Goldman Sachs attended CNOOC's (00883) site visit in Zhuhai, and came away more optimistic in CNOOC positioning to grow its natural gas earnings (i.e. scale & margin) and materially grow reserves/production in South China Sea.
The research house is incrementally more comfortable in CNOOC's strategy and positioning into 2019 - and believes the recent oil-led pullback presents an attractive buying opportunity.
CNOOC also outlined large gas exploration potential in the South China Sea & Bohai Bay.
China has experienced gas shortages in recent years, and CNOOC is part of the solution, Goldman said. It believes tighter gas market conditions, sizable price increases by PetroChina along with more complex deepwater projects, can all work to drive improved bargaining power for CNOOC. Goldman raised CNOOC's average China domestic gas prices by 2%/4% for 2019/2020.
Goldman maintained its "buy" rating on CNOOC, with a target price of HK$16.1.
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