Incident: The company issued the “Notice of Voluntary Disclosure on Overseas Projects”. On July 17, 2024, the company signed a general contract for the development of SHWE gas field phase IV with South Korea's Pohang Steel International Company. As the general contractor, the company will undertake general contracting work for design, procurement, marine transportation, installation and pre-commissioning. The contract amount is about 0.523 billion US dollars.

Comment:

General contracting capabilities have been recognized by overseas giants, and the overseas strategy has taken a solid step forward. The project is located in Myanmar. The construction period is 36 months. The main contents include platform transformation, installation of marine pipes and umbilical cord cables, and installation of underwater facilities such as underwater wellhead manifold and marine pipe terminal FLET. Korea's Pohang Steel International Co., Ltd. is a large integrated multinational company. Its business involves various businesses such as battery business, green hydrogen business, LNG business, steel production, agriculture, and oil and gas field development. The project is the company's second offshore engineering turnkey project in Myanmar waters. The implementation of the project marks that the company's general contracting capacity of over 1000 meters has been recognized and trusted by the owners, and has taken a more solid step in the implementation and promotion of the company's overseas strategy. It shows that the company continues to strengthen overseas market development efforts and promote the high-quality development of overseas business, which is an important sign of the company's strategic strength.

Overseas projects continue to advance, and overseas projects continue to advance with high quality. 2024Q1, the company signed a new contract amount of 6.517 billion yuan, +11% year over year, with a new contract amount of 6.11 billion yuan signed in China, +17% year over year, and 0.407 billion yuan overseas, -39% year over year. 2024Q1, China's first independent Saudi Aramco offshore oil and gas general contracting project - the first batch of 6 conduit racks of the Saudi CRPO122 project was loaded at the Qingdao site and officially entered the maritime transportation and installation stage; CPF equipment and pipe gallery infrastructure for the Ugandan KingFisher project have been fully advanced, and storage tank installation work has begun; the Saudi Marjan project, the P79 FPSO upper block project, and the BASF module project are progressing steadily according to the plan; preliminary preparations for the Qatar ISND5-2 project have begun.

The high level of industry prosperity compounded the parent company's expansion of upstream capital expenses, and the company is expected to continue to benefit. In terms of the international market, global oil demand will continue to grow in 2024. According to IHSmarkit's forecast, the total global upstream exploration and development capital expenditure in 2024 will exceed 600 billion US dollars, an increase of 5.7% compared to 2023. In terms of the domestic market, according to CNOOC's 2024 strategic outlook, CNOOC's total capital expenditure budget for 2024 is 125-135 billion yuan, which is still a certain increase compared to the high base in 2023. As the oil service industry continues to be booming, the company is expected to achieve a continuous increase in revenue and profit.

Profit forecasting, valuation and ratings: The company continues to obtain overseas general contracting contracts, and is expected to fully benefit from the domestic and foreign marine oil service industry. We maintain our profit forecast for the company. We expect the company's net profit to mother for 24-26 to be 1.863/2.152/2.499 billion yuan, respectively, corresponding to EPS of 0.42/0.49/0.57 yuan/share, respectively, maintaining the “increase” rating on the company.

Risk warning: risk of international oil price fluctuations, CNOOC's capital expenditure falling short of expectations, overseas market risk.