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Regional Oil & Gas Summary - 31 Mar 2014

Core Content

This summary highlights key developments and insights in the Asia-Pacific oil and gas sector as of 31 March 2014, focusing on import/export trends, company activities, and market valuations.

Main News Headlines

• China's LPG and Propane/Butane Imports Decline:

  • In February 2014, China experienced a decline in both import prices and volumes for propane and butane, with contract prices dropping by CNY40/tonne and CNY70/tonne respectively to CNY970/tonne.
  • Import volumes for propane and butane declined by 47% and 22% MoM.
  • LPG imports dropped by 40% MoM to 287,266 tonnes, while exports fell by 31% MoM to 82,502 tonnes, attributed to weak domestic demand during the Lunar New Year.

• Bohai Bay Refiners Lead China's Gasoline Exports:

  • Refiners in the Bohai Bay accounted for 70% of China's gasoline exports in January-February 2014.
  • Approximately 56% of the exported gasoline was sent to Indonesia, and 26% to Singapore.

• CNOOC Plans to Increase LNG Supply:

  • CNOOC is considering increasing truck-delivered LNG supply at its Putian terminal in the second half of April due to a supply shortage caused by delays in Indonesian LNG shipments.
  • The last Indonesian LNG cargo arrived on 22 March, with the next expected on 29 March.
  • Each LNG truck carries about 20-21 tonnes of LNG, and the price of domestic LNG increased due to the short-term supply-demand imbalance.

• Germany's Energy Policy Shift:

  • Chancellor Angela Merkel discussed the potential to reduce reliance on Russian gas from Gazprom, especially in the wake of the Crimea crisis, by leveraging Norwegian gas sources.

• Petronas Renewed Contract with GE:

  • Petronas inked a new seven-year contract with GE for gas turbine packages for onshore and offshore projects.

Analyst Coverage

• Howard Wong (HK/CHINA):

  • Focus on Chinese oil and gas market dynamics.

• Liaw Thong Jung (MALAYSIA):

  • Covers Malaysian oil and gas sector, including Petronas and related companies.

• Jigar Shah (INDIA):

  • Analyzes Indian oil and gas companies such as ONGC, Reliance Industries, and Cairn India.

• Yeast Chee Keong (SINGAPORE):

  • Provides insights on Singapore's oil and gas market.

• Sutthichai Kumworachai (THAILAND):

  • Analyzes Thai oil and gas companies like PTT and Thai Oil.

• Pandu Anugrah (INDONESIA):

  • Focuses on Indonesian oil and gas market.

• Laura Dy-Liacco & Bianca Solema (PHILIPPINES):

  • Reviews Philippine oil and gas companies, including Petron Corp.

• Le Nguyen Nhat Chuyen (VIETNAM):

  • Provides insights on Vietnamese oil and gas market.

Our Latest Reports

• Petron Corp (PCOR PM):

  • 2015 outlook remains positive.
  • Target Price: PHP15.90.
  • FY13 reported profit increased by 187% to PHP5.1b, but fell short of estimates.
  • Full commercial operations of RMP-2 expected by 2015.
  • Maintain BUY with TP of PHP15.90.

• SapuraKencana Petroleum (SAKP MK):

  • FY14 results within expectations.
  • Target Price: MYR5.30.
  • Newfield Malaysia will drive earnings growth: +MYR116m in FY15 and +MYR447m in FY16.
  • Maintain BUY with TP of MYR5.30.

• Ezion Holdings (EZI SP):

  • Reiterate BUY with TP trimmed to SGD2.90.
  • Gulf Marine Services listing reinforces the attractiveness of Ezion's valuation.
  • Liftboat market is underpenetrated in Southeast Asia, and new entrants will drive adoption.

• Malaysia and Singapore Oil & Gas:

  • Maintain OVERWEIGHT.
  • Sector interest is wide-ranging, with bottom-up driven funds.
  • Key drivers include rig building, drilling, OSV upcycles, and PETRONAS capital expenditure.
  • Top BUYs for Malaysia: Bumi Armada, Dialog, SAKP, Perisai, and Perdana.
  • Top BUYs for Singapore: SembCorp Marine, Ezion, Mermaid, and Nam Cheong.

Valuation Comparison

Asia Oil & Gas

Asia Oil Service Valuation

Summary of Key Trends

• Import/Export Dynamics: China saw significant declines in propane, butane, and LPG imports due to weak domestic demand and supply chain issues.
• Energy Policy Shifts: Germany and other countries are exploring alternatives to reduce reliance on Russian gas.
• LNG Supply Adjustments: CNOOC is considering increasing LNG supply in response to supply shortages.
• Market Valuation: The report compares valuations of key companies across the region, with varying P/E, EV/EBITDA, and RoE metrics.
• Investment Outlook: The sector is viewed positively, with several companies receiving BUY ratings, indicating potential growth opportunities.