Core views

In 2023, CNOOC achieved revenue of 49.308 billion yuan, up 3.19% year on year; realized net profit of 3.081 billion yuan, up 27.52% year on year; realized net profit after deduction of 2,863 billion yuan, an increase of 35.57% year on year. In Q1 '24, we achieved revenue of 9.207 billion yuan, down 3.47% year on year; realized net profit of 501 million yuan, up 21.44% year on year; realized net profit of 438 million yuan after deduction, up 31.08% year on year.

Key projects are progressing steadily, and all annual milestones have been achieved; the results of continuing to improve quality, reduce costs and increase efficiency, and strengthening cash flow management have been remarkable; the parent company raised capital expenditure and net production targets, which is beneficial for the company to achieve performance growth.

occurrences

The company released its annual report for the year 23: in 2023, it achieved revenue of 49.308 billion yuan, a year-on-year increase of 3.19%; realized net profit of 3.081 billion yuan, an increase of 27.52% over the previous year; realized net profit of 2,863 billion yuan after deduction, an increase of 35.57% over the previous year.

The company released its quarterly report for '24: Q1 achieved revenue of 9.207 billion yuan, down 3.47% year on year; realized net profit of 501 million yuan, up 21.44% year on year; realized net profit after deduction of 438 million yuan, up 31.08% year on year.

Brief review

Production and operation are progressing steadily, and the three major business segments are gradually developing

The company achieved revenue of 9.207 billion yuan in Q1 in '24, a year-on-year decrease of 3.47%; realized net profit of 501 million yuan, an increase of 21.44%; and realized net profit of 438 million yuan after deduction, an increase of 31.08% over the previous year.

In '23, the company achieved revenue of 49.308 billion yuan, up 3.19% year on year; realized net profit of 3.081 billion yuan, up 27.52% year on year; realized net profit after deduction of 2,863 billion yuan, an increase of 35.57% year on year. In Q1 '24, we achieved revenue of 9.207 billion yuan, down 3.47% year on year; realized net profit of 501 million yuan, up 21.44% year on year; realized net profit of 438 million yuan after deduction, up 31.08% year on year.

By industry:

(1) The energy technology service industry achieved revenue of 18.889 billion yuan in 23 years, an increase of 21.19% over the previous year. The market share of intelligent injection mining increased by 19%, the market share of underground lift products increased by 24%, and the operating rate of FPSO and LNG carriers increased by 100%.

(2) The low-carbon environmental protection and digital industry achieved revenue of 9.70 billion yuan in 23 years, an increase of 9.35% over the previous year. New energy technology service workload increased 45.58% year over year, and digital operation business workload increased 25.72% year over year.

(3) The energy logistics service industry achieved revenue of 23.072 billion yuan in 23 years, a year-on-year decrease of 8.71%. The average price of Brent crude oil fell 17% year on year in '23, the price of oil and gas by-products fluctuated, and industry revenue fell year on year. The supply of materials and fuel for offshore work increased by 7.47% year on year. The overall efficiency of the industry was healthy and improving, and the resilience of industrial development was further enhanced.

Key engineering projects are progressing steadily, and China's first new intelligent FPSO “Offshore Oil 123” has all been successfully put into operation at the milestone points of the year, and China's second offshore mobile self-installing wellhead platform “Offshore Oil 165” was put into operation ahead of schedule. Construction of the Tianjin Marine Equipment Intelligent Manufacturing Base (Phase I) project has begun, the “Offshore Oil 302” LNG carrier was built and launched, and the first ship of the medium- to long-term FOB resource-supporting LNG carrier project (Phase I) has been completed and is about to be delivered.

Continuing to promote quality, cost reduction and efficiency, and improving cash flow management, the company insists that “all costs can be reduced”, focuses on the three major areas of improving quality and efficiency, “three fees” pressure reduction, and maintenance cost reduction to continue to promote lean cost management, increase the marginal contribution to project profits, and promote a 1.78% year-on-year increase in cost and cost profit margin in 23 years. To improve the efficiency of asset use, the overall asset profit and turnover indicators improved. The return on net assets increased 2.04% year on year in '23, accounts receivable and inventory balances decreased by 17.22% and 12.02%, respectively, and the turnover ratio increased 0.24 times and 1.01 times year on year, respectively. Operating activities generated a net cash flow of 7.745 billion yuan during the reporting period, an increase of 126.75% over the previous year.

The parent company raised its capital expenditure and net production targets, which will help the company achieve performance growth. The parent company CNOOC expects capital expenditure of 1250-135 billion yuan for the full year of '24 (capital expenditure of 129.6 billion yuan in '23), boosting the increase in reserves and production to a new level.

Among them, exploration, development and production capitalization expenses are expected to account for 16%, 63%, and 19% of the total capital expenditure budget, respectively. The net production target is 700-720 million barrels of oil equivalent (net production of 678 million barrels in 23 years), of which China accounts for about 69% and overseas accounts for about 31%. The target reserve replacement rate is not less than 130%.

The parent company has increased capital expenditure and offshore operations, which is beneficial to CNOOC's development to achieve performance growth.

Profit forecast and valuation: The company's net profit for 2024, 2025, and 2026 is estimated to be 35.5/39.8/4.54 billion yuan, EPS 0.35 yuan, 0.39 yuan, and 0.45 yuan respectively; the corresponding PE is 12.0X, 10.7X and 9.4X, respectively.

Risk analysis:

(1) Health, safety and environmental risks. First, the safety and environmental risks inherent in oil and gas production itself persist. Second, the company involves a lot of business, and contractors account for a large proportion of working hours, and management is difficult. Lack of control or inadequate attention to these risk factors may pose risks to the company's production and operation.

(2) Operating risks caused by fluctuations in oil prices Potential fluctuations in oil prices due to factors such as supply and demand and geography may have an impact on the company's operations.

(3) International business risks Risks of changes in the macroeconomic situation at home and abroad, such as the Russian-Ukrainian conflict, still exist, and public safety risks such as politics, military, society, nature, and infrastructure still require attention.

(4) Sensitivity analysis