- Buy Entry – 8.6 Target – 9.5 Stop Loss – 8.2
- China Oilfield Services Limited is a comprehensive oilfield service provider. The Company mainly operates through four business segments. The Drilling Services segment is mainly engaged in the provision of oilfield drilling services. The Oil Field Technical Services segment is mainly engaged in the provision of oilfield technical services, including the logging, drilling fluids and directional drilling services. The Geophysical and Engineering Exploration Services segment is mainly engaged in the provision of seismic prospecting and engineering exploration services. The Marine Support Services segment is engaged in the transportation of supplies, including the delivery of crude oil, as well as refined oil and gas products. The Company mainly operates its businesses in domestic and overseas markets.
- 1Q22 results review. Gross revenue grew by 15.2% YoY to RMB6.8bn. Gross profit grew by 10.8% YoY to RMB733.7mn. Net profit attributable to shareholders of the company jumped by 67.7% YoY RMB303.8mn. Net profit excluding non-recurring gain and loss attributable to shareholders of the company jumped by 76.5% YoY to RMB266.7mn.
- Key operations highlights.
| Drilling Services | 1Q22 | 1Q21 | YoY Change (%) |
| Operating days | 3,922 | 3,291 | 19.2 |
| Jack-up Drilling Rigs | 3,239 | 2,568 | 26.1 |
| Semi-submersible Drilling Rigs | 683 | 723 | -5.5 |
| Utilisation rate (Available Day) | 84.2% | 69.8% | +14.4 ppts |
| Jack-up Drilling Rigs | 89.4% | 70.2% | +19.2 ppts |
| Semi-submersible Drilling Rigs | 66.1% | 68.3% | -2.2 ppts |
| Utilization Rate (Calendar Day) | 75.9% | 65.8% | 10.1 ppts |
| Jack-up Drilling Rigs | 83.0% | 67.0% | +16.0 ppts |
| Semi-submersible Drilling Rigs | 54.2% | 61.8% | -7.6 ppts |
- Expecting ongoing crude supply tightness. The EU continued to haggle with Hungary over plans to ban oil imports from Russia. Meanwhile, the European Council was confident to reach an agreement on the EU embargo on Russian oil before the council’s next meeting on May 30. President Joe Biden’s envoy for Iran said Wednesday the prospects of reviving the 2015 Iran nuclear deal were “tenuous” at best. The US also imposed sanctions on what it described as a Russian-backed oil smuggling and money laundering network for Iran’s Revolutionary Guards’ Quds Force. The geopolitical headwinds intensified the concerns over supply tightness moving forward. Brent and WTI slightly edged up to above US$114/bbl and US$110/bbl respectively on Thursday during the Asian hours.
- Mean reversion of capex. During 2020/21, the global integrated oil companies trimmed the capex of the exploration and production substantially. However, market analysts expect the capex to surge by 36.6% YoY to US$52.4bn in 2022. The performance of the exploration sector still lags behind the one of the production sector currently, but it will catch up eventually.
- Updated market consensus of the EPS growth in FY22/23 is 896.5%/19.4% YoY respectively, which translates to11.4x/9.6x forward PE. The current PER is 82.4x. Bloomberg consensus average 12-month target price is HK$10.99.
(Source: Bloomberg)