cnooc ltd. (883 hk) equities oil & gasimg.zhitongcaijing.com/uploadfile/20170327/...2017/03/27...
TRANSCRIPT
Disclosures & Disclaimer
This report must be read with the disclosures and the analyst certifications in
the Disclosure appendix, and with the Disclaimer, which forms part of it.
Issuer of report: The Hongkong and Shanghai Banking Corporation Limited
View HSBC Global Research at:
https://www.research.hsbc.com
Just beyond the horizon, are big projects; growth returns via
an exciting project slate in 2020+ in Africa, Latin America
But delivering the plan will be challenging and with execution
risk, despite strong partners
Upgrade to Hold from Reduce; raise TP to HKD8.8 from
HKD6.75; based on PB/ROE methodology
We expect oil price driven ROE improvement over 2017-19e, as production
guidance is essentially flat over 2017-19e. Returns will remain below their historical
average, despite our expectation for higher prices. We expect ROEs to cross back over
10%, which should lift us back toward a 1x PB fair value in time. Revenue and operating
profit should rise given our view that oil prices are likely to move higher. Chairman Yang
indicated that some of the hard fought cost efficiency gains will likely erode with the
stronger commodity cycle, although overall, operating and net margins should expand.
Better context was given on capex and dividend policy, both of which are driven by cash
flow more than earnings, as CNOOC aims to maintain positive free cash flow. The 17%
cash flow payout ratio in 216 is beyond our expectation by 3ppt, while we still set a 14%
ratio in our forecast period, which is a comfortable and manageable level of incremental
debt. Management reiterated 2017 capex of RMB60-70bn, or 20-40% higher y-o-y.
2016 net profit of RMB637m -97% y-o-y: The final dividend was above our expectation
of HKD0.23, which with the HKD0.11 interim, implies a spot yield of 4% and signals yield
potential. PBT and net income were roughly in line with HSBCe and consensus. The
income tax credit of RMB5.9bn was larger than we had expected. Revenue -15%, as oil
and gas prices fell 19% and 15% y-o-y. Production volume fell 4% to 477mboe near the
low-end of guidance. Asset impairments were higher at RMB12.2bn with provisions in
North America, Europe, Africa, and Canada oil sands adjustments. Lease contract expiry,
DD&A, and exploration expenses added RMB1.4bn.
Upgrade to Hold from Reduce with a new fair value TP of HKD8.80 (from HKD6.75).
Our revised TP implies 1% downside from current levels; accordingly, we rate the stock
Hold. We value CNOOC using a near-term pure PB-based methodology. We see a slow
valuation recovery, given a lower ROE trajectory in 2017-18e compared with previous
cyclical recoveries. Specifically, we apply a PB multiple of 0.91x to the 2017e BVPS of
HKD9.70 to reflect the expected 2017-18e average ROE of 9.1% (previously, a PB
multiple of 0.7x to 2017e BVPS of HKD9.48 was used to reflect the expected 2017e ROE
of 7%). Key upside risks: Higher oil prices, faster production growth, effective cost
control, limited asset impairments, lower taxes, and positive emerging market equity
flows. Key downside risks: Lower oil prices, production problems, cost inflation, higher
taxes, failed exploration, and destructive M&A.
24 March 2017
UPGRADE TO HOLD
TARGET PRICE (HKD) PREVIOUS TARGET (HKD)
8.80 6.75
SHARE PRICE (HKD) UPSIDE/DOWNSIDE
8.89 -1.0% (as of 23 Mar 2017)
MARKET DATA Market cap (HKDm) 396,916 Free float 35%
Market cap (USDm) 51,108 BBG 883 HK
3m ADTV (USDm) 86 RIC 0883.HK
FINANCIALS AND RATIOS (RMB) Year to 12/2016a 12/2017e 12/2018e 12/2019e
HSBC EPS 0.01 0.61 1.03 0.98
HSBC EPS (prev) -0.05 0.59 0.99 -
Change (%) n/m 3.4 4.0 -
Consensus EPS -0.01 0.60 0.81 0.80
PE (x) 552.4 12.9 7.7 8.0
Dividend yield (%) 3.8 3.9 4.9 5.0
EV/EBITDA (x) 7.0 4.3 3.4 3.4
ROE (%) 0.2 7.0 11.2 10.0
52-WEEK PRICE (HKD)
Source: Thomson Reuters IBES, HSBC estimates
Thomas C. Hilboldt*, CFA Head of Resources and Energy Research, Asia Pacific
The Hongkong and Shanghai Banking Corporation Limited
+852 2822 2922
Dennis Yoo, CFA* Analyst The Hongkong and Shanghai Banking Corporation Limited
+852 2996 6917
Yi Ru*
Associate
*Employed by a non-US affiliate of HSBC Securities (USA) Inc, and is not registered/qualified pursuant to FINRA regulations.
