EB SECURITIES: Maintains "Buy" rating on CNOOC Limited (00883) AH shares; optimistic about the company's potential for reserve growth and production increase.

EB SECURITIES released a research report stating that in the first half of 2026, CNOOC Limited (00883; 600938.SH) benefited from rising oil prices and accelerated reserve replacement and production, resulting in significant performance growth that met the bank's expectations. The bank maintains its earnings forecast for the company, predicting that the net profit attributable to the parent company for 2026-2028 will be 174.7 billion, 180.2 billion, and 184.7 billion yuan, respectively, with corresponding EPS of 3.67, 3.79, and 3.89 yuan per share. The bank is optimistic about the companys potential for reserve replacement and production as well as its cost control capabilities, believing that the companys performance is likely to cross the oil price cycle to achieve long-term growth, maintaining a "Buy" rating for the companys A-shares and H-shares. The main points from EB SECURITIES are as follows: Event The company released its semi-annual report for 2026. In the first half of 2026, it achieved total operating revenue of 242.7 billion yuan, up 17% year-on-year, with a net profit attributable to the parent company of 85.8 billion yuan, up 23% year-on-year. In the second quarter of 2026, the company achieved total operating revenue of 126.6 billion yuan, up 26% year-on-year and up 9% quarter-on-quarter, with a net profit attributable to the parent company of 46.7 billion yuan, up 42% year-on-year and up 19% quarter-on-quarter. Record High Performance in 26H1 Driven by Increasing Production and Rising Oil Prices In the first half of 2026, influenced by geopolitical conflicts in the Middle East, international oil prices fluctuated upward, with the average price of Brent crude oil at 87.60 USD per barrel, up 23.7% year-on-year. The company seized the opportunity in the industry with rising oil prices, continuously strengthening efforts in reserve replacement and production as well as strict cost control, significantly enhancing its profitability. The company achieved a net profit attributable to the parent company of 85.8 billion yuan, an increase of 23% year-on-year, marking a historical high; cash flow performance was excellent, with operating cash flow for 26H1 amounting to 141.6 billion yuan, up 29.7% year-on-year. The weighted average ROE for 26H1 was 10.3%, up 1.3 percentage points year-on-year. The company adhered to a prudent financial policy, with a debt-to-asset ratio of 28.6% as of the end of June 2026, down 0.9 percentage points year-on-year. Production Hits New Highs, Oil and Gas Equivalent Output Grows 3.7% Year-on-Year In the first half of 2026, the company achieved net production of 398.7 million barrels of oil equivalent, representing a year-on-year increase of 3.7%, marking another historical high. Among them, net production in China was 275.4 million barrels of oil equivalent, up 3.3% year-on-year; overseas net production was 123.6 million barrels of oil equivalent, up 4.7% year-on-year. In terms of realized prices, the company recorded an average realized oil price of 85.49 USD per barrel for 26H1, up 23.6% year-on-year; the Q2 realized oil price was 95.48 USD per barrel, with a discount of 1.19 USD per barrel compared to the Brent average price, which increased by 0.25 USD per barrel year-on-year; the average realized natural gas price for 26H1 was 8.0 USD per thousand cubic feet, up 1.3% year-on-year. The company accelerated the commissioning of new production capacity, with five new projects coming online, including secondary adjustment projects for the Penglai 19-3 oilfield, the development project for the western area of the Weizhou 10-3 oilfield, the comprehensive adjustment project for the Huizhou 25-8 oilfield, and Brazil's Buzios 8. The pace and efficiency of capacity construction continued to increase. The company strengthened fine management of oil reservoirs, promoted quality and efficiency improvements in oil and gas field production, effectively controlled the natural decline rate of offshore oil fields, and ensured a steady increase in recovery rates, consolidating stable production from operating oil fields. Additionally, adjustment wells and operational measures were systematically implemented to further release production increments. Continuously Conducting Quality Enhancement and Efficiency Improvement Initiatives, Maintaining Cost Competitiveness The company continued to solidify its cost competitiveness, with main costs for oil in 26H1 being 29.70 USD per barrel of oil equivalent, up 10.2% year-on-year, primarily due to increases in taxes and special profit-sharing resulting from rising oil prices and the appreciation of the RMB against the USD. In terms of operating costs per barrel, which reflect the operational capacity of oil companies, the company recorded operating expenses of 7.23 USD per barrel of oil equivalent in 26H1, up 7.0% year-on-year. The company maintained a focus on quality improvement, cost reduction, and efficiency enhancement, achieving effective control of unit operating costs under high oil prices. The company will continue to strengthen cost management and adhere to a cost leadership strategy, laying a solid foundation for its performance during periods of oil price fluctuations. The Company Will Maintain High Capital Expenditure in 26 to Support Stable Production Growth In 26H1, the company completed capital expenditures of 62 billion yuan, an increase of 7.6% year-on-year, with investments in exploration, development, and production seeing increases of 5.9%, 7.8%, and 10.4% year-on-year, respectively. In 2026, the company will focus on its oil and gas main business, continuously pursuing effective production, with a capital expenditure budget of 112-122 billion yuan and an annual production target of 780-800 million barrels of oil equivalent, representing a 1.6% year-on-year growth in target midpoint. The company will focus on high-quality development and pursue effective production while maintaining a steady growth in production scale. Geopolitical Conflicts Driving Oil Prices, Highlighting the Value of the Companys Energy Supply Assurance Strategy Recently, the ongoing US-Iran conflict and Iran's blockade of the Strait of Hormuz have disrupted energy exports from the Middle East, causing significant shocks to crude oil supply and driving a wide increase in oil prices. As a key player in Chinas energy supply guarantee, the company will continue to maintain high capital expenditures. Amid increasing external uncertainties and significant fluctuations in oil prices, the company will continue to enhance reserve replacement and production, strengthen oil and gas resource exploration, and expand its natural gas market development, highlighting the strategic value of its energy supply assurance. Risk Warning: Significant fluctuations in crude oil and natural gas prices, slower-than-expected project progress, cost fluctuation risks.