Petrochemical Oil Service (600871) and Saudi Aramco’s Multi-year Order Announcement Commentary: Multi-year Large Orders with Saudi Aramco Overseas Market Next City

Petrochemical Oil Service (600871) and Saudi Aramco’s Multi-year Order Announcement 北京spa会所 Commentary: Multi-year Large Orders with Saudi Aramco Overseas Market Next City
Event: The company announced an announcement on the evening of November 4, 2019. Recently, Sinopec Group International Petroleum Engineering Co., Ltd., a wholly-owned subsidiary of the company, and Saudi Aramco (Saudi Aramco) leaked six unconventional gas well drilling rig contracts. The contract modelIt is a daily fee system with a contract period of 4 years and a total contract value of USD 400 million. Actively explore overseas markets and hold hands with Saudi Aramco’s long-term large-scale orders. According to the announcement, the amount of this order is 400 million US dollars, according to the exchange rate on November 4, 2019, the median price of 1 US dollar = RMB 7.Calculated at 0382 yuan, the contract budget is equivalent to about 28 yuan.US $ 1.5 billion, accounting for approximately 4% of the company’s 2018 operating income under China Accounting Standards.8%, which is expected to have a positive impact on the company’s performance in the next four years.At the same time, the contract’s gradual further consolidation of the company’s extended profile as Saudi Aramco’s largest onshore well, and expansion of the fracturing team and fracturing equipment in the Saudi market, further expanding the company’s service area in the Saudi market.We believe that with the implementation of the One Road One Belt policy and the accumulation of the company’s overseas operation experience, the company is expected to obtain more overseas orders in the future. The domestic oil service industry is booming, and the company is expected to continue to benefit from national policy guidelines. PetroChina, Sinopec and CNOOC have proposed a seven-year action plan, which has strengthened oil and gas exploration and development to ensure energy security.As a subsidiary of Sinopec, Sinopec Oilfield Services is Sinopec’s major integrated service provider of petroleum engineering and turbine technology. In 2019, Sinopec’s exploration and development capital expenditure budget was 59.6 billion, +41 over the previous year.4%.In addition, in the long run, after the stabilization of international oil prices, the prosperity of the oil and gas industry is expected to gradually rise, and the oil service industry will benefit significantly. We believe that domestic exploration and development capital expenditures have increased, and the international oil service industry’s business environment has risen.Benefit space. Earnings forecast and investment recommendations: The company ‘s first three quarter results are in line with expectations and business development is smooth. We maintain our earnings forecast for the company and expect net profit for 2019-2021 to be 11.52, 13.99, 15.64 ppm, corresponding to EPS.06, 0.07, 0.08 yuan, maintaining the “overweight” rating on the company’s A shares and maintaining the “overweight” rating on the company’s H shares. Risk factors: international oil price fluctuation risk, overseas operation risk, market competition risk, exchange rate risk.

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