CNOOC Ltd. (883 HK) EQUITIES OIL & GAS
China
8.30
9.65
11.00
03/16 09/16 03/17
Target price: 8.80 High: 10.70 Low: 8.59 Current: 8.89
Upgrade to Hold from Reduce: The first inflection
EQUITIES ● OIL & GAS
24 March 2017
2
Financial statements
Year to 12/2016a 12/2017e 12/2018e 12/2019e
Profit & loss summary (RMBm)
Revenue 146,490 191,985 240,830 252,362
EBITDA 66,495 110,527 140,229 142,699
Depreciation & amortisation -68,907 -71,637 -76,952 -81,935
Operating profit/EBIT -2,412 38,890 63,278 60,763
Net interest -5,345 -6,496 -7,316 -7,805
PBT -5,275 36,484 61,212 58,411
HSBC PBT -5,275 36,484 61,212 58,411
Taxation 5,912 -9,121 -15,303 -14,603
Net profit 637 27,363 45,909 43,808
HSBC net profit 637 27,363 45,909 43,808
Cash flow summary (RMBm)
Cash flow from operations 72,863 68,206 88,397 118,786
Capex -56,359 -65,345 -80,126 -107,510
Cash flow from investment -56,780 -65,478 -80,269 -107,544
Dividends -13,391 -13,860 -17,201 -17,604
Change in net debt -16,037 11,132 9,073 6,362
FCF equity -6,369 48,344 57,647 17,541
Balance sheet summary (RMBm)
Intangible fixed assets 20,339 20,043 20,192 21,395
Tangible fixed assets 468,997 474,050 489,406 517,857
Current assets 122,045 154,551 196,593 208,757
Cash & others 13,735 12,603 18,530 22,169
Total assets 637,681 676,917 738,705 782,148
Operating liabilities 99,164 113,136 129,325 136,117
Gross debt 150,476 160,476 175,476 185,476
Net debt 136,741 147,873 156,946 163,307
Shareholders' funds 382,371 395,874 424,583 450,787
Invested capital 498,482 522,905 558,337 589,723
Ratio, growth and per share analysis
Year to 12/2016a 12/2017e 12/2018e 12/2019e
Y-o-y % change
Revenue -14.6 31.1 25.4 4.8
EBITDA -26.8 66.2 26.9 1.8
Operating profit -113.8 62.7 -4.0
PBT -130.8 67.8 -4.6
HSBC EPS -96.9 4195.5 67.8 -4.6
Ratios (%)
Revenue/IC (x) 0.3 0.4 0.4 0.4
ROIC 0.1 5.7 8.8 7.9
ROE 0.2 7.0 11.2 10.0
ROA 0.0 5.0 7.3 6.6
EBITDA margin 45.4 57.6 58.2 56.5
Operating profit margin -1.6 20.3 26.3 24.1
EBITDA/net interest (x) 12.4 17.0 19.2 18.3
Net debt/equity 35.8 37.4 37.0 36.2
Net debt/EBITDA (x) 2.1 1.3 1.1 1.1
CF from operations/net debt 53.3 46.1 56.3 72.7
Per share data (RMB)
EPS Rep (diluted) 0.01 0.61 1.03 0.98
HSBC EPS (diluted) 0.01 0.61 1.03 0.98
DPS 0.30 0.31 0.39 0.39
Book value 8.56 8.87 9.51 10.10
Key forecast drivers
Year to 12/2016a 12/2017e 12/2018e 12/2019e
Total Production (mboe) 478 452 458 465
Brent (USD/b) 45 60 75 76
Realized Oil Price(USD/b) 41 56 70 72
Realized Gas Price (USD/kcf) 5.5 5.5 5.8 6.1
Lifting Costs (USD/b) 7.6 8.3 9.6 10.1
Valuation data
Year to 12/2016a 12/2017e 12/2018e 12/2019e
EV/sales 3.2 2.5 2.0 1.9
EV/EBITDA 7.0 4.3 3.4 3.4
EV/IC 0.9 0.9 0.9 0.8
PE* 552.4 12.9 7.7 8.0
PB 0.9 0.9 0.8 0.8
FCF yield (%) -2.0 14.9 18.0 5.5
Dividend yield (%) 3.8 3.9 4.9 5.0
* Based on HSBC EPS (diluted)
Issuer information
Share price (HKD) 8.89 Free float 35%
Target price (HKD) 8.80 Sector Oil & Gas
Reuters (Equity) 0883.HK Country China
