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The company announced on December 23, 2016 that the first batch of five horizontal wells deployed by Mateng in the Kara oilfield had been successfully drilled, becoming the first oil company to successfully complete horizontal wells in the world-class oil region of Atreau, Kazakhstan.
Main viewpoints
1. Adhere to the two-wheel drive strategy of "project value-added + project M & A", grasp overseas rich oil and gas resources, and steadily promote production.
The company firmly continues to acquire overseas oil and gas assets through a series of project operations in the era of low oil prices, Mateng in 2014, Keshan in 2015 and Banks in 2016 (announced plan, ongoing). It has a total reserve of 372 million barrels of 2P (confirmed + estimated reserves), corresponding to the purchase price of $5.53,4.51,2.21 per barrel, respectively. The average purchase price is 3.54 U.S. dollars per barrel, which is at a low level among similar companies. if we consider the 1.2 million tons / year output of Banks, the company is currently producing 1.9 million tons / year of crude oil, and is expected to reach 5 million tons / year in the next three years.
On December 19, 2016, Mateng Company made new progress steadily. The first batch of five horizontal wells deployed in Kara Oilfield were successfully drilled. The average daily oil production per well of three wells that have been put into production is 24 tons. Compared with vertical wells, the production per well is increased by about 3 times while the cost per well is only increased by less than 50%. The technology can also be extended to other oilfields to reduce the production cost of crude oil per barrel.
two。 Acquire 50% stake in Kazakh oil and gas transportation company to enhance anti-risk ability
On December 9, 2016, the company's board of directors approved the proposed acquisition of a 50 per cent stake in Kazakh oil and gas transportation company Petroleum LLP for about US $100m. The Kazakh Oil and Gas Transportation Company has a total of 153 leased trucks and 3378 tanks (947 liquefied petroleum gas tanks and 2431 oil tanks). In 2015, it had total assets of $113 million, net assets of $63 million, total income of $67 million and net profit of $19 million. The performance commitment is from 2016 to 2018, and its after-tax net profit is increasing year by year. This acquisition will help to expand the company's layout in Kazakhstan, enhance the company's overall anti-risk ability, and to a certain extent reduce the impact of crude oil market price fluctuations on the company's production and operation.
3. Strategically take a stake in Andong Oil, and open a strategic model of deep cooperation with Andong Oil and Hewlett-Packard. The synergy is worth looking forward to.
On December 15, 2016, the company signed a share subscription agreement with Anton Group, with a total investment of about HK $223 million, and subscribed for about 222 million shares of Anton Group at HK $1.008 per share, accounting for about 8.33% of the total share capital of Anton Group. And reached a "Intercontinental Oil and Gas and Andong Group, HP Deep Cooperation Strategic Agreement" with Andong Oil and Gas and Hewlett-Packard. This strategic investment and in-depth cooperation will help to integrate the strength of oil companies, technical services and engineering construction companies, form an oil and gas industry alliance, give full play to synergy, and promote common and rapid development. This strategic investment is also expected to warm up as the oil service industry bottoms out and get a better return on capital.
4. Benefit from 2017 oil price hub upward, performance flexibility due to increased demand, OPEC and non-OPEC reached a joint production reduction agreement of about 1.76 million barrels per day, superimposed oil and gas upstream investment decreased, oil and gas production costs support, the global oil supply and demand rebalance is expected to come in 2017, promoting the oil price hub upward in 2017. At present, the complete cost of crude oil is 35-40 US dollars per barrel. Considering the balance sheet of Banks, the output of crude oil is 1.9 million tons per day. If the oil price increases by 10 US dollars per barrel on average, the company's profit is expected to increase by about 600 million yuan.
5. Investment suggestion: assuming Banks'H2 consolidated table in 2016, the average selling price of crude oil in 2016-2018 is US $/ barrel on 41-55-60. We estimate that the company's 2016-2018 return net profit is 37 million yuan, 381 million yuan, 916 million yuan, corresponding to 0.02,0.17,0.40 yuan for PE 580X, 56x, 23x. 3.159 billion shares after IPO, corresponding to EPS 0.01,0.12,0.29 yuan, PE 810X, 79x, 33x, covered for the first time, given a "recommended" rating.
6. Risk hint: crude oil price fluctuation, need to pay close attention to the implementation of Q1 production reduction in 2017; fixed increase progress