The main investment company has completely transformed into a private oil company based in the US. After the actual control changed in 2014, the company successively divested traditional real estate, construction and installation, wire and cable businesses, etc., and initiated major asset restructuring in February and September 2015. It acquired the Hoople conventional oil field in the US Permian Basin and the shale oil and gas block in Howard & Borden County, and has transformed into a US-based oil company. The acquisition cost of the Howard & Borden block is low, and the company's bottoming out advantage is obvious. When the company bought the Howard & Borden shale oil and gas block, oil prices were low, and the acquisition cost was low. The 1P and 2P reserve costs were only 6.81 and 2.28 US dollars/barrel. After a certain degree of exploration, the current adjusted oil and gas cost is about 8 US dollars/barrel. Compared with neighboring blocks, the advantage is obvious, and it is also significantly lower than the current oil and gas asset transaction price of 15 to 25 US dollars/barrel. Shale blocks dilute full costs and are highly resilient to the risk of oil price fluctuations. The company's conventional oil and gas consumption costs and operating costs for the Hoople oil field are about 18.5 and 17.2 US dollars/barrel, respectively. The corresponding depreciation and operating costs for the Howard & Borden shale block are only 8 and 12 US dollars/barrel, respectively. In August 2017, the shale block also drastically reduced barrel oil costs. The company's complete cost dropped sharply from $64 per barrel in 2017 H1 to $30.69 per barrel, and 2018H1 has fallen below $28 per barrel, comparable to leading US shale oil companies. Production at the Hoople field is generally stable, and shale oil and gas production is growing rapidly. The Hoople oil field is currently in the secondary oil production stage, and the cost is high, while the Howard & Borden shale block has considerable reserves and is inexpensive. The company's current business focus is on increasing production in shale blocks. It is expected that Hoople oil field production will slowly decline at a rate of about 3% in the future, while shale oil and gas production will continue to grow. The 2017-2020 annualized growth rate is expected to be around 20%. The international oil price trend is hedging against the company's oil and gas sales price. It is expected that the price will remain above 50 US dollars/barrel in the future. Until 2020, international crude oil prices are expected to be high due to supply shortages. Shale oil and gas in the US Permian Basin is limited by capacity. Currently, the price is around 15 to 20 US dollars/barrel; in 2020 and beyond, the US shale oil and gas capacity restrictions are expected to be lifted, and international crude oil prices may be affected to a certain extent, but at the same time, the price of shale oil and gas will gradually return to normal. It is expected that the company will achieve oil prices above $50 per barrel in the future. Risk factors: 1. Risk of oil price fluctuations; 2. The company's shale oil and gas production falls short of expectations; 3. Risk matters accumulated during the company's previous management tenure have not been fully disclosed; 4. The company's equity is scattered, and control may change at any time. Profit forecast, valuation and investment rating: The company focuses on oil and gas extraction and sales business. The acquisition cost of oil and gas assets is low, mining costs are manageable, reserves are considerable, and production continues to grow. It is expected that oil prices will continue to stabilize above 50 US dollars/barrel. We expect the company's revenue from 2018 to 2020 to continue to grow. Based on the cautious assumption of achieving a slight increase in oil prices, and fully considering the impairment of some other investment projects and the impact of hedging, the net profit attributable to shareholders of listed companies in 2018/19/20 is estimated to be 8/14/1.6 billion yuan, corresponding to EPS of 0.12/0.20/0.23 yuan, respectively. On this basis, referring to international and domestic peer valuations, combined with merger and acquisition valuations in the primary market, we gave the company a target price of 3.60 yuan based on the average of the company's valuations of 15 times PE and 1.8 times PB in 2019, covering the “buy” rating for the first time.