Event
Bacon Energy released a report for the third quarter of 2017, with operating income of 187.57 million yuan, down 3.3% from the same period last year. Net profit belonging to shareholders of listed companies was 30.18 million yuan, up 29.5% from the same period last year. Net profit belonging to shareholders of listed companies after deducting non-recurring gains and losses was 27.65 million yuan, up 20.6% from the same period last year.
The operating income in the first three quarters was 392.33 million yuan, up 11.3% from the same period last year; the net profit belonging to shareholders of listed companies was 48.42 million yuan, up 32.8% from the same period last year; and the net profit belonging to shareholders of listed companies after deducting non-recurring profits and losses was 45.31 million yuan, up 42.7% from the same period last year.
The company expects the net profit attributable to shareholders of listed companies to be between 68.87 million yuan and 87.65 million yuan for the whole of 2017, an increase of 10 to 40 percent over the same period last year.
Comment
Drilling is the first to benefit from the growth of upstream investment. In 2017, the company's operating income and net profit increased from a decline to an increase. Revenue in the first three quarters increased by 11.3% compared with the same period last year, and net profit belonging to shareholders of listed companies increased by 32.8%.
Real capital expenditure in the upper reaches of Petrochina Company Limited increased by about 15 per cent in the first half of the year, driving higher investment in oil and gas development in Xinjiang, a region rich in oil and gas. The company's main business drilling is concentrated in Xinjiang oilfields, and the benefits are more obvious.
The main business of drilling is extended to overseas. In July 2017, the company won the bid for the Ukrainian Natural Gas drilling and production Company's three-year drilling engineering service project, with a total contract value of 400 million yuan in four blocks, for the company to expand its main business overseas for the first time. The company is expected to have more oil field service orders in the "Belt and Road Initiative" strategic area in the next two years as the industry recovers.
Maintain Bacon Energy's "overweight" rating
The company's domestic business grew significantly, exceeding the growth rate of capital expenditure in the upper reaches of Petrochina Company Limited, and the company expanded its main business overseas for the first time through market-oriented means. It is estimated that in 2017-2019, the operating income is 5.44,6.98 and 882 million yuan respectively, achieving EPS of 0.67,0.81,0.94 yuan per share respectively, and the corresponding PE is 41,34 and 29 times respectively, maintaining the "overweight" rating.
Risk hints: the implementation rate of OPEC production limit agreement is too low, the situation in Ukraine has undergone a major change, the increase of shale oil and gas production in the United States is much higher than expected, the international demand for oil products has dropped sharply, and the oil and gas reform plan has not been substantially implemented.