currently have oil and gas assets in more than 20 countries across six continents; we formed a crude oil dominated asset portfolio comprising both conventional and unconventional oil and gas resources. Along with the evolvement of our scale and asset portfolio, we now face new challenges in various areas including production growth and cost structure.

In order to bring the “New Leap Forward” blueprint to reality, we will continue to carry out reform and be innovative, and strive for steady progress in all aspects. While continuing to strengthen exploration activities, we are also devoted to growing reserves and production to ensure the long-term and sustainable development of the Company. In 2014, the Company plans to bring seven to ten new projects on stream out of around 20 projects that are expected to be under construction. These serve as a strong foundation for our development over the next few years and beyond.

In 2014, the Company will further strive to control costs and enhance efficiency. The rapid increase in costs in recent years has drawn the attention from all managerial levels. In this regard, we have designated 2014 as “Year of Quality and Efficiency”, where staff at all levels will take on collective role in controlling costs through technology and management innovation.

We will also strive to further innovate the management of our overseas business, continue to optimize our overseas assets portfolio, improve overseas development mechanisms, and enhance the management capabilities and profitability of our overseas assets.

Over the years, the Company has always placed health, safety and environmental protection in top priorities, and maintained a strong track record in these areas. We remain committed to supporting these causes to pave the way for the Company’s sustainable development.
 
 
2

 

In 2014, Mr. Wang Tao, an independent non-executive director, Mr. Zhou Shouwei and Mr. Wu Zhenfang, both non-executive directors, retired from the Board. Mr. Kevin G. Lynch was appointed as an independent non-executive director while Mr. Lv Bo, Mr. Zhang Jianwei and Mr. Wang Jiaxiang were appointed as non-executive directors. I would like to express my appreciation and gratitude to Mr. Wang, Mr. Zhou and Mr. Wu for contributing their knowledge and expertise to the Company. At the same time, I would also like to warmly welcome Mr. Lynch, Mr. Lv, Mr. Zhang and Mr. Wang to join the Board.

Looking ahead, we will continue to seek long-term growth by following our “New Leap Forward” strategic roadmap to further create values for our shareholders.



WANG Yilin
Chairman

Hong Kong, 28 March 2014
 
 
3

 
 
CEO’S STATEMENT


Dear Shareholders,

In 2013, the Company successfully achieved production and operational targets for the year and opened up new areas for future development after overcoming various challenges. I am pleased to share the results of our development in 2013 and our plans for year 2014.

COMPLETING OUR OPERATIONAL TARGETS FOR 2013 WITH MAJOR ACHIEVEMENTS

In 2013, the Company made steady progress in various operational activities while stepping up its pace in international development: it made major exploration achievements in both offshore China and overseas; the Company overcame unfavorable and unexpected situations and exceeded its production target for 2013; the integration following the Nexen transaction progressed smoothly; our financial position remained healthy and we continued to maintain sound performance in health, safety and environmental protection.

First, on exploration: as a result of continuous innovation in mindset, technology and management, as well as more intensified activities, breakthroughs were made in both mature and new exploration areas. We made a total of 18 commercial new discoveries and successfully appraised 20 oil and gas structures. In 2013, the Company’s reserve replacement ratio reached 327%. As of the end of 2013, the Company had net proved reserves of around 4.43 billion BOE, which makes it a leading exploration and production company in the world. In offshore China, we made 10 commercial new discoveries during the year, including several mid-sized oil and gas discoveries of Bozhong 8-4, Kenli 9-5, Kenli 9-6, Weizhou 12-11 and Luda 5-2 North. Overseas, we made a new oil and gas discovery by Elephant-1 well in Congo, and extended exploration activities in Uganda and Algeria. The successful exploration results over the past few years and in 2013 have established a strong reserve base to bring the Company in line with the strategic roadmap of the “New Leap Forward”.

Second, on development and production: 2013 was a challenging year for the Company in terms of development
and production. Despite unfavorable factors such as delayed startup of several new PSC projects in offshore China and tough weather conditions, the Company still maintained high operating efficiency and mitigated the decline in production base in the existing oil and gas fields through streamlined management. The Company also optimized operational measures to ensure quick ramp up of the newly added production capacities. In 2013, the Company’s net production reached 411.7 million BOE, beating its target set earlier the year.

Meanwhile, in line with the concept of regional development and comprehensive adjustments, the Company has taken a further step in integration on exploration and development, and brought to fruition development plan of many new projects.
 
 
4

 

Third, on overseas expansion: the Company successfully closed the Nexen transaction in February 2013 and embarked on a new phase in international development. To date, the integration of exploration and development, safety and environmental protection, human resources and corporate culture has progressed smoothly. All the assets of Nexen continued to operate well. The progress in integration met the Company’s expectation.

In October 2013, the Company successfully acquired a 10% interest in the production sharing contract of the Libra oil field in Brazil. In addition, production volumes from the Eagle Ford shale oil and gas project in the U.S. and the Missan oil fields in Iraq continued to ramp up. The Kingfisher block in Uganda entered into the development phase. The Egina oil field in Nigeria entered into the engineering construction stage.

Fourth, on financial performance: in 2013, the Company recorded a net profit of approximately RMB56,461 million, with basic earnings per share of RMB1.26. The Company maintained a healthy financial position and kept a stable credit ratings.

COPING WITH CHALLENGES TO ENSURE SUSTAINABLE DEVELOPMENT

The Company has made more than 10 new oil and gas discoveries each year for the past few years. At the same time, the Company has established a rich resource base for short, medium and long-term development, building up a predominantly crude oil asset portfolio that consists of both conventional and unconventional resources, with offshore China and overseas assets complementary to each other. This is a strong foundation for the Company’s sustainable development.

