Good evening, ladies and gentlemen. Welcome to CNOOC Limited's 2023 annual results announcement. I'm pleased to present Mr. Wang Dongjin, Chairman of the Company. Mr. Zhou Xinhuai, CEO and President of the Company. Mr. L in Boqiang, Independent Non-Executive Director of the Company. Ms. Wang Xin, CFO of the Company. And Mr. Xu Yugao, Joint Company Secretary of the Company. We have three parts in today's presentation. Chairman Wang will deliver opening remarks, and Ms. Wang will give you an update on the performance of the whole year 2023. Afterwards, we'll have a Q&A session. Ladies and gentlemen, now may I pass the floor to Chairman Wang.
[Foreign language]
Dear investors, analysts, and friends, good afternoon. It is a great pleasure to meet with you again in this wonderful season to share the excellent results of CNOOC over the past year. First of all, on behalf of the board of directors and management team of CNOOC Limited, I would like to extend a very warm welcome to you all.
[Foreign language]
2023 is a year of commitment and hard work. In the face of a complex external environment, we adhered to high-quality development, further consolidated reserve and production growth, and continued to carry out quality improvement, cost control, and efficiency enhancement with record-high reserves and production. Our cost-competitive advantage has further consolidated and profitability maintained at a high level.
[ Foreign language]
While developing our main oil and gas business, we have strived to promote technological innovation, strengthened our ability to tackle key core technologies, and made good progress in digital transformation. We have steadily implemented the Green Development Project and promoted the integration of the main oil and gas business with the new energy business. We focus on high standards of corporate governance and actively reward our shareholders, which is well recognized by the market and resulted in record-high share prices in both markets.
[ Foreign language]
In 2023, thanks to careful planning, hard work, and efforts, CNOOC once again delivered brilliant results. Sharing the results with our shareholders, the board of directors has recommended the dividend payout of HKD 0.66 per share tax inclusive for 2023.
[ Foreign language]
Friends, entering into a new year with spring upon us. Looking ahead, I have full confidence in CNOOC's high-quality developments. We will accelerate the pace of building a world-class energy company and create higher value returns for our shareholders. Please continue to walk hand in hand with us to create a better tomorrow. Thank you very much.
Thank you, Mr. Wang. Ms. Wang, please continue. [ Foreign language].
Good evening, ladies and gentlemen. Welcome to CNOOC Limited 2023 annual results analyst briefing. Today I will share with you our operating and financial results for the year of 2023. This slide shows the directors and management at today's conference. Before we begin, please take a moment to read the disclaimer on slide three. Let's turn to the next slide. Today's presentation consists of three parts. I will start with an overview of our operating results, then a more detailed discussion of business highlights, and finally our outlook into the future. Now let's have a look at the 2023 operating and financial results. In 2023, with the joint efforts of the board, the management, and the staff, we have once again achieved outstanding operating results. The net production was 678 million BOE, and net proved reserve reached 67,784 million BOE, both reaching record highs.
Benefiting from the strong operating performance and cost competitiveness, our net profit reached RMB 103.8 billion, and operating cash flow reached RMB 209.7 billion. To reward our shareholders, the board has recommended a year-end dividend of 0.66 HKD per share, tax inclusive. In the past few years, we continued to pursue profitable growth of reserves and production, and promoted cost reduction and efficiency enhancement. So this slide shows our last 10 years' operation results. You can see in 2023, we maintained strong profitability in spite of a significant 17% drop in Brent oil prices, with the net profit remaining above RMB 120 billion. It's quite difficult to find a very similar oil price with last year if you look at last 10 years. Maybe the similar price is in 2018. So if we compare with five years ago, international oil prices only increased by 14.7%.
Well, our net profit increased significantly by 135%. This was mainly due to an increase in net production by 43%. In spite of the oil price cycles, we have achieved high-quality development, significantly increased profit, and created greater value for shareholders. Next, I'd like to share with you the business highlights and key measures adopted in 2023. In terms of exploration, we have made multiple oil and gas discoveries, both in China and overseas, offshore and onshore, including oil and natural gas in 2023. We made nine new discoveries and successfully appraised 22 oil and gas structures. This slide shows our exploration highlights. We made two successful appraisals in Bozhong 26-6 and Kaiping South, and achieved three successful discoveries in Qinhuangdao 27-3, Shenfu Deep Coalbed Methane and Lancetfish. Also, we reached four breakthroughs in new places and new types in Bohai and the South China Sea.
