strong first quarter due to higher oil price, maintain ... · 5/15/2017 · due to low oil prices...

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Company Report: CNOOC (00883 HK) David Liu 刘静骁

公司报告：中国海洋石油 (00883 HK) +852 2509 5441

[email protected]

15 May 2017

Strong First Quarter Due to Higher Oil Price, Maintain “Accumulate" 由于油价的上涨，公司录得强劲的第一季度业绩，维持“收集”

U.S. oil supply data continues to put pressure on oil price recovery;

continuation of OPEC production cuts necessary to guide rebalancing of

oil markets in 2017. U.S. crude production grew to 9.29 mb/d on April 28th this

year, 5.3% growth YoY, and is estimated to continue to grow throughout the

year, increasing global supply. Oil demand is expected to increase 1.2 mb/d

-1.4 mb/d in 2017, capable of offsetting supply increases from the U.S. and

draw down global inventories gradually. However, OPEC will need to maintain

its production cut agreement in order to keep supply in control and allow the

market to rebalance.

CNOOC’s total production will decrease in 2017, however, profitability

will likely improve along with higher realized oil prices. The Company’s

guidance for total production decline is indicative of its maturing domestic

assets as it waits for increased overseas contribution to its production portfolio.

We think domestic oil production will decrease and overseas oil production will

increase slightly in 2017.

Maintain investment rating as “Accumulate” and TP at HK$11.50. The TP

corresponds to 18.1x/11.9x/9.5x FY17/FY18/FY19 PER, equivalent to

1.2x/1.1x/1.1x FY17/FY18/FY19 PBR, and is also equivalent to a 21.4%

discount on our 2017E DCF valuation analysis based the long-term oil price of

US$70/bbl.

美国石油供应数据继续对石油价格回复产生压力，2017 年石油市场重新平衡需要 OPEC 维

持减产。美国原油产量在 4 月 28 日上涨至 9.29 百万桶/天，同比增长 5.3%，并且预计将在

整年持续增长，提升全球供应。2017 年石油需求增长预期为 1.2 至 1.4 百万桶/天，能够抵

消美国的供应增长，并逐步降低全球库存。但为了确保供应正常并使市场重新平衡，OPEC

则需要维持减产状态。

虽然中海油 2017 年的总产量将会下降，但盈利会随着实现油价的上涨有所提高。公司给出

的总产量下降的指引表明了其国内资产成熟，同时公司正等待增加海外生产对生产组合的贡

献。我们认为在 2017 年原油产量在国内将下降而在海外会小幅上升。

维持投资评级为“收集”和目标价 11.50 港元。目标价相当于 18.1 倍/11.9 倍/9.5 倍

2017/2018/2019 财年市盈率，与 1.2 倍/1.1 倍/1.1 倍的 2017/2018/2019 财年市净率，对我

们以 70 美元/桶长期油价为基础做出的 2017 年预测 DCF 估值分析有 21.4%的折让。

Rating: Accumulate

Maintained

评级：收集(维持)

6-18m TP 目标价: HK$11.50 Revised from 原目标价: HK$11.50

Share price 股价： HK$9.200

Stock performance 股价表现

(10)

(5)

0

5

10

15

20

25

May-16 Jul-16 Sep-16 Nov-16 Jan-17 Mar-17 May-17

% of return

HSI index CNOOC

Change in Share Price

股价变动

1 M

1 个月

3 M

3 个月

1 Y

1 年

Abs. %

绝对变动 % (2.4) (3.5) 3.5

Rel. % to HS index 相对恒指变动 %

(7.0) (9.2) (25.2)

Avg. share price(HK$) 平均股价（港元）

9.0 9.2 9.5

Source: Bloomberg, Guotai Junan International.

