CNOOC’s Record-High 2022 Earnings Driven by High Energy Prices and Effective Cost Control

CNOOC’s 2022 net profit of CNY 141.7 billion, double 2021 earnings, was in line with guidance. The robust results were backed by higher sales volume and strong oil and gas prices. We keep our fair value estimate at HKD 17.50 per H-share (CNY 15.30 per A-share) after incorporating our latest energy price and foreign exchange assumptions. CNOOC remains our top pick in the sector given its cost efficiency and oil and gas output growth. Although the payout ratio of 43% for 2022 appears low versus more than 80% in 2021 (due to a special dividend), we think forecast 2023 dividend yield of more than 8% for H-shares remains attractive for investors. We believe management is leaving some headroom considering the lower oil prices and heavy capital expenditure, but shareholder returns will remain a priority for CNOOC.