The valuation discount of China's three major oil and gas giants is being re-priced by changes in cash flow and cost curves. Goldman Sachs believes that CNOOC and PetroChina have demonstrated strong cash flow generation capabilities over the past three years, combined with leading free cash flow yields, which are expected to drive their valuations closer to global peers.
According to the Wind Trading Desk, Goldman Sachs analyst Amber Cai pointed out in a report released on March 12, 2026, that CNOOC and PetroChina have ranked among the top global peers in terms of capital return rates, but the current valuation multiples still show a significant gap compared to peers. Over the past decade, CNOOC has traded at an average discount of about 42% relative to E&amp;P peers.
The report raised CNOOC's 12-month target price from HKD 21.10 to HKD 31.00, an increase of 47%, with the implied discount narrowing to 6%. PetroChina's H-share target price was raised from HKD 8.60 to HKD 11.50, and the A-share target price was raised from RMB 11.80 to RMB 15.30.
Meanwhile, Goldman Sachs maintains a neutral rating on Sinopec, raising its H-share target price from HKD 3.60 to HKD 4.90 and its A-share target price from RMB 4.80 to RMB 6.70, but the rationale for the increase mainly stems from a shift in valuation benchmarks rather than fundamental improvements (the oversupply pressure in the chemical products market has weakened its profitability compared to upstream).
<h2>CNOOC: Optimal Tier in Global Cost Curve, Maximum Revaluation Space</h2>
Goldman Sachs believes that CNOOC is the clearest and most resilient target in this round of upgrades. The report points out that CNOOC's average Brent breakeven oil price is about USD 30 per barrel, and future production expansion will mainly be driven by low-cost projects in China's offshore and Guyana.
In terms of cash flow, Goldman Sachs expects CNOOC's free cash flow breakeven oil price to be as low as USD 27 per barrel, with a dividend breakeven oil price of about USD 48 per barrel. It is expected that its free cash flow yield and dividend yield in 2027 will be approximately 11% and 5%, respectively.
CNOOC has raised its minimum annual dividend payout ratio for 2025 to 2027 from 40% to 45% at the beginning of 2025, further strengthening its commitment to shareholder returns.
Goldman Sachs raised CNOOC's target multiple from 3.0 times to 4.6 times (corresponding to 0.5 standard deviations above the historical average from 2014 to 2026), with the new target price implying an EV/DACF multiple that still discounts peers by 6%. Goldman Sachs expects this discount to gradually narrow as the valuation convergence process progresses.
<h2>PetroChina: Green Energy Substitution and AI Cost Reduction Open Long-term Breakeven Downward Space</h2>
Goldman Sachs' bullish logic on PetroChina focuses on the visible path of continuously declining costs. The report points out that PetroChina is currently at the higher end of the oil and gas production cost curve, with a Brent breakeven oil price of about USD 62 per barrel in 2025, but cost-saving measures are expected to **reduce this figure to USD 54 per barrel before 2035
**
The first is self-supply of green electricity. The distribution of oil and gas fields of PetroChina overlaps significantly with China's renewable energy resource areas. By replacing purchased grid electricity (approximately RMB 0.6 to 0.7 per kWh) with self-generated green electricity (approximately RMB 0.3 per kWh), Goldman Sachs estimates that it could contribute about USD 5 per barrel to the breakeven cost reduction by 2035.
The second is AI and digitalization initiatives. Since 2021, PetroChina has accelerated its digital and intelligent strategy, aiming to fully establish &#34;Digital Intelligent PetroChina&#34; by 2035. Goldman Sachs conservatively estimates that, based on the International Energy Agency's upper limit calculation that digital technologies can reduce production costs by 10% to 20%, it could contribute an additional USD 5 per barrel in cost reduction potential.
In terms of cash flow, Goldman Sachs expects PetroChina's free cash flow yield to be around 10% in 2027, with a dividend yield of about 5%. Under the benchmark capital expenditure and dividend coverage criteria, the breakeven oil price could be below USD 50 per barrel. The current stock price of PetroChina's H shares has about 8% upside potential compared to the new target price, while the potential increase for A shares is about 18%.
<h2>Sinopec: Chemical capacity surplus suppresses free cash flow, maintaining neutral</h2>
Compared to the other two companies, Goldman Sachs is clearly more cautious about Sinopec. The report points out that Sinopec's profit elasticity in a high oil price environment has a significant ceiling:
EBITDA rises in sync with oil prices before Brent crude reaches USD 90 per barrel, but once it exceeds that level, the effect of domestic refined oil pricing policies compressing refining profits will begin to outweigh the contributions from upstream and inventory gains, putting downward pressure on EBITDA.
Additionally, Sinopec's high proportion of imported crude oil exposure makes it more sensitive to increases in international shipping costs and official crude oil sales prices, while China's refined oil pricing formula does not reflect these additional costs, further compressing refining profit margins.
<h2>Valuation discount and global peer comparison: Core basis for re-evaluation</h2>
From a global horizontal comparison, the valuation discounts of CNOOC and PetroChina are particularly prominent. According to Goldman Sachs data, measured by the forecast free cash flow yield for 2027, CNOOC is about 11%, and PetroChina is about 10%, both ranking among the top in the global industry.
In terms of EV/GCI (Enterprise Value/Total Invested Capital), CNOOC is at 0.54 times, while PetroChina is only at 0.38 times, far below the levels of global integrated oil and gas companies such as Shell (0.56 times), Total (0.52 times), and ExxonMobil (1.12 times).
Goldman Sachs' analysis shows that the return on capital for CNOOC and PetroChina has entered the top ranks of global peers, but the current valuation multiples still have a significant gap compared to peers. Over the past decade, CNOOC has traded at an average discount of about 42% relative to E&amp;P (exploration and production) peers, with its target price implying a narrowing discount to 6%.
Goldman Sachs' baseline assumption uses Brent crude prices of USD 70 per barrel for 2026 to 2027, but its commodity team believes the overall risk is tilted to the upside and has raised its overseas gas price forecast on March 8, 2026, with the JKM spot price forecast for 2026 raised by 42%
This provides additional support for the upstream natural gas profits of PETROCHINA.
Risk Warning and Disclaimer
The market has risks, and investment should be cautious. This article does not constitute personal investment advice and does not take into account the specific investment goals, financial situation, or needs of individual users. Users should consider whether any opinions, views, or conclusions in this article are suitable for their specific circumstances. Investment based on this is at one's own risk

600938

00857

00883

601857

Goldman Sachs is optimistic about China's three major oil and gas giants, believing their valuations will align with global peers. The report points out that CNOOC and PETROCHINA have strong cash flow performance, with significant valuation discounts. Goldman Sachs raised the target price for CNOOC from HKD 21.10 to HKD 31.00, and the target price for PETROCHINA's H shares from HKD 8.60 to HKD 11.50. CNOOC's free cash flow breakeven oil price is USD 27 per barrel, and it is expected to have a free cash flow yield of 11% in 2027

- Goldman Sachs reports that China National Offshore Oil Corporation (CNOOC) and China Petroleum's strong cash flow generation may drive their valuations closer to global peers, despite significant current discounts.  
- CNOOC's target price has been raised to HKD 31.00, reflecting a substantial increase, while China Petroleum's targets have also been adjusted, suggesting long-term cost reductions through green energy and AI initiatives.  
- Conversely, Goldman maintains a neutral rating on Sinopec due to oversupply in the chemical sector impacting free cash flow, highlighting the potential risks in high oil price environments.

Goldman Sachs is bullish on the "Three Oil Giants": A wave of "valuation aligning with global standards" revaluation is expected next!