Year 2014 is another peak cycle for the development of oil and gas fields, with around 20 new projects expected to be under construction, among which seven to ten new projects are expected to commence production, including Kenli 3-2 oil fields with an expected peak production of approximately 37,000 BOE per day, and Qinhuangdao 32-6 comprehensive adjustment project with an expected peak production of approximately 36,000 BOE per day. This is expected to significantly boost the Company’s production growth in the next few years.

In the course of development and production, we have noticed the escalating costs of developing oil and gas fields amid prevailing high oil price. We are also mindful of the challenges posed by the uncertainties which stem from the more stringent environmental protection standards, governmental approval procedures as well as adverse weather conditions caused by climate change. To cope with these challenges, we will implement scientific management, advanced planning and meticulous organization in our operations.

Over the years, the Company has built up a conscientious, dedicated and hardworking team of employees who are veterans in offshore China oil and gas development. We have also accumulated abundant experience in overseas exploration and development. With such an excellent team, I am confident that the Company will be able to maintain its long-term sustainable growth.
 
 
5

 
 
CAREFUL PLANNING IN IMPLEMENTING VARIOUS TASKS FOR 2014

Having made health, safety and environmental protection our priorities, we will organize domestic and overseas resources to fulfill our production and operational tasks in 2014:

First, ensure the production target to be met. The Company will continue to plan prudently and work meticulously to explore the potential of our producing oil and gas fields and to ensure new development projects come on stream on time to meet our production target of 422 to 435 million BOE for the year.

Second, control cost and improve efficiency. 2014 was designated as “Year of Quality and Efficiency”. With focus on cost containment, the Company will adopt a series of measures to further enhance its earning potential.

Third, intensify exploration and development activities. The Company will strengthen the integration of exploration and development as well as its exploration activities in the frontier areas in order to ensure a reserve replacement ratio of over 100%.

Fourth, enhance the management of our overseas business. In 2014, the Company will foster a deeper integration with Nexen, streamline the management of its overseas business, optimize the allocation of resources and strengthen project management and raise the operational efficiency and profitability of Nexen’s and other overseas assets.

2014 is a crucial year for the Company’s “New Leap Forward” roadmap. While working hard to achieve the various targets for the year, we will maintain a long-term vision and seize the right opportunities to fully promote the Company to a new phase of development.


Li Fanrong
Chief Executive Officer

Hong Kong, 28 March 2014
 
 
6

 
 
Consolidated Statement of Profit or Loss and Other Comprehensive Income
Year ended 31 December 2013
(All amounts expressed in millions of Renminbi, except per share data)

         
Group
 
   
Notes
   
2013
   
2012
 
REVENUE
                 
Oil and gas sales
    5       226,445       194,774  
Marketing revenues
            55,495       50,771  
Other income
            3,917       2,082  
                         
              285,857       247,627  
EXPENSES
                       
Operating expenses
            (30,014 )     (21,445 )
Taxes other than income tax
            (15,937 )     (15,632 )
Exploration expenses
            (17,120 )     (9,043 )
Depreciation, depletion and amortisation
    6       (56,456 )     (32,903 )
Special oil gain levy
            (23,421 )     (26,293 )
Impairment and provision
            45       (31 )
Crude oil and product purchases
            (53,386 )     (50,532 )
Selling and administrative expenses
            (7,859 )     (3,377 )
Others
            (3,206 )     (1,230 )
                         
              (207,354 )     (160,486 )
                         
PROFIT FROM OPERATING ACTIVITIES
            78,503       87,141  
Interest income
    6       1,092       1,002  
Finance costs
    7       (3,457 )     (1,603 )
Exchange gains, net
            873       359  
Investment income
    6       2,611       2,392  
Share of profits of associates
            133       284  
Share of profit/(loss) of a joint venture
            762       (311 )
Non-operating income, net
            334       908  
                         
PROFIT BEFORE TAX
    6       80,851       90,172  
Income tax expense
    8       (24,390 )     (26,481 )
                         
PROFIT FOR THE YEAR ATTRIBUTABLE TO OWNERS OF THE PARENT
            56,461       63,691  
                         
OTHER COMPREHENSIVE (LOSS)/INCOME
                       
Items that may be subsequently reclassified to profit or loss:
                       
Net loss on available-for-sale financial assets, net of tax
            (626 )     (1,128 )
Exchange differences on translation of foreign operations
            (4,143 )     (42 )
Share of other comprehensive (loss)/income of associates
            (29 )     21  
Other items that will not be reclassified to profit or loss
            393       -  
                         
OTHER COMPREHENSIVE LOSS FOR THE YEAR, NET OF TAX
            (4,405 )     (1,149 )
                         
TOTAL COMPREHENSIVE INCOME FOR THE YEAR ATTRIBUTABLE TO OWNERS OF THE PARENT
            52,056       62,542  
                         
EARNINGS PER SHARE ATTRIBUTABLE TO ORDINARY EQUITY HOLDERS OF THE PARENT
                       
Basic (RMB Yuan)
    10       1.26       1.43  
Diluted (RMB Yuan)
    10       1.26       1.42  
                         
Details of the dividends proposed and paid for the year are disclosed in Note 9.
 
