Core views:
Temperatures in the oil and gas industry have warmed up, and they have gone through the coldest winter
On November 30, 2016, OPEC reached the first production limit agreement after a lapse of 8 years. Eleven countries cut production by a total of 1.166 million b/d to 32.5 million b/d. The conclusion and implementation of the production reduction agreement will boost industry confidence and improve future oil price expectations. It is expected that oil and gas capital expenses will be recovered to benefit related oil and gas service and equipment companies. As global energy demand has continued to increase in recent years, abundant offshore oil and gas resources have become the next breakthrough point. According to estimates, offshore oil resources account for about 34% of the world's total oil resources. The cumulative proven reserves of offshore oil are about 40 billion tons, and the discovery rate is about 30%. It is still in the early stages of exploration. Compared with onshore oil, offshore oil extraction is more expensive. Many projects cost 40-50 US dollars, while the cost of deep-sea oil extraction is even higher.
Therefore, we believe that, based on the current steady recovery in oil prices, onshore oil will recover first, followed by offshore oil.
Jutao Offshore Oil: General contractor of oil and gas treatment equipment and offshore services, Jutao Offshore Oil Service Co., Ltd. is a domestic manufacturer that provides offshore oil and gas extraction equipment. The company has reached strategic cooperation agreements with many world-renowned companies and has successfully entered the global supplier list of famous customers such as CNOOC. Currently, the company is actively adjusting to industry fluctuations, reducing costs and increasing efficiency, reforming and integrating business, and concentrating resources for development. The company first became a system supplier with EPC capabilities for complete natural gas treatment equipment and oil and water treatment equipment.
At the same time, based on oil and gas equipment manufacturing, the company is actively expanding into the high-end offshore equipment industry chain and entering subsea equipment and FPSO upper module construction. After completing and delivering the company's first FPSO upper module construction project at the end of 2014, it also undertook another FPSO upper module construction project from a world-renowned petroleum equipment facility supplier in 2015, entering the mainstream market for construction in this field. The successful implementation of a series of key projects marks the maturity of Ju Tao's level of safety, quality, design, production and project management for high-end offshore module construction.
Investment advice
The oil and gas equipment service industry has distinct “cyclical growth” characteristics. Excellent domestic enterprises are speeding up their international layout and maintaining a good financial situation. As supply and demand in the crude oil market become more balanced, we believe that the timing and extent of continuous improvement in the oil and gas equipment service industry will be relatively optimistic next year. Among them, onshore oil will recover first, followed by offshore oil. It is recommended to focus on oil and gas equipment service companies that are improving their fundamentals and actively deploying overseas markets.
Risk warning
Crude oil has multiple properties, and its price fluctuations are highly uncertain, which is a key factor affecting the prosperity of the oil and gas equipment service industry.