Description of the event

The company released its 2024 quarterly report. In the first quarter of 2024, the company achieved total revenue of 5.672 billion yuan, a year-on-year decrease of 11.33%; net profit to mother of 475 million yuan, an increase of 5.96% year-on-year; after deducting non-net profit of 400 million yuan, an increase of 23.35% year-on-year.

Incident comments

The workload hit a new high in 2023, and 2024Q1 progressed steadily. In 2023, 472,000 tons of steel were processed, an increase of 25% over the previous year, reaching a record high; 24,800 days of investment were carried out, a decrease of 5% over the previous year. In the first quarter of 2024, the company actively promoted the construction of domestic and foreign oil and gas projects. A total of 63 projects above the scale of operation were completed, 4 of which were completed and delivered. The onshore construction of 19 conduit racks and 7 conduit blocks, the offshore installation of 9 conduit racks and 6 blocks, and the laying of 68.9 km of submarine pipelines and 39 km of submarine cables were completed. The construction business completed 136,000 tons of steel processing, an increase of 13% over the same period last year; 0.48,000 ship days were invested in offshore operations such as installation. Due to differences in workload distribution, the total number of ships invested in the reporting period decreased by 23% year on year, but among them, the number of ships installed for large ship structures increased by 336% year on year, and the number of owned ships increased by 438 days year on year.

Actively promote market development, and sufficient on-hand orders provide strong support for future workloads. In 2023, the company achieved a market commitment of 33.986 billion yuan, an increase of 32.55% over the previous year. Among them, the overseas market contract amount was 14.176 billion yuan, an increase of 233% over the previous year, both of which reached record highs. Second, it won the bid for a number of key overseas general contracting projects, such as Qatar's ISND5-2, to achieve effective breakthroughs from international engineering subcontractors to general contractors, and market development effectively guarantees the implementation of strategic goals. In the first quarter of 2024, the company achieved commitments of 6.517 billion yuan, an increase of 11% over the same period last year, including 6.110 billion yuan in China and 407 million yuan overseas.

As of the end of the first quarter, orders in hand were about 40.5 billion yuan, providing strong support for future workloads.

Offshore oil and gas resources have huge potential, and CNOOC is expected to fully benefit from increasing storage and production and increasing capital expenditure. In terms of the global oil and gas detection rate, ultra-deep water is far lower than that of land. The detection rates for terrestrial oil and natural gas are 36.72% and 47.01%, respectively. The detection rates for ultra-deep-water oil and natural gas are only 7.69% and 7.55%. The potential for marine oil and gas resources is huge, and ultra-deep water is the future trend.

Domestically, the overall quality of proven oil and gas reserves has deteriorated, and the overall quality of marine reserves is better. In the future, whether in terms of quality or reserves, offshore, deep-water, and unconventional oil and gas are important fields and directions for future oil and gas exploration and development. The total capital expenditure budget of CNOOC in 2024 is 125 to 135 billion yuan. Compared with the high base in 2023, there is still a certain increase, which will guarantee the prosperity of the offshore oil service industry for a certain period of time. In the future, as China continues to increase its offshore oil field exploration and development efforts, it will continue to benefit corresponding supporting oil and gas service and equipment suppliers, and offshore oil engineering will fully benefit.

Announcing shareholder return plans, increasing dividends will help increase the company's competitiveness. In the context of state-owned enterprise reform, in the future, the company is likely to pay more attention to asset quality and return on assets, steadily increase profits, and pay more attention to improving free cash flow and gradually increasing the amount of cash dividends. The dividend rate in 2023 was over 40%, and the total amount of dividends reached a record high in 2016. The “Shareholder Return Plan for the Next Three Years (2024-2026)” was released. Except for special circumstances, on the premise that the company's cash can meet the company's continuous operation and long-term development, the company uses a cash method to distribute dividends, and the dividend ratio is not less than 30%.

Without considering future changes in share capital, the company's 2024-2026 EPS is expected to be 0.49 yuan, 0.61 yuan, and 0.78 yuan. The PE corresponding to the closing price on April 30, 2024 is 13.05X, 10.43X, and 8.13X, respectively, maintaining a “buy” rating.

Risk warning

1. The sharp drop in international oil prices;

2. Risks arising from international market operations.