Key investment event description In the first quarter of 2016, CNOOC achieved operating income of 5.391 billion yuan, a year-on-year decrease of 41.5%, gross margin decreased 17.0 percentage points to -4.66%, net profit attributable to the parent company fell 225.4% year on year to -859 million, and EPS was -0.07 yuan, compared to 0.06 yuan in the same period last year. Incident review revenue declined markedly, and gross profit declined sharply. In the first quarter of 2016, the company's operating income decreased by 41.5% year-on-year due to a reduction in container transportation revenue. Meanwhile, operating costs fell 30.2% year over year, less than revenue, and gross margin fell 17.0 percentage points year over year to -4.66%. In the end, the company achieved attributable net profit of -859 million, a year-on-year decrease of 225.4%. The main factors in the decline in profit were: 1) The company's gross profit decreased by 1,393 million yuan compared to the previous period due to declining revenue and narrowing gross margin; 2) Financial expenses rose 77.6% (+141 million) from the previous period due to the year-on-year increase in bank loans in the current period. The change in fixed asset accounting estimates affected the 2016 profit of about 153 million dollars. The company passed the “Proposal on Changing the Company's Accounting Estimation of Ship Assets and Container Assets”. The core content is: 1) the full life value of the company's ship assets will be adjusted from 420 US dollars/light ton to 280 US dollars/light ton; 2) for the company's container assets, the accounting estimate for the service life of the company's container assets will be unified from 12-15 years to 15 years, and the residual value of containers that have expired to 560 US dollars/UNIT for 20-foot dry containers; 40- and 45-foot dry bins are both 896 US dollars/UNIT. All of the above changes in accounting estimates will be applied from January 1, 2016. Considering that the decline in the residual value benchmark will lead to an increase in current depreciation amounts, the announcement shows that the impact of this change in accounting estimates on the company's current profit and loss in 2016 is expected to reduce the company's net profit and loss by about 153 million dollars. The prosperity of the main transport industry is low, and business profitability improved after restructuring. Before the restructuring of state-owned shipping enterprises, the company's business was mainly international container maritime transport. In the first quarter of 2016, the shipping market was affected by weak macroeconomic growth in destination countries such as Europe and the US, and demand continued to be sluggish. The typical SCFI quarterly average price index fell 53.4% from the same period last year; through state-owned enterprise restructuring, the company will sell shipping and port assets and transform financial leasing business, including containers, ship leasing, and non-shipping financial services. Among them, the company's container leasing business ranked 3rd in the world. Its profitability and stability have improved compared to container shipping, and the non-shipping finance business is also a highlight. Maintain the “Overweight” rating. Considering that the company's performance will improve after the company's transition to financial leasing, we expect the company's 2016 EPS to be 0.01 yuan, maintaining the “increase in holdings” rating. Risk warning: the world economy continues to be sluggish, industry supply and demand deteriorates