China National Offshore Oil Co., Ltd. (hereinafter referred to as “CNOOC”) has applied for IPO on the main board of Shanghai stock market, which means that “three barrels of oil” is expected to gather in the A-share market.
On February 24, the CSRC disclosed the audit results of the IEC, and CNOOC’s A-share IPO application was approved. According to the prospectus, before exercising the over allotment option, the company plans to issue no more than 2.6 billion shares and raise 35 billion yuan for multiple oilfield development projects and supplement working capital.
Unlike Petrochina Company Limited(601857) and China Petroleum & Chemical Corporation(600028) (there are many middle and downstream businesses), CNOOC’s business is mainly concentrated in the upstream, which makes CNOOC’s performance greatly affected by oil and gas price fluctuations.
In terms of the future trend of oil price, in the short term, many people in the futures industry believe that there will be a certain correction in the short-term probability of oil price, the correction range will not be too deep, and it may be in a high shock situation.
However, at present, the market is divided on the medium-term trend. Some people believe that according to historical experience, there will be a sharp decline in crude oil after every armed conflict in Russia; There are also views that the background of the oil market is slightly different this time, the tight pattern of the oil market is still in place, and the high point of oil price in the year may not appear at present.
oil and gas prices affect performance
According to the prospectus, CNOOC’s main business is the exploration, development, production and sales of crude oil and natural gas. It is the largest offshore crude oil and natural gas producer in China and one of the largest independent oil and gas exploration and production groups in the world.
By the end of 2020, the company had net proved reserves of about 5.37 billion barrels of oil equivalent, and the annual average daily net output was 1.443 million barrels of oil equivalent.
CNOOC oil level ranks in the upper reaches of the industry, and the main source of income is the sales of crude oil and natural gas. Compared with upstream and downstream integrated oil companies, oil and gas price fluctuations are more sensitive to the impact of the company’s business, revenue and profits.
From 2018 to 2020 and the first half of 2021, CNOOC’s revenue was 227.710 billion yuan, 233.199 billion yuan, 155.373 billion yuan and 110.233 billion yuan respectively, and the net profit attributable to the parent company was 52.675 billion yuan, 61.045 billion yuan, 24.957 billion yuan and 33.329 billion yuan respectively.
Among them, in 2020, due to the sharp decline in international oil prices, the net profit attributable to the parent decreased by 59.12% year-on-year; In the first half of 2021, affected by the recovery of international oil prices, CNOOC’s main business revenue increased by 47.84% year-on-year, including oil and gas sales revenue increased by 51.69% year-on-year, and the performance gradually recovered.
According to the prospectus, the crude oil sold by CNOOC in China includes heavy oil, medium oil and light oil, and the benchmark oil price attached is brent; The crude oil produced overseas is mainly sold in the international and Chinese markets based on the regularly updated crude oil transaction prices such as Brent, Dubai, Oman and WTI and the official prices of national oil companies of oil producing countries.
The fluctuation of oil price has a great impact on the performance of CNOOC. What is the current oil price and how will it be interpreted in the future?
Recently, the geopolitical situation has been turbulent, and the fluctuation of oil price has been significantly enlarged. After Russia launched a comprehensive war against Ukraine on February 24, the oil price rose sharply. Brent crude oil futures and WTI crude oil futures once stood at the position of $100 / barrel. However, with the progress of the war, the market expectation began to fall, and the high oil price began to callback.
On February 25, Beijing time, Brent crude oil futures and WTI crude oil futures experienced a shock correction. As of 20:00 Beijing time, Brent crude oil futures and WTI crude oil futures reported US $94.56/barrel and US $92.10/barrel respectively. There was also a certain correction in the main contract of ine crude oil futures on the same day, but the day ended in red, closing at 612.3 yuan / barrel.
“The oil price is good for upstream enterprises. The situation in Russia and Ukraine will not be downgraded and there will be no major correction. It is expected to be high and volatile in the short term.” Xu Jie, a geopolitical expert, told China business news that when the conflict subsides gradually, Europe and the United States will maintain high-intensity sanctions, and the most direct and effective sanctions on the Russian economy is low oil prices. It can be seen from historical experience that after every armed conflict in Russia, there will be a sharp decline in crude oil. This was true after the Soviet Union’s attack on Afghanistan in the 1970s, the Russian Georgian war in 2008 and the Crimean conflict in 2014.
Hong Xiaoqiang, the person in charge of oil products of Zheshang futures, also agreed that from the performance of oil prices in previous wars, the impact of war on oil prices is often violent and short-lived, and oil prices tend to fall sharply after rising.
However, Hong Xiaoqiang believes that the background of the oil market is slightly different. On the one hand, it lies in the late sanctions imposed by western countries on Russia. Although the sanctions have not yet involved the energy field, the sharp decline of Urals crude oil discount shows that some international traders are still cautious about Russian crude oil, and whether Russian crude oil exports are affected remains to be further confirmed; In addition, at present, the crude oil inventory itself is in a very low position, the oil price is more sensitive to supply fluctuations, and it is difficult for the oil price to fall deeply.
