Dongxing: Capital expenditures for offshore oil and gas development are expected to grow, with a focus on companies with high growth potential.

Dongxing released a research report stating that against the backdrop of tight global oil supply and demand and increasing energy security needs, there is an accelerated progress in offshore oil and gas development. However, not all oilfield service companies will benefit equally; those with core competitive advantages will achieve excess growth. In the next two years, the expected growth in capital expenditures for offshore oil and gas in our country will directly orders and performance for oilfield service companies. Focus should be on those companies with high growth potential that achieve breakthroughs in deep water and core technologies, and can fully enjoy the benefits of the industrial chain. Domestically, the institution recommends upstream oil and gas companies that are expected to increase capital expenditures, with high-growth beneficiaries, including CNOOC Energy Technology & Services, which is also expected to benefit. Dongxing's main points are as follows: The domestic economy continues to recover, gradually increasing the demand for oilfield engineering, with stable revenue performance. In 2025, the domestic manufacturing PMI is projected to be 49.57%. From January to June 2026, the domestic manufacturing PMIs are expected to be 49.3%, 49.0%, 50.4%, 50.3%, 50.0%, and 50.3%, fluctuating around the boom-bust line of 50.0%. It is estimated that in 2025, operating revenue will reach 320.201 billion yuan, a year-on-year increase of 3.01%, with a net profit attributable to shareholders reaching 11.154 billion yuan, up 2.18% year-on-year. In Q1 2026, operating revenue is expected to be 63.307 billion yuan, a year-on-year decrease of 0.16%. Oilfield engineering: domestic offshore oil and gas capital expenditures are expected to grow, driving performance growth in offshore oilfield engineering. Global upstream oil investment is under pressure, and offshore oil and gas is becoming the core and absolute mainstay of current global oil and gas investment. Global upstream oil investment is under pressure: Multiple factors, including expectations for global low-carbon energy transition, some oil companies strictly adhering to capital discipline that prioritizes shareholder returns rather than aggressive expansion, and uncertainties arising from geopolitical conflicts, have prompted the global oil industry to reassess its priorities in the upstream sector. The IEA's "World Energy Investment Report 2026" forecasts that the overall investment scale of global oil companies will be less than $500 billion in 2026. Offshore oil and gas investment is growing against the trend, becoming the current core and absolute mainstay of global oil and gas investment: Amid the structural adjustments facing global oil and gas investment, offshore oil and gas (especially in deep water and ultra-deep water fields) is becoming a "safe haven" and the core growth engine of global oil and gas investment due to its superior asset returns. On the investment side: A high prosperity cycle continues, with capital accelerating towards the offshore sector. According to data and forecasts from the CNOOC Limited Group's Energy Economic Research Institute's "China Marine Energy Development Report 2025," offshore oil and gas exploration and development investments have increased for five consecutive years. It is expected that by 2025, global offshore oil and gas exploration and development investment will reach $217.55 billion, accounting for 35.7% of total global investment, continuing an upward trend for five years with a compound annual growth rate (CAGR) of 11%. The "China Marine Energy Development Report 2025" predicts that in 2026, global offshore oil and gas exploration and development investment will grow by more than 3% year-on-year, accounting for approximately 36% of total global oil and gas exploration and development investment. The future increase in oil and gas imports and the growth potential of offshore oil and gas production in our country will drive upstream exploration and development spending. Domestic oil and gas demand is rising year by year. In the fiscal year 2025, our country's oil import volume is expected to reach 68.566 million tons, an increase of 3.16% year-on-year. On the production side: There is still significant growth potential for offshore oil and gas production, which will favorably drive upstream exploration spending. Against the backdrop of sustained growth in global offshore oil and gas investment, China's offshore crude oil and natural gas production has maintained steady growth for three consecutive years. By 2025, CNOOC's production is expected to be around 68 million tons, an increase of approximately 2.5 million tons year-on-year, accounting for about 80% of the national oil production increase. Offshore natural gas production is expected to reach about 30 billion cubic meters, with a year-on-year increase of 4 billion cubic meters. In 2026, steady growth is anticipated, with offshore oil production expected to be around 69 million tons and offshore natural gas production likely to exceed 32 billion cubic meters. According