 
 
7

 
 
Consolidated Statement of Financial Position
31 December 2013
(All amounts expressed in millions of Renminbi)

         
Group
 
   
Notes
   
2013
   
2012
 
NON-CURRENT ASSETS
                 
Property, plant and equipment
          419,102       252,132  
Intangible assets
          17,000       973  
Investments in associates
          4,094       3,857  
Investment in a joint venture
          20,303       20,160  
Available-for-sale financial assets
          6,798       7,051  
Deferred tax assets
          2,729       40  
Other non-current assets
          4,895       963  
                       
Total non-current assets
          474,921       285,176  
                       
CURRENT ASSETS
                     
Inventories and supplies
          9,153       5,247  
Trade receivables
    11       34,136       23,624  
Derivative financial assets
            329       -  
Available-for-sale financial assets
            51,103       61,795  
Other current assets
            11,295       8,314  
Time deposits with maturity over three months
            26,218       16,890  
Cash and cash equivalents
            14,318       55,024  
                         
Total current assets
            146,552       170,894  
                         
CURRENT LIABILITIES
                       
Loans and borrowings
    13       49,841       28,830  
Trade and accrued payables
    12       48,558       23,989  
Derivative financial liabilities
            220       -  
Other payables and accrued liabilities
            16,914       17,435  
Taxes payable
            13,415       12,183  
                         
Total current liabilities
            128,948       82,437  
                         
NET CURRENT ASSETS
            17,604       88,457  
                         
TOTAL ASSETS LESS CURRENT LIABILITIES
            492,525       373,633  
                         
NON-CURRENT LIABILITIES
                       
Loans and borrowings
    13       82,011       29,056  
Provision for dismantlement
            41,146       29,406  
Deferred tax liabilities
            25,362       3,403  
Other non-current liabilities
            2,386       1,988  
                         
Total non-current liabilities
            150,905       63,853  
                         
NET ASSETS
            341,620       309,780  
                         
EQUITY
                       
Equity attributable to owners of the parent
                       
Issued capital
    14       949       949  
Reserves
            340,671       308,831  
                         
TOTAL EQUITY
            341,620       309,780  
 
Li Fanrong Wu Guangqi
   
Director  Director
 
 
8

 
 
 
Notes
31 December 2013
(All amounts expressed in millions of Renminbi unless otherwise stated)

1.
CORPORATE INFORMATION

 
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 thereby creating a group comprising the Company and its subsidiaries (hereinafter collectively referred to as the “Group”). During the year, the Group was principally engaged in the exploration, development, production and sale 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 the 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.

2.1 
STATEMENT OF COMPLIANCE

These financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRSs”)  issued by the International Accounting Standards Board (the “IASB”), Hong Kong Financial Reporting Standards (“HKFRSs”) issued by the Hong Kong Institute of Certified Public Accountants (the “HKICPA”), and the Hong Kong Companies Ordinance.

2.2 
CHANGES IN ACCOUNTING POLICY AND DISCLOSURES

The IASB has issued a number of new and revised IFRSs that are first effective for the current accounting year commencing 1 January 2013 or later but available for early adoption. The equivalent new and revised HKFRSs consequently issued by the HKICPA have the same effective dates as those issued by the IASB and are in all material aspects identical to the pronouncements issued by the IASB.

The accounting policies adopted are consistent with those of the year ended 31 December 2012, except for the first time adoption of the new and revised IFRSs/HKFRSs effective for the Group’s financial year beginning on 1 January 2013 and the early adoption of the amendments to IAS 36/HKAS 36 Recoverable Amount Disclosures for Non-Financial Assets effective from 1 January 2014:

Mandatorily adopted as of 1 January 2013:

IFRS 13/HKFRS 13 – Fair Value Measurement

IFRS 13/HKFRS 13 improves consistency and reduces complexity by providing, for the first time, a precise definition of fair value and a single source of fair value measurement and disclosure requirements for use across IFRSs/HKFRSs. The requirements do not extend the use of fair value accounting, but provide guidance on how it should be applied where its use is already required or permitted by other standards within IFRSs/HKFRSs. In accordance with the transitional provisions of IFRS 13/HKFRS 13, the Group has applied the new fair value measurement and disclosure requirements prospectively. The application of IFRS 13/HKFRS 13 has no impact to the financial position and performance of the Group but results in more extensive disclosure in the consolidated financial statements.

IAS 1/HKAS 1 (Amendments) – Presentation of Items of Other Comprehensive Income

The IAS 1/HKAS 1 (Amendments) introduce new terminology, whose use is not mandatory, for statement of comprehensive income and income statement. Under the amendments to IAS 1/HKAS 1, the “statement of comprehensive income” is renamed as “statement of profit or loss and other comprehensive income” and the “income statement” is renamed as the “statement of profit or loss”. The amendments to IAS1/HKAS 1 retain the option to present profit or loss and other comprehensive income in either a single statement or in two separate but consecutive statements. IAS 1/HKAS 1 (Amendments) requires companies preparing financial statements in accordance with IFRSs/HKFRSs to group items of other comprehensive income into two categories: (1) items that will not be reclassified subsequently to profit or loss; and (2) items that may be reclassified subsequently to profit or loss when specific conditions are met. Income tax on items of other comprehensive income is required to be allocated on the same basis. The amendments have been applied retrospectively, and hence the presentation of items of other comprehensive income has been modified to reflect the changes.
 
 
9

 

2.2 
CHANGES IN ACCOUNTING POLICY AND DISCLOSURES (continued)

Early adopted before mandatory effective dates

IAS 36/HKAS 36 (Amendments) –Recoverable Amount Disclosures for Non-Financial Assets

The amendments to IAS 36/HKAS 36 remove the requirement to disclose the recoverable amount of a cash generating unit (CGU) to which goodwill or other intangible assets with indefinite useful lives had been allocated when there has been no impairment or reversal of impairment of the related CGU. Furthermore, the amendments introduce additional disclosure requirements regarding the fair value hierarchy, key assumptions and valuation techniques used when the recoverable amount of an asset or CGU was determined based on its fair value less costs of disposal. The amendments to IAS 36/HKAS 36 are effective for annual periods beginning on or after 1 January 2014, earlier application is permitted. The Group adopts the amendments for annual period beginning on 1 January 2013. The application of IAS 36/HKAS 36 amendments has no impact to the financial position and performance of the Group.

Except for those new and revised IFRSs/HKFRSs that have been adopted for the first time for the current year’s consolidated financial statements as listed above, there are also a number of new and revised to IFRSs/HKFRSs effective as of 1 January 2013. The adoption of those amendments upon their effective dates did not have any material impact on the financial position or performance of the Group.

