CNOOC Earnings: Excellent Cost Control Underpins Profit; Attractive Dividend

Despite weaker oil prices, CNOOC's first-half 2023 net profit of CNY 63.8 billion, down 11% year on year, was largely in line with the Refinitiv consensus. However, the results beat our expectations mainly due to lower-than-expected special oil gain levy and exploration expenses. After incorporating the latest results and updating our latest energy price and foreign exchange assumptions, we raise our 2023-25 earnings estimates by 22%-47%. Consequently, our fair value estimates are increased to HKD 18.00 per H-share (CNY 16.60 per A-share) from HKD 17.50 (CNY 15.30). Our long-term Brent forecast of USD 60 per barrel remains intact. We think CNOOC’s H-shares are currently undervalued, and the firm remains our top pick in the sector, given its cost efficiency and robust production growth.