Shares of Chinese oil giant CNOOC (CEO) were down 0.8% in recent trading, but UBS sees a compelling case to buy the stock on its recent weakness.
Today, anlayst Peter Gastreich upgraded the stock from Hold to Buy: As the stock has lost 15% since mid-February, he sees downside as limited short of a material drop in global crude oil prices. He also notes that the stock is hovering very close to levels at which the company repurchased $40 million of its shares in the fourth quarter of 2011.
“We have made some modest adjustments to our outlook including a 4% boost to our 2012 EPS estimates, but a 4-5% cut to our estimates for 2013-2014. We have raised our crude oil price forecasts moderately in each year, in line with our global teamÂs oil price upgrade. However, we have slightly lowered our production volume forecasts, and raised our lifting cost and depreciation expense forecasts.
Volume growth looks slow this year, but with 16 projects under construction and a planned record level of capex this year, we believe CNOOC is gearing up for large volume growth in 2013-2015. We expect first gas from the Husky deepwater Liwan project by 2H13. We note that news flow on the other foreign deepwater operators (Chevron (CVX), BP (BP), BG Group (BRGYY), Anadarko (APC), and Eni (E)) has picked up recently.”