Year End 年结

Turnover 收入

Net Profit 股东净利

EPS 每股净利

EPS 每股净利变动

PER 市盈率

BPS 每股净资产

PBR 市净率

DPS 每股股息

Yield 股息率

ROE 净资产收益

率

12/31 (RMB m) (RMB m) (RMB) (△%) (x) (RMB) (x) (RMB) (%) (%)

2015A 171,437 20,246 0.450 (66.4) 18.1 8.646 0.9 0.457 7.0 5.3

2016A 146,490 637 0.014 (96.9) 571.1 8.564 1.0 0.330 3.8 0.2

2017F 199,819 25,298 0.567 3,871.4 14.4 8.701 0.9 0.430 5.3 6.6

2018F 227,347 38,367 0.859 51.7 9.5 9.058 0.9 0.503 6.2 9.7

2019F 245,291 47,855 1.072 24.7 7.6 9.606 0.8 0.523 6.4 11.5

Shares in issue (m) 总股数 (m) 44,647.5 Major shareholder 大股东 CNOOC 64.4%

Market cap. (HK$ m) 市值 (HK$ m) 452,835.2 Free float (%) 自由流通比率 (%) 35.6

3 month average vol. 3 个月平均成交股数 (‘000) 82,475.1 FY17 Net gearing FY17 净负债/股东资金 (%) 26.3%

52 Weeks high/low (HK$) 52 周高/低 10.700/8.528 FY17 Est. NAV (HK$) FY17 每股估值（港元） 14.6

Source: the Company, Guotai Junan International.

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Rising U.S. crude production and unexpected stockpile fluctuations during March and April have fueled market

sentiment that OPEC’s 1H2017 production cuts may not be enough to draw down oil inventories. U.S. Crude

production reached 9.31 mb/d for the week ending May 5th

, a 0.9% and 5.8% increase MoM and YoY, respectively. U.S. crude

production peaked in June 2015 at 9.61 mb/d when WTI spot price was trading around US$60/bbl, right before the nosedive

towards US$26/bbl. U.S. crude oil stocks rose to 1,211 mn bbl for the week ending May 5th

, increasing 1.6% and 2.9% MoM

and YoY, respectively. Crude oil stocks averaged 940 mn bbl from 1990 through to 2014, since then, it has grown 5.2%

annually, averaging 1,161 mn bbl. Active oil rigs in the U.S. continued to increase to 703 on May 5th

, 375 more YoY.

Additionally, utilization rates of refineries rose above 90% since the week ending March 31st, as refiners ramp up production

ahead of rising demand from the summer driving season. Due to large cost savings and efficiency improvements, it is likely

that the U.S. will increase its crude production YoY, potentially adding 400 kb/d -600 kb/d to global supply in 2017.

Figure-1: U.S. Crude Oil Production and Stocks Figure-2: U.S. Utilization of Operable Refinery Capacity

0

2

4

6

8

10

12

0

500

1,000

1,500

2,000

2012 2013 2014 2015 2016 2017

Stocks of Crude Oil and Petroleum Products

Stocks of Crude Oil

Production of Crude Oil

mbbl mb/d

80

82

84

86

88

90

92

94

96

98

100 %

Source: EIA. Note: Crude stock data includes SPR.

Source: EIA.

Oil price recovery in 2017 will depend on OPEC extending its production cuts to guide the rebalancing of global oil

markets. Global demand growth is estimated to be 1.2 mb/d-1.4 mb/d in 2017, led primarily by China and India. The

International Energy Association (IEA) estimated that world oil supply fell 755 kb/d in March following decreased crude

production from OPEC countries, with Nigeria and Libya also decreasing production. Upward and downward pressure to oil

prices should keep Brent trading in the US$50-US$60 range throughout the year, with increasing seasonal demand expected

in 3Q2017. Therefore, given the current weakness of the oil market, our view is that while there will be production increases in

places such as the U.S., Canada, and Brazil, growth in global demand and reduced OPEC production will offset production

increases elsewhere and drive down global inventories gradually throughout 2017. It is imperative for OPEC to extend its

production cuts for the full year, but the risk of non-compliance increases if the cuts are extended as OPEC production was

expected to increase in 2H2017. Our assumption for Brent oil prices is US$57/bbl, US$65/bbl, and US$70/bbl for 2017, 2018,

and 2019, respectively. The transportation and petrochemical industries will drive growth in oil demand over the next few

years, however, demand for natural gas is expected to grow at an even faster pace than oil. We expect oil prices to exhibit a

gradual upward trend as oil demand continues to rise, reaching a range of US$60-US$80 per barrel in the medium to long

term.

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Figure-3: Crude Oil Prices

20.00

40.00

60.00

80.00

100.00

120.00

140.00

2012 2013 2014 2015 2016 2017

US

$/b

bl

Brent TAPIS DURI WTI

Source: Bloomberg.

