Energy 120424

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Energy 120424

  1. 1. Global StrategyEquity Research Asia Oil & Gas Sector StrategyApril 24, 2012 Weekly Roundup: Breakups Galore2012 GDP ESTIMATES:China: 7.7%-8.2% CNOOC Ltd: A m essy e nding to a f ailed a cquisition. BP is seeking toHong Kong: 2.5%-3.0% enforce a USD700-mln termination fee payable by BP to Bridas for the failureIndia: 6.8%-7.3% to complete the Pan American Energy (PAE) deal in November 2011. BridasIndonesia: 6.0%-6.5% had earlier rejected the payment, claiming the deal was void from the start.Japan: 1.5%-2.0% Given the payment, if any, is due to Bridas, the impact on CNOOC Ltd shouldKorea: 2.8%-3.3% be negligible. CNOOC Ltd is due to release its results at end today, which weMalaysia: 4.4%-4.9% expect to be boosted by crude oil price strength in 1Q12. Still, given recentSingapore: 2.0%-2.5% negative newsflow in Argentina, a stalled global recovery, and tumbling oilTaiwan: 2.3%-2.8% prices (especially for Asian crude grades - Minas and Tapis are down 10%Thailand: 3.5%-4.0% and 6% from their peak respectively), we expect near-term share priceU.S.: 2.1% performance will remain insipid.Eurozone: 0.0% Sinopec Group to spin off engineering arm. Sinopec Group, the parent of listed Sinopec Corp, has apparently completed the restructuring of its eight engineering and construction (E&C) subsidiaries into one company, which2012 INDEX TARGETS: may be listed as early as next month, according to a source report by HongS&P 500: 1,450 Kong’s The Standard . While there was some speculation as to whether theS&P Euro 350: 1,170 E&C companies would be injected into the listed Sinopec Corp, it appearsS&P Asia 50: 3,500 the parent company is taking the route previously undertaken by CNOOC with the listing of its oilfield services unit China Oilfield Services Ltd in 2002. Sinopec Corp will be releasing its 1Q12 results on Friday, while PetroChina’s results for the same period are due Thursday; we expect some improvement on both companies’ refining losses following the refined product price hikes in February and March. Also, given the lag effect in Chinese crude prices ofEnergy one to two months, the jump in crude prices in January and February may only have a one-month impact on the refiners in March 2012.Oil & Gas Sudan: B order fighting may worsen. In response to South Sudan’s seizureOverweight and widespread damaging of infrastructure at the oil-producing Heglig territory earlier this month, Sudan allegedly launched an air strike on a market in South Sudan’s oil-producing Unity State. Although the strike was denied by Sudan, weeks of border fighting may ramp up to full-blown war after Sudan’s President Omar Hassan Al-Bashir ruled out a return to negotiations with South Sudan, claiming its government understood only Halim,Ahmad Halim, CFA “the language of the gun”. South Sudan has essentially shut-in all of itsEquity Analyst production since January 2012, and the EIA has forecast Sudanese production to average at 190 kbpd in 2012, from 2011’s average of 430 kbpd, although should the conflict lengthen and worsen, there may be downward revisions to this estimate. Thai O &G: G as field shutdowns to affect output & costs in 1H12. O&G: Following up from the shutdown of the Yedana and Yetagun fields in Myanmar from April 8-20 for maintenance, which led to a 1.1 bcf/day shortfall in gas supplies to Thailand, the Bongkot field, which produces some 0.6 bcf/d, will be going offline for maintenance May 25-31. PTTEP is due to announce its results on Friday, we will look for renewed production guidance from the company. Meanwhile, parent PTT PCL reportedly had to source for some 55.5 mln liters of fuel oil and 1.4 mln liters of diesel to This report is for information purposes and should not be considered a solicitation to buy or sell any security.Standard & Poor’s Neither Standard & Poor’s nor any other party guarantees its accuracy or makes warranties regarding resultsEquity Research Services from its usage. Redistribution is prohibited without written permission. Copyright © 2012. All required17th Floor, Prudential Tower d i s c l o s ur e s a nd an a l y st c er t if i c a t io n ap p e ar s o n t he la s t 3 p a g e s of t h i s r epo r t . A dd i t io n a l i nf or m a t io n i s30 Cecil Street, Singapore a v a i l a b le on r eq u e st .
