Key points of investment

Incident: In the first three quarters of 2024, the company achieved operating income of 326.02 billion yuan (YoY +6.3%), net profit attributable to mother of 116.66 billion yuan (YoY +19.5%), and net profit not attributable to mother of 115.87 billion yuan (YoY +21.1%). Among them, 2024Q3 achieved operating income of 99.25 billion yuan (-13.5% YoY), net profit attributable to mother of 36.93 billion yuan (YoY +9%), and net profit of 36.67 billion yuan (YoY +9.9%) after deducting non-attributable net profit.

The company has stepped up oil and gas exploration and development efforts, and net oil and gas production has grown steadily, and its competitive cost advantage has been consolidated.

Crude oil achieved a year-on-year increase in sales prices: international Brent oil prices declined slightly year-on-year in the first three quarters of 2024: the average price of crude oil was 81.9 US dollars/barrel in the first three quarters of 2023, and the average price of crude oil was 81.8 US dollars/barrel in the first three quarters of 2024. Meanwhile, the sales price of the company's crude oil increased from 76.8 US dollars/barrel in the first three quarters of 2023 to 79.0 US dollars/barrel in the first three quarters of 2024, +3% over the same period, and the discount price of crude oil narrowed from 5 US dollars/barrel to 3 US dollars/barrel.

The project was successfully put into operation & the new project was signed, and oil and gas production continued to grow: in the first three quarters of 2024, the company's actual net oil and gas production was 542.1 million barrels of oil equivalent (+8.5% over the same period last year). Among them, net oil production was 422.4 million barrels (+8% YoY) and 19.7 billion cubic meters of natural gas (+10% YoY). The company's 2024 oil and gas equivalent production target set at the beginning of the year was 700-720 million barrels of oil equivalent, and the year-on-year growth rate of production was 3% to 6%. The increase in net production in China was mainly due to production contributions from oil and gas fields such as Bozhong 19-6 and Enping 20-4, while the increase in overseas net production was mainly due to the increase in production brought about by the commissioning of the Payara project in Guyana.

In addition, the company signed four new oil exploration blocks in Brazil.

Year-on-year increase in capital expenditure: In the first three quarters of 2024, the company's total capital expenditure was 95.3 billion yuan, +5.9 billion yuan (+7%) year over year, mainly due to the year-on-year increase in the workload of construction projects and well adjustment. Among them, exploration/development/production capitalization/others were 138/61.8/18/1.7 billion yuan, respectively, compared with -2/+45/+8/+0.8 billion yuan year-on-year. The company's capital expenditure for 2024 was 125-135 billion yuan at the beginning of the year, and the year-on-year growth rate of capital expenditure was -4% to +4%.

Excellent barrel oil cost control: In the first three quarters of 2024, the main cost of the company's barrel oil was $28.14 per barrel, -0.23 US dollars/barrel (-0.8%) year over year. Among them, operating expenses were 7.21 US dollars/barrel, -0.11 US dollars/barrel (-1.5%); depreciation, depreciation and amortization of 13.96 US dollars/barrel, +0.11 US dollars/barrel (-4.1%); disposal fee of 0.83 US dollars/barrel, -0.09 US dollars/barrel (-9.8%); sales and management expenses of 2.06 US dollars/barrel, -0.17 US dollars/barrel (-7.6%); taxes other than income tax were 4.08 US dollars/barrel, and +0.03 US dollars/barrel (+0.7%) year over year.

The company focuses on shareholder returns: According to our forecast, the company's net profit for 2024 is expected to be 150 billion yuan, with a total dividend of 64.5 billion yuan, according to the 2024 full-year dividend ratio. At the closing price of October 28, 2024, the CNOOC A share dividend rate is 5.0%; the pre-tax dividend rate for CNOOC H shares is 7.9%, 10% tax deducted, and the dividend rate after tax is 5.7%.

Profit forecast and investment rating: According to the company's increase in storage and production & progress of new projects, we maintain net profit of 150, 163.5, and 172.9 billion yuan respectively in 2024-2026, corresponding to 8.7, 8.0, and 7.5 times PE for A shares, respectively, and 5.4, 5.0, and 4.7 times PE for H shares, respectively, according to the closing price of October 28, 2024. The company has remarkable profitability, excellent cost control, and maintains a “buy” rating.

Risk warning: macroeconomic fluctuations; oil price fluctuations; the company's increase in storage and production are falling short of expectations