Bloomberg (Equity) 883 HK Analyst Thomas C. Hilboldt, CFA
Market cap (USDm) 51,108 Contact +852 2822 2922
Price relative
Source: HSBC Note: Priced at close of 23 Mar 2017
5.50
7.50
9.50
11.50
13.50
5.50
7.50
9.50
11.50
13.50
2015 2016 2017
CNOOC Ltd. Rel to HSCEI
Financials & valuation: CNOOC Ltd. Hold
3
EQUITIES ● OIL & GAS
24 March 2017
Investment thesis
CNOOC is a state-owned enterprise (65%) and one of the world’s largest pure E&P companies.
We rate CNOOC shares Hold with a fair value target price of HKD8.80, which is based on a
PB/ROE relationship. The company’s impressive progress in reducing operating costs and
restraining capex has allowed it to pass through the worst of the industry down cycle and
emerge tougher. Y-o-y flat output targets can be partially offset by higher crude oil price
expectations. We believe that the stock needs to move further through the current oil price cycle
before investors turn more constructive on the stock.
Other features of our thesis. We have suggested over the past year that CNOOC shares
would not outperform peers in a low oil price environment. As you look down the long row of oil-
related names in the chart below you will see that this is correct. The shares are near the same
level they have been over all recent periods, i.e. stuck in a range.
Conversely, we have seen the integrated oils, select services, and refiners, perform relatively
well in absolute terms.
Outlook. We see a pivot, a slow pivot, towards better absolute and relative share price
performance. The market took the CNOOC shares above HKD10.0 on a number of trading days
over 2016. However, in the past CNOOC only traded above HKD10 when oil was above
USD80/b. Thus we viewed this as misplaced euphoria on the share price potential. We think we
are closer to a better balanced oil market, and the potential for the shares to hold these levels
until crude oil regains its price momentum.
OPEC production restraint and the meeting on 25 May 2017. OPEC plans to hold a meeting
in 2Q17 to discuss its oil production policies and potentially extend the production targets that
are in place to help balance the oil market. If the production cuts were extended or even
tightened this would be a positive signal and could improve the outlook for CNOOC shares.
China Oils: Absolute share price performance (%)
Source: Thomson Reuters Datastream
-4 -2 -4 -2
4 7
-5 -7 -8 -4
14
-3
1
-8
80 5
20 18
4 7
-8
010
213
-2
13 1828
20 22
512
3926
107
1440
23
920
13
26
-12
19 2313
114
1219
-6
92
821 20
3 5
-8
5
18
311
-20
0
20
40
60
80
100
120
140
-1M -3M -6M -1YR YTD
EQUITIES ● OIL & GAS
24 March 2017
4
Earnings revisions
We raise our revenue forecast by 1%/2%/3% in 2017-19e and EBIT margin by up to 2% in
2017-19e to reflect better cost management. As a result, we raise our EPS estimates by
3%/4%/6% for 2017-19e. We update our model for the following key variables to reflect 2016
estimates, 2017-18 guidance, and establish our 2019 estimates.
