HONG KONG (Reuters) - CNOOC Ltd. (0883.HK: Quote, Profile, Research), China’s top offshore oil and gas firm, beat forecasts with a 38 percent jump in first-half earnings on Tuesday after higher oil prices offset a hefty windfall tax payout.

The company reaffirmed its output targets for 2006.

Analysts expect CNOOC to sustain growth in the second half if oil prices hold steady, while rivals PetroChina Co. Ltd (0857.HK: Quote, Profile, Research) (PTR.N: Quote, Profile, Research) and Sinopec Corp. (0386.HK: Quote, Profile, Research) (SNP.N: Quote, Profile, Research) suffer from loss-making refining businesses.

Chairman Fu Chengyu also told reporters on Tuesday the firm would soon announce details on deals related to buying liquefied natural gas for its Fujian and Shanghai terminals — potentially multibillion-dollar deals. He did not elaborate.

CNOOC managed the highest interim earnings growth among China’s triumvirate of energy companies, and reiterated it would churn out 9 percent more oil and gas this year, or 168 to 170 million barrels of oil equivalent (BOE).

“It’s a forecast-beating result,” said Daiwa Institute of Research’s Rachel Tsang. “We expect a better second half, because they have two new oilfields beginning production.”

Net oil and gas production from offshore China — the lion’s share of the firm’s output — increased 7.2 percent to 74.4 million BOE in the first six months.

CNOOC made a first-half profit of 16.28 billion yuan ($2 billion) against 11.83 billion a year ago. That surpassed a forecast of 15.61 billion yuan, based on the average estimate of six analysts polled by Reuters.

For more earnings details, go the company’s Web site at: http://www.cnoocltd.com/investor/reports/664921301.pdf

Analysts like CNOOC’s ability to hold down costs. Its offshore Chinese production cost climbed 11 percent to US$12.68 per barrel, less than PetroChina’s 15 percent and Sinopec’s 12 percent.

CNOOC now seeks overseas assets to drive growth and help sate the needs of an economy that expanded about 10 percent in the first half.

It completed its biggest-ever acquisition in the first half — a $2.3 billion Nigerian oilfield buy — and is now developing deep water exploration to supply China, the world’s largest oil consumer after the United States.

Fu added that CNOOC was looking to invest more in Canada’s oil sands after it paid HK$122 million last year to buy a stake in unlisted MEG Energy Corp.

TYPHOON AND TAXES

CNOOC, which joins global peers Exxon Mobil Corp. (XOM.N: Quote, Profile, Research) and Royal Dutch Shell Plc (RDSa.L: Quote, Profile, Research) in enjoying the soaring price of crude, reported a 42 percent leap in its first-half average oil price to US$62.39/barrel.

Shares in CNOOC — a member of the blue-chip Hang Seng Index — rose 18 percent in the first half, while PetroChina jumped 31 percent and Sinopec gained 16 percent. The index of Chinese companies listed in Hong Kong rose 27 percent.

“With oil prices expected to stabilize at between $60 to $70 in the second half, earnings growth should be maintained,” said Xiao Hui, an analyst at United Securities Co. in Shenzhen.

Analysts said they were concerned over how windfall taxes would affect the sector in the latter half of 2006. Chinese oil firms are required to give billions of yuan of oil revenue back to society via a new tax levied from the second quarter.

CNOOC paid out almost 2 billion yuan in such taxes in the first six months, equivalent to over 12 percent of net income.

Analysts were confident, however, that CNOOC would meet its full-year target despite typhoons causing the loss of 2.04 million BOE of output in the first half versus an average loss of 1.9 million BOE in the past eight years.

“We will do all we can to meet our target,” President Zhou Shouwei told reporters.

Yet one of CNOOC’s largest oil fields, Liuhua, at which production was halted in May after a direct hit from a typhoon, is expected to restart only in mid-2007, Zhou said.

Liuhua boasted a production capacity of about 22,000 barrels per day, more than 5 percent of CNOOC’s targeted daily oil output for 2006.