  2. 2. April 24, 2012 Global Strat egy offset the loss of Myanmar gas in April; it reportedly will seek additional fuel oil and spot LNG cargoes to offset the loss from Bongkot. We expect some 2 pressure on PTT’s 1H12 costs as a result. Preferred picks. Prefe rred picks We continue to have an Overweight stance on the sector, with all our China O&G stocks ranked at 4-STARS (Buy). We rank PTT PCL at 3-STARS (Hold), while PTTEP is ranked 2-STARS (Sell), on concerns of potential equity raising, given its large capex program and leveraged balance sheets. Select Integrated Oil & Gas and E&P Performance and Key Capital IQ Consensus Ratios as at April 23, 2012 23, Price Performance PER (x) PAT Growth Trading Share Market Cap Company Name CIQ Ticker Ccy Price (USD mln) 1 Mth 3 Mths 6 Mths FY2012 FY2013 FY2012 FY2013 (USD Integrated O&G Exxon Mobil Corporation NYSE:XOM USD 85.69 402,954 0.2% -2.0% 6.9% 10.2x 9.6x -5.5% 5.5% PetroChina Co. Ltd. SEHK:857 HKD 11.20 283,149 1.4% -1.1% 19.1% 10.7x 10.0x 19.5% 4.2% Royal Dutch Shell plc LSE:RDSA GBP 21.10 218,865 -5.0% -8.7% -6.2% 7.6x 7.1x -13.7% 7.0% Chevron Corporation NYSE:CVX USD 102.44 202,081 -3.7% -4.3% -2.9% 7.7x 7.4x -1.1% 0.8% BP plc LSE:BP. GBP 4.30 131,349 -10.0% -9.9% -2.2% 6.3x 5.9x -20.5% 5.0% China Petroleum & Chemical Corp. SEHK:386 HKD 8.14 98,276 -5.8% -9.9% 14.0% 7.2x 6.7x 13.5% 5.5% ConocoPhillips NYSE:COP USD 72.33 92,560 -5.5% 2.5% 0.7% 8.2x 7.9x -11.5% 4.1% PTT Public Co. Ltd. SET:PTT THB 347.00 31,957 -0.6% 4.8% 22.2% 8.5x 7.5x 11.2% 14.0% Average -3.61% -3.55% 6.45% 8.3x 7.8x -1.0% 5.8% Exploration & Production (E&P) CNOOC Ltd. SEHK:883 HKD 16.00 92,045 -2.3% 3.2% 24.6% 8.3x 8.3x 0.1% 0.4% Statoil ASA OB:STL NOK 148.60 82,198 -6.1% 0.5% 5.2% 8.4x 7.9x -30.2% 4.6% Suncor Energy Inc. TSX:SU CAD 31.02 48,703 -5.4% -9.4% 2.5% 9.2x 8.6x 20.6% 14.8% Anadarko Petroleum Corporation NYSE:APC USD 71.00 35,897 -10.6% -10.7% -10.2% 17.5x 13.6x NM 33.0% Apache Corp. NYSE:APA USD 90.96 34,970 -10.6% -7.5% -4.0% 7.2x 6.4x 11.5% 15.9% Woodside Petroleum Ltd. ASX:WPL AUD 34.96 29,641 -1.2% 3.7% 4.7% 14.8x 12.8x 27.1% 20.5% PTT E&P PCL SET:PTTEP THB 174.00 18,626 -0.6% -0.9% 13.7% 10.7x 8.8x 20.4% 21.3% Hess Corporation NYSE:HES USD 54.12 18,267 -9.6% -12.2% -9.5% 8.0x 6.8x 36.5% 25.5% Average -5.79% -4.14% 3.38% 9.5x 8.5x 12.3% 17.0% EV/EBITDA PBV ROE Gross Margin Div Yield Company Name FY2012 FY2013 FY2012 FY2013 FY2012 FY2013 FY2012 FY2013 FY2012 FY2013 Integrated O&G Exxon Mobil Corporation NYSE:XOM 4.6x 4.5x 2.4x 2.1x 22.8% 21.5% 42.70% 44.30% 2.32% 2.45% PetroChina Co. Ltd. SEHK:857 5.7x 5.4x 1.5x 1.4x 14.6% 14.6% 37.40% 47.05% 4.24% 4.56% Royal Dutch Shell plc LSE:RDSA 3.8x 3.7x 1.1x 1.0x 15.8% 15.2% 17.80% 18.40% 4.97% 5.16% Chevron Corporation NYSE:CVX 3.2x 3.1x 1.5x 1.3x 20.4% 18.6% 44.30% 45.90% 3.23% 3.40% BP plc LSE:BP. 3.5x 3.3x 1.1x 0.9x 17.8% 16.9% 18.80% 19.70% 4.67% 5.16% China Petroleum & Chemical Corp. SEHK:386 4.6x 4.2x 1.1x 1.0x 16.1% 15.2% 16.89% 17.28% 4.13% 4.40% ConocoPhillips NYSE:COP 3.7x 3.7x 1.4x 1.2x 16.8% 16.1% 27.30% 28.60% 3.78% 4.04% PTT Public Co. Ltd. SET:PTT 5.8x 5.2x 1.6x 1.4x 19.7% 19.6% 9.42% 10.28% 4.03% 4.48% Average 4.4x 4.1x 1.4x 1.3x 18.0% 17.2% 26.83% 28.94% 28.94% 3.92% 4.21% Exploration & Production (E&P) CNOOC Ltd. SEHK:883 4.1x 4.1x 1.9x 1.6x 24.6% 21.1% 62.67% 61.45% 3.80% 3.93% Statoil ASA OB:STL 2.1x 2.0x 1.5x 1.3x 18.7% 18.0% 47.28% 45.87% 4.56% 4.80% Suncor Energy Inc. TSX:SU 4.7x 4.2x 1.1x 1.0x 13.5% 12.7% 60.80% 62.60% 1.47% 1.55% Anadarko Petroleum Corporation NYSE:APC 5.5x 4.8x 1.7x 1.6x 10.3% 12.3% 71.30% N/A 0.51% 0.51% Apache Corp. NYSE:APA 3.1x 2.9x 1.1x 0.9x 15.7% 15.3% 79.30% N/A 0.72% 0.72% Woodside Petroleum Ltd. ASX:WPL 8.8x 7.2x 2.1x 1.9x 14.9% 16.6% 68.90% 68.90% 3.48% 3.85% PTT E&P PCL SET:PTTEP 4.8x 4.0x 2.4x 2.0x 23.8% 24.6% 50.37% 51.43% 3.59% 4.42% Hess Corporation NYSE:HES 3.1x 2.8x 0.9x 0.8x 11.5% 11.3% 36.30% 37.60% 0.77% 0.77% Average 4.5x 4.0x 1.6x 1.4x 16.6% 16.5% 59.61% 54.64% 54.64 % 2.36% 2.57% Source: S&P Capital IQ Standard & P oor’s Equity Research
