The volume and price of the company's oil and gas products rose sharply, and net profit to mother increased 23.7% year-on-year, and the performance exceeded expectations. In the first quarter of 2024, the company achieved operating income of 111.47 billion yuan (+14.1% YoY, +1.5% YoY), net profit of 39.72 billion yuan (YoY +23.7%, YoY +51.6%), net profit without return to mother of 39.48 billion yuan (+25.5% YoY, +33.9%), net operating cash flow of 59.98 billion yuan (+15.4% YoY), and free cash flow of 30.96 billion yuan (YoY +13.7%), which exceeded expectations.
The performance exceeded expectations mainly due to the sharp rise in the volume and price of the company's oil and gas products and the continuous optimization and decline in costs. The second adjustment and development project for the Suizhong 36-1/Luda 5-2 oilfield has been successfully put into operation, and peak production can reach 30,300 barrels of oil equivalent per day. The company's oil and gas sales revenue for the first quarter was 90 billion yuan (+21.3% YoY), of which net production was 180.1 million barrels of oil equivalent (+9.9% YoY), the average realized price of petroleum liquid was 78.8 US dollars/barrel (+6.2% YoY), and the barrel oil cost was 27.6 US dollars/barrel of oil equivalent (-2.2% YoY).
Capital expenditure efforts continued to increase, and overseas net production grew strongly. The company's capital expenditure target for 2024 was 1250-135 billion yuan, and the capital expenditure for the first quarter was 29 billion yuan, an increase of 4.3 billion yuan (+17.3%) over the previous year. It obtained two new discoveries, Qinhuangdao 29-6 and Guyana Bluefin, and successfully evaluated 4 oil and gas structures. The company's production target for 2024 is 700-720 million barrels of oil equivalent, with net production of 180.1 million barrels of oil equivalent in the first quarter (+9.9% YoY), of which net oil production is 140.7 million barrels (+9.6% YoY), net natural gas production 229.5 billion cubic feet (YoY +10.6%); domestic net output is 123.2 million barrels of oil equivalent (+6.9% YoY), and overseas net production of 56.9 million barrels of oil equivalent (YoY +16.9%), mainly due to the contribution of Guyana and Canada's Changhu oil sands projects.
The cost of barrel oil continues to drop, and the price of crude oil has been drastically reduced. The company's main cost of barrel oil in the first quarter of 2024 was $27.59 per barrel of oil equivalent, down 0.63 US dollars/barrel oil equivalent (-2.2%) from the previous year, and 1.24 US dollars/barrel oil equivalent (-4.3%) from the average cost in 2023, mainly affected by depreciation of exchange rates and changes in production structure. The average price of Brent crude oil in the first quarter of 2024 was 81.8 US dollars/barrel, a year-on-year decrease of 0.4 US dollars/barrel, but the price of the company's petroleum liquid was 78.8 US dollars/barrel, an increase of 4.6 US dollars/barrel over the previous year. The price of natural gas was 7.69 US dollars/thousand cubic feet (-7.7% YoY), mainly due to the decline in overseas gas prices and the depreciation of the domestic exchange rate.
Risk warning: risk of large fluctuations in crude oil prices; risk of frequent natural disasters; geopolitical risk; policy risk, etc.
Investment advice: As crude oil prices remain high, we raised the 2024 Brent crude oil average price forecast from $85 per barrel to $86 per barrel, so we raised the company's 2024 profit forecast to 149.8 billion yuan (original value was 146.8 billion yuan), and maintained the company's profit forecast for 2025-2026 at 1,564 and 163.3 billion yuan, +21.0%/+4.4%/+4.5%, EPS was 3.15/3.29/3.43, corresponding to PE shares 9.2/8.8/8.4 times, respectively The PE for H shares was 5.5/5.3/5.1 times, respectively, maintaining a “buy” rating.