CNOOC's energy technology service company has a stable profit level. CNOOC Development was founded by CNOOC Holdings and developed from the predecessor base group to a one-stop service platform with offshore oil production services as its core business during the restructuring of CNOOC. 2024H1 achieved net profit of 1.617 billion yuan to mother, +20.90% YoY.

The company's business is closely related to the oil and gas production side. Compared with other central enterprises, which are oil service companies, the company's performance is more stable. Considering that CNOOC production growth prospects and barrel oil operating costs remain stable, we believe that the profitability of CNOOC's development is expected to continue to rise as China's CNOOC operating expenses rise.

Build a diversified service platform covering all major aspects of offshore oil production. The company lays out three core business segments: energy technology services, low-carbon environmental protection and digitalization, and energy logistics services. The company's revenue in the energy technology service sector increased 21.19% year-on-year in 2013. The number of FPSO holdings ranked third in Asia and fourth in the world, and dominated the Chinese offshore FPSO production technology service market. The revenue of the energy logistics service industry is greatly affected by oil prices, but gross margin is relatively stable. In terms of low-carbon environmental protection and digitalization, the company focuses on developing technical services such as safety and emergency response, energy saving and environmental protection, water treatment, green coatings, cold energy utilization, and digitalization.

The results of “increasing storage and production” have been remarkable, and the domestic offshore oil service industry has improved. CNOOC is focusing on increasing oil and gas storage and production. Net oil and gas production in 2023 reached 678.00 million barrels of oil equivalent (exceeding the target limit of 660 million barrels of oil equivalent), an increase of 8.7% over the previous year, and has reached a record high for five consecutive years. CNOOC plans to put into operation 13 new projects in 2024, with peak production totaling 0.154 million barrels of oil equivalent per day to support future production growth. Global upstream capital expenditure continued to rise in '23. Annual upstream exploration and development investment was 568.7 billion US dollars, up 10.6% year on year. Among them, offshore capital expenditure was 177 billion US dollars, up 19.7% year on year, and offshore capital expenditure grew faster. Investment in new projects will continue to rise steadily in 2024, and the number of project FIDs will exceed 23 years.

Continue to deepen reforms to improve efficiency, and focus on improving innovation and creativity. The company continuously stimulates reforms to deepen and improve efficiency, and focuses on enhancing the company's ability to innovate and create value. The company insists that “all costs can be reduced”, focuses on improving quality and efficiency, and pays close attention to “two financial” controls. In 2023, the total net asset interest rate was 7.40%, an increase of 0.86 pct over the previous year, and the total asset turnover ratio was 1.15 times. The company's green core products have been upgraded, and the “green factory” construction has achieved remarkable results, and actively promoted the construction of photovoltaic and wind power generation projects. The company further pushes forward the reform of the science and technology system, vigorously develops new quality productivity, focuses on the leading role of major scientific and technological achievements in shaping core industries, digitally empowers oil and gas exploration, development and production, and unleashes oil and gas productivity.

Investment suggestions: The oil service industry maintains a high boom, domestic “storage and production increase” efforts continue to advance, and the company continues to reduce costs and increase efficiency to promote digital empowerment, which is expected to continue to benefit. We maintain our profit forecast for the company. The company's net profit for 24-26 is 3.714/4.262/4.698 billion yuan, respectively, and the corresponding EPS is 0.37/0.42/0.46 yuan/share, respectively, maintaining the company's “buy” rating.

Risk analysis: Fluctuating crude oil prices, inadequate policy implementation, project construction progress falling short of expectations, safety and environmental risks.