Forecast revision
___________________ New __________________ ___________________ Old __________________ _________________% change _______________ 2016 2017e 2018e 2019e 2016e 2017e 2018e 2019e 2016e 2017e 2018e 2019e
RMB:USD 6.65 7.13 7.20 7.20 6.65 7.13 7.20 7.20 0% 0% 0% 0% Brent oil price (USD/b) 45.0 60.0 75.0 76.0 45.0 60.0 75.0 76.0 0% 0% 0% 0% Realized oil price (USD/b) 41.4 55.8 69.8 72.2 42.8 57.0 71.3 73.0 -3% -2% -2% -1% Realized gas price (USD/mcf) 5.46 5.51 5.79 6.08 5.62 5.76 6.05 6.35 -3% -4% -4% -4% CNOOC CONSOL (mboe) 460 434 440 447 457 437 441 445 1% -1% 0% 0% Equity (mboe) 18 18 18 18 18 18 18 18 -2% -2% -2% 0% CNOOC RPT PROD (mboe) 478 452 458 465 475 455 459 463 1% -1% 0% 0% CNOOC RPT PROD (mtoe) 65 62 63 63 65 62 63 63 1% -1% 0% 1% Revenue (RMBbn) 146.5 192.0 240.8 252.4 144.8 190.3 236.6 244.2 1% 1% 2% 3% EBIT (RMBbn) (2.4) 38.9 63.3 60.8 (1.7) 38.9 61.6 57.6 39% 0% 3% 5%
Net Income (RMBbn) 0.6 27.4 45.9 43.8 (2.3) 26.6 44.2 41.2 -128% 3% 4% 6%
EBIT Margin -1.6% 20.3% 26.3% 24.1% -1.2% 20.4% 26.0% 23.6% 37% -1% 1% 2% Net Income Margin 0.4% 14.3% 19.1% 17.4% -1.6% 14.0% 18.7% 16.9% -128% 2% 2% 3%
EPS (RMB) 0.01 0.61 1.03 0.98 -0.05 0.59 0.99 0.92 -128% 3% 4% 6% DPS (RMB) 0.30 0.31 0.39 0.39 0.21 0.31 0.38 0.39 40% 0% 1% 1%
CFPS (RMB) 1.82 2.43 2.98 3.05 1.79 2.43 2.96 3.00 BVPS (RMB) 8.56 8.87 9.51 10.10 8.38 8.66 9.27 9.81 EPS Growth y-o-y (%) -97% 4196% 68% -5% -111% -1261% 67% -7% CFPS Growth y-o-y (%) -30% 33% 23% 2% -31% 36% 22% 1% EPS Payout (%) 2102% 51% 37% 40% -420% 52% 39% 42% CFPS Payout (%) 17% 14% 14% 14% 14% 14% 14% 14% Yield (%) 3.9% 3.8% 4.7% 4.8% 2.5% 3.4% 4.1% 4.2%
ROE (%) 0.2% 7.0% 11.2% 10.0% -0.6% 7.0% 11.0% 9.7% ROE: 2YR Rolling (%) 2.7% 3.6% 9.1% 10.6% 2.3% 3.2% 9.0% 10.4% ROE: 3YR Rolling (%) 7.4% 4.2% 6.1% 9.4% 7.1% 3.9% 5.8% 9.2%
EPS (HKD) 0.02 0.67 1.11 1.06 -0.06 0.65 1.07 1.00 DPS (HKD) 0.35 0.34 0.42 0.43 0.25 0.34 0.41 0.42 CFPS (HKD) 2.12 2.65 3.23 3.31 2.09 2.66 3.21 3.25 BVPS (HKD) 9.99 9.70 10.30 10.94 9.78 9.48 10.04 10.62 Current px (HKD) 8.93 10.00 -11%
Target px (HKD) 8.80 6.75 30%
Up/(downside) % -1% -33%
Current PE(x) 536.3 13.3 8.0 8.4 -167.2 15.4 9.3 10.0 Current PB(x) 0.89 0.92 0.87 0.82 1.02 1.06 1.00 0.94 Current P/CF(x) 4.2 3.4 2.8 2.7 4.8 3.8 3.1 3.1
Target PE (x) 528.5 13.1 7.9 8.3 -112.9 10.4 6.3 6.8 Target PCF (x) 4.1 3.3 2.7 2.7 3.2 2.5 2.1 2.1 Target PB (x) 0.88 0.91 0.85 0.80 0.69 0.71 0.67 0.64
Consensus Target (HKD) 11.14 11.73 -5% HSBC vs. Consensus -21% -42%
Consensus Target PE (x) -340.9 17.1 13.0 402.1 18.2 12.1 8.7
HSBC EPS (RMB) 0.01 0.61 1.03 0.98 (0.05) 0.59 0.99 0.92 Consensus EPS (RMB) (0.03) 0.60 0.79 0.74 0.03 0.59 0.90 1.24 -212% 1% -11%
HSBC vs Consensus (%) -151% 3% 30% 32% -305% 1% 10% -26%
Source: Company report, HSBC estimates
5
EQUITIES ● OIL & GAS
24 March 2017
Lower 2017-19e CNOOC oil price vs. Brent: We widen the spread to reflect 2016 relative
Brent vs. CNOOC oil price.
