The company's oil and gas production continues to grow, superimposed by 18Q1-Q3 oil prices continue to rise, and the performance has risen steadily in 2019. The company's shale oil resources have low mining costs and high gross profit margin. The fair value loss caused by the 2018 homing net profit compared with the same period last year, + 63.91% and 2019Q1 hedging does not affect cash flow, and the "buy" rating is maintained.
Oil production rose at the same time, and the company's performance last year was slightly higher than expected. The company's 2018 and 2019Q1 achieved operating income of 4.781 billion yuan and 1.266 billion yuan respectively, compared with the same period last year, which exceeded market expectations, but the net profits of 2018 and 2019Q1 were 601 million yuan and-163 million yuan respectively, compared with the same period last year, which were lower than market expectations. In 2018, due to the significant amount of a single item and the increase of 971 million yuan in other receivables that separately set aside the provision for bad debts, the net profit was greatly reduced. 2019Q1 due to the upward international oil price, the company's hedging contract was lower than the market price, resulting in a decline in the fair value of book assets, while hedging output was equivalent to one year's output, which did not match 2019Q1's single-quarter output, which also led to excessive hedging losses.
The production of shale blocks is increasing rapidly. The company 2018 and 2019Q1 respectively produce 14.726 million and 4.186 million barrels of oil equivalent of crude oil and natural gas, of which crude oil accounts for more than 85 per cent, exceeding our previous forecast of 13.5 million and 3.75 million barrels of oil equivalent. Among them, the overall production of Hoople conventional block does not change much, the increase of oil and gas production mainly comes from Howard & Borden shale block, and the number of new drilling is slightly higher than expected. It is estimated that the company will produce 160 million to 17 million barrels of oil equivalent in 2019.
The company has a low cost of oil and gas production. The oil and gas depletion cost and operating cost of the company's Hoople conventional oilfields are about $18.50 and $17.20 per barrel respectively, while the corresponding depletion and operating costs of the Howard & Borden shale block are only $8 and $12 per barrel respectively. Excluding major items in financial expenses, the total cost of the company's 2018 and 2019Q1 is US $30.29,29.64 / barrel, which is maintained at a low level.
Oil prices are expected to remain at a high level in the future. The oil price of company 2018 and 2019Q1 is about 52.4,48.7 US dollars per barrel, and the price difference between the company and WTI in the same period is 12.5,5.30 US dollars per barrel respectively. 2019 Yearbook due to sanctions against Iran, Venezuela and other countries, the implementation of the OPEC production reduction agreement and the slowdown in the growth of shale oil in the United States, the overall global oil supply is expected to tighten and international oil prices will rise steadily. At the same time, Permian basin capacity restrictions will be lifted in 19H2, oil price discount is expected to return to less than $5 / barrel, the company is expected to achieve oil prices above $50 / barrel in 2019.
Risk factors: the risk of large fluctuations in international oil prices; the risk that the company's shale oil and gas production is less than expected; the risk that the company's equity is dispersed and the control may change.
Investment suggestion: maintain the company's 2019-2020 EPS forecast of 0.23 EPS 0.26 yuan, the new 2021 EPS forecast of 0.28 yuan, the current stock price corresponding to the PE is 10-9-8 times. At present, the market expects the crude oil price center to rise slowly, and the company's performance is expected to be further highlighted. At the same time, the market risk appetite increases and the "buy" rating is maintained.