  3. 3. April 24 , 2012 Global Strat egy S&P Capital IQ Equity Research – S&P Capital IQ Equity Research U.S. includesGlossary Standard & Poor’s Investment Advisory Services LLC; Standard & Poor’s Equity Research Services Europe includes Standard & Poor’s LLC- London; Standard & 3 Poor’s Equity Research Services Asia includes McGraw-Hill Financial Singapore Pte.S&P STARS - Since January 1, 1987, S&P Capital IQ Equity Research has ranked a Limited’s offices in Singapore, Standard & Poor’s Investment Advisory Servicesuniverse of U.S. common stocks, ADRs (American Depositary Receipts), and ADSs (HK) Limited in Hong Kong, Standard & Poor’s Malaysia Sdn Bhd, and Standard &(American Depositary Shares) based on a given equity’s potential for future Poor’s Information Services (Australia) Pty Ltd.performance. Similarly, S&P Capital IQ Equity Research has used STARS® Abbreviations Used in S&P Capital IQ Equity Research Reportsmethodology to rank Asian and European equities since June 30, 2002. Under CAGR- Compound Annual Growth Rateproprietary STARS (STock Appreciation Ranking System), S&P equity analysts rank CAPEX- Capital Expendituresequities according to their individual forecast of an equity’s future total return CY- Calendar Yearpotential versus the expected total return of a relevant benchmark (e.g., a regional DCF- Discounted Cash Flowindex (S&P Asia 50 Index, S&P Europe 350® Index or S&P 500® Index)), based on a EBIT- Earnings Before Interest and Taxes12-month time horizon. STARS was designed to meet the needs of investors looking EBITDA- Earnings Before Interest, Taxes, Depreciation and Amortizationto put their investment decisions in perspective. Data used to assist in determining EPS- Earnings Per Sharethe STARS ranking may be the result of the analyst’s own models as well as internal EV- Enterprise Valueproprietary models resulting from dynamic data inputs. FCF- Free Cash FlowS&P Quality Rankings (also known as S&P Earnings & Dividend Rankings Rankings)- FFO- Funds From OperationsGrowth and stability of earnings and dividends are deemed key elements in FY- Fiscal Yearestablishing S&P’s earnings and dividend rankings for common stocks, which are P/E- Price/Earningsdesigned to capsulize the nature of this record in a single symbol. It should be noted, PEG Ratio- P/E-to-Growth Ratiohowever, that the process also takes into consideration certain adjustments and PV- Present Valuemodifications deemed desirable in establishing such rankings. The final score for R&D- Research & Developmenteach stock is measured against a scoring matrix determined by analysis of the scores ROE- Return on Equityof a large and representative sample of stocks. The range of scores in the array of ROI- Return on Investmentthis sample has been aligned with the following ladder of rankings: ROIC- Return on Invested Capital ROA- Return on AssetsA+ Highest B+ Average C Lowest SG&A- Selling, General & Administrative ExpensesA High B Below Average D In Reorganization WACC- Weighted Average Cost of CapitalA- Above Average B- Lower NR Not Ranked Dividends on American Depository Receipts (ADRs) and American DepositoryS&P Issuer Credit Rating - A Standard & Poor’s Issuer Credit Rating is a current Shares (ADSs) are net of taxes (paid in the country of origin).opinion of an obligor’s overall financial capacity (its creditworthiness) to pay itsfinancial obligations. This opinion focuses on the obligor’s capacity and willingnessto meet its financial commitments as they come due. It does not apply to any specificfinancial obligation, as it does not take into account the nature of and provisions of Disclosures/Disclaimersthe obligation, its standing in bankruptcy or liquidation, statutory preferences, or thelegality and enforceability of the obligation. In addition, it does not take into accountthe creditworthiness of the guarantors, insurers, or other forms of creditenhancement on the obligation. Required Disclosures In contrast to the qualitative STARS recommendations covered in this report, whichS&P Capital IQ EPS Estimates – S&P Capital IQ earnings per share (EPS) estimates are determined and assigned by S&P Capital IQ equity analysts, S&P’s quantitativereflect analyst projections of future EPS from continuing operations, and generally evaluations are derived from S&P’s proprietary Fair Value quantitative model. Inexclude various items that are viewed as special, non-recurring, or extraordinary. particular, the Fair Value Ranking methodology is a relative ranking