CNOOC will need oil prices to recover beyond US$60/bbl for commercial viability for some of its deepwater assets

looking beyond 2019. According to Wood Mackenzie’s analysis of various types of oil resources and similar analysis from

Stratas Advisors, deepwater and ultra-deepwater assets generally have the highest breakeven prices for commercial viability.

As CNOOC looks to rely more on its deepwater assets in Africa (Egina), the Gulf of Mexico (Appomattox, Stampede), and

Brazil (Liza, Libra) for production growth, oil prices will need to reach >US$60/bbl in order to provide positive ROI for those

assets. The Egina oil field is expected to be first off the block, beginning production in 2018, potentially adding 90 kb/d to

CNOOC’s production (Egina is expected to reach 200 kb/d, CNOOC has a 45% interest). The Company announced that it

expects Liza and Libra to commence production in 2019-2020. However, global reduction in capital spending from 2015-2016

due to low oil prices could have significant supply risks moving past 2020 as project cancellations and postponements will

result in oilfields being left undeveloped. Since deepwater wells take many years to develop, if oil prices fail to continuously

trend upward, risk of oil supply deficit in the mid-term increases.

Figure-4: Breakeven Costs by Oil Resource Type

Source: Wood Mackenzie.

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Figure-5: CNOOC Quarterly Total Oil & Gas Production

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20

40

60

80

100

120

140mmboe


CNOOC’s 1Q2017 total production decreased 4.2% YoY, in line with company guidance of YoY decline of 3.5%-5.6%

for the entire year. The Company set a target production range at its annual strategy meeting of 450-460 mmboe for 2017,

1Q2017 total production accounted for 25.9% of the Company’s upper bound production target range for the full year. Fewer

new projects from last year will limit attempts to ramp up production this year in response to rising oil prices. Additionally,

natural declines in its domestic producing wells as well as relatively few development projects in 2017 will put further

downward pressure on the Company’s production prospects. Our view on the Company’s production over the next few years

is that due to aging domestic producing wells, production growth will continue to shift towards overseas assets, which includes

developing its more expensive deepwater assets. In 1Q2017, the Company’s domestic oil production decreased 6.0% YoY,

whereas overseas oil production increased 1.6%, in line with our estimates for decreasing domestic production and increasing

overseas production.

Table-1: CNOOC 1Q2017 Production Summary

1Q2017 1Q2016 YoY change

Crude Oil & Liquids (mmbbls)

China

Bohai Bay 40.5 43.8 (7.5)%

Western South China Sea 9.3 9.9 (6.1)%

Eastern South China Sea 17.5 17.9 (2.2)%

East China Sea 0.4 0.4 0.0%

China Subtotal (mmbbls) 67.7 72 (6.0)%

Overseas

Asia (excl. China) 4.6 4.5 2.2%

Oceania 0.2 0.3 (33.3)%

Africa 7.2 6.8 5.9%

North America (excl. Canada) 4.2 4.2 0.0%

Canada 4.9 3.7 32.4%

South America 2 2.2 (9.1)%

Europe 9.4 10.3 (8.7)%

Overseas Subtotal (mmbbls) 32.5 32 1.6%

Crude and Liquids Subtotal (mmbbls) 100.2 104 (3.7)%

Natural Gas (bcf)

China

Bohai Bay 13.6 13.5 0.7%

Western South China Sea 25.7 25.7 0.0%

Eastern South China Sea 18.8 17.9 5.0%

East China Sea 5.6 5.7 (1.8)%

China Subtotal (bcf) 63.7 62.8 1.4%

Overseas

Asia (excl. China) 12.8 13.9 (7.9)%

Oceania 4.3 7.3 (41.1)%

North America (excl. Canada) 11 11.2 (1.8)%

Canada 4 5.1 (21.6)%

South America 12.3 13.6 (9.6)%

Europe 2.5 4 (37.5)%

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Overseas Subtotal (bcf) 46.9 55.1 (14.9)%