2017-18e output remains as per guidance: Limited adjustments within a guided range of
outcomes.
Consistent application of cash flow to capital spending. We forecast capex at 80% of
cash flow from operations, leaving room for dividend payments.
Dividend payout is a slightly less given lower cash flow as development expenditure
is set to rise. We fix the dividend at 14% of cash flow from operations, which is a
comfortable level which requires a manageable level of incremental debt.
This puts our earnings 3%/30%/32% above Bloomberg consensus in 2017/18/19e, as
consensus guided for a lower oil price deck and a 5% lower EBIT margin in 2018/19e vs. our
forecast.
Valuation and risks
Upgrade to Hold from Reduce with a new fair value TP of HKD8.8 (from HKD6.75). Our
revised TP implies 1% downside from current levels; accordingly, we rate the stock Hold. We
value CNOOC using a near-term pure PB-based methodology. We see a slow valuation
recovery, given a lower ROE trajectory in 2017-18e compared with previous cyclical recoveries.
Specifically, we apply a PB multiple of 0.91x to the 2017e BVPS of HKD9.70 to reflect the
expected 2017-18e average ROE of 9.1% (previously, a PB multiple of 0.7x to 2017e BVPS of
HKD9.48 was used to reflect the expected 2017e ROE of 7%). We use the average ROE of
2017-18e instead of 2017e ROE to emphasize our more forward looking weighted approach.
Key upside risks: Higher oil prices, faster production growth, effective cost control, limited
asset impairments, lower taxes, and positive emerging market equity flows. Key downside
risks: Lower oil prices, production problems, cost inflation, higher taxes, failed exploration, and
destructive M&A.
CNOOC: Semi-annual ROE vs. PB, time series, 2000-16 1H
CNOOC: Semi-annual ROE vs. PB, scatter, 2000-18e
Source: Bloomberg Source: Bloomberg, HSBC estimates
R² = 0.6466
-1.0-0.50.00.51.01.52.02.53.03.54.04.5
-5 0 5 10 15 20 25 30 35 40 45
PB
(x)
ROE (%)
-1.0-0.50.00.51.01.52.02.53.03.54.04.5
-10-505
1015202530354045
1H01
1H02
1H03
1H04
1H05
1H06
1H07
1H08
1H09
1H10
1H11
1H12
1H13
1H14
1H15
1H16
1H17
e1H
18e
RETURN_COM_EQY (LHS)
LT avg ROE (LHS)
AVERAGE_PRICE_TO_BOOK_RATIO (RHS)
EQUITIES ● OIL & GAS
24 March 2017
6
Key valuation parameters
CNOOC: Share price vs. Consensus EPS CNOOC: Share price vs. Consensus BPS
Source: Bloomberg Source: Bloomberg
CNOOC: PE band CNOOC: PE historical range and average
Source: Thomson Reuters Datastream Source: Thomson Reuters Datastream
CNOOC: PB band CNOOC: PB historical range and average
