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Regional Oil & Gas Summary

Core Content

This document provides an overview of the oil and gas market conditions as of 1 September 2015, including price movements, company performance, and analyst ratings across various regions. It highlights key events impacting the sector and presents valuation data for major players in Asia and other regions.

Key Market Movements

• Brent and WTI Crude Oil Prices:
  • Brent crude oil prices rose by 8.2% to USD54.15/b.
  • WTI crude oil prices increased by 8.8% to USD49.20/b.
• Dubai Crude Oil:
  • Platts Oct cash Dubai crude closed at USD48.41/b and averaged USD47.691/b in August.
• LNG Prices:
  • LNG Northeast Asia CFR price was USD7.67/MMBtu, with a 0.0% change in the last day.
• Gold and USD-CNY:
  • Gold price was USD1,134.93/Oz, with a 0.1% increase.
  • USD-CNY exchange rate was 6.38, with a -0.2% change.

Major News Highlights

1. Oil sees biggest three-day surge since 1990:

   • Oil prices surged due to revised US production data and OPEC's willingness to talk with other producers.
   • US crude prices rose over $10/barrel in three days, reversing the month's declines.

2. EIA: US oil production fell in June:

   • US oil production dropped by 100,000 barrels per day between May and June.
   • The average production in June was 9.3 million barrels per day, still 7% higher than the same period a year ago.

3. Platts Oct cash Dubai crude closes at USD48.41/b:

   • The average price for front-month cash Dubai crude in July was USD56.168/b, indicating a significant drop in August.

4. Rosneft Second-Quarter Profit Falls 22%:

   • Rosneft's profit dropped by 22% due to a 50% slump in crude prices.
   • Net income was 134 billion rubles ($2 billion), below the analyst estimate of 95.5 billion rubles.

5. Trafigura raises stake in Pacific Exploration:

   • Trafigura increased its stake to over 10%, becoming the second-largest shareholder.
   • It purchased 2.2 million shares, totaling 31.65 million shares in the company.

6. Walking Oil Rigs Spur Cheaper, Quicker Drilling:

   • New drilling rigs can move to the next well under their own power, making drilling faster and cheaper.
   • These rigs have boosted per-rig output by at least 40% in the four largest U.S. shale fields since 2014.

Analyst Ratings and Company Performance

China

• PetroChina (H):
  • Rating: SELL
  • 1H15 Net Profit: CNY25.4b, down 63% YoY.
  • Full-Year Forecast: Only 50% of the forecast.
• China Petroleum & Chemical Corp:
  • Rating: HOLD
  • 1H15 Net Profit: CNY25.4b, down 22% YoY, representing 68% of the full-year consensus forecast.
• CNOOC LTD:
  • Rating: BUY
  • 1H15 Net Profit: CNY14.7b, representing 57% of the full-year consensus forecast.
  • Expected Earnings Cut: Due to lower oil price assumptions.

Malaysia

• UMW Oil & Gas:
  • Rating: SELL
  • Earnings Cut: Reduced by 39% - 142% due to lower DCRs and utilization rates.
  • Target Price: Lowered to MYR0.80, a 57% decrease.
• Perisai:
  • Earnings Cut: Reduced by 39% - 142%.
  • Target Price: Lowered to MYR0.22, a 12% decrease.

Asia Oil & Gas Valuations

Asian Refiners Average

• Exxon Mobil:
  • Price: USD75.24
  • Market Cap: USD313.7m
• Chevron:
  • Price: USD80.99
  • Market Cap: USD152.4m
• ConocoPhillips:
  • Price: USD49.15
  • Market Cap: USD60.6m
• Shell:
  • Price: USD1,695
  • Market Cap: USD166.0m
• BP plc:
  • Price: USD360.50
  • Market Cap: USD101.2m
• Gazprom:
  • Price: USD148.19
  • Market Cap: USD54.5m
• Rosneft Oil:
  • Price: USD3.77
  • Market Cap: USD39.9m

Key Insights

• Oil prices experienced a significant surge, driven by production data revisions and OPEC engagement.
• US production declined slightly, but remained 7% higher than the same period in 2014.
• Rosneft's profit dropped due to a steep decline in crude prices, affecting its financial performance.
• Trafigura's investment in Pacific Exploration strengthens its position in the Latin American market.
• Walking rigs are transforming the U.S. shale industry with faster and cheaper drilling.
• Analysts are cautious about future earnings due to lower oil price assumptions, advising SELL or HOLD for some companies.
• Valuation metrics such as PER and EV/EBITDA show mixed performance, with some companies showing positive trends and others facing declines.

Summary

The document outlines the oil and gas market trends and company performance in Asia and other regions as of 1 September 2015. It highlights a significant price surge for crude oil and LNG, driven by production data and market sentiment. Companies like CNOOC received a BUY rating due to strong performance, while others like PetroChina and UMW Oil & Gas were rated SELL or HOLD due to expected earnings cuts. The market analysis shows a shift in valuation metrics and the impact of lower oil prices on financial forecasts. Overall, the market is in a volatile state, with both opportunities and challenges emerging for oil and gas firms.