methodology,Also, S&P Capital IQ EPS estimates reflect either forecasts of S&P Capital IQ equity whereas the STARS methodology is not. Because the Fair Value model and theanalysts; or, the consensus (average) EPS estimate, which are independently STARS methodology reflect different criteria, assumptions and analytical methods,compiled by Capital IQ, a data provider to S&P Capital IQ Equity Research. Among quantitative evaluations may at times differ from (or even contradict) an equitythe items typically excluded from EPS estimates are asset sale gains; impairment, analyst’s STARS recommendations. As a quantitative model, Fair Value relies onrestructuring or merger-related charges; legal and insurance settlements; in process history and consensus estimates and does not introduce an element of subjectivityresearch and development expenses; gains or losses on the extinguishment of debt; as can be the case with equity analysts in assigning STARS recommendations.the cumulative effect of accounting changes; and earnings related to operations thathave been classified by the company as discontinued. The inclusion of some items,such as stock option expense and recurring types of other charges, may vary, and S&P Global STARS Distributiondepend on such factors as industry practice, analyst judgment, and the extent to In North Americawhich some types of data is disclosed by companies. As of March 31, 2012, research analysts at S&P Capital IQ Equity Research North America recommended 34.5% of issuers with buy recommendations, 57.9% withS&P Core Earnings – S&P Capital IQ Core Earnings is a uniform methodology for hold recommendations and 7.6% with sell recommendations.adjusting operating earnings by focusing on a companys after-tax earningsgenerated from its principal businesses. Included in the S&P Capital IQ definition are In Europeemployee stock option grant expenses, pension costs, restructuring charges from As of March 31, 2012, research analysts at S&P Capital IQ Equity Research Europeongoing operations, write-downs of depreciable or amortizable operating assets, recommended 30.1% of issuers with buy recommendations, 49.4% with holdpurchased research and development, M&A related expenses and unrealized recommendations and 20.5% with sell recommendations.gains/losses from hedging activities. Excluded from the definition are pension gains,impairment of goodwill charges, gains or losses from asset sales, reversal of prior- In Asiayear charges and provision from litigation or insurance settlements. As of March 31, 2012, research analysts at S&P Capital IQ Equity Research AsiaS&P 12 Month Target Price – The S&P S&P Capital IQ equity analyst’s projection of recommended 35.9% of issuers with buy recommendations, 54.3% with holdthe market price a given security will command 12 months hence, based on a recommendations and 9.8% with sell recommendations.combination of intrinsic, relative, and private market valuation metrics, including S&PFair Value. Standard & Poor’s Equity Research
  4. 4. April 24 , 2012 Global Strat egyGlobally Parties shall have no liability for any errors, omissions, or interruptions therein,As of March 31, 2012, research analysts at S&P Capital IQ Equity Research globally regardless of the cause, or for the results obtained from the use of the information 4recommended 34.0% of issuers with buy recommendations, 56.3% with hold provided by the S&P Parties. S&P PARTIES DISCLAIM ANY AND ALL EXPRESS ORrecommendations and 9.7% with sell recommendations. IMPLIED WARRANTIES, INCLUDING, BUT NOT LIMITED TO, ANY WARRANTIES OF MERCHANTABILITY, SUITABILITY OR FITNESS FOR A PARTICULAR PURPOSE ORAdditional information is available upon request. USE. In no event shall S&P Parties be liable to any party for any direct, indirect, incidental, exemplary, compensatory, punitive, special or consequential damages,Other Disclosures costs, expenses, legal fees, or losses (including, without limitation, lost income or lost profits and opportunity costs) in connection with any use of the informationThis report has been prepared and issued by S&P Capital IQ and/or one of its contained in this document even if advised of the possibility of such damages.affiliates. In the United States, research reports are prepared by Standard & Poor’s