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Disclaimer: The information contained in this document is intended only for use during the presentation and should not be disseminated or distributed to parties outside the presentation. Phillip Securities accepts no liability whatsoever with respect to the use of this document or its contents.
Phillip Securities Pte Ltd (A member of PhillipCapital) Co. Reg. No. 197201035Z © PhillipCapital 2014. All Rights Reserved. For internal circulation only.
1
Market StrategistsJoshua Tan, Head of Research
Kenneth Koh, Market & Equity Analyst
Soh Lin Sin, Macro Economist
Osama Bakhteyar, Research Assistant
SG & US Equity Analysts Lucas Tan, Real Estate
Wong Yong Kai, US Equities
Colin Tan, Telcos
Caroline Tay, Real Estate
Ben Ong, Financials
Richard Leow, Transport
By Phillip Securities ResearchMr. Chan Wai Chee, CEO
Jermaine Tock, Operations Exec
21st July 14, 8.15am/11.15am Morning Call/Webinar
Disclaimer: The information contained in this document is intended only for use during the presentation and should not be disseminated or distributed to parties outside the presentation. Phillip Securities accepts no liability whatsoever with respect to the use of this document or its contents.
Phillip Securities Pte Ltd (A member of PhillipCapital) Co. Reg. No. 197201035Z © PhillipCapital 2014. All Rights Reserved. For internal circulation only.
22
Disclaimer
This presentation is provided to you for general information only and does not constitute a recommendation, an offer or solicitation to subscribe for, purchase or sell the investment products mentioned herein. It does not have any regard to your specific investment objectives, financial situation and any of your particular needs. Accordingly, no warranty whatsoever is given and no liability whatsoever is accepted for any loss arising whether directly or indirectly as a result of you acting based on this information. Investments are subject to investment risks including the possible loss of the principal amount invested. The value of the units in any fund and the income from them may fall as well as rise. Access to services and your account may be affected by market conditions, system performance and other reasons.
The information contained in this presentation has been obtained from public sources which PSPL has no reason to believe are unreliable and any analysis, forecasts, projections, expectations and opinions (collectively the “Research”) contained in this presentation are based on such information and are expressions of belief only. PSPL has not verified this information and no representation or warranty, express or implied, is made that such information or Research is accurate, complete or verified or should be relied upon as such. Any such information or Research contained in this presentation is subject to change, and PSPL shall not have any responsibility to maintain the information or Research made available or to supply any corrections, updates or releases in connection therewith. In no event will PSPL be liable for any special, indirect, incidental or consequential damages which may be incurred from the use of the information or Research made available, even if it has been advised of the possibility of such damages.
You may wish to seek advice from a qualified financial adviser, pursuant to a separate engagement, before making a commitment to purchase any of the investment products mentioned. In the event that you choose not to seek advice from a qualified financial adviser, you should consider whether the investment product is suitable for you before proceeding to invest and we do not offer advice in this regard unless mandated to do so by way of a separate engagement.
You are advised to read the Conditions governing Phillip Securities Trading Accounts and the Risk Disclosure Statement carefully before investing in this product.
Disclaimer: The information contained in this document is intended only for use during the presentation and should not be disseminated or distributed to parties outside the presentation. Phillip Securities accepts no liability whatsoever with respect to the use of this document or its contents.
Phillip Securities Pte Ltd (A member of PhillipCapital) Co. Reg. No. 197201035Z © PhillipCapital 2014. All Rights Reserved. For internal circulation only.
3
Indonesia (Upgrade UW to OW)
Ø Call for structural reforms 2.0
Ø Open policy – way to sustainable economy
Ø Risks to monitor –stubborn twin deficits, government transition and policy change (reform agenda)
Ø upgrade to OW from UW on bet on a Jokowi victory leading to a cleaner and efficient administration; reform story remains in tact
Disclaimer: The information contained in this document is intended only for use during the presentation and should not be disseminated or distributed to parties outside the presentation. Phillip Securities accepts no liability whatsoever with respect to the use of this document or its contents.
