Newsletter summary
Sinopec won the bid for EBN and MF blocks in the bidding for oil and gas blocks in Iraq, and the net profit is expected to increase by 34% annually from 2024 to 2026.Digitalroulettewheel.4% to 12Digitalroulettewheel.8%, maintain a "buy" rating, with risks including falling oil prices and geopolitics.
Text of news flash
[Zhongman Petroleum (603619) successfully won the bid for two major oil and gas blocks in Iraq to open a new chapter of profitability]
Zhongman Petroleum participated on May 11, 2024.DigitalroulettewheelIraqi Ministry of OilDigitalroulettewheelWon the exploration and development rights of East Baghdad Field Northern Extension block (EBN block) and Middle Euphrates block (MF block).
After the successful tender, the company will quickly start contract negotiations with the Iraqi Ministry of Oil according to the relevant policies on the development of oil and gas fields in Iraq and the actual situation of the company.
Six years after the last round, the Iraqi Ministry of Oil tender adopts a profit-sharing agreement to optimize the allocation of resources and attract more investment.
According to the tender conditions, the EDPC contract includes an exploration period of 5 to 9 years and a development period of 25 years. The DPC contract is 20 years and can be renewed for 5 years. The contractor invests in oil and has the right to recover costs, as well as accelerated recovery and interest for certain costs.
The contractor is required to pay signing fees and certain fees after commercialization, which are not covered by cost recovery and are not tax deductible. In terms of taxes and fees, the contractor is required to pay 15% of the recognized income as royalties and pay income tax in Iraq.
Remuneration is paid on the basis of remaining net recognized income, mainly in the form of oil exports, and contractors are also required to provide training, technology transfer, hire local personnel, purchase local goods and services, and contribute to the Infrastructure Fund.
The EBN and MF blocks in which Zhongman Oil has won the bid are both DPC contracts with a development period of 20 to 5 years. The company's integration of exploration and development and drilling equipment services is expected to improve the profitability of the project.
According to the profit forecast, the company's return net profit from 2024 to 2026 is expected to be 10.89,13.51 and 1.523 billion yuan respectively, with year-on-year growth rates of 34.4%, 24.0% and 12.8%. The company maintains a "buy" rating based on high crude oil prices and expectations of rapid production growth.
Risk factors to be noted include economic fluctuations, declining oil prices, slower-than-expected rates of production, and economic sanctions and geopolitical risks.