The Group has not applied the following new and revised IFRSs/HKFRSs, that may be relevant to the Group and have been issued but are not yet effective, in these consolidated financial statements:

Amendments to IFRS 10/HKFRS 10,
 
Investment Entities1
  IFRS 12/HKFRS 12 and IAS 27/HKAS 27
   
     
Amendments to IAS 19/ HKAS 19
 
Defined Benefit Plans: Employee Contributions2
     
IFRS 9/HKFRS 9
 
Financial Instruments3
     
Amendments to IFRS 9/ HKFRS 9 and
 
Mandatory Effective Date of IFRS 9/ HKFRS 9 and Transition
  IFRS 7/ HKFRS 7
 
  Disclosures3
     
Amendments to IAS 32/HKAS 32
 
Offsetting Financial Assets and Financial Liabilities1
     
Amendments to IAS 39/HKAS 39
 
Novation of Derivatives and Continuation of Hedge Accounting1
     
IFRIC 21/HK(IFRIC)-Int 21
 
Levies1

 
1
Effective for annual periods beginning on or after 1 January 2014
 
2
Effective for annual periods beginning on or after 1 July 2014
 
3
Available for application- the mandatory effective date will be determined when the outstanding phases of IFRS 9/HKFRS 9 are finalised
 
 
10

 
 
3. 
ACQUISITIONS AND OTHER VENTURES
 
2013

 
(i)
On 23 July 2012, the Company, CNOOC Canada Holding Ltd. and Nexen entered into an arrangement agreement in relation to the Company’s proposed acquisition (through its wholly-owned subsidiary, CNOOC Canada Holding Ltd.) of all the Nexen common shares and preferred shares, pursuant to a plan of arrangement under the Canada Business Corporations Act.

The acquisition of Nexen was completed on 26 February 2013 (Beijing time). The consideration of the acquisition was approximately US$14.8 billion (approximately RMB92.8 billion), and was paid in cash. The consideration is related to acquisition of common shares and preferred shares. As a result of the acquisition, an additional amount of approximately US$275 million was paid by Nexen to settle its long-term incentive plans. The indebtedness of Nexen at the acquisition date remains outstanding except for the US$460 million of subordinated debt that was repaid subsequently in 2013.

The fair values of the identifiable assets and liabilities of Nexen as at the date of acquisition are as follows:

   
Final amounts
recognized
 
       
Property, plant and equipment
    150,572  
Intangible assets
    4,196  
Investment in an associate
    234  
Deferred tax assets
    119  
Other non-current assets
    889  
Trade receivables
    11,148  
Inventories and supplies
    2,782  
Other current assets
    672  
Cash and cash equivalents
    4,858  
         
Trade and accrued payables
    (17,709 )
Taxes payable
    (1,399 )
Other payables and accrued liabilities
    (529 )
Loans and borrowings
    (34,893 )
Provisions for dismantlement
    (13,076 )
Other non-current liabilities
    (1,681 )
Deferred tax liabilities
    (26,745 )
         
Net assets acquired
    79,438  
Goodwill on acquisition
    13,346  
         
Satisfied by cash
    92,784  
 
 
11

 
 
3. 
ACQUISITIONS AND OTHER VENTURES (continued)
 
2013 (continued)

 
(i)
(continued)

An analysis of the net outflow of cash and cash equivalents in respect of the acquisition is as follows:

Cash consideration
    92,784  
Cash and cash equivalents acquired
    (4,858 )
         
Net outflow of cash and cash equivalents in respect of the acquisition
    87,926  

Since the acquisition, Nexen contributed RMB37,249 million to the Group's revenue and RMB1,078 million to the consolidated profit for the year.

Legal and professional fees related to the acquisition were approximately RMB474 million. The expenses are charged to profit or loss directly.

 
(ii)
On 2 December 2013, CNOOC Petroleum Brasil LTDA, a wholly-owned subsidiary of CNOOC International Limited, entered into a production sharing contract with Ministry Of Mines And Energy in Brazil, to be a non-operator contractor in Block LIBRA. CNOOC Petroleum Brasil LTDA holds 10% working interest and paid its share of signature bonus of BRL1.5 billion (approximately RMB4.1 billion), which has been recorded as an acquisition cost of oil and gas properties.

 
4. 
SEGMENT INFORMATION

 
 
(a)
Segments results
 
The Group is engaged worldwide in the upstream operating activities of the conventional oil and gas, shale oil and gas, oil sands and other unconventional oil and gas business.  The Group reports the business through three reporting segments: exploration and production ("E&P"), trading business and corporate. These segments are determined primarily because the Group's chief operating decision maker makes key operating decisions and assesses performance of the segment separately. The Group evaluates the performance of each segment based on segment profit or loss. The geographical information is separately disclosed in (b).
 
The following table presents the segment financial information for the Group for the years ended 31 December 2013 and 2012.
 