Phillip Securities Pte Ltd (A member of PhillipCapital) Co. Reg. No. 197201035Z © PhillipCapital 2014. All Rights Reserved. For internal circulation only.
4
Mutual Funds that proxy IndonesiaØAberdeen Indonesia EquityØFidelity Indonesia A USD
ETFs that proxy IndonesiaØLyxor Indonesia10US$x@ (P2Q)ØDBXT MSINDO 10US$x@ (KJ7)ØIshares MSCI Indonesia ETF (EIDO)ØMarket Vectors Indonesia Index ETF (IDX)
Indonesia (Upgrade UW to OW)
Ø JCI has rallied 18.65% year-to-date, currently trading at 20.49x P/E, slightly above its 52-weeks trailing P/E, and valued at 16.35x estimated 12-month earnings with a consensus earnings forecast growth to grow at 50.86% y-y.
Ø Post-election near term volatility. Investors may book gains into potential market rally post-election, but reforms agenda and timeline may limit market upside.
Disclaimer: The information contained in this document is intended only for use during the presentation and should not be disseminated or distributed to parties outside the presentation. Phillip Securities accepts no liability whatsoever with respect to the use of this document or its contents.
Phillip Securities Pte Ltd (A member of PhillipCapital) Co. Reg. No. 197201035Z © PhillipCapital 2014. All Rights Reserved. For internal circulation only.
5
Update: M1 Limited (S$3.62, Accumulate, TP S$3.68 - under review, pending results)• Share price at S$3.62, up 8.4% since 1Q14 results on
14 Apr 14 (1yr return: ~11%) • 3M14 earnings at S$43m, representing 25.4% of our
FY14F earnings (Fwd P/E: ~20x)• 2Q14 results to be released on 21 Jul 14 after trading
hours.• Key Upsides: Ø Growth in Mobile services from:
1) higher excess data charges at S$10.70/Gig, 2) more subscribers exceeding data bundle, 3) extra charges on 4G plans from Jan-2015
(new signups/re-contracts) Source: Bloomberg
Fig: M1 share Price over last 6 months
Ø Growth in Fixed services from: 1) Increase residential take-ups in fibre broadband2) Demand from SMEs for ICT & hi-speed connectivity solutions
• Downside risks:Ø Further price erosion for fibre broadband offerings due to strong competitionØ Potential new competitor entry in mobile telecom space
Disclaimer: The information contained in this document is intended only for use during the presentation and should not be disseminated or distributed to parties outside the presentation. Phillip Securities accepts no liability whatsoever with respect to the use of this document or its contents.
Phillip Securities Pte Ltd (A member of PhillipCapital) Co. Reg. No. 197201035Z © PhillipCapital 2014. All Rights Reserved. For internal circulation only.
6
Update: Silverlake Axis Limited (SAL)(S$1.15, Accumulate, TP S$1.32)• Share price rallied over 30% since 3Q results on 7th May• Bright growth prospects, supported by consolidation,
regionalisation and digitisation initiatives from banks.Ø Bank IT spending in Asia expected to grow at about
7% CAGR leading up to 2017*
Ø Focus toward integrated software suite instead of standalone systems
Ø Approx. 300 banks in the region still using in-house developed software applications
• Key Upsides: Ø Post-merger integration projects from possible
CIMB-RHB-MBSB, OCBC-Wing Hang mergersØ Upgrades, enhancements from existing customers
• Downside risks: Ø Above mergers, acquisitions fall throughØ Absence of new customer acquisitions
• Maintain Accumulate with revised TP of S$1.32 (~15% upside, 3.3% div yield)
Source: Capgemini Analysis, 2013
Source: Company
Fig: Evolution of Core Banking Systems
Fig: Growing SAL’s Core Revenue
Disclaimer: The information contained in this document is intended only for use during the presentation and should not be disseminated or distributed to parties outside the presentation. Phillip Securities accepts no liability whatsoever with respect to the use of this document or its contents.
