Overview#
Goldman Sachs has recently improved its outlook for two significant Chinese oil producers, CNOOC and PetroChina. The investment bank highlights their competitive cost structures and strong potential for generating cash flow as key factors for expected growth in their valuations over the coming months.
CNOOC's Strong Position#
Goldman Sachs has raised its target price for CNOOC to HK$31.00, up from HK$21.10. This makes CNOOC the firm's top pick in the sector. The company has a strong cost position, with an average breakeven price of about $30 per barrel for Brent crude oil. This allows CNOOC to generate substantial cash flow, even in challenging market conditions. Goldman Sachs estimates that the current share price reflects a long-term Brent price of $67 per barrel, with projected free cash flow and dividend yields of around 11% and 5%, respectively. CNOOC's production growth is expected to come mainly from offshore projects in China and Guyana, which are positioned favorably on the global cost curve.
PetroChina's Upgraded Targets#
For PetroChina, Goldman Sachs has set new target prices of HK$11.50 for H-shares and Rmb15.30 for A-shares, increasing from HK$8.60 and Rmb11.80. This upgrade considers potential cost savings and adjustments in their valuation base year. With strong earnings from upstream gas operations and effective cost management, Goldman Sachs believes PetroChina can achieve a breakeven point for free cash flow below $30 per barrel of Brent crude by 2027. The current share price is estimated to reflect a long-term Brent price of $62 per barrel, with projected free cash flow and dividend yields of around 10% and 5%, respectively. PetroChina is focusing on cost control, with new opportunities in green energy and digital initiatives that could further enhance its cost-saving capabilities.