Natural Gas Subtotal (bcf) 110.6 117.9 (6.2)%

Total Production (mmboe) 119.1 124.3 (4.2)%


Table-2: CNOOC Development Projects 2016-2017

Project

Production Commencement Date

Peak Production Time to Peak Production

2017

1 Penglai 19-9 Jan. 12th, 2017 13,000 2019

2 Enping 23-1 Jan. 17th, 2017 24,800 2018

3 Weizhou 12-2 Phase II 2H2017 11,800 n.a.

4 BD gas field 1H2017 25,500 n.a.

5 Hangingstone 2H2017 18,100 n.a.

2016

1 Kenli 10-4 Jan. 27th, 2016 9,600 Reached

2 Weizhou 11-4 North Feb. 1st, 2016 8,000 <1 year

3 Weizhou 12-2 Feb. 1st, 2016 16,000 Reached

4 Panyu 11-5 Apr. 25th, 2016 3,900 Reached

5 Weizhou 6-9/6-10 comprehensive adjustment Sep. 12th, 2016 3,800 2018

6 Enping 18-1 Sep. 21th, 2016 11,800 <1 year

Source: the Company.

Table-3: CNOOC 1Q2017 Revenue and CAPEX

RMB million 1Q2017 1Q2016 YoY change

Sales Revenue

Crude oil and liquids 34,354 20,777 65.3%

Natural gas 4,039 3,861 4.6%

Marketing revenue, net 228 253 (9.9)%

Others 1,857 928 100.1%

Total 40,478 25,819 56.8%

Of which: oil and gas 38,393 24,638 55.8%

Capital Expenditures

Exploration 2,101 2,059 2.0%

Development 5,599 6,678 (16.2)%

Production 962 954 0.8%

Others 7 3 133.3%

Total 8,669 9,694 (10.6)% Source: the Company, Guotai Junan International. CNOOC’s sales revenue will continue to be sensitive to oil price fluctuations, but profitability is improving from years

past. CAPEX in 1Q2017 decreased 10.6% YoY due to reduced development expenses as the Company reported that it

concluded expenses related to the development of its Egina oil field. Revenue is expected to continue to trend upwards

following expectations for oil price recovery as significant inventory decline may be realized come 3Q2017. Due to cost cutting

measures in years past, we expect to see a gradual increase in profitability for the Company as lower operational expenses

persist into the future.

Maintain target price HK$11.50 and investment rating “Accumulate”. The target price corresponds to 18.1x/11.9x/9.5x

FY17/FY18/FY19 PER, equivalent to 1.2x/1.1x/1.1x FY17/FY18/FY19 PBR, and is also equivalent to a 21.4% discount on our

2017E DCF valuation analysis based the long-term oil price of US$70/bbl. The Company’s lower valuation compared to its

peers reflects the sensitivity of the Company’s earnings to oil price. The weighted average peers’ FY17 P/B is 1.4x compared

to 1.2x for CNOOC. However, we are optimistic that as oil prices recover and stabilize over the next two years, CNOOC’s

improved operational efficiency and continued overseas development will drive growth; we maintain our investment rating

“Accumulate”.

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Table-4: Valuation Comparison

Company Stock Code Currency Last price

PE (fiscal year) PB (fiscal year) ROE(%) D/Y(%) EV/EBITDA

16A 17F 18F 19F 16A 17F 18F 19F 17F 17F 17F

Peers

Cnooc Ltd 883 HK HKD 9.20

787.0 14.3 10.8 8.8

1.0 0.9 0.9 0.9

6.4

4.1

4.2

Kunlun Energy Co Ltd 135 HK HKD 6.99

85.7 11.6 10.8 9.5

1.4 1.2 1.2 1.1

10.4

2.5

5.9

Petrochina Co Ltd-H 857 HK HKD 5.32

113.8 20.6 12.8 12.1

0.7 0.7 0.7 0.7

3.4

2.2

6.1

China Petroleum & Chemical-H 386 HK HKD 6.45

14.3 12.6 11.6 10.6

1.0 0.9 0.9 0.9

7.5

4.4

4.5

Occidental Petroleum Corp OXY US USD 60.87

n.a. 61.2 33.7 22.1

2.2 2.3 2.4 2.5

4.7

5.0

9.3

Encana Corp ECA CN CAD 15.46

n.a. 34.2 15.1 10.5

1.8 1.7 1.5 1.3

4.3

0.5

9.5

Eog Resources Inc EOG US USD 94.70

n.a. 72.3 37.9 22.0

3.9 3.8 3.5 3.1

4.9

0.7

11.6

Repsol Sa REP SM EUR 14.83

12.8 10.9 10.3 9.8

0.7 0.7 0.7 0.7

6.4

5.3

5.2

Canadian Natural Resources CNQ CN CAD 42.24

n.a. 26.8 15.4 13.5

1.8 1.6 1.6 1.5

7.2

2.6

8.0

Murphy Oil Corp MUR US USD 26.58

n.a. 194.0 36.0 17.4

0.9 0.9 0.9 0.6

2.2

3.9

4.7

Conocophillips COP US USD 46.97

n.a. 78.7 25.7 17.8

1.7 1.7 1.7 1.7

2.1

2.3

7.0

Anadarko Petroleum Corp APC US USD 51.63

n.a. n.a. 74.9 23.7

2.3 1.9 1.8 1.6

(2.1)

