Investment points: Maintain an increase in holdings rating and maintain a target price of 4.9 yuan. In 2017, the company's hedging losses caused profits to fall short of expectations. We lowered the company's net profit for 2017-19 from 3.2/22.2/33.5 to 2.5/18.2/2.85 billion yuan, and EPS from 0.05/0.33/0.49 to 0.04/0.27/0.42 yuan. Due to the rapid growth rate of production, we raised the corresponding PE in 2019 from 10 times to 12 times, maintained a target price of 4.9 yuan, and maintained an increase in holdings rating. The 2017 performance forecast was lower than expected, due to high losses due to hedging, but the final performance is expected to be $250 million. We expect the company to have a profit of 187.5 million yuan in 2017, which is lower than our previous profit forecast of 250-300 million yuan: first, the increase in oil prices in the fourth quarter of 2017 was large, and the company's hedging book losses reached 2-3 billion yuan, which greatly offset the release of performance; second, the profit forecast did not take into account the impact of income tax incentives; third, at the end of the reporting period, it is expected that a certain amount of additional profit will be released. The company's final net profit for 2017 is estimated at 250 million yuan. Production growth is realized and will double over the next two years. The company disclosed that production in the fourth quarter of 2017 was 2.89 million barrels, with an average annual output of 25,000 barrels per day, in line with our expectations. In 2017, 98 new well drills were added, which is basically in line with our expectations. With the successful issuance of US$700 million bonds by a US subsidiary, future drilling expenses are fully guaranteed, and production is expected to reach 50,000 barrels per day in 2019. The company's core logic has not changed. It is expected that production elasticity, oil price flexibility, and tax reform flexibility will be gradually released to support the company's continued growth in performance. We expect production in 2019 to double compared to 2017, and maintain a high level after the recovery in international oil prices. In 2018, the year-on-year increase was 10 US dollars, increasing the company's annual performance by 7-900 million yuan. Furthermore, the implementation of the US tax reform in 2018 boosted the company's performance by 23%. Risk warning: Production falls short of expectations, and the exchange rate fluctuates greatly.