 
12

 
 
4. 
SEGMENT INFORMATION (continued)
 
 
(a) 
Segments results and other information (continued)

   
E&P
   
Trading business
   
Corporate
   
Eliminations
   
Consolidated
 
                                                             
   
2013
   
2012
   
2013
   
2012
   
2013
   
2012
   
2013
   
2012
   
2013
   
2012
 
Sales to external customers:
                                                           
Oil and gas sales
    226,445       194,774       -       -       -       -       -       -       226,445       194,774  
Marketing revenues
    -       -       55,495       50,771       -       -       -       -       55,495       50,771  
Intersegment revenues
    17,443       14,299       -       -       -       -       (17,443 )     (14,299 )     -       -  
Other income
    3,415       1,633       221       -       303       464       (22 )     (15 )     3,917       2,082  
                                                                                 
Total
    247,303       210,706       55,716       50,771       303       464       (17,465 )     (14,314 )     285,857       247,627  
                                                                                 
Operating expenses
    (30,014 )     (21,445 )     -       -       -       -       -       -       (30,014 )     (21,445 )
Taxes other than income tax
    (15,920 )     (15,602 )     -       -       (17 )     (30 )     -       -       (15,937 )     (15,632 )
Exploration expenses
    (17,142 )     (9,058 )     -       -       -       -       22       15       (17,120 )     (9,043 )
Depreciation, depletion and amortisation
    (55,512 )     (32,775 )     (497 )     -       (447 )     (128 )     -       -       (56,456 )     (32,903 )
Special oil gain levy
    (23,421 )     (26,293 )     -       -       -       -       -       -       (23,421 )     (26,293 )
Impairment and provision
    34       (31 )     12       -       (1 )     -       -       -       45       (31 )
Crude oil and product purchases
    -       -       (53,386 )     (50,532 )     -       -       -       -       (53,386 )     (50,532 )
Selling and administrative expenses
    (4,294 )     (2,513 )     (1,021 )     (9 )     (2,544 )     (855 )     -       -       (7,859 )     (3,377 )
Others
    (3,024 )     (1,130 )     -       -       (182 )     (100 )     -       -       (3,206 )     (1,230 )
Interest income
    19       9       -       -       1,396       1,441       (323 )     (448 )     1,092       1,002  
Finance costs
    (2,269 )     (1,893 )     (5 )     (4 )     (1,506 )     (154 )     323       448       (3,457 )     (1,603 )
Exchange gains/(losses), net
    137       389       20       -       716       (30 )     -       -       873       359  
Investment income
    -       -       -       -       2,846       2,567       (235 )     (175 )     2,611       2,392  
Share of profits/(losses) of associates
    (98 )     71       -       -       231       213       -       -       133       284  
Share of profit/(loss) of a joint venture
    -       -       -       -       762       (311 )     -       -       762       (311 )
Non-operating income/(expenses), net
    339       896       -       -       (5 )     12       -       -       334       908  
Income tax expense
    (24,524 )     (25,886 )     77       (2 )     57       (593 )     -       -       (24,390 )     (26,481 )
                                                                                 
Segment profit for the year
    71,614       75,445       916       224       1,609       2,496       (17,678 )     (14,474 )     56,461       63,691  
                                                                                 
Other segment information
                                                                               
Investments in associates
    1,145       1,080       -       -       2,949       2,777       -       -       4,094       3,857  
Investment in a joint venture
    -       -       -       -       20,303       20,160       -       -       20,303       20,160  
Others
    476,414       272,804       11,205       3,172       337,813       342,616       (228,356 )     (186,539 )     597,076       432,053  
                                                                                 
Segment assets
    477,559       273,884       11,205       3,172       361,065       365,553       (228,356 )     (186,539 )     621,473       456,070  
                                                                                 
Segment liabilities
    (315,805 )     (244,481 )     (8,499 )     (3,020 )     (137,345 )     (69,866 )     181,796       171,077       (279,853 )     (146,290 )
                                                                                 
Capital expenditure and acquisition
    248,462       70,746       40       2       602       310       -       -       249,104       71,058  


 
(b)
Geographical information

The Group mainly engages in the exploration, development, production and sale of crude oil, natural gas and other petroleum products in offshore China. Activities outside the PRC are mainly conducted in Canada, the United States of America, United Kingdom, Nigeria, Agentina, Indoesia, Uganda and Australia etc.

In presenting the Group’s geographical information, revenues from external customers are based on the location of the Group’s customers, and non-current assets are attributed to the segments based on the location of the Group’s assets. 67% (2012: 75%) of the Group’s revenues are generated from PRC customers, and revenues generated from customers in other locations are individually less than 10%.

The following table presents certain non-current assets information for the Group’s geographical information for the years ended 31 December 2013 and 2012.

   
PRC
   
Canada
   
Others
   
Consolidated
 
   
2013
   
2012
   
2013
   
2012
   
2013
   
2012
   
2013
   
2012
 
                                                 
Property, plant and equipment
    164,939       149,473       97,140       16,816       157,023       85,843       419,102       252,132  
Investments in associates/a joint venture
    3,054       2,945       857       912       20,486       20,160       24,397       24,017  
Other non-current assets
    3,716       963       1,021       -       158       -       4,895       963  


 
(c)
Information about major customers

The current year's revenue of approximately RMB29,855 million (2012: RMB44,622 million) was derived from sales by the E&P segment and the trading business segment to China Petroleum & Chemical Corporation.
 
 
13

 

5.
OIL AND GAS SALES
 
     
Group
 
     
2013
   
2012
 
               
Gross sales     233,450       198,428  
Less:  
Royalties
    (3,655 )     (1,036 )
 
PRC government’s share of oil
    (3,350 )     (2,618 )
                   
Oil and gas sales     226,445       194,774  


6.
PROFIT BEFORE TAX
 
The Group’s profit before tax is arrived at after charging/(crediting):

   
Group
 
   
2013
   
2012
 
             
Crediting:
           
Interest income from bank deposits
    (1,092 )     (1,002 )
                 
Investment income:
               
 – Net gain from available-for-sale financial assets
    (2,611 )     (1,869 )
 – Net gain from held-to-maturity financial assets
    -       (523 )
                 
      (2,611 )     (2,392 )
Insurance compensation on disposal of property,
  plant and equipment
    (372 )     (390 )
                 
Charging:
               
Auditors’ remuneration:
               
 – Audit fee
    42       24  
 – Other fees
    17       12  
                 
      59       36  
                 
Employee wages, salaries, allowances and social security costs
    6,546       2,537  
                 
Equity-settled share option expenses
    11       50  
                 
Depreciation, depletion and amortisation:
               