Source: Thomson Reuters Datastream Source: Thomson Reuters Datastream
-0.50
0.00
0.50
1.00
1.50
2.00
2.50
0.02.04.06.08.0
10.012.014.016.018.0
Sep
-13
Dec
-13
Mar
-14
Jun-
14
Sep
-14
Dec
-14
Mar
-15
Jun-
15
Sep
-15
Dec
-15
Mar
-16
Jun-
16
Sep
-16
Dec
-16
Mar
-17
Rm
b/S
h
HK
D
Sh Px-CNOOC (LHS) EEPS-Current Yr
EEPS-Next Yr
7.00
8.00
9.00
10.00
11.00
12.00
13.00
14.00
56789
101112131415
Jan-
13
Jun-
13
Nov
-13
Apr
-14
Sep
-14
Feb
-15
Jul-1
5
Dec
-15
May
-16
Oct
-16
Mar
-17
Rm
b/S
h
HK
D
Sh Px-CNOOC (LHS) EBPS_CURRBEST_EBPS_NXT_YR
8x
10x
12x
6x0
5
10
15
20
25
30
Nov
-04
Nov
-05
Nov
-06
Nov
-07
Nov
-08
Nov
-09
Nov
-10
Nov
-11
Nov
-12
Nov
-13
Nov
-14
Nov
-15
Nov
-16
Share Price (HKD)
Avg. 11.9
0x
10x
20x
30x
40x
50x
Nov
-04
Nov
-05
Nov
-06
Nov
-07
Nov
-08
Nov
-09
Nov
-10
Nov
-11
Nov
-12
Nov
-13
Nov
-14
Nov
-15
Nov
-16
CNOOC forward PE
1.0x
2.0x
2.5x
1.5x
0
5
10
15
20
25
30
Nov
-04
Nov
-05
Nov
-06
Nov
-07
Nov
-08
Nov
-09
Nov
-10
Nov
-11
Nov
-12
Nov
-13
Nov
-14
Nov
-15
Nov
-16
Share Price (HKD)
Avg. 1.8
0x
1x
2x
3x
4x
5x
Nov
-04
Nov
-05
Nov
-06
Nov
-07
Nov
-08
Nov
-09
Nov
-10
Nov
-11
Nov
-12
Nov
-13
Nov
-14
Nov
-15
Nov
-16
CNOOC forward PB
7
EQUITIES ● OIL & GAS
24 March 2017
CNOOC: Production target, 2016-19
2016 2017T 2018T 2019T
Output shares China 65% 64% 64% 64% Overseas 35% 36% 36% 36%
Total Output Low 476 450 455 460 High 460 465 470
Low Output China 309 288 291 294 Overseas 167 162 164 166
LOW TOTAL mboe 476 450 455 460
Variance China -21 3 3 Overseas -5 2 2 LOW DELTA mboe -26 5 5
y-o-y growth China -7% 1% 1% Overseas -3% 1% 1% GROWTH -5% 1% 1%
High Output China 309 294 298 301 Overseas 167 166 167 169
HI TOTAL mboe 476 460 465 470
Variance China -15 3 3 Overseas -1 2 2 HI DELTA mboe -16 5 5
y-o-y growth China -5% 1% 1% Overseas -1% 1% 1% HI GROWTH -3% 1% 1%
Note: T = Company target. Source: Company report
2016 results summary
CNOOC reported a loss at the operating level and the PBT level. Operation loss at RMB2.4bn
was above our estimate of RMB1.7bn while PBT was below our expectation at RMB5.3bn
(HSBCe: RMB5.7bn). Total revenue fell 15% y-o-y to RMB146.5bn, as production fell 3.8% to
477mboe and realised oil/gas prices fell 19% and 15%, respectively to USD41.4/bbl for oil and
USD5.46/mcf for gas. Costs were contained well but there were impairments of RMB12.1bn
with provisions in North America, Europe, Africa, and Canada oil sands adjustments. Lifting
costs totalled USD7.6/b vs. USD9.4/b in 2015. A tax credit of RMB5.9bn ensured that net
income moved into positive territory at RMB637m.
