CNOOC (600938)
The production capacity cycle leads to great energy inflation and is optimistic about the historic allocation opportunities of energy resources such as crude oil: whether it is traditional oil and gas resources or American shale oil, capital expenditure is the main reason for limiting crude oil production. Considering that the global capital expenditure on crude oil is insufficient for a long time, the elasticity of global crude oil supply will decline. In the transformation of old and new energy sources, the demand for crude oil is still growing, and the world will face the problem of crude oil shortage for many years. The international oil price will usher in an upward turning point in 2022. In the medium and long term, the oil price will remain high for a long time, and the energy resources are expected to be in an upward cycle in the next 3-5 years. We will continue to be firmly optimistic about this round of energy inflation, Continue to be firmly optimistic about the historic allocation opportunities of energy resources such as crude oil under the capacity cycle. We believe that the oil price will remain high for a long time in the next few years, and the oil price center will rise, which is good for the upstream sector. Meanwhile, CNOOC’s oil and gas production ratio is 8:2, which is higher than Petrochina Company Limited(601857) (oil and gas production ratio is 6:4), China Petroleum & Chemical Corporation(600028) (oil and gas production ratio is 6:4), BP (oil and gas production ratio is 6:4), Chevron (oil and gas production ratio is 6:4), ExxonMobil (oil and gas production ratio is 6:4), Devon Energy (oil and gas production ratio is 7:3), western Petroleum (oil and gas production ratio is 7:3) and other foreign energy companies.The, More benefit from rising oil prices.
Continue to promote incremental cost reduction and highlight profit growth: in terms of output, the company’s net oil and gas output targets will reach Shanghai Zhongyida Co.Ltd(600610) , 640650 and 680690 million barrels of oil equivalent respectively from 2022 to 2024, with an annual growth rate of about 6-7%. By 2025, the company plans to achieve a daily output target of 2 million barrels and an annual net output target of 730 million barrels of oil equivalent. The growth of oil and gas production will further expand the scale of the company’s performance. At the same time, the company continues to increase oil and gas exploration, and the reserve substitution rate will remain at 130% in 2022. In terms of cost, in 2021, the main cost of the company’s barrel of oil was $29.49, with a difference of $40 from the oil price in Burundi. Under effective cost control, in addition to the impact of low oil prices in 2015, 2016 and 2017 and the impact of the epidemic in 2020, the price difference between Brent crude oil price and CNOOC barrel oil cost is more than $34, which can bring sufficient profit space. In terms of capital expenditure, CNOOC’s capital expenditure budget is 90-100 billion yuan in 2022. High capital expenditure supports the continuous expansion of the company’s storage scale.
Actively promote the progress of new production capacity and deeply tap the production potential: in Q4 of 2021, four new projects have been put into operation: Caofeidian 11-6 oilfield expansion, Kenli 16-1 oilfield, regional development of Lufeng Oilfield Group and UK Buzzard phase II. Among the 19 new projects announced by the company in 2021, the remaining Jinzhou 31-1 gas field, Kenli 6-1 Oilfield Block 4-1 development project, LvDa 4-2 Oilfield Block 4-3 and LvDa 5-2 North oilfield will continue to step up construction in 2022. In 2022, the company is expected to have 13 new projects put into operation, mainly including the development of Bozhong 29-6 oilfield in China, the development of blocks 5-1, 5-2 and 6-1 of Kenli 6-1 oilfield, the joint development of Enping 15-1 / 10-2 / 15-2 / 20-4 Oilfield Group and the development of shenfunan steam field, as well as the overseas Liza phase II project in Guyana and 3M (MDA, MBH and MAC) project in Indonesia, providing strong support for the realization of the company’s future production target. After the project is put into operation, it can contribute the maximum output of 200000 barrels / day to the company, which provides a pragmatic basis for the medium and long-term output growth of the company. By April 2022, Guyana Liza phase II and Weizhou 12-8 oilfield east development project have been announced to be put into operation.
Offshore oil and gas exploration has broad space and laid the potential for sustainable development of the company: China has vigorously carried out onshore oil and gas exploration since the 1950s, and only set foot in offshore oil and gas exploration in the 1980s. At present, the growth of new onshore oil and gas reserves in China is weak, and offshore oil and gas has large exploration and development space. According to the China marine energy development report 2021 issued by the energy economy Research Institute of CNOOC on January 14, 2022, in 2021, China’s offshore crude oil output was 54.64 million tons, and the year-on-year increase of offshore crude oil accounted for more than 80% of the total increase in China. In 2022, China’s offshore crude oil production is expected to reach 57.6 million tons, an increase of about 5.4% year-on-year, and continue to maintain the leading position of national oil increment. China’s sea area is the core operation area of CNOOC. At present, CNOOC has applied to the state for mineral certificates for areas with development potential in China’s sea area, and more than 95% of the regional mineral certificates are held by CNOOC.
In absolute valuation method, there is room for significant improvement: we assume: 1. The average price of oil distribution from 2022 to 2025 is 80 US dollars / barrel, the average net profit of the company in 2022 is 80 billion yuan, and the performance of the company in 20232025 has a growth rate of 7% caused by output growth; From 2026 to 2060, assuming that the average price of oil distribution is 60 US dollars / barrel, the average net profit of the company is 60 billion yuan. Under the assumption of 5-8% discount rate, the total value of the company is 806.2-1121.8 billion yuan, and the market value of the company still has 85-158% room for growth. 2. From 2022 to 2025, the average price of oil distribution is US $100 / barrel, and the average net profit of the company in 2022 is RMB 100 billion. From 2023 to 2025, the performance of the company has a growth rate of 7% caused by the increase of output; From 2026 to 2060, it is conservatively assumed that the average oil distribution price is 60 US dollars / barrel, and the average net profit of the company is 60 billion yuan. Under the assumption of 5-8% discount rate, the total value of the company is 879.2-1200.2 billion yuan, and the market value of the company still has 102176% growth space.
