Mark Williams, chief Asia economist at Capital Economics in London, states the obvious: "Clearly the dispute adds another layer of risk in an industry where risks are already high. Oil and gas projects take years to deliver a return. The prospect that rigs may at some point end up caught in a standoff between two navies is likely to be a chilling one for prospective investors."

But CNOOC shows no sign of cooling, and its shares should remain attractive at least through the end of 2012. First, it's coming off two quarters of high prices. Crude oil topped $120 per barrel in March, a year-to-date peak. Second, CNOOC serves the eternally stable Chinese domestic market, where a $7.4 trillion economy led largely by manufacturing thirsts for more fuel sources to keep its plants running.

"Its profits are higher, compared to oil companies overseas, so it's a good investment," says Liu Chia-jen, petrochemicals analyst with KGI Securities in Taipei. "Downsides are relatively few."

Share Impact

Share prices of CNOOC have fallen 14% in Hong Kong since July 2011 because of global economic weakness and the closure of an oilfield in China. But prices have picked up steadily so far in 2012.

Large Chinese energy companies in general have seen no share price impact, despite selling after oil prices peaked in March, notes Joseph Tang, investment director with Invesco Hong Kong. Government-ordered energy pricing reforms this year have also helped company performances, Tang argues. He says stable oil prices, reduced inflation and valuations should keep those firms ahead of foreign peers.

Share prices for the Chinese firm's offshore kin Exxon ( XOM) and BP ( BP) are stable, though not quite surging.

CNOOC's ADR ( CEO) also has received positive reviews because the company sits on exclusive rights to find oil for its hungry parent nation. It has cash and a steadily improved expertise to find what it's looking for from the waters of China to Africa to North America.

Company revenues grew from 91 billion yuan to 241 billion yuan between 2007 and 2011, with pre-tax profits up from 43 billion yuan to 93 billion over the same period, according to CNOOC's 2011 annual report. Investment income grew from 902 million to 1.28 billion yuan, the report says.

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