Summary of the report:
Event: the company announced its performance, KuaiBao, with revenue of 4.78 billion yuan in 2018 and net profit of about 601 million yuan, an increase of 63.91% over the same period last year; deducting non-net profit reached 770 million yuan, an increase of 136.75% over the same period last year. In addition, in 2018, the company set aside 179 million yuan for investment losses; in addition, 1.086 billion yuan for the full impairment of the book assets involved in the lawsuit; and 11 million yuan for the liquidation of other problem assets.
The company's management will be completely changed in 2018, and the existing board of directors has strengthened the main business of oilfield exploitation and operation. as a result, all the problems left over from the previous board of directors (including Hami mining rights, founder trust and other investments) are impairment of assets, while streamlining the existing business chain. In 2018, the company lost 180 million yuan in non-operating profit and loss, including 1.067 billion yuan in assets involved in litigation and 50 million yuan in cleaning up other problem assets. For the whole year, the company's total loss (investment, asset impairment, etc.) is about 1.3 billion yuan, so the annual net profit is expected to be 6.05-641 million yuan, an increase of 65% over the same period last year. On the one hand, the large amount of asset provision expresses the determination of the new management to focus on the main industry of oil and gas production, on the other hand, it also "demines" the performance in 2019, paving the way for the outbreak of performance next year.
At present, the most important oil and gas field assets of the company are located in the Midland sub-basin of the Permian basin, which is characterized by high-quality assets, low production costs and high reserves. In 2018, the total production of oil and gas equivalent was more than 14.5 million barrels, an increase of 62% over the same period last year (the whole year). The net profit level of the main business was 19.67-2.056 billion yuan, an increase of 43.4% to 459% over the same period last year (August-December profits last year). In the context of overall low mining costs, the sustained growth of production is the main driving force of the company's performance growth. In addition, the Midland local discount has narrowed significantly, which means that the company's sales to achieve oil prices on the large discount pressure gradually disappeared.
Profit forecast: the oil price is expected to be US $/ barrel in 53-53-55 in 18-20 years. According to the current drilling plan, the company is expected to achieve a net profit of 5.94 billion yuan per barrel of shareholders belonging to listed companies in 18-20 years, corresponding to a PE of 2.081 billion yuan in 35-11-10. For the first time, coverage gives a "buy" rating.
Risk tips: a sharp drop in oil prices, pipeline construction lag in Midland area, and so on.