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Regional Oil & Gas Summary - 25 June 2014

Core Content Overview

This summary provides an update on the regional oil and gas market as of 25 June 2014, highlighting price movements, key industry news, and analyst ratings for major companies across Asia, India, and other regions. It also includes valuation comparisons and insights on market trends.

Major Price Movements

• Brent Crude Oil: Closed at $114.00, down 0.46% or 0.4% in the last 24 hours, with a 3.8% increase over the last month.
• WTI Crude Oil: Closed at $106.50, up 0.47% or 0.4% in the last 24 hours, with a 3.0% increase over the last month.
• Henry Hub: Closed at $4.57, up 0.03 or 0.7% in the last 24 hours, with a -2.0% change over the last week.
• Gold: Closed at $1,319.18, up 0.89 or 0.1% in the last 24 hours, with a 3.2% weekly increase.
• USD-CNY: Closed at 6.23, up 0.00 or 0.1% in the last 24 hours, with a 0.1% weekly increase.

News Headlines

• Total cancels USD150m vessel charter with Aker: Total has canceled a vessel charter with Aker, with the remaining value of USD150m, indicating low utilization.
• CalEnergy hires semi-sub for exploration drilling in Browse basin: CalEnergy has hired a semi-submersible rig for exploration in the Browse basin, with an estimated 11 days for dry hole drilling.
• Inpex announces Ichthys 50% complete: The Ichthys LNG project is 50% complete, with a projected completion in 2016 and a capacity of 8.4mtpa LNG, 1.6mtpa LPG, and 100kbpd condensate.
• Keppel lands Golar conversion contract: Keppel Shipyard has secured a conditional conversion contract to convert the Moss Hilli LNG tanker into an FLNG host.
• Japan to build LNG tankers in China: Kawasaki Heavy Industries is allocating LNG tanker orders to its joint venture with China Ocean Shipping Group to cut costs and compete with Korean rivals.
• Bree: Australian LNG export volume remains steady: Australia's LNG exports are expected to be 23.8m tonnes for the current fiscal year.
• Roc Oil in talks with another potential target for M&A: Roc Oil is discussing M&A opportunities while still in the process of merging with Horizon Oil.

Analyst Reports and Ratings

• Petron Corp: RMP-2 is within sight, with a target price of PHP16.80. BUY recommendation with a positive outlook.
• SapuraKencana Petroleum: Results are on track, with a target price of MYR5.30. BUY recommendation.
• Offshore & Marine: Insights from key OSV players indicate optimism for long-term fundamentals but caution about near-term challenges. NEUTRAL recommendation.
• PetroChina: Initiating with a BUY rating and a target price of HKD11.50. Expected to benefit from the energy reform and pipeline access.
• Sinopec: Initiating with a HOLD rating and a target price of HKD6.85. Lacks catalysts for further re-rating.
• CNOOC: Initiating with a HOLD rating and a target price of HKD14.34. Expected to face challenges with cost inflation and FCF returns.
• NewOcean Energy: Initiating with a BUY rating and a target price of HKD8.88. Potential to become the largest auto natural gas distributor in China by 2017.

Valuation Comparison

Company	Ticker	KE Rating	Price (25-Jun)	Target Price	Market Cap (USD)	90D T/O (USD)	P/E 2014E	P/E 2015E	EV/EBITDA 2014E	EV/EBITDA 2015E	RoE %	P/B (X)	Yield %
PetroChina - H	857 HK	Buy	9.58	11.50	221.6	87.6	10.5	9.4	5.4	4.8	11.3	1.2	4.3
Sinopec - H	386 HK	Hold	7.20	6.85	99.5	84.6	9.7	9.1	5.0	4.7	11.7	1.1	4.1
CNOOC LTD	883 HK	Hold	13.48	14.34	77.6	94.1	8.8	8.3	3.7	3.4	15.1	1.3	4.0
ONGC	ONGC IN	NR	436.85	NR	62.2	46.4	11.5	10.3	5.2	4.7	18.0	2.0	2.7
Reliance Industries	RIL IN	NR	1,051.00	NR	56.6	75.3	12.9	11.5	8.7	7.6	12.4	1.5	1.0
Cairn India	CAIR IN	Buy	369.35	443.00	11.7	18.2	5.1	4.9	3.7	3.4	23.6	5.1	3.8
BPCL	BPCL IN	NR	581.30	NR	7.0	18.1	14.7	13.0	7.2	6.8	14.5	2.0	2.1
HPCL	HPCL IN	NR	416.30	NR	2.3	12.6	10.3	8.2	6.8	6.3	9.4	0.9	2.8
INPEX	1605 JT	NR	1,557.00	NR	22.4	68.7	12.8	13.6	2.0	2.0	6.2	0.8	1.2
JAPEX	1662 JT	NR	4,295.00	NR	2.4	14.9	9.2	7.9	4.5	4.7	6.7	0.6	1.1
JX Holding	5020 JT	NR	548.00	NR	13.4	49.6	10.0	7.7	7.4	6.5	6.2	0.6	3.1
Showa Shell	5002 JT	NR	1,192.00	NR	4.4	17.9	13.0	11.5	6.8	6.5	11.7	1.4	3.1
TenonGeneral	5012 JT	NR	1,001.00	NR	5.6	15.5	39.2	21.6	15.8	13.7	4.1	1.2	3.8
Idemitsu	5019 JT	NR	2,216.00	NR	3.5	8.3	12.9	9.6	9.1	7.9	4.1	0.5	2.3
Cosmo	5007 JT	NR	219.00	NR	1.8	6.8	11.3	11.6	8.8	8.5	6.4	0.8	1.9
Petron Corp	PCOR PM	Buy	12.50	16.80	2.7	2.7	15.6	8.0	10.3	6.2	6.7	1.3	0.4
Phoenix Petro	PNX PM	Buy	6.45	7.05	0.2	0.1	10.4	8.8	10.3	9.1	13.9	1.3	1.6

Analyst Notes

• PetroChina: BUY with a target price of HKD11.50. It is expected to benefit from the energy reforms and access to transmission pipelines.
• NewOcean Energy: BUY with a target price of HKD8.88. The company is expected to expand its auto LNG business and become a major distributor in China.
• Sinopec and CNOOC: HOLD with target prices of HKD6.85 and HKD14.34, respectively. Both lack catalysts for further re-rating and face challenges in earnings.
• CNOOC: HOLD due to uninspiring earnings outlook, despite the potential for growth in the energy sector.

Key Themes

• Energy Reform in China: Phase II is underway, focusing on natural gas liberalization, unconventional gas production, and natural gas vehicles.
• M&A Activity: Roc Oil is in talks for another potential M&A target, while Total has canceled a vessel charter.
• LNG Development: Japan is building LNG tankers in China, and the Ichthys LNG project is 50% complete.
• OSV Market: Optimism for long-term fundamentals, with a focus on demand for newer vessels.

Conclusion

The regional oil and gas market is experiencing mixed price movements, with Brent and gold down slightly, while Henry Hub and some stocks show gains. Key developments include M&A activity, project progress, and strategic moves by companies in the sector. Analysts maintain a BUY or HOLD stance on various companies, with a focus on long-term growth potential and structural changes in the industry.