COSL’s third-quarter revenue rises without profit growth as weak domestic business offsets drilling rig improvements

Where did third-quarter results fall short?

In the third quarter of 2026, COSL reported revenue of RMB 11.94 billion, up 3.5% year on year; net profit attributable to shareholders was RMB 1.22 billion, down 1.7% year on year, as revenue rose without profit growth.
Morgan Stanley said quarterly earnings per share were broadly in line with its expectations but below market consensus. Revenue for the first three quarters was RMB 35.73 billion, up 2.5% year on year; net profit attributable to shareholders was RMB 3.23 billion, up just 0.7%. By comparison, market consensus forecast full-year earnings growth of 17% for 2026.

Morgan Stanley believes higher day rates and utilization for semi-submersible drilling rigs would have supported earnings, but the related gains were largely offset by weaker-than-expected domestic oilfield technology services and offshore support businesses.
The bank believes that, despite high energy prices, drilling rig utilization remains constrained and operating leverage is limited, leaving limited scope for an improved price environment to translate into overall profit growth.

Morgan Stanley is watching the downturn in CNOOC’s capital expenditure cycle: lower spending could weigh on more complex drilling activity and demand for services at higher-value well locations.
The bank expects market consensus earnings forecasts to be revised downward over the coming months. Key variables it lists include CNOOC’s capital expenditure, oil prices, and day rates for jack-up and semi-submersible drilling rigs; accelerating supply growth could prompt a pullback in rates, while a significant rise in costs would also create pressure.

The bank maintained its Equal-weight rating on COSL’s H-shares, with a target price of HK$8.00, and maintained its Underweight rating on the A-shares.
The H-share valuation is based on 3.25 times expected 2026 enterprise value to EBITDA (EV/EBITDA), half a standard deviation below the five-year average, to reflect the downturn in China’s offshore capital expenditure cycle.
The A-share valuation is based on 5.5 times expected 2026 EV/EBITDA, assuming a 70% valuation premium to the H-shares based on the ten-year average; the bank also noted a risk that the premium could narrow.