Phillip Securities Pte Ltd (A member of PhillipCapital) Co. Reg. No. 197201035Z © PhillipCapital 2014. All Rights Reserved. For internal circulation only.
7
Pre-results update: SATS Ltd – 1Q FY15 (FYE Mar)(Previous close: S$3.18, Neutral, TP S$3.05)
§ 1Q FY15 financial results to be announced on Tuesday, 22 July.
§ Announced the Changi operating data for 1Q FY15 on Friday, 18 July.
§ All operating metrics saw modest y-y growth.§ Growth in Cargo throughput was slightly stronger.§ In line with our forecasts (made in last report) of y-y growth across the board.
§ "Neutral" rating, with revised TP of S$3.05
Operating Statistics for Singapore Aviation Business1Q15 1Q14 y-y (%) 4Q14 q-q (%) Comments
Passengers Handled (mn) 10.7 10.6 0.8% 10.5 1.5%Flights Handled ('000) 33.2 32.4 2.5% 33.5 -1.0%Unit Services ('000) 27.3 26.9 1.6% 27.5 -0.8%Cargo ('000 tonnes) 388.4 370.4 4.9% 373.4 4.0%Gross Meals Produced (mn) 6.5 6.4 0.5% 6.4 1.6% Growth in pa ssegers handled.Uni t Meals Produced (mn) 5.1 5.1 1.0% 5.0 1.6% Growth in pa ssegers handled.Source: Company, CAG, PSR
Disclaimer: The information contained in this document is intended only for use during the presentation and should not be disseminated or distributed to parties outside the presentation. Phillip Securities accepts no liability whatsoever with respect to the use of this document or its contents.
Phillip Securities Pte Ltd (A member of PhillipCapital) Co. Reg. No. 197201035Z © PhillipCapital 2014. All Rights Reserved. For internal circulation only.
8
Company update: Ezion Holdings Limited (S$2.10, Accumulate, TP S$2.53 - under review, pending change of analyst)
• Wins two service rig contracts
1. Secured new contract to support an east European based National Oil Major in the North SeaØ To provide a service rig over a 7 year periodØ Contract value approx. USD 122.6 million Ø Bareboat charter to be deployed by 2Q 2015Ø Ezion will not own the rig
2. Received LOI to provide a new-build to be used by a Southeast Asian based national oil company Ø To provide a liftboat over a 5 year period : 3 + 1 + 1Ø Contract value approx. USD 146 million Ø Time Charter to be deployed by 3Q 2016
• Remain positive on Ezion with strong demand for liftboats as key growth driver
• Downside risks include competition and rising gearing
Disclaimer: The information contained in this document is intended only for use during the presentation and should not be disseminated or distributed to parties outside the presentation. Phillip Securities accepts no liability whatsoever with respect to the use of this document or its contents.
Phillip Securities Pte Ltd (A member of PhillipCapital) Co. Reg. No. 197201035Z © PhillipCapital 2014. All Rights Reserved. For internal circulation only.
9
Kim Heng Offshore & Marine is an established integrated offshore & marine value chain services provider. Their activities are classified into two 2 broad categories, namely (i) Offshore Rig Services and Supply Chain Management; and (ii) Vessel Sales and Newbuild.
Asset light business with high returns and strong operating and free cash flow generation•Gross profit margins and net profit margins high, resulting in superior returns on equity and invested capital, robust and positive Op CF and FCF since FY2010. Once capex cycle over, expect good potential for increasing shareholders’ returns
High utilization rates and aging rig fleet a positive for Kim Heng•Rig utilization across the global fleet of offshore drills high. High oil prices (>US$100/barrel) are also keeping offshore activity levels buoyant. Above 40% of global jackups and close to 30% of global floaters are above 30 years old. These factors would be demand drivers for Kim Heng’s repair and maintenance services and solutions.
Re-rating catalyst with expansionary plans and potential turnkey projects•Enhancing yard facilities and looking to acquire subsea services. Catalyst for growth!
