CNOOC LTD(883.HK)：1Q25 EARNINGS SLIGHTLY AHEAD OF FORECAST-格隆汇

机构：中银国际
研究员：Lawrence LAU/Rainey DAI

　　The earnings of CNOOC Limited dropped 8% YoY to RMB36.6bn in 1Q25, 9% ahead of our forecast. The discrepancy mainly came from the higher-than-expected realised oil price and lower-than-expected costs.
　　The company will see lower earnings QoQ in 2Q25 if oil price stays at the current level for the rest of the period. However, Trump’s attitude towards his tariff war and Iran could significantly swing oil price. We change our 2025-27 earnings forecasts by -1.5% to +1.5% after updating our forecasts with the results and its annual report. We reiterate our BUY call with target price slightly lowered to HK$23.55.
　　Key Factors for Rating
　　In 1Q25, the company’s total oil and gas output grew 5% YoY to 188.8m BOE, reaching 24.5% of the mid-point of its full-year output guidance. However, its realised oil price dropped 8% YoY to US$72.65/bbl. Together with the negative swing of RMB1.2bn in investment income and the increase in effective tax rate (from 24% in 1Q24 to 27% in 1Q25), this resulted in 8% YoY decline in earnings.
　　The company continued to benefit from stringent cost control with unit opex and all-in cost down 3% YoY and 2% YoY to US$6.69/BOE and US$27.03/BOE respectively.
　　Its realised price was 2% above our forecast, its all-in cost was 1% below our forecast and its effective tax rate was 2ppt blow our forecast. All these enabled the company to beat our earnings forecast.
　　After the sharp fall in oil price in early April, the company will see lower earnings QoQ in 2Q25 if oil price stays at the current level. However, Trump’s fickle attitude towards his tariff war and his approach to Iran could result in big swing in oil price. Its low cost will also enable it to better deal with headwinds in oil price.
　　The company’s shares offer attractive dividend yield of 7.4-8.1% for 2025-27 assuming 45% payout. Our base case forecasts for Brent are still US$72/67/65 per bbl for 2025/26/27 respectively.
　　Key Risks for Rating
　　Sharp fall in oil price.
　　Higher-than-expected costs.
　　Valuation
　　We marginally lower our target price from HK$23.60 to HK$23.55 to reflect the changes in our earnings forecasts. Our target valuation is still 5.5% average 2025-27E dividend yield. Our target price is equal to 7.8x 2025E P/E.