Event: On October 30, 2024, the company released its report for the third quarter of 2024. In the first three quarters of 2024, the company achieved operating income of 3.051 billion yuan, a year-on-year increase of 6.87%; achieved net profit of 0.668 billion yuan, an increase of 12.65% over the previous year; and realized net profit deducted from non-mother of 0.633 billion yuan, a year-on-year decrease of 5.96%.

Net profit attributable to mother increased year-on-year and decreased month-on-month in 24Q3. In 24Q3, the company achieved operating income of 1.133 billion yuan, up 13.23% year on year and 2.02% month on month; achieved net profit of 0.241 billion yuan, up 41.62% year on year and 5.84% month on month; realized net profit deducted from mother 0.215 billion yuan, down 15.47% year on year and 13.37% month on month.

We are actively promoting increased storage and production, and crude oil production continues to grow. From 24Q1 to Q3, the company achieved crude oil production of 0.628 million tons, an increase of 28.08% over the previous year; among them, the Wensu project produced 0.4863 million tons, an increase of 12.88% year on year, and the Tenge project produced 0.1417 million tons, an increase of 138.15% year on year. Looking at 24Q3, the company achieved a total crude oil output of 0.223 million tons, up 24.23% year on year and 7.63% month on month; among them, the Wensu project produced 0.17 million tons, up 9.18% year on year, up 5.07% month on month, and the Tenge project output was 0.053 million tons, up 122.69% year on year and 16.74% month on month.

A new oil and gas block was signed in Iraq, and the oil and gas reserves were raised to the next level. On May 11, 2024, the company participated in the fifth round and sixth round of oil and gas block tenders from the Iraqi Ministry of Petroleum, and successfully won the bid for Iraq's EBN block and MF block. The two blocks have an area of 231 and 1,073 square kilometers, respectively. On October 27, 2024, the company and Central Iraqi Oil Company signed a two-block development and production contract. The contract is valid for 20 years and can be extended for 5 years. According to information provided by the Ministry of Petroleum of Iraq, the original petroleum geological reserves discovered in the EBN block are about 1.766 billion tons and about 153.8 billion cubic meters of dissolved gas, while the original petroleum geological reserves discovered in the MF block are about 0.4 billion tons and about 20.7 billion cubic meters of dissolved gas, totaling 2.166 billion tons of petroleum geological reserves and 174.5 billion cubic meters of dissolved gas. According to the company's preliminary assessment, the company predicts that the EBN block has about 0.464 billion tons of petroleum geological reserves, about 85.4 billion cubic meters of dissolved gas, about 1.258 billion tons of petroleum geological reserves and 50.8 billion cubic meters of dissolved gas in the MF block. The total petroleum geological reserves are about 1.722 billion tons and 136.2 billion cubic meters of dissolved gas.

Investment advice: Global crude oil capital expenditure is insufficient, supply and demand are compounded by low inventories, oil prices are expected to remain stable and high, and the company's output is expected to have high growth potential, compounded by integrated cost advantages. We expect the company's net profit to be 0.917/1.218/1.516 billion yuan respectively from 2024 to 2026, and EPS corresponding to the current share capital is 1.98/2.63/3.28 yuan, respectively. PE corresponding to the closing price on October 30, 2024 is 10/8/6 times, respectively, maintaining the “recommended” rating.

Risk warning: the risk of a sharp drop in oil prices; the risk of the exploration process falling short of expectations; the risk of overseas oil field operations falling short of expectations.