CNOOC: Low production target (mboe) CNOOC: Hi production target (mboe)
Note: T = Company target. Source: Company data
Note: T = Company target. Source: Company data
309 288 291 294
167162 164 166
476450 455 460
0
100
200
300
400
500
600
2016 2017T 2018T 2019T
China Overseas LOW TOTAL mboe
309 294 298 301
167 166 167 169
476 460 465 470
0
100
200
300
400
500
600
2016 2017T 2018T 2019TChina Overseas HI TOTAL mboe
EQUITIES ● OIL & GAS
24 March 2017
8
All-in-costs, 2010-2016 (USD/b)
Source: : Company data, (differences from disclosed figures are a function of different exchange rates)
Low tax rate and high dividend payout persist for another year
CNOOC: Historical consolidated income expense and tax rate (RMBm and %)
CNOOC: Historical dividend payment and payout on cash flow (%)
Source: Company data Source: Company data , HSBC estimates
5.3 6.2 7.4 8.0 7.0 9.1 10.6 12.4 12.2 9.4 7.65.2 5.7 6.9
10.2 12.014.2
15.2
22.3 21.923.6
21.7
1.2 1.31.3
1.5 1.41.4
1.7
3.2 2.6 1.92.1
2.5 2.73.6
2.5 3.2
5.17.7
6.64.6
3.62.3
14.216.0
19.222.1 23.6
29.8
35.3
44.541.3
38.4
33.7
0
10
20
30
40
50
60
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
(1) Lif ting Costs (5) DD&A+Dismant SGA (2) Prod+Res Taxes TOTAL OPEX (USD/b)
-120%-100%-80%-60%-40%-20%0%20%40%
(40,000)
(30,000)
(20,000)
(10,000)
0
10,000
20,000
30,000
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
Tax (Exp)/Credit (Rmb mn) Tax Rate (%)
0%10%20%30%40%50%60%70%80%90%100%
(40,000)(30,000)(20,000)(10,000)
010,00020,00030,000
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
e20
18e
2019
e
Dividend (Exp) (Rm mn)
Payout on Cash Flow (%)
CNOOC annual results, 2016 (RMBm)
Yearly 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Oil & Gas Sales 73,037 100,831 83,914 146,134 189,279 194,774 226,445 218,210 146,597 121,325 Marketing Revenue 315 292 297 209 162 248 286 275 171 146
EBT 43,311 57,880 40,821 72,603 92,565 87,141 78,503 80,915 17,456 -2,412
Income Tax exp/(credit)- 12,052 13,505 11,336 18,193 22,310 26,481 24,390 22,314 -3,116 -5,912
NET PROFIT 31,258 44,375 29,486 54,410 70,255 63,691 56,461 60,199 20,246 637
EPS-RMB 0.72 0.99 0.66 1.22 1.57 1.43 1.26 1.35 0.45 0.01 DPS-RMB 0.26 0.33 0.35 0.40 0.44 0.38 0.45 0.45 0.41 0.30 Payout: EPS 37% 33% 53% 33% 28% 27% 36% 34% 89% NA Payout: CFPS 29% 24% 31% 19% 16% 14% 14% 14% 16% 17% y-o-y (%)
Oil & Gas Sales 38% -17% 74% 30% 3% 16% -4% -33% -17% Marketing Revenue -7% 2% -30% -22% 53% 15% -4% -38% -15% EBT 34% -29% 78% 27% -6% -10% 3% -78% -114% Income Tax 12% -16% 60% 23% 19% -8% -9% -114% 90% NET PROFIT 42% -34% 85% 29% -9% -11% 7% -66% -97% EPS-RMB 38% -33% 85% 29% -9% -12% 7% -66% -98% DPS-RMB 24% 7% 14% 10% -13% 18% 0% -11% -26%
Source: Company data
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24 March 2017
Disclosure appendix
Analyst Certification
The following analyst(s), economist(s), and/or strategist(s) who is(are) primarily responsible for this report, certifies(y) that the
opinion(s) on the subject security(ies) or issuer(s) and/or any other views or forecasts expressed herein accurately reflect their
personal view(s) and that no part of their compensation was, is or will be directly or indirectly related to the specific
recommendation(s) or views contained in this research report: Thomas C. Hilboldt, CFA and Dennis Yoo, CFA
Important disclosures
Equities: Stock ratings and basis for financial analysis
HSBC believes an investor's decision to buy or sell a stock should depend on individual circumstances such as the investor's
existing holdings, risk tolerance and other considerations and that investors utilise various disciplines and investment horizons
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From 23rd March 2015 HSBC has assigned ratings on the following basis:
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Our ratings are re-calibrated against these bands at the time of any 'material change' (initiation or resumption of coverage,
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Prior to this date, HSBC’s rating structure was applied on the following basis:
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however, volatility had to move 2.5 percentage points past the 40% benchmark in either direction for a stock's status to change.
