Citigroup: CNOOC (00883)'s target price for the third quarter fell short of the expected target price of HK$33 due to one-time impairment performance

The Zhitong Finance App learned that Citibank released a research report saying that CNOOC (00883)'s net profit for the third quarter was RMB 33.3 billion, down 29% from quarter to quarter and up 3% year on year. The performance was lower than expected, mainly dragged down by a one-time depreciation of RMB 7.2 billion in specific overseas assets; the bank maintained the “buy” rating and target price of CNPC H shares of HK$33.

According to the bank, compared with the quarterly decline, oil prices have fallen 8% quarterly to US$88.03 per barrel, mainly dragged down by a one-time depreciation of RMB 7.2 billion in specific overseas assets, which is expected to decline in future cash flow due to changes in the business environment and revisions to production/sales arrangements. Management did not disclose specific asset or regional details. The company will re-evaluate the asset value at the end of the year and make additional preparations in the fourth quarter only if there are signs of impairment.

The bank pointed out that China continues to be highly dependent on oil and gas imports, and the National New Ten-Year Action Plan provides a favorable policy background for CNOOC to accelerate domestic exploration, expansion of reserves and production growth. Production in the third quarter was 195 million barrels of oil equivalent, up 0.6% year on year; production in the first nine months was 594 million barrels of oil equivalent, up 2.7% year on year. It has reached the annual target (780 million to 800 million barrels of oil equivalent) of about 74% to 76%, in line with management guidelines.