20150112-高盛-Re-positioning_in_the_New_Oil_Order__reform,_capital_efficiency,_costs_13页_451kb

Summary of Document: Re-positioning in the New Oil Order

Core Content

The document discusses the strategic repositioning of Chinese oil majors in response to the new oil price environment, focusing on reforms, capital efficiency, and cost reduction. It also provides updated forecasts for oil and gas prices, EPS estimates, and valuation changes for PetroChina (H), CNOOC, and Sinopec, along with key investment ratings and risks.

Main Strategic Considerations

• Capital Expenditure (Capex) Reduction: Chinese oil majors are prioritizing capex cuts, particularly PetroChina, which is expected to cut capex the most (15%) compared to Sinopec (14%) and CNOOC (11%) over 2014-2016.
• Cost Efficiency: Improving operating costs is a key focus, with an estimated average 5% CAGR in cost reduction.
• Balance Sheet Management: Companies aim to preserve financial flexibility and maintain dividend payouts, with PetroChina noted for having the most stable and lowest gearing, along with the highest dividend payout ratio.
• Asset Prioritization: Companies are re-evaluating their investment in direct oil imports, domestic production, and overseas resource acquisitions at distressed valuations.
• Asset Divestiture: Non-core assets are being divested, and capital is being reallocated to higher-return projects.
• Shale Gas Review: Re-evaluation of shale gas targets and investments is ongoing.

Updated Oil Price Forecasts

• Brent Oil Price:
  • 2015: US$50 (down from US$84)
  • 2016-2018: US$70 (down from US$90)
• WTI Oil Price:
  • 2015: US$47 (down from US$74)
  • 2016-2018: US$65 (down from US$80)
• Natural Gas Prices in China (Rmb/m³):
  • Incremental volume: from Rmb2.95 to Rmb2.65 (-10%)
  • Inventory volume: from Rmb2.47 to Rmb2.65 (+7%)
  • Average: from Rmb2.57 to Rmb2.65 (+3%)

Valuation and Target Prices

• PetroChina (H):
  • Rating: Buy
  • 12-month target price: HK$10.2
  • Current price: HK$8.8
  • P/E (2016E): 13
• CNOOC:
  • Rating: Neutral
  • 12-month target price: HK$11.6
  • Current price: HK$10.6
  • P/E (2016E): 15
• PetroChina (A):
  • Rating: Neutral
  • 12-month target price: Rmb10.1
  • Current price: Rmb12.1
  • P/E (2016E): 22
• Sinopec (H):
  • Rating: Not Rated
  • 12-month target price: N/A
  • Current price: Rmb6.2
  • P/E (2016E): 11
• Sinopec (A):
  • Rating: Not Rated
  • 12-month target price: N/A
  • Current price: Rmb6.7
  • P/E (2016E): 15
• PetroChina (ADS):
  • Rating: Buy
  • 12-month target price: US$131.0
  • Current price: US$113.1
  • P/E (2016E): 13
• CNOOC (ADS):
  • Rating: Neutral
  • 12-month target price: US$149.0
  • Current price: US$136.2
  • P/E (2016E): 15

EPS Forecast Changes

• PetroChina (H):
  • 2015E: 0.16 (down 76% from previous)
  • 2016E: 0.56 (down 26% from previous)
• CNOOC:
  • 2015E: 0.17 (down 80% from previous)
  • 2016E: 0.57 (down 40% from previous)
• Sinopec (H):
  • 2015E: 0.24 (down 57% from previous)
  • 2016E: 0.44 (down 28% from previous)

Key Risks

• Oil Price Volatility: Higher or lower-than-expected oil prices.
• Sales Volume Fluctuations: Impact on revenue and profitability.
• Profit Margin Changes: Affecting overall financial performance.
• Asset Impairments: Potential risks from asset valuations.

Investment Ratings

• PetroChina (H): Buy
• CNOOC: Neutral
• PetroChina (A): Downgraded to Neutral from Buy
• Sinopec: Not Rated

Valuation Summary and Notes

• The 12-month target prices are based on EV/DACF multiples.
• The valuation basis has been rolled forward to 2016 for all companies, with the exception of PetroChina (A), where the multiple increased to 7.7X from 6.5X.
• The document notes that the recent rally in PetroChina (A) has made its risk/reward less attractive.

Summary of Key Forecast Assumptions

• Lifting Costs: Expected to fall for all companies.
• Capex: Significant reductions are anticipated, especially for PetroChina.
• Production Volumes: Likely to decrease in 2015E but stabilize in 2016E.
• Refining Margins: Expected to remain relatively stable.
• Interest Rates: Impact on EPS growth.
• Dividend Payout Ratios: Maintained for all companies.
• Tax Rates: Generally stable, with minor changes noted.

Conclusion

The document outlines a strategic shift among Chinese oil majors towards cost efficiency and capital optimization, amid lower oil price forecasts. PetroChina is highlighted as a leader in these efforts, with a focus on capex cuts and cost reductions. However, due to recent price performance, PetroChina (A) has been downgraded. The analysis suggests that while oil price forecasts are lower, the companies' valuations and EPS estimates have been adjusted accordingly, reflecting the new market realities and strategic moves.