CNOOC Stock at a Glance
- Fair Value Estimate: HK$ 18.00
- Morningstar Rating: 4 stars
- Morningstar Uncertainty Rating: High
- Morningstar Economic Moat Rating: None
CNOOC Earnings Update
Despite weaker oil prices, CNOOC's first-half 2023 net profit of CNY 63.8 billion, down 11% year on year, was largely in line with the Refinitiv consensus. However, the results beat our expectations mainly due to lower-than-expected special oil gain levy and exploration expenses. After incorporating the latest results and updating our latest energy price and foreign exchange assumptions, we raise our 2023-25 earnings estimates by 22%-47%. Consequently, our fair value estimates are increased to HK$ 18.00 per H-share (CNY 16.60 per A-share) from HK$ 17.50 (CNY 15.30). Our long-term Brent forecast of USD 60 per barrel remains intact. We think CNOOC’s H-shares are currently undervalued, and the firm remains our top pick in the sector, given its cost efficiency and robust production growth.
We think the key highlights are the impressive all-in cost and attractive dividend. First-half 2023 all-in cost was down 7% year on year to US$ 28.17 per barrel on the back of lower tax and operating expenses. Although this was partly aided by the depreciation of the Chinese yuan, this reaffirms management’s track record in containing costs and we believe CNOOC will keep its average all-in cost at around US$ 30 in our explicit five-year forecast periods. Meanwhile, CNOOC’s interim dividend of HK$ 0.59 per share (payout ratio of 40%) translates to an annualized yield of more than 9% for its H-shares based on the Aug. 17 closing price.