According to the relative valuation method, the valuation is significantly lower than the historical scope and peer level: according to the unanimous expectation of PetroChina and Sinopec and our calculation of CNOOC A shares, we believe that according to the issuance price of A-Shares of 10.8 yuan, the PE of CNOOC A shares from 2022 to 2024 is 4.99, 4.21 and 3.87 times, and the Pb is 0.90, 0.79 and 0.71 times, respectively. From 2022 to 2024, the PE valuation of CNOOC A shares was lower than that of PetroChina and Sinopec A shares and H shares, and significantly lower than that of international oil companies. On the other hand, the A / H share premium of PetroChina and Sinopec from 2022 to 2024 is 70% and 30%. According to the issuance price of CNOOC A shares of 10.8 yuan, the A / H share premium of CNOOC is 10%. The PE range of CNOOC H shares from 2011 to 2021 is 9-12 times and the Pb range is 1-1.8 times. There is room for CNOOC to significantly revise the A-share valuation.
High dividend scheme, providing absolute income guarantee: the dividend yield of the company is at a high level among its peers at home and abroad.
From 2022 to 2024, the company said that the annual dividend payment rate would not be less than 40%, and the absolute value would not be less than HK $0.70 per share (including tax). In view of the official launch of the company’s return to a, in order to avoid affecting the issuance progress, the company decided not to pay dividends at the end of 2021, and will officially announce the special dividend plan after the completion of the return to a.
Under the constraint of double carbon target, the company has increased the proportion of natural gas and offshore wind power: in the transition to carbon neutrality, in order to meet the national development and growing energy demand, the proportion of natural gas in the energy consumption structure will gradually increase, the company will actively layout, and the proportion of natural gas revenue and output will continue to increase. In addition, offshore wind power will become an important force to promote the transformation of energy structure and the development of global low-carbon economy. Relying on its existing advantages, the company takes offshore wind power as an important exploration of energy transformation. In Lingshui sea area of Hainan, the world’s first 100000 ton deep-water semi submersible production and storage platform “deep sea No. 1” energy station has completed three world-class innovations, marking the historic leap of China’s offshore oil and gas exploration and development to ultra deep water. The production of deep sea No. 1 ultra deep water atmospheric field will also help the company further increase the proportion of natural gas production. In addition, the company continues to explore the field of new energy, and Jiangsu Zhugensha (h2) 300000 kW offshore wind power project has realized full capacity grid connected power generation.
Complete the return to a and increase the oil and gas production with the raised funds: the company received the approval of the CSRC to return to a on March 30, 2022 and officially launched the issuance of a shares. The company has launched the over allotment option mechanism. As of April 18, the scale of this A-share issuance accounted for 5.50-6.28% of the total shares of the company after the issuance, of which the circulating A-shares with unlimited sales conditions accounted for 3.13-3.16%. The raised funds will be used for the development and application projects of payara oilfield in Guyana, the secondary development of Liuhua 11-1 / 4-1 oilfield, the phase II development of Liza oilfield in Guyana, the development of Lufeng Oilfield Group, Lingshui 17-2 gas field, Lufeng 12-3 oilfield, the onshore power application project of Qinhuangdao 32-6 / Caofeidian 11-1 Oilfield Group and the development of LvDa 6-2 oilfield, as well as the supplement of working capital. With the support of this round of raised funds, the company’s oil and gas development scale ushered in a new round of growth, and the company’s value is expected to be further improved. On the other hand, unlike the “exploration and development refining retail” onshore integrated oil companies such as China Petroleum & Chemical Corporation(600028) and Petrochina Company Limited(601857) CNOOC is China’s largest offshore upstream oil and gas production leader and the world’s largest independent oil and gas exploration and production company. CNOOC’s return to a this time has further enriched the stock types of A-share market and filled the gap in the pure upstream stock in the Chinese market.
Profit forecast and investment rating: we expect the company’s net profit attributable to the parent company from 2022 to 2024 to be 102197 billion yuan, 121167 billion yuan and 131863 billion yuan respectively, with year-on-year growth rates of 45.3%, 18.6% and 8.8% respectively, and EPS of 2.16, 2.56 and 2.79 yuan / share respectively. The PE corresponding to the issue price of A-Shares is 4.99, 4.21 and 3.87 times respectively. Considering that the company benefited from the rise of crude oil price and output growth, the company’s performance growth accelerated from 2022 to 2024, there is room for significant repair and upward valuation, and enjoys high dividends, so it is rated as “buy”.
Stock price catalyst: frequent geopolitical conflicts; The shortage of supply leads to the maintenance of medium and high oil prices; Insufficient global capital expenditure leads to oil, gas and energy crisis; The progress of global economic recovery exceeded expectations.
Risk factors: repeated epidemic, economic fluctuation and downward risk of oil price; The company’s speed of increasing reserves and production is lower than the expected risk; Economic sanctions and geopolitical risks.
