COP, CVX, Eurasia Drilling, ENBL, NBL, NEE, Nostrum Oil, RICE, TMK, XOM,
European Oils
US EIA Petroleum Statistics
ConocoPhillips (COP)
A Poster-Child for the “Stand and Deliver” Generation
21 May 2014 ¦ 28 pages ir.citi.com
We transfer coverage of COP to Alastair Syme as Citi moves to global coverage
of Big Oil. The re-focused COP that has emerged over the last two years looks
well positioned for the Stand and Deliver" phase of the industry cycle. Extensive
positions in North American shale, the only Big Oil that has competed effectively
in this space, powers 70% of COP’s expected medium-term growth and gives the
flexibility to control capital and benefit from likely efficiency-gains. We think COP
can deliver a 14% ROE (+200 bps vs peers) and grow book value at 9% p.a.
(peers at 7%) to 2018. A valuation of 1.3x end-17E book, a discount to most Big
Oil peers, looks rooted in market prejudice around the capital allocation of COP
of old, not the new re-focused, shale-powered COP of this generation. We raise
the price target from $85 to $100/share.
Chevron (CVX)
Improving Execution Bodes Well
21 May 2014 ¦ 20 pages ir.citi.com
We transfer coverage of CVX from Faisel Khan to Alastair Syme as Citi moves to
global coverage of Big Oil. Our investment rating (Buy) is unchanged as is our
target price of $141/share, but we raise 2014/15 by an average of 6% to
incorporate new oil prices forecasts from Citi’s Commodity Team. We think CVX
has been the synthesis of our Stand and Deliver thesis for the industry, with high
capital intensity and project execution issues combining to see ROE fall from
29% to 13% since 2007. But we think the future is now brighter, with better
execution, growth in book value and stabilising ROE (at around 12%). With a
valuation of 1.2x end-17 book market suggesting to us the market is continuing to
discount delivery,
Eurasia Drilling (EDCLq.L)
New long-term contract with Gazprom Neft - implications
22 May 2014 ¦ 7 pages ir.citi.com
New long-term agreement with Gazprom Neft: According to EDC, the agreement
covers a three-year period beginning Jan 2014 and includes a pricing formula
and a minimum guaranteed number of active rigs for onshore drilling and
sidetracking in Russia. Volumes and pricing will be adjustable, with the consent
of both parties, in line with changing market conditions. According to Gazprom
Neft, EDC is expected to provide 25-30% of its total drilling volume going
forward.
Enable Midstream Partners LP (ENBL)
Stable Diversified Midstream & Pipeline Assets; Initiating at Neutral
21 May 2014 ¦ 46 pages ir.citi.com
Noble Energy Inc (NBL)
Alert: Woodside Bows Out of Leviathan JV
21 May 2014 ¦ 7 pages ir.citi.com
NextEra Energy Inc (NEE)
Alert: YieldCo – S-1 with Incentive Distribution Right (IDR) Fees Disclosed
20 May 2014 ¦ 7 pages ir.citi.com
Nostrum Oil & Gas (NOGNq.L)
Proposed Premium Listing Tackles One of the Two Prerequisites to Potential Re-rating
20 May 2014 ¦ 7 pages ir.citi.com
Rice Energy Inc (RICE)
Q1’14 Wrap-Up: Adjusting Estimates And Raising Price Target
20 May 2014 ¦ 13 pages ir.citi.com
TMK (TRMKq.L)
1Q14 IFRS preview – A tough quarter expected
21 May 2014 ¦ 7 pages ir.citi.com
Citi's Take: TMK is set to release its 1Q14 IFRS results this Friday, May 23rd,
followed by a call at 5pm Moscow time, 2pm London. We forecast that TMK will
report $1.45bn of revenues, $194mn of EBITDA, and $12mn of net income, with
the latter number depressed due to an expected $25mn FOREX charge from a
weakening ruble’s effect on the company’s c$3.5bn net debt position.
Exxon Mobil Corp (XOM)
Premium Returns, Although Advantage Eroding
21 May 2014 ¦ 19 pages ir.citi.com
We transfer coverage of XOM from Faisel Khan to Alastair Syme as Citi moves to
global coverage of Big Oil. Our investment rating (Neutral) is unchanged, but our
target is revised from $108 to $102/share, aligning our target price methodology
(DCF) to the approach we use for peers, and we lower EPS by an average of 6%
to reflect higher depreciation. XOM’s business model has stood it well in the last
cycle with a combination of: (1) selective investment and, (2) good project
execution seeing ROE average a steady +600 bps premium versus peers over
the last five years But peers are trying to follow, and the XOM portfolio does not
look differentiated enough to maintain that ROE premium, in our view. We see
the gap closing to around +300bps by 2018 = 15% against which a valuation of
2.1x end-17E book does not look under-appreciated by the market.
European Oils
Raising 2014E/15E oil prices and adjusting exchange rates
21 May 2014 ¦ 47 pages ir.citi.com
Raising oil price assumptions to new Citi commodity forecasts, raising EPS by
c.4% in 2014E and 9% in 2015E 1Q14 highlighted stabilising earnings and
returns — Central to our “Stand and Deliver” thesis for Big Oil is a belief that after
several years of sharp deterioration earnings and returns for the group are now
starting to stabilise. Equity winners should be those with portfolios capable of
delivering profitable growth, who
US EIA Petroleum Statistics
Is a well-supplied US pushing back at crude imports?
21 May 2014 ¦ 27 pages ir.citi.com
Another low for imports may suggest the US is backing out more crude,
substituting it with US and Canadian supply. EIA is likely understating exports,
meaning net oil imports could be as low as 5-m b/d, down 2-m b/d y/y. PADD III
imports fell to 2.8-m b/d; if ~3-m b/d import levels are sustained, PADD III stocks
can tighten into the summer, although light crude availability may still be ample.
Cushing stocks drew 225-k bbls to 23.2-m bbls, the lowest since December
2008. |
