CNOOC 0883

[winston]

Not vested. Note: Production Cost +15% yoy

DJ MARKET TALK: Cnooc Down 4.0%; Cost Pressure A Concern -Taifook

1128 [Dow Jones] Cnooc (0883.HK) down 4.0% at HK$11.60, vs HSI's 3.0% fall, after Nymex March crude futures settled down 5% at US$73.14/bbl Thursday, lowest settlement level since Jan. 29.

Taifook keeps positive view on Cnooc given its robust production target for 2010 but notes rising cost pressure a concern for upstream oil players.

"With increasing exploration expenses and the recovery of the crude oil price, we expect Cnooc's unit production cost to rise by 15% on-year in FY10 after an estimated 10% on-year increase in FY09," it says.

Keeps at Buy, raises target to HK$14.83 vs HK$14.37 after raising earnings estimate by 3% for FY10 to reflect higher projections both for production volume, costs.

Source: Dow Jones Newswire

[winston]

Not vested.

DJ MARKET TALK: Cnooc Down;Tullow Asset Talks Still Uncertain-DBS

1210 [Dow Jones] Cnooc (0883.HK) down 3.1% at HK$11.24; Gideon Lo at DBS attributes fall to continued crude price weakness, as crude price may test below $70/bbl again near-term due to USD strength.

Regarding company's plan to buy a stake in Ugandan oil assets of Tullow (TLW.LN) for US$2.5 billion, according to Dow Jones Newswires, which cites people with direct knowledge of the deal, Lo says it's still early to expect earnings contribution as it's not yet a done deal, while uncertainties over deal remain, with Total (TOT) and Tullow still in talks over Tullow's Ugandan assets, as Cnooc and Total are not interested in entering Uganda's oil sector together.

"We cannot work out any forecast over this deal, as it's not yet confirmed, while there are no details provided of its oilfield reserves." Keeps stock at Buy.

Source: Dow Jones Newswire

[winston]

Not vested.

DJ MARKET TALK: Sell Cnooc Into Current Bounce -Credit Suisse

1014 [Dow Jones] STOCK CALL: Credit Suisse tips selling Cnooc (0883.HK) into current bounce on view stock expensive. Says based on company's assessment of value in PV-10 filing to U.S. SEC for 2008, shares worth HK$2.80/share; estimates adjusting for current oil price environment puts value at HK$7.50/share.

Estimates market paying 50%-75% premium for future discoveries; says DCF valuation at HK$10.67 for 3.3 billion new barrels, indicating stock price implies long-term oil prices between US$85-US$120/bbl.

"With exploration activity rising, we believe CNOOC can deliver higher reserve replacement. But, the market appears to be pricing this in and more - leaving little room for disappointment."

Adds, "With volume growth surprises done and dusted, a disappointment on earnings will come from the cost side and should weigh on performance." Rates at Underperform, target at HK$10.67. Shares +1.0% at HK$12.72.

Source: Dow Jones Newswire

[winston]

Not vested. From Phillips:-


Valuation

We raise our target price from HK$ 13.10 to HK$15.53; thus we raise our recommendation from “HOLD” to “BUY”. Our target price is based on a P/E 16.52x (1 standard deviation above the historical mean) of our FY10 earning estimate, HK$ 0.94 per share. We assume the realized crude oil price will be US$75/bbl for FYI10.


Risk

1. Unstable and volatile crude oil price.
2. Sales are denominated in both RMB and US dollar. RMB appreciation is highly pressured. A currency risk is exposed: sales will decrease as oil and gas are priced in US dollar; imported equipment and materials will decrease; debt repayment will decrease as debts are denominated in US dollars.
3. 36% of the Company's debts were fixed interest rate, and the remaining are exposed to interest rate fluctuation.

[winston]

Not vested. From Phillips:-

RISKS
- Lower oil price.
- RMB appreciation will hurt oil and gas sales as they are priced in US dollar.
- Decrease demand of drills and rigs due to the potential new deep water drilling regulations caused by the BP rig explosion.


VALUATION
Currently, the Company is trading at 2010e p/e 11.3x, below our full year estimate of 14.15x. CNOOC has the est. strongest growth rate in both 2010 and 2011 among its peers; thus, we believe it's a good point to enter due to the cheap valuation.

We give CNOOC `BUY` rating with target price of HK$14.49, which is based on eps of HK$1.01 with p/e of 14.15x.

