Matters:
By the close of February 20, the settlement price of WTI crude oil futures was $77.04 per barrel, up 4.4% from the beginning of the month; the settlement price of Brent crude oil futures was $82.34 per barrel, up 4.6% from the beginning of the month.
Guoxin Chemical's opinion:
1) Oil prices will remain in the medium to high range in 2024, and the upstream oil and gas extraction sector will remain high: crude oil prices rose in February, on the one hand, due to the heated geographical situation; on the other hand, strong US economic data performance. China's interest rate cuts stimulate the economy's demand for crude oil, and market sentiment is optimistic. We believe that overall crude oil supply and demand are tight, and Brent oil prices are expected to remain high in the range of 80-90 US dollars/barrel in the coming year. According to the latest monthly reports from OPEC, IEA, and EIA, crude oil demand in 2024 was 104.40, 103.00, and 102.42 million barrels per day, respectively, compared with the previous month's forecast of +4, +6, and 40,000 b/d, respectively, and an increase of 224, 1.2, and 1.42 million barrels over 2023, respectively.
2) The 2024 capital expenditure budget remains stable, and several new projects are scheduled to be put into operation during the year: according to CNOOC's 2024 strategic outlook, the company's capital expenditure is expected to be 128 billion yuan in 2023, and the net output is expected to be 675 million barrels of oil equivalent; the total capital expenditure budget for 2024 is RMB 1250-135 billion, and the net output is expected to be 720-750 million barrels of oil equivalent. The company's key new production projects in 2024 include China's Suizhong 36-1/Luda 5-2 oilfield secondary adjustment and development project, the Bozhong 19-2 oil field development project, the Deep Sea No. 1 Phase II gas development project, the Huizhou 26-6 oil field development project and the Shenfu deep coalbed methane exploration and development demonstration project, and the Brazilian Mero3 project overseas. The total peak output reached 364,300 barrels of oil equivalent per day (equity output 202,300 barrels of oil equivalent per day).
3) Overseas oil and gas resources are abundant, and the Guyana project has exceeded expectations: the company's net overseas oil and gas production accounts for about 30%, which is expected to rise to 35% in the future. The core increase in overseas crude oil comes from new projects in Guyana and Brazil in recent years. Among them, the Guyana Stabroek block currently has proven reserves of more than 11 billion barrels, and the company has 25% equity. According to ExxonMobil's annual report, the third phase of the Stabroek Block Payara project was put into operation ahead of schedule in November 2023 and reached a design production capacity of 220,000 b/d in January 2024. Currently, the total output of the three platforms has reached 645,000 b/d, which is higher than the total design capacity of 580,000 b/d, which is a significant increase from about 400,000 b/d at the end of 2023. The fourth phase of the Yellowtail project and the fifth phase of the Uaru project will be put into operation in 2025 and 2026 respectively. The development plans for the sixth phase of the Whiptail project have been submitted to the Guyanese government. The expected production capacity is 250,000 b/d, and the total output is expected to exceed 1.2 million b/d by 2027.
4) Investment advice: We maintain the forecast for the company's 2023-2025 net profit of 1349/1545/178.3 billion yuan. The corresponding EPS is 2.84/3.25/3.75 yuan, respectively, and the corresponding PE is 8.6/7.5/6.5 times, respectively, maintaining the “buy” rating.
Risk warning
Risk of large fluctuations in crude oil prices; risk of frequent natural disasters; risk of new projects falling short of expectations; geopolitical risk; policy risk, etc.