Next, I will give some details on several major discoveries. Bozhong 26-6 was successfully appraised, and its total proved in-place volume exceeded 200 million m³ , becoming the largest metamorphic buried hill oil field in the world. Total proved in-place volume of Kaiping South exceeded 100 million tons, making it the first 100 million tons deep water and deep play oil field in the South China Sea. The proved in-place volume of Qinhuangdao 27-3 exceeds 100 million tons, which is an important breakthrough in the exploration of shallow play in Bohai. The proved in-place volume of Shenfu deep play coalbed methane exceeds 100 billion m³ , making it China's first deep play coalbed methane field of this scale. Overseas, breakthroughs continue to be made in Guyana's Stabroek Block. Lancetfish was discovered in ultra-deep water deep play with proved in-place volume of 100 million tons.
Total recoverable resources reached approximately 11 billion BOE in the block. Overseas, natural gas exploration has also shown positive progress. The rolling exploration in Tangguh Project in Indonesia demonstrated good potential. Our net proved reserves reached a new record high of 6,784 million BOE. The reserve replacement ratio was 180%, and the reserve life remained above 10 years for seven consecutive years, which consolidated the resource base for sustainable development. In 2023, our net production reached 678 million BOE, an increase of 8.7% year-on-year, setting a record high for the fifth consecutive year. Our production growth rate has been leading the peers in recent years, laying a solid foundation for strong profitability despite the oil price fluctuations. Among the new projects commissioned during 2023, Bozhong 19-6 Condensate Gas Field Phase I Development Project is the first large-scale condensate field in Bohai.
Its peak production is approximately 37,000 BOE per day. Lufeng 12-3 Oil Field Development Project is the largest jointly developed oil field in the South China Sea in the past decade. Its peak production is approximately 30,000 BOE per day. Guyana is one of our main drivers of overseas production growth. Last year, Payara Project was brought onstream. Three projects commenced production with total production of more than 550,000 BOE per day. Six projects will be in operation in the block by 2027, with expected production over 1.2 million BOE per day. Brazil is another driver of overseas production growth. In 2023, the Búzios Project was started production. In Búzios' oil field, five projects have commenced production, and 11 projects will be in operation by 2027. The peak production of the oil field is expected to reach 1.5 million BOE per day by 2029.
Also, in Brazil, Mero- 2 came onstream this January 2024. In Mero Field, two projects have commenced production, and four projects will be in operation by 2027. Peak production of the oil field is expected to be 600,000 BOE per day by 2028. Onshore China, we have built three major unconventional natural gas production bases, and the production increased three times in five years. Onshore China has become a main driver of natural gas production growth. In 2023, we carried out a series of specialized tasks to achieve Two Enhancements and One Reduction . The recovery rate of producing oil fields offshore China was increased by 1.2%, and the natural decline was well controlled under 10%, which laid a solid foundation for stabilizing and increasing the production of producing fields. We have taken multiple measures to enhance quality and efficiency.
In terms of drilling and completion, we have improved our core technical capabilities and refined the management of operations. We also widely applied the new excellent and fast drilling and completion model to reduce the development cycle, thus bringing projects onstream ahead of schedule and improving the economic returns. We expanded the application of engineering standardization and optimized the design, procurement, and construction methods of offshore platforms. The overall speed of new projects has been enhanced by more than 30%, and cost was reduced by up to 5% through bulk purchasing. In Bohai, we have fully completed the Onshore Power Project, with the largest capacity and highest voltage of AC power transmission in offshore oil fields in the world. The completion of the project will facilitate economic and low-carbon development of the resources, generate profitable production, and support the construction of intelligent oil fields
While developing oil and gas business, we have steadily promoted green development. We strengthened energy conservation and carbon emission reduction. We promoted the integrated development of offshore wind power and oil gas production, and we continuously cultivated the negative carbon business sector. In 2023, we realized the oil price of oil and gas was in line with the market trends, and both oil and gas sales revenue and net profit attributable to the equity shareholders remained at a high level. Slide 28 shows the change analysis of net profit. In 2023, we maintained strong profitability, with net profit attributable to shareholders reaching RMB 123.8 billion. This was mainly attributable to our continuous reserves and production growth, and quality and efficiency enhancement, which effectively offset the impact of the decrease in international oil prices. Slide 29 shows the change analysis of cash and cash equivalents.
In 2023, we continued to pursue profitable growth of reserves and production, with operating cash flow rising 2% year-on-year in spite of the lower international oil prices and maintained sufficient free cash flow of RMB 88.87 billion. As of the end of 2023, the financial condition of the company remained healthy. Shareholders' equity increased by RMB 69.5 billion, compared with the beginning of the period. Total assets exceeded RMB 1 trillion, and the gearing ratio further dropped to 15.2%. For capital expenditure, the company invested a total of RMB 129.6 billion in exploration, development, and production, which strongly supported the reserves and production growth, technology research, and oil and gas infrastructure construction. The company maintained effective cost control. The all-in cost was $28.83 per BOE, decreased by 5.1% year-on-year. OpEx was $7.54 per BOE, which outperformed many peers.