EQUITIES ● OIL & GAS
24 March 2017
10
Rating distribution for long-term investment opportunities
As of 24 March 2017, the distribution of all independent ratings published by HSBC is as follows:
For the purposes of the distribution above the following mapping structure is used during the transition from the previous to
current rating models: under our previous model, Overweight = Buy, Neutral = Hold and Underweight = Sell; under our current
model Buy = Buy, Hold = Hold and Reduce = Sell. For rating definitions under both models, please see “Stock ratings and basis
for financial analysis” above.
For the distribution of non-independent ratings published by HSBC, please see the disclosure page available at
http://www.hsbcnet.com/gbm/financial-regulation/investment-recommendations-disclosures.
Share price and rating changes for long-term investment opportunities
CNOOC Ltd. (0883.HK) share price performance HKD Vs
HSBC rating history
Rating & target price history
From To Date Analyst
Overweight Underweight 15 Jan 2015 Thomas C. Hilboldt Underweight Reduce 27 Mar 2015 Thomas C. Hilboldt Reduce Hold 26 Aug 2015 Thomas C. Hilboldt Hold Reduce 31 Aug 2015 Thomas C. Hilboldt
Target price Value Date Analyst
Price 1 15.40 19 Nov 2014 Thomas C. Hilboldt Price 2 9.25 15 Jan 2015 Thomas C. Hilboldt Price 3 8.25 31 Aug 2015 Thomas C. Hilboldt Price 4 5.55 24 Jan 2016 Thomas C. Hilboldt Price 5 5.80 24 Aug 2016 Thomas C. Hilboldt Price 6 6.75 20 Jan 2017 Thomas C. Hilboldt
Source: HSBC
Source: HSBC
To view a list of all the independent fundamental ratings disseminated by HSBC during the preceding 12-month period, please
use the following links to access the disclosure page:
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HSBC & Analyst disclosures
Disclosure checklist
Company Ticker Recent price Price date Disclosure
CNOOC LTD. 0883.HK 8.89 23 Mar 2017 4, 6, 7, 11
Source: HSBC
1 HSBC has managed or co-managed a public offering of securities for this company within the past 12 months.
2 HSBC expects to receive or intends to seek compensation for investment banking services from this company in the next 3
months.
3 At the time of publication of this report, HSBC Securities (USA) Inc. is a Market Maker in securities issued by this
company.
4 As of 28 February 2017 HSBC beneficially owned 1% or more of a class of common equity securities of this company.
5 As of 31 January 2017, this company was a client of HSBC or had during the preceding 12 month period been a client of
and/or paid compensation to HSBC in respect of investment banking services.
6 As of 31 January 2017, this company was a client of HSBC or had during the preceding 12 month period been a client of
and/or paid compensation to HSBC in respect of non-investment banking securities-related services.
5
7
9
11
13
15
17
Mar
-12
Mar
-13
Mar
-14
Mar
-15
Mar
-16
Mar
-17
Buy 45% ( 25% of these provided with Investment Banking Services )
Hold 40% ( 26% of these provided with Investment Banking Services )
Sell 15% ( 18% of these provided with Investment Banking Services )
11
EQUITIES ● OIL & GAS
24 March 2017
7 As of 31 January 2017, this company was a client of HSBC or had during the preceding 12 month period been a client of
and/or paid compensation to HSBC in respect of non-securities services.
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12 As of 20 March 2017, HSBC beneficially held a net long position of more than 0.5% of this company’s total issued share
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Additional disclosures
1. This report is dated as at 24 March 2017.
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12
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