Good reserve prospects; Low cost position; and Strong financial profile. Cyclical industry; Aggressive growth strategy; and Large, although improving, undeveloped reserve base. The rating on CNOOC Ltd., China's third-largest oil and gas company, reflects its good reserve prospects, relatively low cost position, and strong financial profile. These factors are offset by the volatile nature of the independent oil and gas exploration and production (E&P) sector, increasing uncertainties associated with overseas expansion, and risks associated with bringing on stream a large undeveloped reserve base. The outlook is stable. An unsuccessful US$18.5 billion bid for U.S. oil company Unocal Corp. in June 2005 by CNOOC Ltd. appears to be an exceptional opportunity for a one-off large expansion and any future expansion is