Currently Kim Heng is trading at a ~10% to its peers, like Mencast and MTQ Corp, not warranted considering its high returns of invested capital and equity, undergoing expansionary phase now. INITIATE with BUY at TP$0.33, representing ~20% upside.
Initiation: Kim Heng Offshore & Marine(S$0.275, BUY TP S$0.33)
Disclaimer: The information contained in this document is intended only for use during the presentation and should not be disseminated or distributed to parties outside the presentation. Phillip Securities accepts no liability whatsoever with respect to the use of this document or its contents.
Phillip Securities Pte Ltd (A member of PhillipCapital) Co. Reg. No. 197201035Z © PhillipCapital 2014. All Rights Reserved. For internal circulation only.
Oil & Gas Industry:Exploration & Production
Wong Yong Kai
Investment Analyst
Phillip Securities Research
21 July 2014
Disclaimer: The information contained in this document is intended only for use during the presentation and should not be disseminated or distributed to parties outside the presentation. Phillip Securities accepts no liability whatsoever with respect to the use of this document or its contents.
Phillip Securities Pte Ltd (A member of PhillipCapital) Co. Reg. No. 197201035Z © PhillipCapital 2014. All Rights Reserved. For internal circulation only.
11
Different Types of Oil/Gas
§ Natural Gas – gaseous mixture of hydrocarbon compounds, primarily methane.
§ Crude Oil – mixture of hydrocarbons that exists in liquid phase in natural underground reservoirs and remains liquid at atmospheric pressure.
§ West Texas Intermediate (WTI) and Brent – two grades of crude oil used as benchmarks for oil pricing. WTI currently trading at ~$8/bbl discount to Brent.
§ WTI => US & Canada interior | Brent => Europe, Africa, Middle East
§ Natural Gas Liquids (NGLs) – non-crude oil liquids naturally found together with natural gas, and made up of lighter hydrocarbons (ethane and propane > 50%).
§ Shale Gas/Tight Oil refers to hydrocarbons produced from shale formation. NOT to be confused with shale oil, even though media uses the term loosely. Shale Oil = kerogen (non-crude oil) produced from sedimentary rocks.
Disclaimer: The information contained in this document is intended only for use during the presentation and should not be disseminated or distributed to parties outside the presentation. Phillip Securities accepts no liability whatsoever with respect to the use of this document or its contents.
Phillip Securities Pte Ltd (A member of PhillipCapital) Co. Reg. No. 197201035Z © PhillipCapital 2014. All Rights Reserved. For internal circulation only.
12
Different Types of Oil/Gas
§ Crude oil and natural gas are commonly grouped together as “Energy”, BUT: => Crude oil mostly refined into products such as gasoline (cars), diesel (trucks), kerosene (jet fuel), and naptha (plastics). 81% used for transportation.=> Natural gas used in power plants (electricity generation), chemical feedstock (fertilizers, plastics), and also residential heating. Price spikes in winter.
41%
31%
9%
2%
5%
12%
Finished Motor Gasoline
Diesel & Fuel Oils
Kerosene-Type Jet Fuel
Petrochem Feedstock
Petroleum Coke
Other Products
Source: EIA Refinery Yield
41%
31%
9%
2%
5%
12%
Finished Motor Gasoline
Diesel & Fuel Oils
Kerosene-Type Jet Fuel
Petrochem Feedstock
Petroleum Coke
Other Products
Source: EIA Refinery Yield
Disclaimer: The information contained in this document is intended only for use during the presentation and should not be disseminated or distributed to parties outside the presentation. Phillip Securities accepts no liability whatsoever with respect to the use of this document or its contents.
Phillip Securities Pte Ltd (A member of PhillipCapital) Co. Reg. No. 197201035Z © PhillipCapital 2014. All Rights Reserved. For internal circulation only.
13
Resources vs Reserves
§ PROSPECTIVE RESOURCES– potentially recoverable + undiscovered accumulations.
