20160311-高盛-Asia_Pacific__Energy__Oil-Gaining_confidence_in_oil_price_recovery__Buy_PetroChina,_InterOil_24页_517kb

Document Summary: Oil Price Recovery and Investment Recommendations

Core Content

Goldman Sachs has updated its oil price forecasts and provided investment recommendations for oil and gas companies across different regions. The analysis focuses on the near-term volatility in oil prices, the gradual recovery outlook, and the performance of key upstream and integrated oil companies.

Oil Price Forecast

• 2016E: Brent oil prices are forecasted at $38.5/bbl (down 14% from previous estimate), WTI at $38/bbl (down 4%).
• 2017E: Brent oil prices are forecasted at $59.5/bbl (down 4%), WTI at $58/bbl.
• 2018E–2020E: Forecasts remain unchanged at $53/bbl for Brent and WTI.
• The current Brent oil price is around $40/bbl, which is higher than the 2Q16E forecast of $35/bbl.
• The firm expects non-OPEC supply reduction and US oil production decline to support a gradual oil price recovery.
• A rapid price rally could trigger US shale producers to increase drilling activity, potentially undermining the recovery.

Key Investment Views

China

• PetroChina (H) is recommended as a Buy, with a 12-month EV/DACF-based target price raised by 5% to HK$6.90.
• The firm expects refining segment profits to rise while the upstream segment faces challenges.
• Asset restructuring and pipeline optimization are expected to help dividend sustainability and free cash flow.
• CNOOC is rated Neutral, with concerns over potential asset impairments and less attractive risk/reward.
• Sinopec has a Rating Suspended due to market conditions and is excluded from the analysis.

Australia/PNG

• InterOil is recommended as a Buy, with a 12-month SOTP-based target price at USD35.15.
• Santos and Beach Energy are rated Sell.
• Santos target price is raised by 8% to AUD2.98, reflecting less-than-anticipated dilution from deleveraging.
• Beach Energy is rated Sell due to integration of Drillsearch acquisition and low valuation.
• Woodside and Oil Search are rated Neutral.

India

• ONGC, Oil India, and Cairn India are rated Neutral.
• Realization for upstream names may remain range-bound due to low oil prices and under-recovery burden.
• Reserve life is a concern, with limited upside expected in the short term.

ASEAN

• PTT and PTTEP are rated Neutral.
• PTTEP has a low reserve life (around 5 years), which limits its upside potential.
• The firm remains Neutral on ASEAN E&P names due to limited upside and M&A overhang.

Valuation Overview

• PetroChina is highlighted for its high free cash flow yield and operating cash flow yield.
• InterOil is noted for its strong balance sheet and potential M&A catalysts.
• The implied long-term Brent oil prices from current stock valuations range from $48 to $69/bbl.
• CROCI (Cash Return on Capital Invested) is expected to rise in 2017E due to Brent oil price increase.
• CROCI levels are generally falling due to lower oil prices and increased lifting costs.

Key Information

• PetroChina (H) is expected to reduce domestic crude oil production by 8% and cut capex by 15% over 2015E–2017E.
• InterOil is expected to move into a net cash position due to a $715mn contingent payment from Total SA.
• PetroChina Pipelines, a 72% owned subsidiary, is a platform for asset restructuring and potential partial disposals.
• Santos and Beach Energy are Sell-rated due to high leverage and low valuation.
• PetroChina (A) is rated Neutral, with free cash flow yield at 6.2% and dividend yield at 1.2%.

Summary of Ratings and Target Prices

Conclusion

Goldman Sachs remains bullish on PetroChina and InterOil, citing strong balance sheets, free cash flow, and potential for asset restructuring and M&A. The firm is cautious on other upstream and integrated players, particularly in Australia and India, due to high leverage, limited upside, and long-term reserve life concerns. The oil price outlook is gradual recovery, with near-term volatility expected.