Overall Investment Rating: Maintained as "Recommend"
**Event Summary**
On March 26, 2026, Cnooc Limited released its 2025 Annual Report. For the full year 2025, the company reported operating revenue of RMB 398.22 billion, a decrease of 5.3% year-on-year. Net profit attributable to equity holders was RMB 122.08 billion, down 11.5% compared to the previous year. Adjusted net profit, excluding non-recurring items, stood at RMB 120.38 billion, reflecting a 9.8% decline.
**Analysis and Insights**
**Production Increased 7.0% in 2025, 2026 Target Growth of 0.3%-2.9%**
In 2025, Cnooc Limited achieved a net production of 777 million barrels of oil equivalent (BOE), representing a 7.0% increase year-on-year. By region, domestic net production reached 537 million BOE, up 9.0%, while overseas output was 240 million BOE, growing 2.7%. By product, crude oil production was 600 million barrels, a 5.8% increase, and natural gas output reached 1,037.3 billion cubic feet, rising 11.6%. For 2026, the company has targeted a production range of 780 to 800 million BOE, indicating a planned growth of 0.3% to 2.9% compared to 2025. This growth is supported by accelerated capacity construction, with 16 new projects commencing production during the year. Notably, the fourth phase of the Stabroek block in Guyana commenced operations, with up to eight phases expected by 2030. In Brazil, seven phases of the Buzios field are online, with a target of 11 phases by 2027. Furthermore, the company made six new discoveries and successfully appraised 28 oil and gas structures, boosting its net proven reserves to a record high of 7.773 billion BOE.
**Oil Prices Declined Year-on-Year, While Gas Prices Increased Against the Trend**
The average closing price for Brent crude futures in 2025 was $68.22 per barrel, down 14.6% year-on-year. Correspondingly, Cnooc Limited's realized oil price was $66.40 per barrel, a decrease of 13.5%. This decline in oil prices was the primary factor behind the profit decrease, contributing to an estimated reduction of RMB 42.7 billion in net profit attributable to equity holders. In contrast, the realized natural gas price was $7.95 per thousand cubic feet, showing a counter-trend increase of 3.0%.
**Excellent Cost Control, Stable to Lower Expenses**
In 2025, the company's all-in cost per barrel was $27.90, a decrease of 2.2% year-on-year. Operating costs per barrel were $7.46, down 2.0%. Using the exchange rate as of December 31, 2025 (USD 1 = RMB 7.029) for cost calculations, depreciation, depletion, and amortization per barrel was $14.98, a slight increase of 0.5%. Selling and administrative expenses per barrel were $2.26, up 1.6%. Taxes other than income tax per barrel fell significantly by 15.6% to $3.42, and the special oil income levy per barrel decreased sharply by 76.8% to $0.38.
**Cash Dividend Payout Ratio of 45%, A/H Share Dividend Yields of 2.8%/5.1%**
The company plans to distribute a final dividend for 2025 of HKD 0.55 per share. Combined with the interim dividend of HKD 0.73 per share, the total annual dividend amounts to HKD 1.28 per share. Based on the year-end exchange rate (HKD 1 = RMB 0.903), this equates to an annual dividend of RMB 1.16 per share, representing a payout ratio of 45.0%. Based on the closing share prices on March 26, 2026, the dividend yield for A-shares is 2.8%, while the H-share yield is 5.1%.
**Investment Recommendation**
Cnooc Limited possesses substantial reserve and production potential, demonstrates strong cost control capabilities, and maintains a firm commitment to shareholder returns through dividends. Against a backdrop of sustained high oil price benchmarks, the company offers attractive dividend characteristics. Furthermore, with the State-owned Assets Supervision and Administration Commission (SASAC) incorporating listed company value realization and market capitalization management into performance evaluation systems for central enterprises, the historically undervalued valuations of these entities are expected to experience a rational correction. We forecast net profits attributable to equity holders for 2026-2028 to be RMB 163.565 billion, RMB 157.702 billion, and RMB 161.353 billion, respectively. Corresponding earnings per share (EPS) are projected at RMB 3.44, RMB 3.32, and RMB 3.39 per share. Based on the share price as of March 26, 2026, the price-to-earnings (P/E) ratio for 2026 is estimated at 12x. We maintain our "Recommend" rating.
**Risk Warnings**
Potential risks include underperformance in oil and gas exploration and development, volatility in international crude oil prices due to geopolitical changes, slower-than-expected macroeconomic growth, and shifts in energy policies.
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