Goldman Sachs Bullish on "Big Three" Oil Companies: A Wave of "Valuation Alignment with Global Standards" Revaluation Coming Next!

The valuation discount of China’s three major oil and gas giants is being re-priced due to changes in cash flow and cost curves. Goldman Sachs believes that the strong cash flow generation ability demonstrated by China National Offshore Oil Corporation (CNOOC) and China National Petroleum Corporation (CNPC) over the past three years, combined with leading free cash flow yields, is likely to drive their valuations toward global peers.

According to Chasing Wind Trading Platform, Goldman Sachs analyst Amber Cai stated in a report released on March 12, 2026, that both CNOOC and CNPC have ranked among the top global peers in capital return rates, but their current valuation multiples still lag significantly behind. Over the past decade, CNOOC has traded at an average discount of about 42% relative to E&P (exploration and production) industry peers.

The report significantly raised CNOOC’s 12-month target price from HKD 21.10 to HKD 31.00, a 47% increase, implying a narrowing of the implied discount to 6%. The target price for PetroChina H-shares was raised from HKD 8.60 to HKD 11.50, and the A-shares target price from RMB 11.80 to RMB 15.30.

Meanwhile, Goldman Sachs maintained a neutral rating on Sinopec and raised its H-share target price from HKD 3.60 to HKD 4.90, and the A-share target from RMB 4.80 to RMB 6.70. The upward revisions mainly reflect a shift in valuation benchmarks rather than fundamental improvements, as the oversupply in the chemical products market continues to weaken upstream profitability.

CNOOC: Among the Best Cost Curves Globally, Largest Revaluation Potential

Goldman Sachs considers CNOOC the most logically clear and resilient target among the recent upward revisions. The report notes that CNOOC’s average breakeven Brent oil price is about $30 per barrel, and future production growth will mainly be driven by low-cost projects in offshore China and Guyana.

In terms of cash flow, Goldman Sachs estimates CNOOC’s FCF breakeven oil price at as low as $27 per barrel, with a dividend breakeven at around $48 per barrel. It expects the 2027 FCF yield and dividend yield to be approximately 11% and 5%, respectively.

CNOOC has already increased its minimum annual dividend payout ratio for 2025-2027 from 40% to 45%, further strengthening its shareholder return commitments.

Goldman Sachs has sharply raised CNOOC’s target multiple from 3.0x to 4.6x (above the 2014-2026 historical average by 0.5 standard deviations). The new target implied EV/Adjusted Cash Flow (EV/DACF) multiple still trades at a 6% discount to peers, and Goldman Sachs expects this discount to gradually narrow as valuation convergence progresses.

PetroChina: Green Energy Substitution and AI Cost Reduction Open Long-term Breakeven Downward Space

Goldman Sachs’s bullish view on PetroChina focuses on the visible path of continued cost reduction. The report states that PetroChina’s current upstream production costs are at the higher end of the cost curve, with a 2025 breakeven Brent oil price of about $62 per barrel. Cost-saving measures are expected to reduce this figure to $54 per barrel before 2035.

First, green electricity self-supply. PetroChina’s oil and gas fields are highly overlapping with China’s renewable energy resource zones. By replacing grid electricity (about RMB 0.6-0.7 per kWh) with self-generated green power (about RMB 0.3 per kWh), Goldman Sachs estimates this could contribute approximately $5 per barrel in cost savings before 2035.

Second, AI and digitalization initiatives. Since 2021, PetroChina has accelerated its digital and intelligent transformation, aiming to fully establish “Digital Smart PetroChina” by 2035. Based on the upper limit of the International Energy Agency’s estimates that digital technologies can cut 10-20% of production costs, Goldman conservatively estimates an additional $5 per barrel in cost reduction potential.

In terms of cash flow, Goldman Sachs expects PetroChina’s 2027 FCF yield to be about 10%, with a dividend yield of around 5%. Under baseline capital expenditure and dividend coverage assumptions, the breakeven oil price could be below $50 per barrel. The current H-share price still has about 8% upside to the new target, with an estimated potential increase of about 18% for A-shares.

Sinopec: Excess Chemical Capacity Suppresses Free Cash Flow, Maintains Neutral

Compared to the other two, Goldman Sachs’s stance on Sinopec is more cautious. The report points out that Sinopec’s profitability in a high oil price environment has a clear ceiling:

EBITDA rises with Brent oil prices up to about $90 per barrel, but beyond that, domestic refined oil pricing policies begin to compress refining margins, exerting downward pressure on EBITDA, surpassing upstream and inventory gains.

Additionally, Sinopec’s high proportion of crude oil imports via shipping makes it more sensitive to increases in international freight rates and official crude oil sales prices. The Chinese refined oil pricing formula does not fully reflect these additional costs, further squeezing refining margins.

Valuation Discount and Global Peer Comparison: The Core of Revaluation

From a global comparison perspective, the valuation discounts of CNOOC and PetroChina are particularly pronounced. Goldman Sachs data shows that, based on forecasted 2027 FCF yields, CNOOC is about 11% and PetroChina about 10%, both among the top globally.

Using EV/Total Invested Capital (GCI) as a metric, CNOOC is at 0.54x and PetroChina at 0.38x, significantly below global integrated oil and gas companies like Shell (0.56x), TotalEnergies (0.52x), and ExxonMobil (1.12x).

Goldman Sachs’s analysis indicates that while CNOOC and PetroChina’s capital returns are now among the top globally, their current valuation multiples still lag significantly. Over the past decade, CNOOC has traded at an average discount of about 42% relative to E&P peers, with the implied target price narrowing this discount to 6%.

The baseline assumption uses Brent oil at $70 per barrel for 2026-2027, but Goldman’s commodities team believes the overall risk is skewed to the upside. They raised their overseas gas price forecasts on March 8, 2026, with JKM spot prices for 2026 increased by 42%, providing additional support for upstream natural gas profitability.

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