Nomura Securities Upgrades CNOOC Ltd. (CEO) to Neutral

Nomura Securities upgraded CNOOC Ltd. (NYSE: CEO) from Reduce to Neutral and cu its price target from HKD 11.40 to HKD 10.10.

Analyst comments, "We revise down our 2015 and 2016 net profit estimates by 57% and 28%, respectively, based on our much lower oil price assumptions. Our new 2015F EPS forecast is now 47% below the Street, which is yet to fully reflect the recent oil price plunge. Despite downward revision of the domestic windfall profit taxes, CNOOC is the most vulnerable among China’s oil trio to further oil price declines, owing to its pure upstream E&P business model. Lower operating cashflow amidst distressed oil prices do not bode well for sustaining the dividend and production growth targets, as we expect both CNOOC and its JV partners will likely announce sharply lower capex budgets this year. However, judging by the recent share price underperformance, we believe investor pessimism is close to a climax, and hence we upgrade the stock to Neutral from Reduce. We note that the share prices of oil companies tend to reach a bottom several months ahead of the physical oil price bottom. We estimate CNOOC’s all-in cost at USD45-50/boe, vs. USD65-70 for both PetroChina and Sinopec. Therefore, the company should still be profitable at USD50/bbl Brent crude price, certainly in terms of cash profits."

For an analyst ratings summary and ratings history on CNOOC Ltd. click here. For more ratings news on CNOOC Ltd. click here.

Shares of CNOOC Ltd. closed at $136.15 yesterday.

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