\u3000\u3000 “In the short term, the US crude oil inventory has begun to accumulate slightly, and the market has a certain expectation of accumulation in the second quarter. In addition, the current war landing will probably lead to a certain correction in the short-term oil price, and the correction range will not be very deep. Brent has strong support around us $80 ~ US $90. The tight pattern of the oil market in the medium term is still in place, and the high point of oil price in the year may not appear at present. ”Hong Xiaoqiang told the first financial reporter.
CNOOC also said that there are risks arising from the price fluctuation of crude oil and natural gas, which may have a substantial impact on the company’s business, cash flow and income.
continued to increase shareholder loans to companies with shares in Russia
Factors such as international oil and gas prices and geopolitics may also have an impact on the profits of CNOOC’s overseas joint-stock companies.
In the special risk tips of the prospectus, CNOOC listed five risks, including the risks caused by the price fluctuations of crude oil and natural gas, the risks of changes in international political and economic factors, and macroeconomic risks.
By the end of last year, CNOOC had five major domestic and foreign joint-stock companies, including Arctic LNG 2 LLC (hereinafter referred to as “Arctic lng2”) located in Russia. The company was established in June 2014 with a registered capital of 15.976 billion rubles and its main place of business and registration is the Russian Federation, Its main business is the exploration and development of natural gas and the production and sales of liquefied natural gas in Russia. CNOOC holds 10% equity of the company.
The Arctic lng2 project is the second full industry chain oil and gas cooperation project between China and Russia in the Arctic circle. The project plans to build three LNG production lines and put them into operation in 2023, 2024 and 2026 respectively. After all put into operation, it is expected to produce 19.8 million tons of LNG per year.
CNOOC said that Arctic lng2 is an oil and gas company, which is still under construction and has not been actually produced. The project is normally constructed according to the investment plan. At present, the losses in the investment period are mainly affected by the short-term exchange rate fluctuations between the euro and ruble, and no signs of asset impairment are identified.
It is noteworthy that in the first half of last year, the net profit of Arctic lng2 increased significantly, and the total assets climbed to more than 10 billion US dollars.
Data show that by the end of June 2021, Arctic lng2 had total assets of US $10.856 billion and net profit of US $231 million. By the end of 2020, the company had total assets of US $8.243 billion and net profit of US $513 million.
CNOOC explained that the international oil price fell sharply in 2020 and rebounded steadily in the first half of 2021. At present, the company is still in the project construction period, and the bookkeeping base currency is ruble. The exchange rate changes have led to exchange gains and losses, resulting in fluctuations in its performance in the last year and the first period. The company’s losses before production were mainly affected by exchange rate fluctuations, which were caused by macroeconomic factors. The losses of Arctic lng2 are not continuous losses. The main reasons for achieving profits in the latest period are exchange rate changes and the recovery of international oil prices.
CNOOC has continued to increase shareholder loans to Arctic lng2 in recent years.
At the end of 2019, the end of 2020 and the first half of 2021, the company’s debt investment was 1.617 billion yuan, 3.619 billion yuan and 4.737 billion yuan respectively, accounting for 0.21%, 0.50% and 0.63% of the total assets respectively, increasing year by year, mainly due to supporting the Arctic lng2 project and continuously increasing shareholder loans to the associated enterprise Arctic lng2.
By the end of June last year, CNOOC had invested 4.737 billion yuan in bonds, and the debtor was Arctic lng2 company.
“three barrels of oil” is expected to gather in A-Shares
CNOOC was incorporated in the Hong Kong Special Administrative Region in August 1999 and was listed on the New York Stock Exchange (hereinafter referred to as “NYSE”) and the stock exchange of Hong Kong (Stock Code: 00883) on February 27 and 28, 2001 respectively. On September 18, 2013, CNOOC was listed on the Toronto Stock Exchange (hereinafter referred to as the “multiple stock exchange”).
In January 2021, CNOOC was included in the list of non SDN military related companies managed by the office of foreign assets control of the U.S. Treasury Department (now replaced by the list of non SDN China military industrial complex enterprises). Affected by this, CNOOC delisted from the New York Stock Exchange and the multi Stock Exchange on October 22, 2021 and December 31, 2021 respectively.
CNOOC returned to A-Shares this time with Citic Securities Company Limited(600030) as the sponsor and China International Capital Corporation Limited(601995) as the co lead underwriter. According to the prospectus declaration draft issued by CNOOC on January 12 this year, before exercising the over allotment option, the company plans to issue no more than 2.6 billion shares, and the total share capital after issuance is no more than 47.247 billion shares, including no more than 2.6 billion A-Shares and 44.647 billion Hong Kong shares.
In this listing, CNOOC plans to raise 35 billion yuan to invest in eight oil field development or application projects such as Guyana payara oil field development project, of which 5 billion yuan is used to supplement working capital.
For the reasons for returning to a shares, CNOOC has said that while maintaining its international development strategy, it will be able to enter China’s capital market through equity financing, improve the capital structure, enhance the corporate image, better meet the company’s capital expenditure needs and broaden financing channels.
CNOOC, PetroChina and SINOPEC are called “three barrels of oil”. Among them, China Petroleum & Chemical Corporation(600028) was listed on the main board of Shanghai Stock Exchange on August 8, 2001 and Petrochina Company Limited(601857) was listed on the main board of Shanghai Stock Exchange on November 5, 2007. If CNOOC is successfully listed this time, “three barrels of oil” will gather in the A-share market.