§ CONTINGENT RESOURCES– potentially but not currently commercially recoverable + known accumulations
§ PROVED RESERVES (1P)– commercially recoverable + known accumulations + 90% probability quantity > estimates
§ PROBABLE RESERVES (2P)– similar to 1P, but only 50% probability quantity > estimates
Disclaimer: The information contained in this document is intended only for use during the presentation and should not be disseminated or distributed to parties outside the presentation. Phillip Securities accepts no liability whatsoever with respect to the use of this document or its contents.
Phillip Securities Pte Ltd (A member of PhillipCapital) Co. Reg. No. 197201035Z © PhillipCapital 2014. All Rights Reserved. For internal circulation only.
14
Exploration Process
§ Crude oil often discovered near known producing areas; similar environment (heat, pressure) encourages formation, geology enables the entrapment.
§ Eagle Ford and Bakken plays each makes up 10% of US proved oil reserves.
§ Conventional reservoirs require sufficient depth for heat and pressure to turn hydrocarbons into crude oil, porous reservoir rocks for crude oil to accumulate over millenniums, and lastly impermeable layer of rocks on top of the porous formations to trap the oil and prevent it from escaping to the surface.
§ Low 10-15% chance of discovering oil in a location where oil has never been found, vs 50% or higher success rate where there is precedence.
§ Step 1: Bidding for concessions that grants rights to explore and produce.Step 2: Seismic study to reveal underground layers and map out oil reservoir.Step 3: Drilling to confirm presence of hydrocarbon, and estimate quantity.
Disclaimer: The information contained in this document is intended only for use during the presentation and should not be disseminated or distributed to parties outside the presentation. Phillip Securities accepts no liability whatsoever with respect to the use of this document or its contents.
Phillip Securities Pte Ltd (A member of PhillipCapital) Co. Reg. No. 197201035Z © PhillipCapital 2014. All Rights Reserved. For internal circulation only.
15
Production Rate
• No. of barrels of oil (bbl) or barrels of oil equivalent (boe) extracted per day.
• 1 bbl oil = 42 US gallons = 159 litres. After initial optimization and ramp-up, oil production will decline over time due to the gradual drop in pressure – unless various recovery techniques are utilized to sustain or increase production.
• 1 boe = Amount of energy released by burning 1 bbl oil = 5.8 x 106 BTU, and roughly equivalent to 6,000 cubic feet of natural gas (6 mcf).
• However, 1 bbl oil doesn’t sell for anywhere near the same price as 1 boe.
• As of 25 June 2014, WTI Crude Oil trades at $106.44/bbl, while NYMEX Natural Gas trades at $4.53/mcf (ie. $27.18/boe). Therefore, 1 bbl ≈ 4 boe in price.
Disclaimer: The information contained in this document is intended only for use during the presentation and should not be disseminated or distributed to parties outside the presentation. Phillip Securities accepts no liability whatsoever with respect to the use of this document or its contents.
Phillip Securities Pte Ltd (A member of PhillipCapital) Co. Reg. No. 197201035Z © PhillipCapital 2014. All Rights Reserved. For internal circulation only.
16
Enhanced Oil Recovery
Primary Oil Recovery• Natural pressure of the reservoir or gravity drives oil into the wellbore. This
pressure, combined with artificial lift techniques such as pumps, transports oil to the surface. 10% of the original oil in place is recovered this way.
Secondary Oil Recovery• As the pressure is relieved, less oil flows out by itself. Injection of water or gas
displaces the heavier oil and drives it to a production wellbore where it is brought to surface. 20-40% of the original oil in place is recovered this way.
Enhanced Oil Recovery (EOR)• By the time secondary techniques fail to induce more oil production, up to
70% of original oil is still underground. EOR (thermal steam or gas injection aims to lower viscosity and improve flow rate) has the potential to ultimately extract 30-60% of the original oil, but more costly than primary and secondary techniques and thus requires higher oil prices to achieve a reasonable ROI.
