CNOOC Ltd., one of China's three major state-owned oil producers, Tuesday cut its dividend by 40 per cent to save up cash needed for its proposed $15-billion takeover of Calgary-based oil and gas producer Nexen.

China's biggest offshore oil and gas producer said it was cutting its payout to 15 Hong Kong cents a share.

That means it would pay out the equivalent of $590 million Cdn less to shareholders than it did last year.

CNOOC also reported its first-half profit fell 19 per cent as it grappled with rising costs and a drop in production from an oil spill in China's Bohai Bay.

It posted a first-half profit equal to $4.96 billion Cdn, down from 6.09 billion the year before. CNOOC said net oil and gas production fell 4.6 per cent to 160.9 million barrels "mainly due" to the production shutdown at an oilfield in the bay off China's northeast.

The shutdown followed the discovery last year of oil leaks at the Penglai 19-3 oil field, the largest in China, which the company operates jointly with U.S. partner ConocoPhillips Co.

Costs rise 13%

The public outcry over the spill's environmental damage was a public relations setback for the company. It was ordered by the government to halt all production so a full cleanup could be carried out.

Rising industry costs and changes in the company's assets structure also helped drag down profit. That pushed up CNOOC's cost per barrel in the first half to $34.60, 13.1 per cent higher than in 2011.

If the Nexen deal goes through, it would be China’s biggest overseas energy acquisition, in a campaign of expanding aggressively overseas.

"Through the transaction, we will be able to expand our overseas business and resource base, enhance our presence in Canada, Gulf of Mexico and Nigeria, and enter the resourceful UK North Sea," CEO Li Fanrong said in a statement.

The company is confident it can meet a production target of 330 million to 340 million barrels for the year, although Li was not optimistic about the global outlook for the rest of 2012.

"For the second half of the year, the world economy will likely to continue to bear the downward pressure and international oil prices are expected to become increasingly volatile," he said in a statement.

With files from The Canadian Press and The Associated Press