\u3000\u3 Guangdong Shaoneng Group Co.Ltd(000601) 808 China Oilfield Services Limited(601808) )
Event: on the evening of March 24, 2022, China Oilfield Services Limited(601808) released the annual report of 2021. In 2021,
The company achieved a revenue of 29.203 billion yuan, a year-on-year increase of + 0.8%, and a year-on-year increase of + 7.0% after deducting the reconciliation income with Norwegian oil in 2020; The net profit attributable to the parent company was 313 million yuan, a year-on-year increase of – 88.4%; The net profit attributable to the parent company after deduction was – 35 million yuan, a year-on-year increase of – 101.5%, and the basic earnings per share was 0.07 yuan. In the Q4 single quarter of 2021, the company achieved a revenue of 9.321 billion yuan, a year-on-year increase of + 24.1% and a month on month increase of + 30.4%; The net profit attributable to the parent company was -1.139 billion yuan, a year-on-year increase of – 307.7% and a month on month increase of – 275.0%; The net profit attributable to the parent company after deduction was -1.378 billion yuan, with a year-on-year increase of – 427.9% and a month on month increase of – 322.3%, realizing a basic earnings per share of -0.24 yuan.
Comments:
Global upstream capital expenditure is prudent, and large impairment hinders the company’s performance. In 2021, the international oil price was high, but under the pressure of repeated epidemic, low-carbon emission reduction and investor capital constraints, the upstream capital expenditure of international oil companies was more cautious. The oil service industry is oversupplied and the market competition is fierce. The company’s overseas business revenue is – 37.7% year-on-year, and the gross profit margin is reduced by 36.6 percentage points year-on-year. Considering the low operating price and utilization rate of large equipment in the drilling sector, the company made an asset impairment provision of 2.01 billion yuan at the end of the year, resulting in a sharp decline in Q4 and full year profits in 2021.
Drilling services: the revenue of drilling business was 8.8 billion, a year-on-year increase of – 23.4%, and the gross profit margin was 0.3%, a year-on-year decrease of 25.7 percentage points. The main reason is the decrease of upstream exploration and development investment, the slow recovery of oil service market, and the decline of drilling operation volume and service price. In 2021, the operation days of jack up and semi submersible drilling platforms were 11383 days and 2699 days respectively, with a year-on-year increase of – 0.4% and – 14.1% respectively; The utilization rates of calendar angels were 73.3% and 55.5% respectively, with a decrease of 1.7 and 5.8 percentage points respectively; The average daily income was US $70000 and US $135000 / day respectively, which were flat and – 27.4% year-on-year respectively.
Oilfield technical services: the revenue of oil technology business was 15.1 billion yuan, a year-on-year increase of + 13.2%, and the gross profit margin was 29.3%, which was basically the same year-on-year. This sector is the main contributor to the company’s profits. The company’s independent scientific and technological innovation continues to improve, and the R & D expenses are + 24.8% year-on-year.
Ship sector: the revenue of ship business was 3.3 billion yuan, with a year-on-year increase of + 13.3%, and the gross profit margin was 8.8%, with a year-on-year increase of 1.2 percentage points. The company’s own fleet operated for 30223 days, which was basically the same year-on-year. The profit of the sector was mainly affected by the recovery of operation price.
Geophysical prospecting and exploration sector: the revenue of the sector was 2 billion yuan, a year-on-year increase of + 62.4%, and the gross profit margin was 2.5%, an increase of 31.3 percentage points year-on-year. In 2021, the company independently developed “Hailiang” streamer acquisition equipment and “Haitu” streamer integrated navigation system to realize commercial production and application, filling the gap of equipment technology in this field in China; The first subsea node (OBN) operation fleet of CNOOC was established. Under the optimization of a series of technologies and equipment structures, the company’s geophysical exploration sector turned losses into profits.
Crude oil has entered a hundred Yuan era, boosting the prosperity of the oil service industry. In the medium and long term, OPEC crude oil surplus capacity is limited and the supply elasticity decreases. For opec-10 countries participating in the production reduction, by the second half of 2022, except the UAE, opec-10 countries basically have no surplus capacity after the completion of production increase, and the supply elasticity of opec-10 domestic volume will decline. Affected by the capital market and policy environment, the recovery of crude oil supply in the United States is slow and the elasticity of production increase decreases. However, the global demand for crude oil is still growing from 2022 to 2025 and will face a long-term shortage of crude oil. We believe that 2022 is the turning point for the rise of oil price. In the next few years, the oil price will remain high for a long time and the oil price center will rise. High oil prices will drive the upstream capital expenditure to hit the bottom and rebound, further boosting the prosperity of the oil service industry. According to the company’s 2022 strategic guidelines, the global upstream capital expenditure will increase by 24% year-on-year in 2022, of which the global upstream offshore capital expenditure will increase by 15% year-on-year. The company expects to sign 54 new overseas contracts with a contract amount of US $1.2 billion, and the operation volume of drilling platforms outside China is expected to increase significantly.
CNOOC’s capital expenditure remained stable and effectively guaranteed the company’s performance in China. China’s dependence on foreign crude oil exceeds 70%. China will continue to enhance oil and gas exploration and development and investment to ensure energy security. Under the promotion of high international oil prices, national energy security strategy, CNOOC parent company’s “seven-year action plan” and other factors, CNOOC will continue to actively increase capital and expand production to ensure the company’s order volume within the group. In 2022, CNOOC’s capital expenditure budget is 90-100 billion yuan, which is the same as that in 2021. It is expected that the workload of the company in the group will remain stable.
Strengthen technology drive and reshape cost leadership. Focusing on the needs of oil fields, “one oilfield, one strategy, one oil well and one scheme”, the company fully guarantees the speed and efficiency improvement of heavy oil thermal recovery, greatly improves the D + W capacity and continues to expand the application scale. Independent high temperature logging equipment is fully applied in Bohai Sea; Rotary steering and logging while drilling equipment enter the markets of Iraq and Indonesia; “Xuanji” system has formed a full-scale equipment system and operation capability, appeared in the national “13th five year plan” scientific and technological innovation achievement exhibition, and permanently settled in the National Museum. The company continues to follow the strategy of “emphasizing technology over assets”, expand the scale of oil technology service business, continuously enhance the anti risk ability in the period of industry fluctuation, and create a cost leading advantage.
Profit forecast and investment rating: we predict that the net profit attributable to the parent company from 2022 to 2024 will be RMB 3.356 billion, 4.385 billion and 5.322 billion respectively, with a year-on-year growth rate of 971.7%, 30.6% and 21.4% respectively, and EPS (diluted) will be RMB 0.70, 0.92 and 1.12/share respectively. According to the closing price on March 25, 2022, the corresponding PE will be 19.61, 15.01 and 12.36 times respectively. Considering that the company benefited from its competitive advantage and the recovery of industry prosperity, the company’s performance growth accelerated from 2022 to 2024 and maintained the “buy” rating of the company.
Risk factors: macroeconomic fluctuations and downside risks of oil prices; The risk that the demand recovery is less than expected due to the rebound of the epidemic; Upstream capital expenditure is less than expected risk; Geopolitical risks; Exchange rate fluctuation risk.
