The stock price of China Oil & Gas Group (“CNPC”, or the “Company”) has increased 61.5% from when we last issued our report. The current stock price seems to fully reflect its value. As a result, we downgraded the stock's rating from “buy” to “neutral.” 2013 is an important year for the company to reach the sales target of 8,000 million cubic meters for oil and gas. Targets have been set for oil and gas, achieving a total gas sales volume of 8,000 million cubic meters in 2015. Under more optimistic assumptions, the company's sales volume would need to increase 38% year over year in 2013 to 4,944 million cubic meters, and record another 28% and 26% growth in 2014 and 2015, respectively, to achieve the target. This sales target may be difficult to achieve due to the continued decline in sales of CNG in the past since 2008. Management may need to find merger and acquisition opportunities to achieve this goal. The basic assumption is that sales volume in 2013 increased 25% year over year. Our basic assumption is that the company achieved sales volume of 4,466 million cubic meters in 2013, which is equivalent to a 25% year-on-year increase over 2012. We think several new projects announced by the company over the past few months will support this basic assumption. Among them, the Zouping Natural Gas Project (Phase I) was completed at the end of 2012, bringing about 800 million cubic meters of transportation capacity and will contribute sales to the Group in 2013. Valuation The current stock price seems to have fully reflected its value. Based on the current stock price of HK$1.22 per share and our earnings per share forecast of HK$0.07343 for 2013, its price-earnings ratio has reached 16.6 times, which is in line with the industry average of 16.7 times. The market account ratio is 1.1 times, which is more likely to be sold than the same industry. However, given China Oil & Gas's low market capitalization and its policy of favoring non-controlling shareholders, we think this sale is reasonable. Downgraded to “neutral.”