The year-on-year decrease of 2.6% was mainly due to the combined impact of changes in exchange rate and production growth. The company has always attached importance to shareholders' returns. We actively share the development results with our shareholders while continuously improving our operating performance. The board has recommended a year-end dividend of HKD 0.66 per share, tax-inclusive, for 2023. The annual dividends reached HKD 1.25 per share, with the total payout ratio of 43.6%. Finally, let's reveal the company's business strategy and targets for the future. We will press ahead with the three major programs of reserves and production growth, technological innovation and green development, and implement the initiative of quality and efficiency enhancement. As always, we will continuously improve value creation capability to create greater value for shareholders. Meanwhile, as a responsible company, we see ESG performance as a priority.
We continue to pursue the coordinated development of economy, environment, and society. In the coming years, our production will continue to grow. We are confident that we will meet our Three-Year Rolling Production Targets. This concludes my presentation. Thanks.
Thank you, Ms. Wang, for your elaboration. Ladies and gentlemen, we now begin our Q&A session. If you would like to ask a question, please raise up your hand or press star one on your telephone touchpad if you're joining us through a telecom system. Prior to asking questions, please briefly introduce yourself and the company you're representing. We appreciate your cooperation. The first question is the lady in the second row.
Hi. Thank you for your presentation and for the generous dividend. I'm Parsley from JP Morgan. I have two questions. So the first question is on your growth opportunities. What challenges and opportunities do you see in regions like Angola, Guyana, and Brazil, and how do you compare this to offshore China? And if the opportunity arises, would CNOOC consider increasing your stake in Guyana? Second question is on CapEx efficiency.
So if we look at what CNOOC has done over the last few years, it seems that the company is on track to spend about RMB 545 billion in CapEx to grow production by about 272 million barrels of oil equivalent under the 14th Five-Year Plan. So this is a very high level of CapEx efficiency, best among peers. And do you expect to be able to maintain a similar level of CapEx efficiency in 2026 - 2030? Thank you.
[Foreign language]
[Foreign language]
Thank you very much for your question. I do remember you very well that every time when you ask questions, you pay a lot of attention to our projects in Guyana and Brazil. As our CFO, Ms. Wang, has stated earlier, in terms of the recent years, the Guyana and Brazil projects are the major projects for us to improve our production.
[Foreign language]
According to our coherent disclosure rules or set of habits, we're not going to give you an apple-to-apple comparison between our onshore as well as offshore opportunities.
[Foreign language]
According to the board, for our overseas business, we'll continue to follow the principle of selecting the best in class and will be focusing across the Atlantic as well as along the Belt and Road. In terms of our company, we continue to look at projects as well as blocks of opportunities based on our company's always very high economic indicators.
[Foreign language]
In terms of onshore market, I would say that this is one of our largest and most important battlefields for CNOOC. It is not only that we have the largest market in China. It is also that we enjoy the biggest advantage by being the closest to our consumers. This provides us with a very solid foundation for our business. In addition, we also have a dedicated and excellent team in China and continuing to work hard and to further develop the market.
[Foreign language]
It should be said that the reason why we have been able to go global for the past few decades, and this is thanks to the stable foundation that we have built up in our onshore market, and this has given us the confidence to go global.
[Foreign language]
In terms of Chinese onshore market, we can see that with the basins in China and they are all in, I would say, the mid-range of maturity, and it still provides us with huge potential. With the further advancement of technology as well as improvement of management, I do believe that the onshore business will continue to contribute.
[Foreign language]
And of course, in the meantime, we are going to be adapting to the global trends, and we will be looking at how to better utilize the company's core competitiveness, such as our cost competitiveness, as well as the return that we are able to garner for our shareholders, and we'll work harder to provide shareholders with even better results. Thank you.
[Foreign language]
I will respond to your second question with respect to CapEx efficiency for the past few years. In 2023, you can see that our CapEx has gone up. In 2024, similarly, it's still at this high level. If you look at our CapEx, which was about RMB 130 billion, I can divide it into two parts. The first part is mainly for E&P, and that part is pretty much stable. The second part is for development. This is the part where our CapEx is going up. This is mainly because of the accumulation of specific projects. In the next three years, we do believe that our CapEx will be more than enough to meet the increasing production for our company.