[winston]

Not vested

DJ MARKET TALK: CS Tips Cnooc 1H10 Net Profit +94% At CNY23.7 Bln

1340 [Dow Jones] STOCK CALL: Credit Suisse tips Cnooc (0883.HK) to report 1H10 net profit +94% on-year at CNY23.7 billion.

Says expects focus will be on costs; tips operating costs to continue rising in 1H10 on high cost of new production; expects unit operating costs +12%; says seasonality to result in higher costs in 2H vs 1H.

Expects EBIT margins flat on-year despite higher oil prices due to structural cost inflation. Notes stock has outperformed oil price, believes due to premium China investors put on company's growth, but house adds, believes costs will erode advantages of volume growth.

Views consensus estimates too high, have downside risk into 2011. Keeps at Underperform, target HK$11.00. Results due Aug. 19.

Source: Dow Jones Newswire

[winston]

Not vested

DJ MARKET TALK: Cnooc Set To Rise On Consensus-Beating 1H Results

0738 [Dow Jones] Cnooc (0883.HK) set to rise, bucking likely broad market decline, boosted by consensus-beating 110% on-year jump in 1H net profit to CNY25.99 billion vs average CNY21.07 billion forecast of 6 analysts surveyed by Dow Jones, driven by higher output, oil prices.

Interim dividend 21 HK cents vs 20 HK cents year ago. Company says Fu Chengyu will relinquish role as CEO but remain as chairman, with Yang Hua taking on CEO's role; unsurprising as analysts widely expected MIT-educated Yang Hua to succeed Fu.

Daiwa says Cnooc's 'excellent cost management' responsible for earnings beat, raises 6-month target price to HK$16.30 from HK$15.40, keeps Outperform call. Stock +0.9% at HK$13.00 yesterday.

Source: Dow Jones Newswire

[winston]

Not vested

DJ MARKET TALK:Cnooc Hit New 3-Yr High; Near Term Breather Likely

1149 [Dow Jones] Cnooc (0883.HK) +0.5% at HK$16.38, off intraday peak of HK$16.50 which marked fresh 3-year high, adding to 3-day 8.4% rally on oil prices strength; PetroChina (0857.HK) +1.2% at HK$9.61.

USD weakness underpins gains in broad range of commodities; Deutsche Bank says, "the world's key economies have launched a competitive and massive monetary reflation program."

While Cnooc likely to take breather near term, valuations by no means lofty, trading at 12.2X FY12 earnings based on Thomson Reuters. Volume tapers off to HK$504.9 million, also hinting near-term breather likely.

Source: Dow Jones Newswire

[winston]

Not vested. From Phillips:-


RISKS

Upside:
1. Higher than expected crude oil and natural gas prices
2. Higher than expected growth rate
3. New M&A activities or faster than expected completion of assets acquisitions

Downside:

1. Lower than expected growth rate. The Company drilled more than 283 wells in 2009 whereas less than half were drilled in 2008 (~110).

We are concerned if the fast growth rate is due to the increase amount of wells or higher flow rates per well, as management gave no details regarding this.

If the former was the case, growth rate had the possibility to slow down.

2. Lower than expected energy prices as CNOOC has a very strong correlation with the oil price.

3. RMB appreciation will hurt sales as they are priced in US dollar



VALUATION
We raise our 12 month target price to HK$15.84, based on 2011e p/e of 11.85x. We estimate CNOOC's production CAGR from 2010 to 2015 to be 9%, within management's 6-10% guideline.

Fundamentally, CNOOC remains to be our top pick within the industry in the long run; yet the Company is currently trading at HK$16.78 with a forward p/e of 14.5x, higher than +1 historical standard deviation.

We believe the stock price is already rich at this level and will see some correction.

[winston]

Not vested

DJ MARKET TALK: Cnooc +0.4%; Risks Not Discounted -Credit Suisse

1208 [Dow Jones] Cnooc (0883.HK) is up 0.4% at HK$19.18 and its volume is in-line with the recent average; the stock has been one of the best-performing blue chips in the past 52 weeks, riding on strong oil prices and strong production growth in 2010.

The stock's all-time high of HK$19.60 set last week, may act as a near-term cap. Credit Suisse says Cnooc did well in 2010, but believes 2011 "holds several challenges" with volume growth likely slowing sequentially, while it believes oil volumes in offshore China will decline by end-2011, and growth will shift from oil to gas and overseas oil, both of which have 30%-60% lower unit post-tax margins.

"Cnooc implies a long-term oil price of $115/bbl, and discounts none of these risks," the house says; it keeps an Underperform call and a HK$14 target.

Source: Dow Jones Newswire