The net profit of CNOOC Limited slipped 8% QoQ to RMB36.9bn in 3Q24, 3% ahead of our forecast. Despite the small decline in realised oil price and oil and gas output, the company managed to contain the impact on earnings. Looking into 4Q24, we expect its earnings to drop 37% QoQ mainly on lower oil price. Although we reduce our forecast of average price of Brent from US$84/bbl to US$80/bbl for 2024, we only change our earnings forecasts by -4%/1%/1% for 2024/25/26 respectively. We reiterate our BUY call given the attractive dividend for the coming three years. We slightly lower our target price to HK$26.64.
Key Factors for Rating
The discrepancy between our forecasts and the actual 3Q24 earnings mainly came from the higher-than-expected investment income and fair value change and lower-than-expected tax rate. The company's gross profit dropped 11% QoQ, 5% below our forecast.
For 9M24, the company's earnings surged 19% YoY to RMB116.7bn, with 8% YoY growth in total oil and gas output and 3% YoY increase in realised oil price as key growth drivers.
The company's total oil and gas output grew 7% YoY in 3Q24 with decent growth in both China and overseas. Despite the disruptions from typhoons, the company contained the impact through remote control of some of the affected production platforms. As its total oil and gas output in 9M24 already reached 75.3-77.4% of its full-year guidance, we now expect the company's full-year output to reach the high-end of its guidance (i.e. 720m BOE).
Its realised oil price dropped 6.7% QoQ to US$76.4/bbl, slightly better than the 7.4% QoQ fall in the average price of Brent.
The company continued to show good cost control. Its unit opex grew 5% YoY while its all-in cost was flat YoY in 3Q24. For 9M24, its opex dropped 2% YoY while its all-in cost decreased 1% YoY.
Its capex grew 7% YoY to RMB95.3bn in 9M24. The company maintains its full- year capex budget at RMB125-135bn for 2024, basically flat YoY.
Key Risks for Rating
Sharp fall in oil price.
Higher-than-expected costs.
Valuation
We lower our target price from HK$26.76 to HK$26.64 to reflect the changes in our earnings forecasts. Our target valuation is still 5.5% average dividend yield for 2024-26E.
