Main points of investment:
Complete the second feedback reply and issue the report on issuing shares to purchase assets and raising supporting funds and related party transactions (draft) (revised version). On March 7, 2017, InterContinental Oil and Gas issued a report on share purchase (draft) (revised version) based on secondary feedback, mainly on the changes of main business, transaction relationship, issue price adjustment mechanism and so on. The company plans to issue 459 million shares at a price of 7.33 yuan per share to purchase 96.70% of Shanghai Luozhou Xinke. After the completion of the transaction, InterContinental Oil and Gas holds 100% stake in Shanghai Luozhou Xinke. At the same time, it is proposed to issue no more than 437 million shares at a price of 7.33 yuan per share to raise a total of no more than 3.2 billion yuan for the construction of the underlying assets under construction and to pay the taxes and fees for this M & A transaction.
Oil and gas mergers and acquisitions have been promoted, and NCP's exploration contract has been completed and extended. Shanghai Luozhou Xinke (or its subsidiaries) has completed the acquisition of 100% equity in Banks and 100% equity in Keith Investment on September 29 and October 14, respectively, and it holds oil and gas assets in Albania and Kazakhstan, respectively. At present, all the five exploration block contracts held by NCP, a subsidiary of Keao Investment, have been signed with extension agreements, all of which are valid until November 14, 2018.
Ma Teng and Keshan Company operated stably and its production and sales increased. Mateng Company's Mating, Dongke and Kara mature oilfields have good production conditions and stable production. The exploration work in the Dole Tarly block of Keshan Company is nearing completion and is applying for a development license from the Kazakh government. We expect that Keshan Company still has a lot of room to increase its production capacity in the future. Mateng and Keshan are currently operating well.
Positive changes are expected in the international crude oil supply side, and the prosperity of the petrochemical industry will pick up. From the perspective of crude oil supply and demand, the overall demand side is relatively stable, and there will be some positive changes on the supply side in the future, including changes in crude oil production in the United States and Middle East countries, capital expenditure of oil companies, and so on. We believe that oil prices fluctuate in the short term but do not change the upward trend, and the prosperity of the petrochemical industry will pick up.
The performance of the rebound in oil prices is flexible. Due to the low cost of purchasing oil field assets at the time of low oil prices, we estimate that the full production cost of the oil field assets owned by the company after this acquisition is about US $350.40 per barrel, which can still make a profit at low oil prices. Crude oil equity production is about 2 million tons (about 15 million barrels), and crude oil production will further increase in the future. As a pure oil and gas production company, its performance is flexible when oil prices rebound.
Profit forecast and investment rating. We estimate that the EPS of the company from 2016 to 2018 will be 0.01,0.26,0.55 yuan respectively (according to the estimate of 3.159 billion shares after the completion of this non-public offering). The company's BPS (MRQ) is 2.30yuan. According to the BPS and four times PB, the company is given a target price of 9.20yuan to maintain the "overweight" investment rating.
Risk hints: large fluctuations in crude oil prices, additional issuance and acquisition progress, new business expansion risks.