CNOOC posted record high 2021 earnings of RMB70,230 (+181.8% yoy), driven by higher production, higher oil and gas prices and well-maintained all-in cost. 2021 operational stats largely in line: production was 573 mmboe (+8.5% yoy); all-in cost remained low at US$29.49/boe (+12.6% yoy).Management guidance: 2022-2024 production targets (mid-point) are 605/ 645/ 685 mmboe, respectively; to reach an annual production of 730 mmboe by 2025. To avoid delay in A-share listing, CNOOC has postponed announcing the final and special dividends for 2021. We estimate that the final and special dividends will range from HK$0.48/share to HK$1.29/share.
　　We forecast 2022-2024 earnings of RMB116,307 mn, RMB92,224 mn, RMB97,069 mn, respectively. We assume Brent to average US$104, US$78 and US$80 in 2022-2024, respectively.
　　The silver lining of being sanctioned by the US: 1) the CCMC sanction on CNOOC has led to a non-fundamentals-related low valuation, which enables the Company to offer attractive and higher-than-peers yields; 2) as China and Russia are expected to enhance cooperation in the energy sector, Chinese energy firms are subject to relatively high US sanction risk. But CNOOC, which has already been sanctioned, has little downside in this regard.
　　Maintain "Buy", raise TP to HK$13.50. CNOOC provides investors with good exposure to benefit from oil price increases, thanks to not only its pure upstream focus, but also its low valuation, which enables higher-than-peers yields. Our TP of HK$13.50 has a 25.6% discount to our DCF-derived NAV of HK$18.13 and corresponds to 4.5x/ 5.6x/ 5.4x 2022-2024 PER, respectively.