0.4

7.3

Oil & Natural Gas Corp Ltd ONGC IN INR 186.70

17.0 11.5 9.1 8.2

1.3 1.2 1.1 1.0

10.5

3.6

5.5

Devon Energy Corp DVN US USD 37.86

n.a. 20.2 14.6 9.9

3.3 2.9 2.4 2.0

14.6

0.6

8.7

Apache Corp APA US USD 51.45

n.a. 51.1 29.9 21.0

3.1 3.1 2.9 2.8

5.4

1.9

7.2

Woodside Petroleum Ltd WPL AU AUD 32.44

23.2 18.9 16.6 13.5

1.3 1.3 1.3 1.3

6.9

4.2

8.4

Hess Corp HES US USD 49.37

n.a. n.a. n.a. n.a.

1.1 1.1 1.2 1.0

(7.0)

2.0

10.2

Inpex Corp 1605 JP JPY 1,087.50

94.6 34.4 23.1 14.0

0.5 0.5 0.5 0.5

1.6

1.6

4.4

Simple Average 143.5 42.1 22.8 14.4

1.7 1.6 1.5 1.4

5.0

2.7

7.1

Weighted Average 151.0 32.3 20.0 14.0

1.5 1.4 1.4 1.3

5.0

2.8

6.8

Source: Bloomberg.

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Financial Statements, Ratios, and Assumptions Income Statement

Cash Flow Statement

Year ended Dec 31 (RMB m) 2015A 2016A 2017F 2018F 2019F


Oil & Gas sales 146,597 121,325 159,855 181,878 196,233

Profit before tax 17,130 (5,275) 39,285 55,418 67,479

Marketing & other revenues 24,840 25,165 39,964 45,469 49,058

Adjustments for:

REVENUE 171,437 146,490 199,819 227,347 245,291

Depreciation 72,293 68,303 65,578 65,332 65,763

Operating expenses (28,372) (23,211) (27,501) (30,017) (31,105)

Amortization 1,306 1,020 1,399 1,364 1,472

Exploration expenses (9,900) (7,359) (9,475) (11,248) (11,596)

Tax Paid 3,116 5,912 (13,987) (17,051) (19,623)

DD&A (73,439) (68,907) (66,976) (66,696) (67,235)

JV/A Income/(loss) - net (1,903) 76 (603) (651) (662)

Special oil gain levy (59) 0 0 0 (448)

Change in Working Capital (14,281) (13,113) 22,728 (4,386) 1,547

Crude oil and product purchases

(19,840) (19,018) (35,568) (40,468) (43,662)

Other Operating Cash Flows 2,434 15,940 11,684 2,035 3,886

SG&A, others (5,705) (6,493) (8,652) (9,844) (10,621)

OPERATING CASH FLOW 80,095 72,863 126,083 102,061 119,861

Impairment and provision (2,746) (12,171) 0 (27) (24)

Other gains - net (13,920) (11,743) (11,989) (13,641) (14,717)

Capital Expenditure (67,674) (51,347) (63,942) (68,204) (73,587)

EXPENSES (153,981) (148,902) (160,162) (171,940) (179,408)

Investments in financial assets - net (6,905) 25,541 (6,614) 3,109 (4,486)

OPERATING PROFIT 17,456 (2,412) 39,656 55,407 65,883

Investments in JV/A (1,456) (1,865) (1,000) (1,020) (1,040)

Interest income 873 901 764 1,364 1,905

Dividends from JV/A 196 207 196 196 196

Finance income / (cost) (6,118) (6,246) (5,267) (5,284) (5,324)

Investments in tangibles (368) (400) (500) (600) (700)

Exchange (losses)/gains, net (143) (790) 399 407 314

Other investments (288) (89) 155 (74) (3)

