The company publishes its 2017 semi-annual report. 2017H1 achieved an operating income of 1.361 billion yuan, an increase of 143.15% over the same period last year, and a net profit of-48.2812 million yuan,-388.64% over the same period last year. In terms of per-share targets, the company achieved basic earnings per share in the first half of the year-0.0213 yuan.
The output of the oil field has increased steadily, and the performance has increased significantly compared with the same period last year. 2017H1's Mateng and Keshan oilfields produced a total of 359100 tons of crude oil, an increase of 26.4 percent over the same period last year, and crude oil sales reached 363000 tons, an increase of 23.6 percent over the same period last year. The company's oil field production and sales grew steadily, coupled with the rebound in oil prices, the performance of oil field assets increased significantly in the first half of the year. 2017H1 Mateng and Keshan oilfields achieved a total sales revenue of 763 million yuan, an increase of 62.88 percent over the same period last year, and a net profit of 135 million yuan, an increase of 177.07 percent over the same period last year. The average realized price of crude oil is about $41.90 / barrel (Brent's average price in the first half of the year was $51.7 / barrel).
The acquisition of Kazakh oil and gas transportation company contributed to the performance in the first half of the year. The company's holding subsidiary, InterContinental Singapore, acquired TCO's 50 per cent stake in Petroleum LLP, a Kazakh oil and gas transportation company, for $100m to expand its midstream and downstream businesses. In the first half of the year, the transportation company made a consolidated statement, contributing 499 million yuan in income and realizing an overall net profit of 84.72 million yuan.
The sharp increase in financial expenses led to a loss in the first half of the year. 2017H1 incurred financial expenses of 313 million yuan, an increase of 223 million yuan over 90 million yuan in the same period last year. Of this total, the net interest expenditure increased by 103 million yuan, and the exchange gain and loss increased by 104 million yuan (the exchange gain reached 71.38 million yuan in the same period last year). The sharp increase in financial expenses directly led to the company's loss in the first half of the year.
It is proposed to adjust the major asset restructuring plan to provide consulting services for the Banks project. The company terminates the previous major asset reorganization and intends to adjust the plan. In order to facilitate the management of overseas Banks Oilfield assets, the company intends to provide consulting services for Banks' oilfield assets and strengthen the technical and production management of Banks Oilfield.
Jointly set up a natural gas industry fund to acquire Suke gas field and enter the natural gas field. The company jointly initiated the establishment of a natural gas industry fund for the acquisition of Kazakh Sook and other natural gas industry chain assets with stable development expectations, with a total size of not less than 2.5 billion yuan in the first phase. The company plans to contribute 3 million yuan to jointly set up a fund management company and then use 31250 yuan to subscribe for inferior shares of industrial funds. In the first half of the year, Suke gas field completed the drilling of three vertical wells and introduced world-class oil service enterprises as strategic partners to jointly develop Suke gas field.
Profit forecast and investment rating. We estimate that the EPS of the company from 2017 to 2019 is 0.01,0.05,0.53 yuan respectively. The company's BPS (MRQ) is 2.29yuan. According to the BPS and three times PB, the company is given a target price of 6.87yuan to maintain the "overweight" investment rating.
Risk hints: large fluctuations in crude oil prices, additional issuance and acquisition progress, new business expansion risks.