If we look at 2026 - 2030, and in terms of our E&P business, and if we continue to have large and medium-sized discoveries, and as what Mr. Zhou has elaborated earlier, for our onshore exploration in China, we are currently in the mid-stage of maturity. There is still pretty much a lot of potential, and we are confident that there will be good discoveries further down the line. In terms of our current production at 7 million BOE, this is very stable. I do believe that in order to maintain this size, we do need to have stable capital available, which justifies for the current CapEx spending. Going forward, I think that it really boils down to new discoveries as well as development opportunities. We do think that our CapEx level will stay at a high level.
We also hope that in the future, we can continue to deliver the CapEx efficiency that we have been able to maintain at. Thank you.
The first question is taken by Mr. Zhou Xinhuai, the CEO and President of the company. The second one is taken by Ms. Wang Xin, CFO of the company. Thank you for the answers, and also we appreciate the question. Our next question is the gentleman in the second row.
Thank you, Neil Beveridge, Bernstein. Well done on the result. A couple of questions. First of all, on the dividend, with $133 billion in cash at year-end, you had scoped to increase the payout ratio further. Why not increase the payout ratio more than you've done? And if not, what's the target gearing ratio for the company? So that's my first question. The second question is on Guyana. So have you filed an arbitration claim against Chevron regarding their purchases of Hess's rights in Guyana? So if you could confirm that and maybe explain how the change of control provision works in that contract. And then maybe a third question. On the Kaiping South discovery, I think that's the first major oil discovery, the deep water South China Sea. I think all the other discoveries have been gassed.
So how significant is this discovery, and does it open up a new frontier for CNOOC? Thank you.
[Foreign language]
[Foreign language]
Thank you, Neil. I will take your first question. In terms of dividend payout, of course, the company will have various different factors to consider. This would include, for instance, the cash position, the margin, as well as CapEx of the company.
[Foreign language]
So in terms of cash flow, we have also done an analysis. If you look at 2023 with the oil price at $82 per barrel, we have about RMB 88 billion cash on hand, which means that RMB 30 billion also would go to the repayment of loans, etc. Then we have another RMB 50 billion for our stock dividend. And roughly, this is a break even for us.
[Foreign language]
For 2024, in terms of the CapEx level, the company's target is keeping it at around RMB 125 billion-RMB 130 billion. This is because of the considerations of looking into the future. There is still uncertainty around oil price. Given that our company would continue to maintain the high growth production and taking everything into consideration, we do think that the current CapEx is enough to sustain our future production growth. We would like to make sure that we would be able to use the resources that we have to be able to generate greater returns in the longer term.
[Foreign language]
This time, you can see from the PPT presentation earlier, I have shared with you the analysis of the past decade. The purpose of this is really to show that without the continuous investment by CNOOC in the past, while the oil price was at a low level, it would not be able to see the production and return that we can see today.
[Foreign language]
Without saying too much, I believe that, of course, we all know with good production, with high revenues and with good profit, we'd be able to pay out more dividend to our shareholders. With respect to gearing ratio, we do not yet have any targets to share with the investors, or we cannot disclose at this stage. Thank you.
[Foreign language]
Thank you, Neil. I'll take your second question. Thank you for your attention given to our Guyana project and the asset. ExxonMobil has put forward its arbitration application against Hess on the 6th of March. Hess has then put forward an application for arbitration on the 11th of March. For CNOOC, we have put forward an application for arbitration on the 15th of March. Basically, there is a set of arbitration rules to follow. For the company, we will try our utmost to use the right legal tools to ensure that we can fight for the best interest of the company.
It's normal activities for our performance.
[Foreign language]
I will take your third question, Neil. You are a very good old friend of ours. I would say that I am quite moved by your specific study in this aspect, and specifically as being a stock market and economy analyst and investor. You know so much about geology. So a few points to address your question. The first point is that you have pointed out that this is our first gas project and first oil project in the onshore deep water field. In the past, we had focused on gas. Actually, if you look at to the eastern part of South China Sea, and for instance, with Liuhua, we had oil in the past. What I would say is that actually, if we go back to history and even earlier, there was never really a distinction of oil and gas.
The reason why there is this separation is caused by the movement of the basins. This is why I say that you have a lot of insight into this. Another point that I would like to say is that for Kaiping South, we had spent over three decades working on this project. With our further gaining of understanding of the site as well as the operation capability improvements, now we are able to achieve 100 million tons of the deep water oil discovery. I would say that this is not a surprise to the company. This is really thanks to our long-term belief in our hard work and innovation in all these regards that we're able to achieve this. Thank you.
Thank you. The first question is taken by Miss Wang Xin, CFO of the company. The second question is taken by Mr. Xu Yugao, Joint Company Secretary of the company. And the third one is taken by Mr. Zhou Xinhuai, CEO and President of the company. Due to the time limit, unfortunately, ladies and gentlemen, this concludes today's presentation. We thank you very much for your attendance and support. Hope to see you very soon. Goodbye.