Disclaimer: The information contained in this document is intended only for use during the presentation and should not be disseminated or distributed to parties outside the presentation. Phillip Securities accepts no liability whatsoever with respect to the use of this document or its contents.
Phillip Securities Pte Ltd (A member of PhillipCapital) Co. Reg. No. 197201035Z © PhillipCapital 2014. All Rights Reserved. For internal circulation only.
17
Identifying Top Picks
Disclaimer: The information contained in this document is intended only for use during the presentation and should not be disseminated or distributed to parties outside the presentation. Phillip Securities accepts no liability whatsoever with respect to the use of this document or its contents.
Phillip Securities Pte Ltd (A member of PhillipCapital) Co. Reg. No. 197201035Z © PhillipCapital 2014. All Rights Reserved. For internal circulation only.
18
Identifying Top Picks
• EV/1P = Enterprise Value (EV) per barrel oil equivalent (boe) of proved reserves. The lower this metric is, the less the investor is paying for reserves.
• Doesn’t reflect composition. $20 EV/1P might look cheap since 1 bbl oil sells for $100, but expensive if 1P is mostly natural gas (6 mcf sells for $27.18).
Adj. EV/1P ($/boe)
$0.00
$5.00
$10.00
$15.00
$20.00
$25.00
$30.00
$35.00
$40.00
$45.00
$50.00
BP PLC
Hess C
orp
Chesa
peak
e Ene
rgy
Range
Res
ource
s
Southw
ester
n
PetroC
hina
EQT Corp
oratio
n
Conoc
oPhil
lips
Maratho
n Oil
Exxon
Mob
il
Total S
A
Devon
Ene
rgy
Cabot
Oil & G
as
Royal
Dutch S
hell
Occide
ntal
Murphy
Oil
Chevro
n Corp
Noble
Energy
Anada
rko P
etrole
um
Apach
e Corp
Cimare
x Ene
rgy
EOG Res
ource
s
Pionee
r Natu
ral
Disclaimer: The information contained in this document is intended only for use during the presentation and should not be disseminated or distributed to parties outside the presentation. Phillip Securities accepts no liability whatsoever with respect to the use of this document or its contents.
Phillip Securities Pte Ltd (A member of PhillipCapital) Co. Reg. No. 197201035Z © PhillipCapital 2014. All Rights Reserved. For internal circulation only.
19
Identifying Top Picks
• If EV/1P weighted based on their selling price, BP PLC, Marathon Oil, ConocoPhillips, PetroChina and Hess Corp are Top 5 with lowest adj. EV/1P.
• Pay less than $25/bbl for reserves that sell for equivalent of > $100/boe when produced. Also a function of production cost and geo-political risk.
Adj. EV/1P Weighted By Price ($/boe)
$0.00
$10.00
$20.00
$30.00
$40.00
$50.00
$60.00
$70.00
$80.00
BP PLC
Maratho
n Oil
Conoc
oPhil
lips
PetroC
hina
Hess C
orp
Exxon
Mob
il
Total S
A
Murphy
Oil
Occide
ntal
Royal
Dutch S
hell
Chevro
n Corp
Chesa
peak
e Ene
rgy
Devon
Ene
rgy
Apach
e Corp
EQT Corp
oratio
n
Range
Res
ource
s
Noble
Energy
Anada
rko P
etrole
um
Southw
ester
n
EOG Res
ource
s
Cabot
Oil & G
as
Cimare
x Ene
rgy
Pionee
r Natu
ral
Disclaimer: The information contained in this document is intended only for use during the presentation and should not be disseminated or distributed to parties outside the presentation. Phillip Securities accepts no liability whatsoever with respect to the use of this document or its contents.
Phillip Securities Pte Ltd (A member of PhillipCapital) Co. Reg. No. 197201035Z © PhillipCapital 2014. All Rights Reserved. For internal circulation only.
20
Identifying Top Picks
• Start-up of LNG export plants in the US might possibly reduce the glut of shale gas supply, with the effect of increasing selling price. It is currently hovering near historical lows, even as Asia LNG price rose to ~$14/mcf.