Investment income 2,398 2,774 2,544 2,276 3,429

INVESTMENT CASH FLOW (76,495) (27,953) (71,704) (66,593) (79,620)

Share of profit of associates 256 (609) 59 96 96

Share of profit of JV 1,647 533 544 555 566

Dividends Paid (20,419) (14,755) (19,193) (22,449) (23,353)

Non-operating income, net 761 574 585 597 609

Change in Gross Debt 28,082 (14,169) (2,628) 204 (82)

PROFIT BEFORE TAX 17,130 (5,275) 39,285 55,418 67,479

Other Financing Cash Flow (14,556) (14,316) 0 0 0

Income Tax 3,116 5,912 (13,987) (17,051) (19,623)

FINANCING CASH FLOW (6,893) (43,240) (21,820) (22,245) (23,435)

PROFIT FOR THE YEAR 20,246 637 25,298 38,367 47,855

Exchange Differences 242 198 0 0 0

Basic EPS, RMB 0.45 0.01 0.57 0.86 1.07

Diluted EPS, RMB 0.45 0.01 0.57 0.86 1.07

Cash at Beginning of the Year 14,918 11,867 13,735 46,294 59,517

Net Change in Cash (3,051) 1,868 32,559 13,223 16,806

Balance Sheet

CASH AT THE END OF THE YEAR 11,867 13,735 46,294 59,517 76,323

Year end Dec 31 (RMB Mn) 2015A 2016A 2017F 2018F 2019F

PPE 454,141 432,465 430,829 433,701 441,525

Investments in JV/A 28,413 29,995 31,402 32,877 34,383

Intangibles 16,423 16,644 15,745 14,981 14,209

Other Non-Current Assets 25,174 36,532 33,533 31,407 29,429

Financial Ratios and Assumptions

NON-CURRENT ASSETS 524,151 515,636 511,509 512,966 519,547


Other Investments.(net) 71,827 53,332 59,946 56,837 61,323 Growth %:

Cash & Equivalents 11,867 13,735 46,294 59,517 76,323 Oil & gas revenue (32.8)% (17.2)% 31.8% 13.8% 7.9%

Inventory 9,263 8,709 5,983 6,793 6,793 Operating profit (78.4)% (113.8)% 1,544.1% 39.7% 18.9%

Trade Receivables 21,829 23,289 19,982 22,735 24,529 Net profit (66.4)% (96.9)% 3,871.4% 51.7% 24.7%

Other Current Assets 25,425 22,980 25,976 29,555 31,888 Margins:

CURRENT ASSETS 140,211 122,045 158,181 175,436 200,855 Operating margin 11.9% (2.0)% 24.8% 30.5% 33.6%

TOTAL ASSETS 664,362 637,681 669,689 688,402 720,402 Net profit margin 11.8% 0.4% 12.7% 16.9% 19.5%

Debt management:

Short-Term Debt 33,585 19,678 15,742 14,955 14,208 Net gearing 39.9% 35.6% 26.3% 22.3% 17.2%

Trade and Accrued Payables 32,614 25,345 36,577 33,318 34,527 Total debt to equity 42.6% 39.4% 38.1% 36.6% 34.5%

Other Current Liabilities 18,181 22,067 27,682 31,496 33,982 Valuation:

CURRENT LIABILITIES 84,380 67,090 80,001 79,769 82,716 BVPS (RMB) 8.646 8.564 8.701 9.058 9.606

Long-Term Debt 131,060 130,798 132,106 133,097 133,762 P/E 18.1 571.1 14.4 9.5 7.6

Other Non-Current Liabilities 62,881 57,422 69,106 71,141 75,027 P/B 0.9 1.0 0.9 0.9 0.8

NON-CURRENT LIABILITIES 193,941 188,220 201,212 204,238 208,789 P/CF 4.5 5.0 2.9 3.6 3.0

TOTAL LIABILITIES 278,321 255,310 281,213 284,007 291,505 Assumptions & others:

Brent oil price (US$/bbl) 54.0 45.1 57.0 65.0 70.0

Share capital 43,081 43,081 43,081 43,081 43,081 Realised oil price(US$/bbl) 51.3 41.4 53.3 61.3 66.3

Reserves 342,960 339,290 345,395 361,313 385,816 Production(mmboe) 496 477 458 462 464

TOTAL EQUITY 386,041 382,371 388,476 404,394 428,897 Production growth 14.6% (3.8)% (3.9)% 0.7% 0.5%

P/reserves(US$/boe) 12.28 13.62

TOTAL EQUITY & LIABILITIES 664,362 637,681 669,689 688,402 720,402

RRR % 67% 145%*

Source: the Company, Guotai Junan International. Note: *adjusted for economic revisions (impairment).

