Incident: The acquisition plan was over. After issuing shares to purchase assets, it will control Zhonghai Wobang to quickly enter the natural gas sector through mergers and acquisitions. The company's merger and acquisition plan is divided into two steps: ① to purchase 27.20% of CNOOC's shares through cash payment through Wojin Energy, a subsidiary holding 51%; ② issuing shares to purchase 23.20% of CNOOC Wobang's shares. The cash payment portion was completed in February 2018. Recently, the company's plan to issue shares and raise supporting capital to purchase 23.2% of CNOOC's shares was conditionally approved by the Securities Regulatory Commission. After the transaction is completed, the company will hold 50.5% of CNOOC Wobang's shares, become its controlling shareholder, successfully enter the unconventional upstream natural gas extraction industry, and become a dual main business company. CNOOC Wobang boosted the company's performance. The company will continue to acquire 67% to achieve an absolute holding company, which is currently one of the largest horticultural companies in China. Gross sales margin has declined year by year since listing in '15, and net profit to mother decreased by 60.64% year on year in '17. In February '18, the company paid cash to acquire 27.2% of Zhonghai Wobang's shares. Q1-Q3 received investment income of 46.53 million yuan. The company's investment income and net sales interest rate increased markedly. The main reason was the good performance of the investment target, which boosted the company's performance. In order to further strengthen CNOOC's control capabilities, the company has reached agreements with Shanxi Huijing, Shanxi Ruilong, and Borui Tiansheng. After the target company's 18-year performance is completed, the company will continue to acquire 16.50% of CNOOC's shares and achieve 67% absolute control over it. The Shilou West Block has entered an unconventional commercial mining period. The Yonghe 18-45 well area plans an annual production capacity of 1.2 billion square meters. Performance growth is expected. In 2009, Haiwobang signed a 30-year product sharing contract with CNPC to develop the Shilou West block. The block area is 1,524 square kilometers. Currently, it has proven geological reserves of 127.6 billion square meters, technical recoverable reserves of 61 billion square meters, and economic recoverable reserves of 44.3 billion square meters. The Yonghe 18 Well Area entered the commercial production stage in May 17, with a production capacity of 500 million square meters/year; the Yonghe 45 well is close to the Yonghe 18 well. Currently, it has applied for joint development with Yonghe 18 well, and the planned production capacity is 1.2 billion square meters/year after the merger. Benefiting from the commercial mining of Yonghe Well 18, CNOOC's gas production volume and gas sales volume in '17 were 636 million square meters and 630 million square meters respectively, up 128% and 125% year on year, respectively; gas production volume in the first half of '18 was 363 million square meters. The company expects gas production to be 774 million square meters for the full year of '18, an increase of 22% year on year. In the future, with the approval of the Yonghe 18-45 Well Area plan with an annual production capacity of 1.2 billion square meters, CNOOC's gas production volume is expected to continue to increase significantly. Profit forecast: The revenue of the company's original business continued to decline in '18, and gross margin continued to decline, so we lowered the profit forecast for the company's original business. At the same time, considering the income from investing in Zhonghe Wobang and the profit and loss of minority shareholders of Wojin Energy, we will adjust the company's net profit forecast for 18-20 from 1416/1507/15.13 million yuan to 803/1896/28.68 million yuan, and the corresponding EPS will be adjusted from 0.23/0.25/0.25 yuan to 0.13/0.31/0.47 yuan. At the same time, two profit forecasts were given: ① After completing the 50.5% share acquisition of Zhonghai Vobang, the company's net profit forecast for 19-20 was 1.25/157 million yuan; the total share capital was 101,965,112 shares, corresponding EPS was 1.22/1.54 yuan; ② After completing the 67% share acquisition of CNOOC Vauban, the company's net profit for 19-20 was 1.63/204 million yuan, corresponding EPS of 1.60/2 yuan. Risk warning: valuation risk of the assets to be purchased, risk of transactions being suspended/cancelled, and the underlying asset's gas production falls short of expectations