Seeking Alpha

As Cnooc sinks on no-growth guidance, Sinopec seen as better bet

  • Cnooc's (CEO -6.2%) loss apparently is Sinopec's (SNP +5.9%) gain, as the two Chinese integrated oil and gas companies move in opposite directions after Cnooc estimated oil production growth below its annual target for the third straight year.
  • J.P. Morgan is surprised Cnooc has guided almost no organic growth in 2014, and thinks the company has set itself up for a difficult 2015, where 14%-18% Y/Y organic production growth would be needed to reach the low end of the 2011-15 6%-10% target; the firm recommends SNP or PetroChina (PTR +0.2%) instead for China oil exposure.
  • SNP's prospects are considered rosier than Cnooc's: Its dividend yield is healthy at 5.21% vs. the 4.67% industry average, and its 9.17 P/E ratio indicates general investor expectations of higher returns in the short and medium term, if not beyond.
  • Also, SNP discloses that Sinopec Group (SHI) increased its shareholding via the acquisition of ~173.25M class A shares on the secondary market as of Jan. 17.
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