 – Property, plant and equipment
    54,919       33,098  
 – Intangible assets
    1,414       200  
 – Less: net amount capitalised
    123       (395 )
                 
      56,456       32,903  
                 
Operating lease rentals:
               
 – Office properties
    460       158  
 – Equipment
    1,944       1,383  
                 
      2,404       1,541  
                 
Repairs and maintenance
    5,925       4,229  
Research and development costs
    1,278       1,420  
Loss on disposal of property, plant and equipment
    681       19  
 
 
14

 
 
7.
FINANCE COSTS

   
Group
 
   
2013
   
2012
 
             
             
Interest on bank loans which are repayable within five years
    1,212       503  
Interest on other loans
    2,223       1,145  
Other borrowing costs
    167       183  
                 
Total borrowing costs
    3,602       1,831  
                 
Less: Amount capitalised in property, plant and equipment
    (2,049 )     (1,549 )
                 
      1,553       282  
Other finance costs:
               
 Unwinding of discount on provision for dismantlement
    1,904       1,359  
 Others
    -       (38 )
                 
      3,457       1,603  
 
The effective interests rates used to determine the amount of related borrowing costs for capitalisation varied from 0.665% to 6.66% (2012: from 1.06585% to 6.375%) per annum during the year ended at 31 December 2013.

8.
INCOME TAX

An analysis of the tax expense in the Group's consolidated statement of profit or loss and other comprehensive income is as follows:

    Group  
   
2013
   
2012
 
             
Current tax
           
Provision for PRC enterprise income tax on the estimated taxable profits for the year
    18,369       20,6622  
Provision for overseas enterprise income tax on the estimated taxable profits for the year
    12,619       8,1776  
                 
Deferred tax
               
Temporary differences in the current year
    (6,598 )     (2,358 )
                 
Income tax expense for the year
    24,390       26,481  

A reconciliation of the statutory PRC corporate income tax rate to the effective income tax rate of the Group is as follows:

    Group  
   
2013
   
2012
 
   
%
   
%
 
             
PRC statutory enterprise income tax rate
    25.0       25.0  
Effect of different tax rates for overseas subsidiaries
    7.6       4.4  
Tax credit from the government
    (2.5 )     (0.2 )
Tax reported in equity-accounted entities
    (0.3 )     -  
Others
    0.4       0.2  
                 
Group’s effective income tax rate
    30.2       29.4  

 
15

 
 
8.
INCOME TAX (continued)

The movements of deferred tax liabilities net of deferred tax assets are as follows:

   
Group
 
   
2013
   
2012
 
             
At 1 January
    3,363       5,488  
Credited to the profit and loss
    (6,598 )     (2,358 )
Acquisition of a subsidiary
    26,626       -  
Charge to equity
    29       237  
Exchange differences
    (787 )     (4 )
                 
At 31 December
    22,633       3,363  

9. 
DIVIDENDS
 
   
Group
 
   
2013
   
2012
 
             
Dividend per ordinary share:
           
2013 interim dividend - HK$0.25 (2012: interim dividend HK$0.15) per ordinary share
    8,843       5,444  
2012 final dividend - HK$0.32 (2011: final dividend HK$0.28) per ordinary share
    11,383       10,191  
Final dividend proposed at HK$0.32 (2012: HK$0.32) per ordinary share by the Board of Directors - not recognised as a liability as at the end of the year
    11,269       11,563  

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 and 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%.


10.
EARNINGS PER SHARE

   
Group
 
   
2013
   
2012
 
             
Earnings
           
Profit for the year attributable to ordinary equity holders for the basic and diluted earnings per share calculations
    56,461       63,691  
                 
                 
Number of shares
               
Weighted average number of ordinary shares for the basic earnings per share calculation
    44,646,825,847       44,646,305,984  
                 
Effect of dilutive potential ordinary shares under the share option schemes
    140,293,242       161,736,346  
                 
Weighted average number of ordinary shares for the purpose of diluted earnings per share
    44,787,119,089       44,808,042,330  
                 
Earnings per share:
               
Basic (RMB Yuan)
    1.26       1.43  
Diluted (RMB Yuan)
    1.26       1.42  
 
 
16

 
 
11.
TRADE RECEIVABLES

The credit terms of the Group are generally within 30 days after the delivery of oil and gas. Payment in advance or collateral may be required from customers, depending on credit rating. Trade receivables are non-interest-bearing.

As at 31 December 2013 and 2012, substantially all the trade receivables were aged within 30 days. All customers have a good repayment history and no receivables are past due.

12.
TRADE AND ACCRUED PAYABLES

As at 31 December 2013 and 2012, substantially all the trade and accrued payables were aged within six months. The trade and accrued payables are non-interest-bearing.
 
13.
LOANS AND BORROWINGS
 
Current
 
     
Group
 
      2013     2012  
                                       
 
Effective interest rate and final maturity
 
Bank loan
   
Notes
   
Total
   
Bank loan
   
Notes
   
Total
 
Short-term loans and borrowings
                                     
                                       
General loans
LIBOR+0.5% to1.18% per annum with maturity within one year
    48,776       -       48,776       27,343       -       27,343  
                                                   
        48,776       -       48,776       27,343       -       27,343  
Loans and borrowings due within one year
                                                 
                                                   
For Tangguh LNG Project
LIBOR+0.23% to 0.38% per annum with maturity within one year
    1,065       -       1,065       231       -       231  
Notes*
      -       -       -       -       1,256       1,256  
                                                   
        1,065       -       1,065       231       1,256       1,487  
                                                   
        49,841       -       49,841       27,574       1,256       28,830  
 
Non-current
 
      Group  
      2013     2012  
 
Effective interest rate and final maturity
 
Bank loan
   
Notes
   
Total
   
Bank loan
   
Notes
   
Total
 
For Tangguh LNG Project
LIBOR+0.23% to 0.38% per annum with maturity through to 2021
    1,190       -       1,190       2,326       -       2,326  
Notes*
      -       80,821       80,821       -       26,730       26,730  
                                                   
        1,190       80,821       82,011       2,326       26,730       29,056  
 
 
17

 

 
13.
LOANS AND BORROWINGS (continued)

 
*
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$200 million of 4.125% guaranteed notes was repaid in May 2013.

