Incident: The company released its report for the third quarter of 2024. In the first three quarters of 2024, the company achieved operating income of 326.024 billion yuan, up 6.26% year on year; realized net profit of 116.659 billion yuan, up 19.47 percent year on year; 2024Q3 achieved operating income of 99.254 billion yuan, down 13.51% year on year and 13.92% month on month; realized net profit to mother 36.928 billion yuan, up 8.98 percent year on year, month over month Decreased by 7.71%.

Oil prices fluctuated at a high level, and oil and gas production continued to increase in the first three quarters of 2024.

According to Wind data, the average price of Brent crude oil futures in the first three quarters of 2024 was 81.76 US dollars/barrel, 85.03 US dollars/barrel, and 78.71 US dollars/barrel, respectively, and oil prices remained high. The company achieved a crude oil price of 79.03 US dollars/barrel in the first three quarters, an increase of 2.9% over the previous year. Benefiting from domestic oil and gas fields such as Bozhong 19-6 and Enping 20-4, as well as the incremental contribution of the overseas Payara project in Guyana, the company's net production reached 542.1 million barrels of oil equivalent in the first three quarters of 2024, an increase of 8.5% over the previous year.

The company insisted on improving quality and reducing costs. The main cost of barrel oil in the first three quarters was $28.14, which was basically the same as the previous year. The current regional conflict is intensifying. Combined with expectations that the Federal Reserve will cut interest rates, oil prices are expected to remain at medium to high levels.

The exploration field is flourishing, and high-quality new projects support future growth.

The company continued to explore in the exploration field in the first three quarters of 2024. The company obtained a total of 9 new discoveries and successfully evaluated 23 oil and gas structures. In terms of new projects, the Suizhong 36-1/Luda 5-2 Oilfield Secondary Adjustment and Development Project, the Shenhai-1 Phase II Natural Gas Development Project, and the Bozhong 19-2 Oilfield Development Project have been successfully put into operation. The completion of the above projects will help the company's oil and gas production continue to grow.

Steady operation with abundant cash flow, effectively supporting capital expenditure.

Benefiting from the increase in oil and gas production, the company's cash flow grew steadily. The net cash flow from the company's operating activities in the first three quarters of 2024 was 182.768 billion yuan, up 14.9% year on year; capital expenditure was 85.107 billion yuan, up 5.24% year on year. The abundant cash flow provided a guarantee for domestic and foreign oil and gas exploration and development.

Investment advice:

We estimate that the company's net profit for 2024-2026 will be 143.098/153.975/162.355 billion yuan, EPS will be 3.01/3.24/3.42 yuan, respectively, and the corresponding PE will be 9/8/8 times. As a world-class energy company, CNOOC is rich in oil and gas resources and has outstanding cost advantages. As new projects continue to be put into operation, the company's oil and gas production is expected to continue to grow. At the same time, the company focuses on shareholder returns. The dividend ratio is outstanding, and the dividend rate is high. First coverage, giving a “buy” rating.

Risk warning: Crude oil prices have fallen, and the commissioning of oil and gas projects falls short of expectations.