CNOOC Earnings: A Record High Quarter Driven by Stronger Oil Price and Excellent Cost Control

CNOOC's first-quarter 2024 net profit beats our expectation, rising 24% year on year to CNY 39.7 billion, a record high. After incorporating our latest energy price assumptions and finetuning our production forecasts, we raise 2024-26 earning estimates by an average of 6%. Consequently, we increase our fair value estimate to HKD 19.70 per H-share (CNY 18.10 per A-share) from HKD 19.00 (CNY 17.50). At current prices, we think CNOOC's H-shares are fairly valued, although its near-term share price performance should continue to be supported by investors' preference for safe-haven assets. That said, on the supply side, Saudi Arabia and OPEC+ have about 5 million barrels per day of supply—if not more—that can be returned to the market if oil prices were to overheat and spike well above USD 100 per barrel. We expect there to be more downside risks than upside now to oil prices. Our long-term Brent oil price forecast of USD 60 per barrel remains unchanged.