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Regional Oil & Gas Summary - 19 June 2014

Core Content

This document provides an overview of the regional oil and gas market, highlighting price movements, recent news, and analyst reports as of 18 June 2014. It includes insights on market trends, company activities, and investment recommendations across various countries in Asia, India, and others.

Key Market Movements

• Brent Crude Oil: Increased by 0.7% to $114.26.
• WTI Crude Oil: Decreased by 0.4% to $105.97.
• Henry Hub: Decreased by 1.5% to $4.64.
• LNG Northeast Asia CFR: Based on ICAPs JKM 1-month forward price for LNG.
• Other Commodities:
  • Dubai Fateh Spot: Up 0.8% to $110.03.
  • China Daqing Spot: Up 1.0% to $111.96.
  • Singapore 92 RON Spot: Up 0.1% to $120.18.
  • Gasoil 500 ppm SG Spot: Up 1.0% to $124.26.
  • 3.5% 180cst Fuel SG Spot: Up 0.6% to $625.63.
  • Gold: Up 0.6% to $1,277.71.
  • USD-CNY: Up 0.1% to 6.23.
  • DJI: Up 0.6% to 16,906.62.
  • S&P 500: Up 0.8% to 1,956.98.

News Highlights

China

• NDRC Energy Reform: Experts from the National Development and Reform Commission (NDRC) are modeling different energy consumption scenarios for China in 2050, with one scenario suggesting that renewable energy and nuclear power could account for 85% of primary energy consumption.
• CIMC Raffles: Begins construction of a new rig for North Sea operations, marking the company's second GM4-D design rig and the sixth for North Sea.

India

• BP's Disappointment: BP expressed disappointment with the slow pace of energy reforms in India, particularly the delay in gas price hikes during the election. The new leader has put price hikes on hold, which BP claims is an intentional effort to keep prices artificially low.

Iraq

• Staff Evacuation: Oil companies such as BP, ExxonMobil, and CNPC are evacuating non-essential staff due to security concerns. Gazprom Neft and Lukoil have no immediate evacuation plans.

Norway

• Stateoil & COSL: Stateoil has agreed to settle a rig payment case with COSL, paying $65m in drilling fees. COSL had previously filed a lawsuit in 2013 for $148m.

Canada

• Northern Gateway Pipeline: The Canadian government has approved Enbridge's $7.9b pipeline project from Alberta to the B.C. coast, though the company has not yet decided to proceed.

Analyst Reports

Offshore & Marine

• Insights from OSV Players: OSV operators remain optimistic about long-term fundamentals but cautious about near-term challenges. Demand for newer vessels is expected to drive replacement demand.
• Recommendation: Maintain NEUTRAL on the sector. Recommended exposure to Ezion, Mermaid Maritime, Nam Cheong, and Vard.

SapuraKencana Petroleum

• New Contracts: Secured USD700m in rig contracts and charters, with fixed term ranging from 1 to 5 years.
• Performance: The company's older rigs are securing decent rates, improving the status of T-10 rigs. Expected core net profit of -MYR250m to -MYR270m for 1QFY15.
• Recommendation: Maintain BUY with a target price of MYR5.30.

China Oil & Gas (Initiation)

• Initiation Report: Initiated coverage with a NEUTRAL view, but recommended BUY on PetroChina and NewOcean Energy, and HOLD on CNOOC and Sinopec.
• Reforms: Phase II of China's energy reform is underway, expected to cause structural changes in the industry.
• Themes: Natural gas liberalization, unconventional gas production, and natural gas vehicles.

Valuation Comparison

Asia Oil & Gas

Asia Oil Service

Analyst Contacts

Notes

• NR: Not Rated
• UR: Under Review
• All forward-looking estimates and multiples for companies not under Maybank Kim Eng's coverage are from Bloomberg consensus.
• Average multiples and yields are weighted by market capitalization.