CNOOC (600938)
CNOOC is the purest upstream oil and gas target, and the revenue of oil and gas sales business accounted for more than 90% in 21 years. The company’s return to a is the first large cap red chip stock to land on A-Shares after the announcement on expanding the pilot scope of domestic listing of red chip enterprises was issued. We think it deserves attention. The specific reasons are as follows:
Crude oil prices are expected to remain high for a long time: in 2022, international oil prices rose sharply, and Brent crude oil exceeded US $100 / barrel. We believe that there are two main reasons for the rise in oil prices: 1 The Russian market is worried that the supply of crude oil is cut off by western countries. Russia exports about 7 million barrels of equivalent crude oil per day. Once the supply is cut off, it is difficult to fill the gap. 2. The market is worried that OPEC + has insufficient potential to increase production. In March, the total output of OPEC was 28.557 million barrels per day, an increase of 57000 barrels per day month on month. Among them, the output of ten countries with reduced production was 24.24 million barrels / day, 820000 barrels / day lower than the agreed amount. In the long run, the capital expenditure of traditional crude oil exploration and development is insufficient, and American shale oil producers are also cautious about capital expenditure. It is expected that the oil price will be high for a long time.
Significant results in cost reduction and efficiency increase: in 2021, the equivalent production cost of the company’s barrel of oil was US $29.5/barrel, which was the lowest among the three barrels of oil. The company has implemented cost control throughout the whole process of exploration, development and production, actively promoted technological and management innovation and enhanced cost competitive advantage. Since 2013, the cost of barrel oil has gradually decreased. Even in 2020 affected by the epidemic, the gross profit margin of the company’s oil and gas sales sector still exceeded 40%.
Continue to promote the “increase of reserves and production” and increase the output year by year: the company steadily promotes the “increase of reserves and production”. In terms of geographical distribution, while continuing to carry out oil and gas exploration, development and production in China’s sea areas, the company deeply cultivates the global market, holds interests in several world-class oil and gas projects, and its assets cover more than 20 countries and regions in the world. Over the past 20 years, the company’s oil and gas production has increased from 88 million barrels of oil equivalent in 2000 to 570 million barrels of oil equivalent, an increase of more than 6 times, and the net proven oil and gas reserves have increased from 1.76 billion barrels in 2000 to 5.73 billion barrels, an increase of more than 3 times. From 2022 to 2024, the company’s net oil and gas production targets are Shanghai Zhongyida Co.Ltd(600610) million barrels, 640650 million barrels and 680690 million barrels respectively. The company plans to increase its capital expenditure by 90-100 billion yuan in 2022.
Profit forecast and investment suggestions
Based on the judgment of oil price and the output of the company in the next three years, we predict that the earnings per share of the company from 2022 to 2024 will be 2.13 yuan, 2.20 yuan and 2.28 yuan respectively. According to the comparable company’s 22-year 8-fold PE, the first coverage is given a target price of 17.04 yuan and a buy rating.
Risk tips
Oil prices fell sharply; The new project is not as expected; The annual output is lower than expected; Uncertainty of net income from changes in fair value; The impact of exchange rate fluctuations.