Capital IQ is a business of S&P Capital IQ.Investment Advisory Services LLC (“SPIAS”). In the United States, research reportsare issued by Standard & Poor’s (“S&P”); in the United Kingdom by McGraw-Hill Ratings from Standard & Poor’s Ratings Services are statements of opinion as ofFinancial Research Europe Limited, which is authorized and regulated by the the date they are expressed and not statements of fact or recommendations toFinancial Services Authority and trades as Standard & Poor’s; in Hong Kong by purchase, hold, or sell any securities or to make any investment decisions.Standard & Poor’s Investment Advisory Services (HK) Limited, which is regulated by Standard & Poor’s assumes no obligation to update its opinions followingthe Hong Kong Securities Futures Commission; in Singapore by McGraw-Hill publication in any form or format. Standard & Poor’s ratings should not be reliedFinancial Singapore Pte. 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  5. 5. April 24 , 2012 Global Strat egy(d) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005,respectively. 5For residents of Singapore - Anything herein that may be construed as arecommendation is intended for general circulation and does not take into accountthe specific investment objectives, financial situation or particular needs of anyparticular person. Advice should be sought from a financial adviser regarding thesuitability of an investment, taking into account the specific investment objectives,financial situation or particular needs of any person in receipt of therecommendation, before the person makes a commitment to purchase theinvestment product.For residents of Malaysia - All queries in relation to this report should be referred toChing Wah Tam and Ahmad Halim.For residents of Indonesia - This research report does not constitute an offeringdocument and it should not be construed as an offer of securities in Indonesia, andthat any such securities will only be offered or sold through a financial institution.For residents of the Philippines - The securities being offered or sold have not beenregistered with the Securities and Exchange Commission under the SecuritiesRegulation Code of the Philippines. Any future offer or sale thereof is subject toregistration requirements under the Code unless such offer or sale qualifies as anexempt transaction.Canadian investors should be aware that any specific securities discussed in thisresearch report can only be purchased in Canada through a Canadian registereddealer and, if such securities are not available in the secondary market, they can onlybe purchased by eligible private placement purchasers on a basis that is exempt fromthe prospectus requirements of Canadian securities law and will be subject to resalerestrictions.For residents of Australia – This report is distributed by Standard & Poor’sInformation Services (Australia) Pty Ltd (“SPIS”) in Australia.Any express or implied opinion contained in this report is limited to "General Advice"and based solely on consideration of the investment merits of the financial product(s)alone. The information in this report has not been prepared for use by retail investorsand has been prepared without taking account of any particular persons financial orinvestment objectives, financial situation or needs. Before acting on any advice, anyperson using the advice should consider its appropriateness having regard to theirown or their clients objectives, financial situation and needs. You should obtain aProduct Disclosure Statement relating to the product and consider the statementbefore making any decision or recommendation about whether to acquire theproduct. Each opinion must be weighed solely as one factor in any investmentdecision made by or on behalf of any adviser and any such adviser must accordinglymake their own assessment taking into account an individuals particularcircumstances.SPIS holds an Australian Financial Services Licence Number 258896. Please refer tothe SPIS Financial Services Guide for more information atwww.fundsinsights.com.au.STANDARD & POOR’S, S&P, S&P 500, S&P Europe 350 and STARSare registered trademarks of Standard & Poor’s Financial ServicesLLC. Standard & Poor’s Equity Research
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