Incident: On December 18, the China Securities Regulatory Commission issued the “Approval on Approving Shanghai Walsh Horticulture Co., Ltd. to issue shares to Tibet Kejian Enterprise Management Co., Ltd. and others to purchase assets”, approving the company's issuance of 13.48 million shares to Tibet Kejian and 7.78 million shares to Jiaze Venture Capital to purchase related assets. On December 23, Tibet Kejian and Tibet Jiaze completed the industrial and commercial change registration procedures for this transaction asset transfer. Investment points: Further increase the equity ratio of CNOOC, and the profit level has been greatly improved: Through this transaction, the company increased its 51% stake in Wojin Energy to 92%. After completion of the transaction, the company controlled 50.5% of CNOOC's shares through Wojin Energy and Naiql, and the equity ratio will increase from 37.17% to 48.32%. Through cooperation with China Petroleum and Coal, CNOOC has obtained the right to explore, develop, produce and operate natural gas in the Shilou West Block. After years of development, CNOOC has rapidly grown into an influential company in the natural gas industry in Shanxi Province. In 2016-2018, Haiwobang's natural gas production in the middle of the year accounted for 6.49%/13.59%/13.59% of the total output in Shanxi Province, respectively. In the first half of this year, CNOOC Wobang achieved revenue of 602 million yuan and net profit of 278 million yuan. Thanks to CNOOC's performance contribution, the company achieved revenue of 1.08 billion yuan in the first three quarters of this year, an increase of 490% over the previous year, and net profit of 60.1 million yuan, an increase of 1466% over the previous year. Shilou West District is rich in natural gas reserves and is expected to greatly improve performance elasticity: China's natural gas production and consumption are increasing year by year, while the gap between supply and demand is gradually widening. Policies relating to the oil and gas industry will continue to encourage private capital to participate in pilot oil and gas cooperative development projects for some time to come, and support and promote the application of the cooperative development model in the industry. The cooperation between CNOOC and CNPC in natural gas development in Shilou West District is a model for cooperation between private enterprises and oil companies. By the end of 2018, Shilou West Block had obtained 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 registered by the Ministry of Natural Resources, and reserves of most areas have been discovered. With the advancement of the Yonghe 45-Yonghe 18-well area natural gas extraction project of 1.2 billion m2/year and the Yonghe 30-well area 800 million m2/year development project, it is expected that in the future, natural gas production in Shilou West will be greatly increased and the company's performance elasticity will increase significantly. Give a “buy” rating. Based on prudential considerations, until the issuance is finalized, its impact on the company's performance and share capital is not considered yet. The company's operating income for the period 2019-2021 is estimated to be 1.61 billion yuan, 2.28 billion yuan, and 4.07 billion yuan, respectively; without considering this stock offering, net profit of the mother would be 161 million yuan, 300 million yuan, and 603 million yuan respectively. Dynamic PE is 23, 13, and 6 times respectively; if the shares issued this time are considered to purchase assets and complete the issuance of an additional share capital of 21.25 million shares, net profit to the mother is 161 million yuan, 406 million yuan, and 814 million yuan respectively; dynamic PE is 29, 11, and 6 times, respectively. First coverage, giving a “buy” rating. Risk warning: risk of additional issuance not being completed successfully; risk of natural gas production falling short of expectations; risk of uncertain timing of obtaining Arai mining permits; risk of falling natural gas prices, etc.