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 principal amount of US$750 million of 1.125% guaranteed notes due in 2016, the principal amount of US$750 million of 1.750% guaranteed notes due in 2018, the principal amount of US$2,000 million of 3.000% guaranteed notes due in 2023 and the principal amount of US$500 million of 4.250% guaranteed notes due in 2043 were issued by CNOOC Finance (2013) Limited, a wholly-owned subsidiary of the Company. The obligations of CNOOC Finance (2013) Limited in respect of the notes are unconditionally and irrevocably guaranteed by the Company.

During March 2005, Nexen issued US$250 million of notes. Interest is payable semi-annually at a rate of 5.2% and the principal is to be repaid in March 2015. In 2011, Nexen repurchased and cancelled US$124 million of principal of these notes. As at 31 December 2013, US$126 million of notes remain outstanding.

During May 2007, Nexen issued US$250 million of notes. Interest is payable semi-annually at a rate of 5.65% and the principal is to be repaid in May 2017. In 2011, Nexen repurchased and cancelled US$188 million of principal of these notes. As at 31 December 2013, US$62 million of notes remain outstanding.

During July 2009, Nexen issued US$300 million of notes. Interest is payable semi-annually at a rate of 6.2% and the principal is to be repaid in July 2019.

During April 1998, Nexen issued US$200 million of notes. Interest is payable semi-annually at a rate of 7.4% and the principal is to be repaid in May 2028.

During March 2002, Nexen issued US$500 million of notes. Interest is payable semi-annually at a rate of 7.875% and the principal is to be repaid in March 2032.

During March 2005, Nexen issued US$790 million of notes. Interest is payable semi-annually at a rate of 5.875% and the principal is to be repaid in March 2035.

During May 2007, Nexen issued US$1,250 million of notes. Interest is payable semi-annually at a rate of 6.4% and the principal is to be repaid in May 2037.

During July 2009, Nexen issued US$700 million of notes. Interest is payable semi-annually at a rate of 7.5% and the principal is to be repaid in July 2039.

All the notes issued by Nexen mentioned above were guaranteed by the Company since 22 March 2013.

During November 2003, Nexen issued US$460 million of unsecured subordinated debentures. Interest was payable quarterly at a rate of 7.35%, and the principal was to be repaid in November 2043. Nexen completed the redemption of such debentures on 28 March 2013.
 
 
18

 
 
14. 
SHARE CAPITAL
 
         
Share
capital
   
Issued share
capital
equivalent of
 
Share
 
Number of shares
   
HK$ million
   
RMB million
 
                   
Authorised:
                 
Ordinary shares of HK$0.02 each
                 
as at 31 December 2013 and 31 December 2012
    75,000,000,000       1,500        
                       
Issued and fully paid:
                     
Ordinary shares of HK$0.02 each as at 1 January 2012
    44,659,180,984       893       949  
                         
As at 31 December 2012
    44,646,305,984       893       949  
                         
Exercise of share options
    1,150,000       -       -  
As at 31 December 2013
    44,647,455,984       893       949  

 
19

 
 
Management’s Discussion and Analysis

STRATEGIES AND RISKS

Strategy

As one of the largest independent oil and gas exploration and production companies, we mainly engage in exploration, development, production and sales of oil and natural gas. The principal components of our strategy are as follows:

Focus on reserve and production growth

As an upstream company specializing in the exploration, development, production and sales of oil and natural gas, we consider reserve and production growth as top priority. We plan to increase our reserves and production through drill bits and value-driven acquisitions. We will continue to concentrate independent exploration efforts on major operating areas, especially in offshore China. In the meantime, we will continue to cooperate with foreign partners to lower capital requirements and exploration risks. In 2013, we achieved a reserve replacement ratio of 327%.

We increase our production primarily through the development of proved undeveloped reserves. As of 31 December 2013, approximately 59.7% of our proved reserves were classified as proved undeveloped, which gives us the opportunity to achieve future production growth, as long as these proved undeveloped reserves are developed at a rate faster than the depletion rate of our currently producing reserves.

Develop natural gas business

We plan to capitalize on the growth potential of the PRC natural gas market, and continue to explore and develop natural gas fields. In the event that we invest in businesses and geographic areas where we have limited experience and expertise, we plan to structure our investments in the form of alliances or partnerships with partners possessing the relevant experience and expertise.

In 2014, the large-sized deepwater gas field Liwan 3-1 in deepwater South China Sea is expected to commence production. We expect that our natural gas production would continue to increase accordingly.

Maintain prudent financial policy

We will continue to maintain our prudent financial policy. As an essential part of our corporate culture, we continue to promote the cost consciousness among both our management team and employees. Also, in our performance evaluation system, cost control has been one of the most important key performance indicators.
 
 
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Aiming to reduce production cost, we plan to actively promote the regional development of oil and gas field groups and to apply cutting-edge offshore engineering, drilling and production technologies to our operations.

Currently, we have a healthy financial position. We intend to maintain our financial strength by managing key measures such as capital expenditure, cash flows and costs per BOE. We also intend to actively manage our account receivables and inventories to enhance liquidity and improve profitability. We will continue to monitor our foreign currency denominated assets and debts in order to manage our exposure to foreign exchange rate fluctuations.

RISK FACTORS

The exploration and production of the oil and gas industry involve a high degree of risks. Our market risk exposures primarily consist of fluctuations in oil and gas prices, changes in reserves, HSE, changes in fiscal regimes and regulatory rules and policies and changes in exchange rates and interest rates.

