20161130-招商证券-2017_outlook_China_Oil_and_Gas_Sector_37页_2mb_2mb

报告摘要

China Oil and Gas Sector - 2017 Outlook Summary

Core Content

The document provides an outlook for the China oil and gas sector in 2017, highlighting moderate recovery in oil prices, upstream capital expenditure (capex) increases, and ongoing reforms focused on natural gas pipeline pricing. It also evaluates key companies in the sector and their financial performance and valuation.

Main Views

Oil Price Recovery: A moderate recovery in oil prices is expected in 2017, with an estimated range of US$45-55/bbl. The long-term oil price is projected to remain at US$75/bbl.
OPEC Production: OPEC production has reached a historical high but is nearing its peak, with limited capacity to increase output further. Key members like Saudi Arabia, Iraq, and Iran are major contributors to this trend.
US Oil Supply: US shale production is expected to increase in the long run due to new energy policies, but short-term supply is capped by breakeven prices. The document estimates that a medium to low oil price is needed to control US crude oil production.
China's Role in Oil Demand: China is a key driver of global oil consumption growth, with strong demand expected to continue. It is projected to maintain a solid 7% CAGR in crude oil imports from 2015 to 2020.
Upstream Capex: Upstream capex in China is expected to increase by 10-15% YoY in 2017E due to oil price recovery.
Natural Gas Reforms: The natural gas pricing mechanism in China has seen progress, but limitations remain. A RMB0.4/cu.m cut in gas prices is expected, driven by lower city-gas prices and transmission tariffs.
Valuation and Investment Outlook: The sector is upgraded from NEUTRAL to OVERWEIGHT. Companies like CNOOC and Sinopec Kantons are preferred due to their attractive valuations and strong earnings growth potential.

Key Information

Oil Price Outlook

OPEC production is close to the end of its ramp-up phase.
US shale production may increase in the long term, but short-term growth is limited by breakeven prices.
The document estimates a US$45-55/bbl oil price for 2016E-2017E, with a long-term projection of US$75/bbl.
A medium to low oil price (around US$60/bbl) is needed to curb US supply in the medium term.

Upstream Capex

Global integrated oil companies are expected to see a moderate capex recovery in 2017E.
Independent E&Ps in North America are more aggressive in capex expansion due to rising shale drilling activities.
Domestic upstream capex in China is expected to increase by 10-15% YoY in 2017E due to rising oil prices.

Natural Gas Reforms

A market-oriented pricing system is being implemented, with a shift from cost-plus to net-back pricing.
A new transmission tariff pricing mechanism was introduced in October 2016, with an allowed investment return of 8%.
City-gate price remains a benchmark set by the National Development and Reform Commission (NDRC), with a cap of 20% upside but no downside limit.
Transmission costs account for 50-70% of retail gas prices in coastal areas, reducing competitiveness.

Gas Price Cut

A RMB0.4/cu.m cut in gas prices is expected in 2017E to reduce the price premium to alternative energy sources.
Upstream players, pipeline operators, and distributors are expected to bear the cost of the price cut, saving downstream users up to RMB23.7bn.
The largest oil and gas producers in China are expected to suffer the most from the price cut.

Companies Overview

Company	Ticker	Rating	Current Price (HK$)	Target Price (HK$)	Upside	FY16E EPS	FY17E EPS	FY16E P/E	FY17E P/E	FY16E P/B	FY17E P/B	FY16E ROE	FY17E ROE
CNOOC	883 HK	BUY	10.04	12.80	27%	0.03	0.59	n/a	14.5	1.0	1.0	0.4	7.0
Sinopec Kantons	934 HK	BUY	3.48	4.90	41%	0.43	0.46	8.1	7.5	0.8	0.8	10.8	10.7
SSC	1033 HK	BUY	1.59	1.90	19%	(0.61)	0.03	n/a	42.4	1.2	1.2	(42.7)	2.8
COSL	2883 HK	SELL	7.42	6.20	-16%	(2.11)	(0.07)	n/a	n/a	0.8	0.8	(24.2)	(0.9)

Natural Gas Price Analysis

The city-gate price is 41% higher than alternative energy prices.
Transmission tariffs are under pressure to reduce energy costs for end users.
A RMB0.6/cu.m cut in gas prices is needed to bring the price premium down.

Sector Outlook

The sector is upgraded from NEUTRAL to OVERWEIGHT.
CNOOC and Sinopec Kantons are highlighted for their earnings turnaround and valuation discount compared to global peers.
The document expects a solid 13% CAGR in natural gas consumption in China from 2015 to 2020.

Conclusion

The China oil and gas sector is expected to benefit from a moderate oil price recovery and increased upstream capex in 2017. Natural gas reforms are progressing, but challenges remain in aligning pricing with market dynamics. Companies like CNOOC and Sinopec Kantons are viewed positively due to their strong fundamentals and attractive valuations.

展开完整摘要