to PwC's report on development scale forecasts, our country will continue to increase investment in offshore oil and gas development over the next five years, with capital expenditures in 2025 and 2026 remaining at a high level of 125 to 135 billion yuan. China's offshore oil and gas capital expenditures are expected to maintain high levels of prosperity, driving the growth of oilfield engineering companies' performance. According to the "China Marine Energy Development Report 2025" from CNOOC Limited Group's Energy Economic Research Institute, offshore oil and gas exploration and development investment has increased for five consecutive years. Data from the report suggests that global offshore oil and gas production will maintain the upward trend observed in recent years, with an expected production of 49.12 million barrels of oil equivalent per day in 2025, a year-on-year increase of 4.1%. The report anticipates that in 2026, global offshore oil and gas exploration and development investment will grow by more than 3% year-on-year, accounting for roughly 36% of total global oil and gas exploration and development investment. Looking ahead to the next five years (2026 to 2030), China's offshore oil and gas capital expenditures are expected to continue to remain at high levels of prosperity, primarily due to the rigid demand of the national energy security strategy and breakthroughs in deep-sea technology. According to PwC's report on development scale forecasts, our country will continue to increase investment in offshore oil and gas development over the next five years, with capital expenditures in 2025 and 2026 remaining at a high level of 125 to 135 billion yuan. It is expected that by 2030, the market scale of China's offshore oil and gas development industry will grow significantly from approximately 1.2 trillion yuan in 2025 to 2.8 trillion yuan, with a CAGR of 10.5%. By 2030, China's offshore crude oil production is expected to reach 80 to 85 million tons, and natural gas production is forecasted to reach 45 to 50 billion cubic meters, with the development of deep-sea resources becoming an important growth engine. The increase in upstream capital expenditures by offshore oil and gas companies will further boost the business volume of oilfield engineering companies, with high certainty of performance growth. Amid the continuously increasing demand for energy security globally, the pace of offshore oil and gas development is being accelerated comprehensively. Since increasing the efforts in domestic oil and gas exploration and development in 2018, CNOOC Limited, for example, has been actively advancing its "Seven-Year Action Plan" to increase domestic oil and gas reserves and production. In 2024, CNOOC Limited's capital expenditures are set to reach 132.7 billion yuan, maintaining high levels of 120.5 billion and 112 to 122 billion yuan respectively in 2025 and 2026. Such substantial rigid investments provide a solid order baseline for the entire oilfield service industry chain, ensuring a high level of prosperity in the oilfield service market over the next two years. The annual oil and gas production target is set at 780 to 800 million barrels of oil equivalent. Main costs per barrel have been reduced to $27.9/barrel (in 2025), demonstrating strong counter-cyclical profitability. In 2025, the increase in CNOOC Limited's capital expenditures directly drove synchronous revenue growth for its three major oilfield service subsidiaries (China Oilfield Services, Offshore Oil Engineering, CNOOC Energy Technology & Services). This positive correlation, where "a rising tide lifts all boats," directly reflects the close interdependence between upstream and downstream of the offshore oil and gas industry chain. Taking the data from 2022 to 2025 as an example, core oilfield service companies have achieved leapfrog growth in both revenue and profit. China Oilfield Services: Breakthroughs in technical services resonate with drilling boom. Revenue increased from 35.659 billion yuan to 50.282 billion yuan; net profit attributable to shareholders rose from 2.359 billion yuan to 3.842 billion yuan. In 2025, China Oilfield Services is projected to achieve total revenue of 50.282 billion yuan, a year-on-year increase of 4.10%. CNOOC Energy Technology & Services: Release of industrial chain dividends leads the oil extraction equipment market. Revenue increased from 47.784 billion yuan to 50.363 billion yuan; net profit attributable to shareholders rose from 2.416 billion yuan to 3.884 billion yuan. In 2025, CNOOC Energy Technology & Services is expected to achieve total revenue of 50.363 billion yuan, a year-on-year increase of 4.46%. In the next five years, China's offshore oil and gas capital expenditures will not only maintain a high level of over 100 billion yuan in absolute terms but also show a strong upward trend in core data such as deep water equipment orders, daily drilling rates, and cost reduction through localization. The business volume of oilfield engineering companies will further increase, with a high certainty of performance growth. Risk Warning: Geopolitical risks; risks of significant fluctuations in energy prices; risks of demand falling short of expectations.