• $3/mcf for liquefaction into LNG, $3/mcf for shipping => money on table.
Source: US National Average Natural Gas Price
Disclaimer: The information contained in this document is intended only for use during the presentation and should not be disseminated or distributed to parties outside the presentation. Phillip Securities accepts no liability whatsoever with respect to the use of this document or its contents.
Phillip Securities Pte Ltd (A member of PhillipCapital) Co. Reg. No. 197201035Z © PhillipCapital 2014. All Rights Reserved. For internal circulation only.
21
Identifying Top Picks
• Investors betting on convergence (higher natural gas price) can look at Southwestern, Cabot Oil & Gas, EQT Corp, Chesapeake Energy, Noble Energy. Conversely, those who are bullish on crude oil fundamentals can considerMarathon Oil, Murphy Oil, Occidental, Chevron Corp and BP PLC.
% Reserves Mix
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Southw
ester
n
Cabot
Oil & G
as
EQT Corp
oratio
n
Chesa
peak
e Ene
rgy
Noble
Energy
Range
Res
ource
s
Hess C
orp
Anada
rko P
etrole
um
Total S
A
Royal
Dutch S
hell
Devon
Ene
rgy
Cimare
x Ene
rgy
PetroC
hina
Exxon
Mob
il
BP PLC
Chevro
n Corp
Apach
e Corp
EOG Res
ource
s
Pionee
r Natu
ral
Conoc
oPhil
lips
Murphy
Oil
Occide
ntal
Maratho
n Oil
NGLCrude OilNatural Gas
Disclaimer: The information contained in this document is intended only for use during the presentation and should not be disseminated or distributed to parties outside the presentation. Phillip Securities accepts no liability whatsoever with respect to the use of this document or its contents.
Phillip Securities Pte Ltd (A member of PhillipCapital) Co. Reg. No. 197201035Z © PhillipCapital 2014. All Rights Reserved. For internal circulation only.
22
Identifying Top Picks
• Increasing production rates generally translate into higher revenue growth and better economies of scale. However, production declines need not be alarming as they could be due to asset divestures. Companies with highest growth are Cabot Oil & Gas, EQT Corp, Range Resources, EOG Resources, Noble Energy.
Production Rate
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
4,500
Cabot
Oil & G
as
EQT Corp
oratio
n
Range
Res
ource
s
EOG Res
ource
s
Noble
Energy
Cimare
x Ene
rgy
Chesa
peak
e Ene
rgy
Pionee
r Natu
ral
PetroC
hina
Anada
rko P
etrole
um
Murphy
Oil
Devon
Ene
rgy
Southw
ester
n
Conoc
oPhil
lips
Chevro
n Corp
Occide
ntal
Maratho
n Oil
Exxon
Mob
il
Total S
A
BP PLC
Royal
Dutch S
hell
Apach
e Corp
Hess C
orp-30%
-20%
-10%
0%
10%
20%
30%
40%
50%
60%
Total ('000 boe/day)% y-o-y change
Disclaimer: The information contained in this document is intended only for use during the presentation and should not be disseminated or distributed to parties outside the presentation. Phillip Securities accepts no liability whatsoever with respect to the use of this document or its contents.
Phillip Securities Pte Ltd (A member of PhillipCapital) Co. Reg. No. 197201035Z © PhillipCapital 2014. All Rights Reserved. For internal circulation only.
23
Identifying Top Picks
• Buy-and-hold investors concerned with income stream, would be interested at dividend yield plays (which tend to be more predictable and rarely cut), such as BP PLC, Total SA, Royal Dutch Shell, PetroChina, and ConocoPhillips.
• Once again, US dividend income is subject to 30% withholding tax rate.