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Company Rating Definition

The Benchmark: Hong Kong Hang Seng Index

Time Horizon: 6 to 18 months

Rating Definition

Buy Relative Performance >15%; or the fundamental outlook of the company or sector is favorable.

Accumulate Relative Performance is 5% to 15%; or the fundamental outlook of the company or sector is favorable.

Neutral Relative Performance is -5% to 5%; or the fundamental outlook of the company or sector is neutral.

Reduce Relative Performance is -5% to -15%; or the fundamental outlook of the company or sector is unfavorable.

Sell Relative Performance <-15%; or the fundamental outlook of the company or sector is unfavorable.

Sector Rating Definition

The Benchmark: Hong Kong Hang Seng Index

Time Horizon: 6 to 18 months

Rating Definition

Outperform Relative Performance >5%; or the fundamental outlook of the sector is favorable.

Neutral Relative Performance is -5% to 5%; or the fundamental outlook of the sector is neutral.

Underperform Relative Performance <-5%; or the fundamental outlook of the sector is unfavorable.

DISCLOSURE OF INTERESTS

(1) The Analysts and their associates do not serve as an officer of the issuer mentioned in this Research Report. (2) The Analysts and their associates do not have any financial interests in relation to the issuer mentioned in this Research Report. (3) Except for SMI Holdings Group Limited (00198 HK), Guotai Junan International Holdings Limited (01788 HK), Binhai Investment

Company Limited (02886 HK), Link Holdings Limited (08237 HK), GFI MSCI A I-R (CNY) (83156 HK), GFI MSCI A I (03156 HK) and CAM SCSMALLCAP (03157 HK), Guotai Junan and its group companies do not hold equal to or more than 1% of the market capitalization of the issuer mentioned in this Research Report.

(4) Guotai Junan and its group companies have not had investment banking relationships with the issuer mentioned in this Research Report within the preceding 12 months.

(5) Guotai Junan and its group companies are not making a market in the securities in respect of the issuer mentioned in this Research Report.

(6) Guotai Junan and its group companies have not employed an individual serving as an officer of the issuer mentioned in this Research Report. There is no officer of the issuer mentioned in this Research Report associated with Guotai Junan and its group companies.

DISCLAIMER

This Research Report does not constitute an invitation or offer to acquire, purchase or subscribe for securities by Guotai Junan Securities

(Hong Kong) Limited ("Guotai Junan"). Guotai Junan and its group companies may do business that relates to companies covered in research reports, including investment banking, investment services, etc. (for example, the placing agent, lead manager, sponsor, underwriter or invest proprietarily). Any opinions expressed in this report may differ or be contrary to opinions or investment strategies expressed orally or in written form by sales persons, dealers and other professional executives of Guotai Junan group of companies. Any opinions expressed in this report may differ or be contrary to opinions or investment decisions made by the asset management and investment banking groups of Guotai Junan. Though best effort has been made to ensure the accuracy of the information and data contained in this Research Report, Guotai Junan does not guarantee the accuracy and completeness of the information and data herein. This Research Report may contain some forward-looking estimates and forecasts derived from the assumptions of the future political and economic conditions with inherently unpredictable and mutable situation, so uncertainty may contain. Investors should understand and comprehend the investment objectives and its related risks, and where necessary consult their own financial advisers prior to any investment decision. This Research Report is not directed at, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in any jurisdiction where such distribution, publication, availability or use would be contrary to applicable law or regulation or which would subject Guotai Junan and its group companies to any registration or licensing requirement within such jurisdiction. © 2017 Guotai Junan Securities (Hong Kong) Limited. All Rights Reserved. 27/F., Low Block, Grand Millennium Plaza, 181 Queen’s Road Central, Hong Kong. Tel.: (852) 2509-9118 Fax: (852) 2509-7793 Website: www.gtja.com.hk

strong first quarter due to higher oil price, maintain ... · 5/15/2017 · due to low oil prices...

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