\u3000\u3 Guangdong Shaoneng Group Co.Ltd(000601) 808 China Oilfield Services Limited(601808) )
Event:
Recently, the company released its annual report for 2021, with annual revenue of 29.203 billion yuan, an increase of 0.8% year-on-year; The net profit attributable to the parent company was 313 million yuan, a year-on-year decrease of 88.4%; 2021q4 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%. In a single quarter, the net profit attributable to the parent company was -1.139 billion yuan, a year-on-year decrease of 307.7% and a month on month decrease of 275%.
Investment summary:
The drilling sector was significantly dragged down by asset impairment
The company’s drilling segment achieved a revenue of 8.779 billion, a year-on-year decrease of 23.4%, a gross profit margin of 0.3% and a year-on-year decrease of 25.7%. On the one hand, affected by the high base of settlement income of $188 million paid by equinor energy as in the same period of 2020, on the other hand, affected by the continuous epidemic, the growth of global upstream exploration and development investment slowed down, the recovery of oil service market was slow, and the drilling operation volume decreased. In 2021, the number of drilling platform operation days of the company was 14082 days, a year-on-year decrease of 487 days, or 3.3%. Due to the low utilization rate of drilling equipment, the company made provision for asset impairment of RMB 2.01 billion at the end of the year, resulting in a sharp decline in the annual profit in 2021.
However, affected by the international conflict between Russia and Ukraine and the economic recovery, the oil price is expected to remain high in the next two years, the global exploration business will continue to increase, driving the overall daily rate increase, and the performance of the company’s drilling sector is expected to hit the bottom and rebound in 2022.
The oilfield technical service sector continued to improve
The company’s oilfield technical service sector achieved a revenue of 15.085 billion yuan, a year-on-year increase of 13.2%, a gross profit margin of 29.3%, and a year-on-year increase of 0.5%. The company is the main supplier of offshore oil field technical services in China, and also provides onshore oil field technical services.
The company adheres to the technological development strategy, fully promotes the key core technology research and the transformation of technical achievements, and undertakes 10 major scientific research projects during the period. In 2021, the company invested 1.255 billion in R & D, an increase of 44% over the average annual R & D investment level (874 million) during the 13th Five Year Plan period. Technological advantages continue to promote the company’s strategic transformation towards asset light. In recent years, the oilfield technical service sector of young assets has gradually been promoted to the largest sector, the company’s cycle attribute has gradually weakened, and its profitability is expected to be further enhanced.
CNOOC’s rising capital expenditure helps the company grow
Most of the company’s businesses are undertaken by CNOOC, and CNOOC’s “seven-year action plan” proposes that the company’s exploration volume and proved reserves in 2025 will double compared with 2019, and the total capital expenditure budget of CNOOC in 2022 will be 90-100 billion yuan. In this context, CNOOC’s exploration work is expected to continue to increase, which provides a strong support for maintaining the company’s long-term workload.
On the basis of ensuring the workload in China, the company is also vigorously developing overseas business. In 2021, more than 100 overseas contracts and supplementary agreements were signed, realizing the simultaneous improvement of the quantity and quality of overseas contracts. Under the background of the reshuffle of the global drilling industry and the significant improvement of independent technology, the company’s overseas business is expected to achieve leapfrog development.
Investment strategy: we estimate that the net profit attributable to the parent company from 2022 to 2024 will be 3.056 billion yuan, 3.915 billion yuan and 4.699 billion yuan respectively, and the earnings per share (EPS) will be 0.64 yuan, 0.82 yuan and 0.98 yuan respectively, corresponding to PE of 22.2 yuan, 17.3 yuan and 14.4 yuan respectively. Considering the leading position of the company, with the increase of CNOOC’s capital expenditure and overseas business expansion in the future, the company’s performance still has a large growth space and maintains the “buy” rating.
Risk tips: the risk of sharp decline in oil prices, the risk of natural disasters such as typhoons and tsunamis, etc.
