Metro energy: shale oil costs less

The company issued 2016 ZhongBao, realize the business income is 27.184 billion yuan, fell 13.48% year on year; Implementation to female net profit of 018 million yuan, fell 89.25% year on year; Earnings per share 0.01 yuan.2016 q2 revenue of 1.536 billion, up 30.82%;Realize female net profit 113 million, fell 16.01% year on year; Earnings per share 0.04 yuan. Basic meet our expectations.

Those remarks

Oil prices slump loss and shale oil, real estate and business with a draw, the financial investment to support performance.

In the first half of 2016 WTI crude oil prices around $40 a barrel, the beginning of the bottom of the lowest $27 per barrel; Due to the downturn, the company shale oil production is low, loss of 79 million yuan, a drag on the company's performance.

Real estate business to go into the main target at present, the business scale shrink; In the first half of the revenues of about 1 billion, the gross profit of 124 million yuan, mainly by Zhejiang Deqing 2 project profit of 62 million yuan, about profit and loss balance as a whole. Company main business of the commercial trade goods including mineral, oil and steel, etc., are greatly influenced by the commodity price, income scale of about 1.4 billion yuan, gross margin of more than 1000, the overall performance is almost breakeven. Financial investment contribution is nearly 90 million.

Offering complete financial costs, reduce the shale oil prices stabilised in the second half is expected to be small profits

Low oil prices during the first half, the company's new play less horizontal shale oil, shale production is only about 770000 barrels of oil, oil prices are expected to around $40 a barrel, the income of about 200 million, single barrel margin less than 8 dollars/barrel; But due to low production and financial costs more than $1, makes the shale oil business net losses of nearly 80 million yuan.

Beauty energy of oil and gas development in the United States is effective. MDAE of oil and gas field located in the United States EagleFord shale oil and gas zone, EagleFord region as the main oil-producing, oil-bearing area, oil reservoir shall distribution, large oil and gas reserves, production capacity expansion foundation is better. New drilling horizontal well in the past two years the company all the technical parameters and the design coincidence rate of at least 90%, the single well drilling and completion costs plunged nearly 40%.Dringinfo company database, based on MadisonvilleWest oilfield in recent years the staged fracturing in horizontal well primiparous ranking sequence, 24 hours a day and 70 of the top 100 of horizontal Wells is MDAE homework well.

Company acquired in 2013 hi-tech company, in 2014, after oil prices at a lower price in consecutive blocks surrounding acquisition Manti, Iola, Devon (2016) and SilverOak after block, the net area is about 259 square kilometers, in production Wells 263 mouth, oil and gas production peak of 17000 barrels per day.

Due to the new acquisition blocks are all in the original oil block perimeter, reservoir geological conditions and development technology, the same to form synergies, overall management costs, operating costs have fallen sharply. Manti oil field acquisition, significantly increase the company's oil reserves; As 2014 MDAE company increase the intensity of the oil and gas exploration, 2015 GCA evaluation, assessed by the third party company reserves of oil and gas company greatly increased; Have brought the cost down.

In June 2016, the company completed a rights issue, raised 5.58 billion of the 6.19 billion has been used to repay foreign loans 3.33 billion, 1.31 billion loans and capacity into the oilfield construction projects within the territory of 940 million; Outside the company has to repay the loan of 3.3 billion, the United States foreign subsidiary MDAE asset-liability ratio has fallen dramatically, is expected to reduce all the company's financial costs about 130 million in the United States, in the future the company cost of shale oil is expected to drop to around $40 a barrel and the following. The future one year we expect the international oil price fluctuations mainly within the range of 45 to 50 dollars/barrel balance, oil business is expected to be profitable.

Adhere to the "energy dominant (traditional energy and new energy)" strategy, to move into the lithium battery

The company actively has new energy industry layout. To quickly enter the production area, the company plans to buy German Lang can power a 49.6% stake. Can Shanghai Delong power battery Co., LTD. main business for new energy vehicles lithium ion power battery research and development, production and sales. As of June 30, 2016, DE Lang can power the total assets of 786 million yuan, net assets of 210 million yuan. Implement the business income is 385 million yuan, net profit of 8.54 million yuan (unaudited).Company will enter the field of new energy battery, in line with the company "energy dominated (traditional energy and new energy)" strategic positioning, is conducive to further consolidate the company core business of the energy business.

The early stage of the company cooperate with college of materials science and engineering, Zhejiang university, to construct the graphene energy storage materials of commercialization and industrialization of research and development, the development platform, graphene in focus lithium ion batteries and the application of super capacitor. In 2015 the company set up a beauty of ink, proposed through rapid acquisition way into production areas; This acquisition, Lang will power, is the early stage of the company is interested in this research results on the market, adhere to the new energy strategy important strides.

A big step in financial innovation, support the development of the company's energy strategy

Company, a subsidiary of beauty's plan to no more than RMB 150 million yuan in cash capital increase of Xin Hui made 6% of its equity, and by no more than RMB 700 million yuan to buy the set holdings owns a 28% stake in the Xin and hui, trading after the completion of the beauty of gold charged with 850 million yuan of total owns a 34% stake in Xin and Hui, as the single largest shareholder.

Xin hui mainly provide Internet financial information platform and set operations; Since it was founded in 2014, based on the understanding of the depth of bridge financial business, to fund bridge business as the breakthrough point, to become one of the largest professional short-term financing platform in China; Is the Internet for Zhejiang financial alliance vice President of units, 2016 becomes the first member unit of China's Internet finance association. Xin hui has formed a silver-colored card financial, margin, stock value three series of nearly 20 product, accumulative total power over 5000 high quality small micro enterprises, in Jiangsu, Zhejiang, Shanghai, Shandong, Guangdong and other 28 cities set up branches or offices, to provide funds amounting to 70 billion yuan. Xin or remit money platform in 2016 consecutive turnover is 30 billion yuan, 40 billion yuan, 50 billion yuan breakthrough, a total more than 5.5 million registered users, accumulative total investment more than 346000 people. June 1-2016 operating income of 88.27 million yuan, net profit of 4.35 million yuan (unaudited).

Company subsidiary beauty gold will owns a 34% stake in Xin or remit, is conducive to further consolidate the company's financial business strategy, in the long run will have a positive impact on the company's financial position and operating results.

Investment advice

Company follow-up will continue in the field of lithium ion battery upstream and downstream industry chain and new financial M&A and exploration, strengthen industry collaborative complementary, provided a basis for the realization of the company's long-term strategic goals. We expect the company from 2016 to 2018 EPS were 0.01 yuan, 0.03 yuan and 0.05 yuan, to maintain "overweight" rating.

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