Hong Kong stocks stabilize amid volatility; energy leader CNOOC demonstrates 'offense-defense balance'

Market sentiment in Hong Kong stocks has been highly volatile recently. Although the Hang Seng Index has declined for three consecutive weeks, with a weekly drop of 1.13% last week, the technology sector slightly rose by 0.62% on a weekly basis, showing signs of market divergence and stabilization amidst fluctuations. In this increasingly volatile environment, investors are refocusing on high-certainty value stocks. Among them, CNOOC (0883.HK), against the backdrop of rising geopolitical tensions boosting oil prices, has once again become an irreplaceable core allocation in the energy sector.

The investment thesis for CNOOC has always been clear: it is not merely a cyclical speculative stock but an upstream energy leader characterized by 'low costs, steady production growth, strong cash flow, and high dividends.' Fundamentally, the company achieved net production of 726.8 million barrels of oil equivalent in 2024, up 7.2% year-on-year; net profit attributable to shareholders reached 137.9 billion RMB, growing 11.4% year-on-year; and the annual dividend was 1.40 HKD, with a payout ratio of 44.7%. Among large oil and gas companies, such profitability and shareholder returns are quite impressive.

More importantly, CNOOC's growth does not solely rely on oil prices. At the beginning of 2025, the company provided clear guidance, targeting annual net production of 760 to 780 million barrels of oil equivalent, which will further increase to 780 to 800 million and 810 to 830 million barrels of oil equivalent in 2026 and 2027, respectively; meanwhile, it committed to maintaining a dividend payout ratio of no less than 45% from 2025 to 2027. This indicates that management has strong confidence in production, capital expenditure, and cash flow over the next three years, leading the market to value it as a 'growth-oriented high-dividend stock,' rather than just a traditional oil stock.

In terms of operational quality, CNOOC's strongest competitive advantage remains its cost leadership. The company’s main per-barrel cost for 2024 is only $28.52, and in the first half of 2025, it has managed to control the full-cost per barrel to $26.94, reflecting that its large-scale offshore projects, standardized development, and lean management are starting to yield consistent results. In other words, as long as oil prices remain within a reasonable range, CNOOC has the ability to convert most incremental revenue into free cash flow, which is also the fundamental reason it can maintain high dividend payouts.

The recent stock price rally has indeed been triggered by geopolitical risks in the short term. Since March, escalating tensions in the Middle East have driven Brent crude above $100 per barrel, with prices rising above $104 on March 15. The sharp rise in oil prices directly fueled market expectations of stronger profitability for upstream resource stocks. For CNOOC, upward movement in oil prices is always the most direct catalyst for valuation.

However, I believe further purchases at current prices should differentiate between 'trading' and 'investing.' If CNOOC is viewed as a beneficiary of geopolitical conflict, the current stock price already partially reflects expectations of a sharp rise in oil prices, implying that short-term volatility will inevitably increase. Once tensions in the Middle East ease and oil prices retrace, the stock could quickly lose momentum.

From a medium-term perspective, however, I remain cautiously optimistic about CNOOC. The reasons are straightforward: it boasts production growth, a cost advantage, and a clear dividend policy. Even if oil prices retreat from their highs, as long as there isn’t a deep collapse, the company's overall profitability and dividend attractiveness will still be well-supported. As a leading state-owned energy enterprise with solid asset quality and strong execution capabilities, it deserves attention.

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