Fluctuations in oil and gas prices

Since the Company’s realized oil prices are priced with reference to international oil prices, fluctuations in international oil prices would have a significant impact on the Company’s sales revenue and profit. In addition, the Company’s natural gas sales contracts also contain price adjustment provisions. Any changes in international oil prices, inflation rate and domestic natural gas price policies may result in changes in natural gas prices. As a result, changes in oil and natural gas prices will affect the Company’s profitability.

Changes in reserves

High-risk and capital-intensiveness are inherent characteristics of the exploration and development of oil and gas. The Company’s exploration and development activities are exposed to various risks, including its inability to encounter any commercial discoveries.

In addition, reserve appraisal depends on a number of factors, including the quantity and quality of technical and economic data, assumptions in oil price assessment, production curve as well as fiscal terms. If these factors and assumptions were proved to be inaccurate, the Company might need to adjust its reserves.

HSE

The Company is exposed to blowout, fire and spillage risks arising from the exploration, development and production operations. Any accident which may lead to casualties, property damages and environmental pollution may have an impact on the Company’s operation and financial conditions.
 
 
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Changes to fiscal regimes and regulatory rules and policies

The Company has oil and gas assets in the PRC and various overseas countries. Any change in the fiscal regimes of these countries, including the introduction of new taxes and increases in tax rates, may affect the profitability of the Company.

Other changes in regulatory rules, including policies on oil and gas prices, resource nationalization, exchange controls and environment protection laws and rules, may affect the Company’s operation and financial position.

Currency risk

The Company’s oil and gas sales are substantially denominated in Renminbi and US dollars. China’s exchange rate regime is a managed floating exchange rate approach that is based on market demand and supply and with reference to a basket of currencies. From 1 January 2013 to 31 December 2013 (the last working day in 2013), Renminbi appreciated approximately 3.1% against US dollars. At the reporting date, 79% (2012: 92%) of the Group’s cash and cash equivalents and time deposits with maturity over three months were denominated in Renminbi, and the remaining amounts were substantially denominated in US dollar and Hong Kong dollar.

Interest rate risk

As at the end of 2013, the interest rates of 59.4% of the Company’s debts were fixed. Except for loans for the Tangguh LNG project in Indonesia, all of our long-term debts are denominated in U.S. dollars with fixed interest rates. The weighted average term of the Company’s debt balance outstanding was approximately 8.63 years.

2013 Overview

In 2013, the global economic recovery was moderate and major economies continued to develop in different trends. The strength of recovery in developed economies as a whole was stronger than expected. The emerging markets and the developing economies stepped into a process of structural adjustment which led to a rapid decline in the rate of economic growth. On the other hand, China managed to maintain a stable economy growth while cautiously pursuing opportunities for sustainable growth. However, the foundation for a sustainable future growth is not solid due to constraints from Chinese economy’s structural problems. Affected by factors such as economic conditions and the supply-demand relationship, international oil prices experienced fluctuations but generally maintained at a relatively high level in 2013.

During the year, faced with complex external conditions, the Company overcame various unfavorable factors, seized opportunities to lay a solid foundation for development, and achieved satisfactory results.
 
 
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In 2013, the Company exceeded its annual production target, with a net production of 411.7 million BOE, representing a 20.2% increase over the previous year. The Company also made new breakthroughs in exploration in both matured and new areas, which, together with the impact of acquisition of Nexen, achieved a reserve replacement ratio of 327%.

In 2013, the Company made significant progress in its overseas development and successfully acquired Nexen. This transaction has built a new overseas platform for the Company. The integration in areas such as exploration and development, safety and environmental protection, human resources and corporate cultures progressed smoothly at a pace in line with the Company’s expectations.

The Company maintained a solid financial position in 2013. Its oil and gas sales were RMB226,445 million (US$36,538.1 million, with the exchange rates applicable for 2013 at 6.1975), representing an increase of 16.3% over the previous year. Net profit was RMB56,461 million (US$9,110.3 million), representing a decrease of 11.4% over the previous year.

For the year ended 31 December 2013, the Company’s basic and diluted earnings per share were RMB1.26 and RMB1.26, respectively. The Company’s board of directors recommended the payment of a final dividend of HK$0.32 per share (tax inclusive).

In 2014, the outlook for the global political and economic situations will remain complicated. The global economic recovery is expected to be largely uncertain. China will continue to implement a proactive fiscal policy and a prudent monetary policy, and by adhering to the overall goal of “cautiously pursuing growth” in economic and social development, China’s economy is expected to maintain a steady growth.

Facing complicated external conditions in 2014, the Company is committed to coordinating domestic and overseas resources and will strive to complete key tasks for production and operation. The Company’s key tasks include:

First, to ensure the annual production target to be met;
Second, to maintain cost control and improve efficiency;
Third, to intensify exploration and development activities;
Fourth, to enhance the management of overseas business.
 
 
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FINANCIAL RESULTS
 
Consolidated net profit

Our consolidated net profit decreased 11.4% to RMB56,461 million (US$9,110.3million) in 2013 from RMB63,691 million in 2012, primarily as a result of the comprehensive impact of the decreased oil price and the increased costs.

Revenues

Our oil and gas sales, realized prices and sales volume in 2013 are as follows:

   
2013
   
2012
   
Change
   
Change (%)
 
                         
Oil and gas sales (RMB million)
    226,445       194,774       31,671       16.3 %
 Crude and liquids
    211,838       181,825       30,013       16.5 %
 Natural gas
    14,607       12,949       1,658       12.8 %
Sales volume (million BOE)
    397.2       322.6       74.6       23.1 %
 Crude and liquids (million barrels)
    326.8       260.8       66.0       25.3 %
 Natural gas (bcf)
    408       356