Incidents:
The company released its 2023 annual report, achieving full year operating income of 416.6 billion yuan (-1% YoY) and net profit to mother of 123.8 billion yuan (-13% YoY). Among them, 2023Q4 achieved revenue of 109.8 billion yuan (-1% YoY, -4% YoY) and net profit to mother of 26.2 billion yuan (-20% YoY, -23% YoY).
Net oil and gas production and net proven reserves have been rising steadily for 6 consecutive years
The company's net oil and gas production in 2023 reached 678 million barrels of oil equivalent (+8.7% year over year), exceeding the production target set at the beginning of the year. The net confirmed reserves reached 6784 million barrels of oil equivalent (+8.7% year over year), and the reserve replacement rate reached 180%. In 2017-2023, the company's oil and gas production reserves reached a record high for 6 consecutive years, and the reserve life remained stable for more than 10 years. The company's three-year rolling production targets for 2024-2026 are 700-720/780-800/810-830 million barrels of oil equivalent, respectively. The target reserve replacement rate in 2024 is not less than 130%, and production reserves are expected to reach a new high.
Technology helps reduce costs and increase efficiency, and has significant cost control advantages
The company has improved its core technical capabilities and strengthened lean management of drilling completion. The recovery rate of China's offshore oil and gas fields has increased significantly by 1.2%, and the natural decline rate has been effectively controlled below 10%. The average daily drilling efficiency was +19% compared to 2019, achieving a four-year increase; the drilling cycle decreased by -18% compared to 2019, for 4 consecutive years. In 2023, the main cost of barrel oil was US$28.83 per barrel of oil equivalent (-5.1% YoY), leading the international industry.
Capital expenditure adapts to production growth, and new projects are progressing steadily
The company's capital expenditure in 2023 reached 129.6 billion yuan (+26.4% year-on-year), of which exploration and development accounted for 15% and 64% respectively; capital expenditure in 2024 is expected to reach 1250-135 billion yuan, of which exploration and development account for 16% and 63%, respectively, and the capital expenditure structure remains stable. The company's new projects in 2024 are progressing steadily, and the Brazilian Mero2 project was put into operation in early 2024, basically completing the target of new projects in 2023. Other major new projects include the Suizhong 36-1/Luda 5-2 oil field adjustment and development project, the Deep Sea 1 Phase II gas development project, and Brazil's Mero3 project, which is expected to be put into operation in 2024.
Profit Forecasts, Valuations, and Ratings
Considering that the international oil price center is expected to remain at a medium to high level, and the company's increase in storage and production is progressing steadily, we expect that the company's revenue for 2024-2026 will be 4375.41/4580.54/465.863 billion yuan, +5.02%/+4.69%/+1.70% year-on-year, net profit to mother will be 1377.52/1486.58/155.304 billion yuan, and EPS will be 2.90/3.13/3.26 yuan/share, respectively.
Risk warning: risk of geopolitical events in the Middle East; risk of oil and gas price fluctuations; risk of falling short of expectations in oil and gas demand recovery.