1. The company's profit situation

In 2022, the company's revenue was 3,065 million yuan, an increase of 73.98% over the previous year, and the net profit of its mother reached 503 million yuan, an increase of 580.35% over the previous year. The main reason for this is that international oil prices continue to run high, the company seized the opportunity, and the Wensu exploration sector showed a good trend of increasing production.

With the rise in the company's crude oil production and sales and the increase in gross profit in the oil service sector, the company expects net profit to return to the mother in the first quarter of 2023 to reach 213 million, an increase of 193.40% over the previous year compared with the first quarter of 2022.

2. Aksu Zhongman Oil & Gas

1) Production situation: In 2022, the company produced 434,000 tons of crude oil, an increase of 264,400 tons over the same period last year, an increase of 155.29% over the same period last year.

2) Profit situation: In 2022, the company's crude oil sales business revenue was 1,595 million yuan, and the gross margin was as high as 82.92%; after our calculation, the subsidiary's crude oil price was 3,997 yuan/ton, equivalent to 90.02 US dollars/barrel.

3) Cost situation: According to our calculation, the cost of the crude oil business is 488 million yuan (including three fees), and the unit cost is 1,244 yuan/ton, equivalent to 27.56 US dollars/barrel.

3. Overseas oil field situation

The Geological Reserve of the Tango Project was assessed to be 64.41 million tons, and the coastal project assessed the geological reserve of 25.23 million tons. Both oil fields have advantages such as low cost and abundant reserves. As of April 19, 2023, the tengo block equity change procedure has been submitted to the Ministry of Energy of Kazakhstan for approval. After the acquisition is completed, Zhongman Oil and Gas Group (Gulf) will hold 51% of the shares in Xinhua Dubai, thereby indirectly controlling the Tengo block.

4. Oil service sector analysis

In 2022, the company's idle drilling rigs were reduced, and the oil service sector achieved continuous improvement in the economic situation. In 2022, the company's drilling engineering services revenue was 1,290 million yuan, an increase of 17.14% over the previous year.

In terms of orders, in 2022, the drilling engineering sector signed a total of 2,687 million yuan of orders for the whole year, and signed 2,369 million new contracts with well-known overseas oil companies such as Schlumberger, ENI, and BP, an increase of 18.10% over the previous year.

5. Profit forecasting and valuation

Maintain the company's net profit of 84/1.11 billion yuan in 23/24, and the corresponding EPS was 2.11/2.78 yuan/share; we assume that the company's crude oil production will reach 1 million tons in 2025, and the company's net profit is 1.46 billion yuan, and the corresponding EPS is 3.66 yuan/share, maintaining the “increase in holdings” rating.

Risk warning: Russia and Iraq lift the ban at the same time, and there is a risk that oil prices will drop sharply; there is a risk that overseas projects will stop as the overseas epidemic worsens; the performance report is the preliminary calculation result, and the details are subject to the company's disclosure of the quarterly report.