Dividend Yields
0.00%
0.50%
1.00%
1.50%
2.00%
2.50%
3.00%
3.50%
4.00%
4.50%
5.00%
BP PLC
Total S
A
Royal
Dutch S
hell
PetroC
hina
Conoc
oPhil
lips
Chevro
n Corp
Occide
ntal
Exxon
Mob
il
Murphy
Oil
Maratho
n Oil
Chesa
peak
e Ene
rgy
Devon
Ene
rgy
Apach
e Corp
Noble
Energy
Hess C
orp
Anada
rko P
etrole
um
EOG Res
ource
s
Cimare
x Ene
rgy
Range
Res
ource
s
Cabot
Oil & G
as
EQT Corp
oratio
n
Pionee
r Natu
ral
Southw
ester
n
Disclaimer: The information contained in this document is intended only for use during the presentation and should not be disseminated or distributed to parties outside the presentation. Phillip Securities accepts no liability whatsoever with respect to the use of this document or its contents.
Phillip Securities Pte Ltd (A member of PhillipCapital) Co. Reg. No. 197201035Z © PhillipCapital 2014. All Rights Reserved. For internal circulation only.
24
Ending Remarks
Disclaimer: The information contained in this document is intended only for use during the presentation and should not be disseminated or distributed to parties outside the presentation. Phillip Securities accepts no liability whatsoever with respect to the use of this document or its contents.
Phillip Securities Pte Ltd (A member of PhillipCapital) Co. Reg. No. 197201035Z © PhillipCapital 2014. All Rights Reserved. For internal circulation only.
25
Ending Remarks
• Oil & Gas Royalty Trusts excluded because marginal production cost will rise. Investors might be seduced by high yields without realizing the dangers.
• Traditional metrics such as P/E and P/B are less relevant to E&P producers, as their value lie in their reserves (not revenue generating), and the carrying value for the oil & gas reserves (historical) has nothing to do with its worth.
Lowest Adj. EV/1P Weighted By Price Highest % Reserves Mix (Crude Oil) Highest % Reserves Mix (Natural Gas)1. BP PLC (NYSE: BP) 1. Marathon Oil (NYSE: MRO) 1. Southwestern (NYSE: SWN)2. Marathon Oil (NYSE: MRO) 2. Murphy Oil (NYSE: MUR) 2. Cabot Oil & Gas (NYSE: COG)3. ConocoPhillips (NYSE: COP) 3. Occidental (NYSE: OXY) 3. EQT Corporation (NYSE: EQT) 4. PetroChina (NYSE: PTR) 4. Chevron Corp (NYSE: CVX) 4. Chesapeake Energy (NYSE: CHK) 5. Hess Corp (NYSE: HES) 5. BP PLC (NYSE: BP) 5. Noble Energy (NYSE: NBL)
Highest Production Growth Rate Highest Dividend Yields1. Cabot Oil & Gas (NYSE: COG) 1. BP PLC (NYSE: BP)2. EQT Corporation (NYSE: EQT) 2. Total SA (NYSE: TOT)3. Range Resources (NYSE: RRC) 3. Royal Dutch Shell (NYSE: RDS-A)4. EOG Resources (NYSE: EOG) 4. PetroChina (NYSE: PTR) 5. Noble Energy (NYSE: NBL) 5. ConocoPhillips (NYSE: COP)
Disclaimer: The information contained in this document is intended only for use during the presentation and should not be disseminated or distributed to parties outside the presentation. Phillip Securities accepts no liability whatsoever with respect to the use of this document or its contents.
Phillip Securities Pte Ltd (A member of PhillipCapital) Co. Reg. No. 197201035Z © PhillipCapital 2014. All Rights Reserved. For internal circulation only.
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Market StrategistsJoshua Tan, Head of Research
Kenneth Koh, Market & Equity Analyst
Soh Lin Sin, Macro Economist
Osama Bakhteyar, Research Assistant
SG & US Equity Analysts Lucas Tan, Real Estate
Wong Yong Kai, US Equities
Colin Tan, Telcos
Caroline Tay, Real Estate
Ben Ong, Financials
Richard Leow, Transport
By Phillip Securities ResearchMr. Chan Wai Chee, CEO
Jermaine Tock, Operations Exec
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