Brief comment
The company is the target of A-share scarce pure overseas oil and gas assets, and there is a significant difference in performance flexibility and expectations under the continuation of high oil prices.
The main operating body of the company is the American subsidiary Surge Energy, which is located in the Permian Basin (Permian basin), the main shale oil producing area in the United States. Q1 oil and gas production in 2022 is 48800 barrels per day. As the pure overseas oil and gas target of A-share scarcity, as the crude oil price remains high after the sharp rise in crude oil prices, the company is expected to usher in a performance harvest and valuation reshaping, with a significant difference in market expectations.
Combined with the following factors, the company's second-quarter results are expected to increase significantly compared with the previous quarter: (1) the spot price of Q2 this year is + 13.9 US dollars / barrel; (2) the hedging end of the company is expected to reduce losses gradually after the oil price has risen sharply from unilateral to high shock; and (3) the company's oil and gas development has been operated as pure overseas assets, benefiting from the depreciation of RMB.
When oil prices remain high and volatile, the company's hedging end is expected to gradually reduce losses as a necessary condition for bank loans. American shale oil companies generally carry out hedging operations. In theory, because the hedging end is equivalent to short selling in the derivatives market, when international crude oil prices rise sharply unilaterally, they will face greater losses. From the historical data, there is a very significant negative correlation between the hedging gains and losses of American shale oil companies and the price changes of crude oil futures at the beginning and end of the quarter. As a result, WTI crude oil futures rose unilaterally in the first quarter of this year, and the company suffered a large loss at the hedging end, while the second quarter was generally strong and volatile, and the company's hedging end is expected to reduce losses. Looking forward to the second half of the year, if the oil price remains high, the performance will improve significantly as the company gradually converges to the spot price.
The low rate of return on historical capital and carbon-neutral vision constraints, superimposed supply chain and other problems disturbance, shale oil production expansion progress is slow, the company is expected to enjoy the high oil and gas boom, the continuation of dividends, the historical low rate of return and carbon-neutral vision have restricted the willingness of American shale oil companies to expand production significantly in the long term, while the production increase in the short and medium term is also slow due to future policy uncertainty, supply chain problems and labor shortage. Therefore, in this round of oil and gas boom, the incremental elasticity of the supply side is relatively limited, and it will remain high before the demand side is significantly damaged, and the company is expected to gradually enjoy high oil price dividends.
Earnings forecasts and valuations:
It is estimated that the net profit of homing from 2022 to 2024 is 26.15,30.41 and 3.239 billion yuan, corresponding to EPS 0.38,0.45,0.48 yuan. Coverage for the first time, giving a "overweight" rating.
Risk Tips:
Global crude oil demand has declined; OPEC or US shale oil production has exceeded expectations; and the company's illegal guarantee lawsuit has resulted in adverse results.