EB SECURITIES: CNOOC Limited (00883) Achieves a New High in Oil and Gas Production and Reserves for 25 Consecutive Years, Showing Resilient Performance in a Period of Declining Oil Prices.

EB SECURITIES release research report stating that by 2025, international oil prices will fluctuate downward, with an average Brent oil futures price of $68.19 per barrel, a year-on-year decrease of -14.6%. CNOOC Limited (00883) has overcome the pressure of downward fluctuations in international oil prices, continuously focusing on increasing reserves and production, and controlling costs, demonstrating resilience in profitability. The company achieved an annual oil and gas equivalent production of 777.3 million barrels of oil equivalent, a year-on-year increase of 7%. Crude oil production increased by 5.8%; natural gas production increased significantly by 11.6%. The bank believes that with geopolitical tensions pushing up oil prices, the strategic value of the company's energy security is highlighted. The main contents of the research report are as follows: Event: The company released its 2025 report. In 2025, the company achieved total operating revenue of RMB 398.2 billion, a year-on-year decrease of -5.3%, and achieved a net profit attributable to equity holders of RMB 122.1 billion, a year-on-year decrease of -11.5%. In the fourth quarter of 2025, the company achieved total operating revenue of RMB 85.7 billion, a year-on-year decrease of -9.3% and a quarter-on-quarter decrease of -18.3%, achieving a net profit attributable to equity holders of RMB 20.1 billion, a year-on-year decrease of -5.5% and a quarter-on-quarter decrease of -38.0%. Commentary: Increasing reserves and production while improving quality and efficiency, resilience in 2025 performance demonstrated. International oil prices are expected to fluctuate downward in 2025, with an average Brent oil futures price of $68.19 per barrel, a year-on-year decrease of -14.6%. The company has overcome the pressure of downward fluctuations in international oil prices by focusing on increasing reserves and production and controlling costs, demonstrating resilience in profitability. The company's cash flow performance remained stable, with operating cash flow for the year at RMB 209.0 billion, a year-on-year decrease of -5.4%. The company's full-year weighted average ROE was 15.7%, a decrease of -3.8 percentage points year-on-year. The company maintains a prudent financial policy, with the asset-liability ratio as of the end of 2025 standing at 26.7%, a decrease of 2.3 percentage points from the end of 2024. Steadily increasing reserves and production, reaching a new high in oil and gas reserves in 2025. The company remains focused on value exploration, with oil and gas reserves reaching a new high, and winning the Wood Mackenzie "Annual Best National Oil Company Exploration Company" award for the first time. In 2025, the company made six new oil and gas discoveries and successfully evaluated 28 oil and gas structures. Net proven reserves reached 7.77 billion barrels of oil equivalent, a year-on-year increase of 6.9%. In China, new discoveries were made in Longkou 25-1 and successful evaluations in Qinhuangdao 29-6, revealing the exploration prospects of the Bohai Sea shallow-layer rocks. Overseas, the Stabroek block in Guyana successfully evaluated the Lukanani and Ranger fields, continually solidifying the resource base of the block. In addition, the company acquired four new exploration projects in Iraq, Kazakhstan, and Indonesia, further enriching the overseas oil and gas asset portfolio. The company achieved a new high in oil and gas production, with significant benefits from developing producing fields. In 2025, several new projects were successfully put into production, with continuous improvement in the utilization rate and recovery rate of producing oil fields. The company achieved an annual oil and gas equivalent production of 777.3 million barrels of oil equivalent, a year-on-year increase of 7%. Crude oil production increased by 5.8%; natural gas production increased significantly by 11.6%, providing valuable support for maintaining profitability resilience. The company deepened water flooding for oil production and applied intelligent water flooding technology on a large scale, helping to reduce the natural decline rate of offshore oil fields to 9.5%, maintaining a good level. Overseas, production in projects in South America, North America, and other regions continued to grow, becoming an important source of production growth for the company. In terms of realized prices, the company achieved an average oil price of $66.47 per barrel in 2025, a year-on-year decrease of -13.4%, and an average natural gas price of $7.95 per thousand cubic feet, a year-on-year increase of +3.0%. Excellent cost control capability, with the main cost of a barrel of oil down by 2.2% year-on-year in 2025. The company further solidified its cost competitiveness, with the main cost of a barrel of oil at $27.90 per barrel of oil equivalent in 2025, a year-on-year decrease of -2.2%. Among them, the operational cost per barrel of oil was $7.46 per barrel of oil equivalent, a year-on-year decrease of -2.0%. The company insists on improving quality, reducing costs, and increasing efficiency, effectively controlling the operational cost per barrel of oil. The DD&A per barrel of oil was $14.82 per barrel of oil equivalent, a year-on-year increase of +0.5%, mainly due to changes in production structure and the combined effects of exchange rate fluctuations. Other taxes per barrel of oil, excluding income tax, decreased by -15.5% year-on-year, mainly due to the decline in international oil prices. The company will continue to strengthen cost control, adhere to a leading cost strategy, and build a solid foundation for performance during oil price fluctuations. A dividend payout ratio of 45% for 2025, highlighting the commitment to high dividends. The company's annual dividend for 2025 was HK$1.28 per share (tax included), with a dividend payout ratio of 45%. From 2025 to 2027, with the approval of shareholders' meetings, the company will maintain an annual dividend payout rate of no less than 45%, and will adjust the dividend policy in a timely manner based on changes in market conditions, shareholder wishes, strategic planning, and operating conditions. The company maintains a high dividend payout ratio, reflecting its focus on shareholder returns and sharing development achievements. In a low-interest-rate environment, companies with high and consistent dividend payouts in the mainland market are rare. The company adheres to a stable high-dividend policy, highlighting its investment value. The company will maintain high capital expenditures in 2026 to support stable production growth. In 2025, the company completed total capital expenditures of RMB 120.5 billion, a year-on-year decrease of 9.1%, with exploration, development, and production investment increasing by +1.0%, -14.3%, and +4.2%, respectively. Exploration and production capital expenditure remained relatively stable, with the variation in development capital expenditure mainly influenced by work arrangements. In 2026, the company will focus on its oil and gas core business, continue to pursue cost-effective production, and budget capital expenditures of RMB 112-122 billion, with a production target of 780-800 million barrels of oil equivalent for 2026, representing a central increase of 1.6% year-on-year. The company will focus on high-quality development, pursue cost-effective production, and maintain steady production growth. Geopolitical conflicts driving up oil prices, highlighting the strategic value of energy security of the company. The ongoing conflict between the US and Iran has led Iran to maintain its blockade of the Strait of Hormuz, cutting off energy exports from the Middle East, significantly impacting the supply side of crude oil. This has driven a significant increase in oil prices. As a mainstay of China's energy security, the company will continue to maintain high capital expenditures. In the context of increased external uncertainties and significant oil price fluctuations, the company will continue to strengthen reserves, production, energy resource exploration, and natural gas market development, highlighting the strategic value of energy security. Risk Warning: Significant fluctuations in oil and gas prices, delays in project progress, and cost fluctuation risks.