RE-ITERATEBUY Entry – 8.0 Target – 9.0 Stop Loss –7.5
CNOOC Limited is a Hong Kong-based investment holding company principally engaged in the exploration, production and trading of oil and gas. Its businesses include conventional oil and gas businesses, shale oil and gas businesses, oil sands businesses and other unconventional oil and gas businesses. The company mainly operates businesses through three segments. The Exploration and Production segment is engaged in the exploration, development and production of crude oil, natural gas and other petroleum products. The Trading segment is engaged in the trading of crude oil, natural gas and other petroleum products. The company mainly operates businesses in China, Canada, the United Kingdom, Nigeria, Indonesia and Brazil, among others.
Oil and gas is one of the 2022 top sector picks globally. We have headed into the third year since the COVID-19outbreak. With most people vaccinated, death rate and inpatient rates have been dropping substantially. Health specialists believe the pandemic will probably end by the end of 2022. Hence, the reopening of borders and economies is destined to come. Accordingly, the demand for oil is expected to rise, driven by the recovery of production and travelling activities. Due to the insufficient investments in exploration and production in the oil and gas sector over the past few years, we will see an imbalance of supply and demand dynamics, but this time there is insufficient supply rather than glut.
Oil prices resume the uptrend. Brent and WTI rebounded from low US$60s to current high US$70s per barrel. The upcoming OPEC+ meeting could bring another 400,000 bbls/d output hike for February. Meanwhile, The OPEC+ Joint Technical Committee, which analyzes the market on behalf of ministers, sees a surplus of 1.4mn bbls/d in 1Q22, about 25% less than it estimated a month ago.
The updated market consensus of the EPS growth in FY22/23 is 7.1%/-0.65% YoY respectively, which translates to 3.9x/3.9x forward PE. Current PER is 6.2x. Bloomberg consensus average 12-month target price is HK$12.44.
