Oil and Gas 2015 Outlook: Can Asia Oils Drill Through An Oil Price Plunge 15 Jan 2015 Grace Lee Asia Oil and Gas Analyst (BI EXPRA) Bloomberg Intelligence glee231@bloomberg.net
Agenda 01 02 03 04 A Recap of 2014 Oil 2015: Will Prices Fall Further? China: Performance and Valuations India Outlook: Performance and Valuations
Agenda 01 02 03 04 A Recap of 2014 Oil 2015: Will Prices Fall Further? China: Performance and Valuations India Outlook: Performance and Valuations
Recap 2014 Stock Performance Correlations R = 0.62, Rsq = 0.39 99.54 MSCI Asia Pacific Index 87.38 BI Asia Pacific Oil and Gas Index Brent 1 st Month Price 65.09 Note: Prices are normalized
Recap 2014 A 2008 Style Collapse? Brent 1 st Month Price $ per BBL 46 Source: Bloomberg Intelligence
Recap 2014 Demand, OPEC drove oil prices U.S shale story no longer new Political uncertainty affecting output abates Growing demand offsets supply Money managers cut long positions OPEC leaves output target unchanged, Saudi lowers OSP Brent 1 st Month Price $ per BBL Growing OPEC output Demand cut on Japan Eurozone growth IEA cut 2014 demand Saudi lowers OSP Strengthening USD 68.24 Source: Bloomberg Intelligence
Agenda 01 02 03 04 A Recap of 2014 Oil 2015: Finding the Floor? China: Performance and Valuations India Outlook: Performance and Valuations
Oil 2015: Will Prices Fall Further? Short-Term Signals
Oil 2015: Will Prices Fall Further? China s Underlying Oil Demand Slowing 30,000 25,000 LPG Demand Growth (k tons) Fuel Oil Demand Growth (k tons) Diesel Demand Growth (ktons) Naphtha Demand Growth (k tons) Kerosene Demand Growth (k tons) Gasoline Demand Growth (k tons) 20,000 15,000 10,000 5,000 - (5,000) 2009-10 (Oct YTD) 2010-11 (Oct YTD) 2011-12 (Oct YTD) 2012-13 (Oct YTD) 2013-14 (Oct YTD)
Oil 2015: Will Prices Fall Further? China s Underlying Oil Demand Slowing
Green River oil Vt Briscoe Rance vol oil (Eagle Ford) San Juan oil (Mancos Shale) Wattenberg Hz oil Uteland Butte Uintah Wasatch Hz Briscoe Ranch condy (Eagle Ford) Permian Wolfcamp Hz Permian Yeso Vt Bakken Pembina oily Bakken Antelope Red Wash + Green River stacked Vt Eagleville vol oil (Eagle Ford) PRB Sussex/Shannon Hz Permian Del Basin Vt (Wolfbone) Permian Central Basin Platform Vt Kaybob Duvernay oily Permian Del Basin Hz (Bone Spring) Permian Central Basin Platform Hz Brown Dense Permian Yeso Hz Permian Cline Shale Hz Miss Lime Core SCOOP Core Oil Tuscaloosa Marine Shale Eagleville condy (Eagle Ford) Wattenberg Hz Tier 2 Eaglebine Permian Del Basin Hz (Avalon) Marmaton (Shelf) Permian Spraberry Vt Permian Midland stacked Vt Tonkawa STACK Pembina gassy Cana Core Oil Miss Lime Tier 2 SCOOP Non-Core Oil Oil 2015: Will Prices Fall Further? OPEC Inaction, U.S. sets the price floor 185 165 145 125 105 85 65 45 25 5 (15) US Shale Play Breakevens (US$ per Barrel) US Shale Play Break-evens (US$ Per Barrel) Source: BNEF
Oil 2015: Will Prices Fall Further? All About Economic Growth Global growth may accelerate in 2015, unlike the recession which accompanied falling oil prices in 2008.
Agenda 01 02 03 04 A Recap of 2014 Oil 2015: Will Prices Fall Further? China: Performance and Valuations India Outlook: Performance and Valuations
Oil: Will Prices Fall Further? Success factors in the last oil drop Strong production growth Crude Importers / Processors Government Reforms No production growth
Agenda 01 02 03 04 A Recap of 2014 Oil 2015: Will Prices Fall Further? China: Performance and Valuations India Outlook: Performance and Valuations
China 2015 Outlook Reforms and Moderating Capex
2H08 1H09 2H09 1H10 2H10 1H11 2H11 1H12 2H12 1H13 2H13 1H14 China 2015 Outlook Growing Upstream Focus 100% 90% 80% 70% 60% 50% 40% 30% 20% Note: PetroChina and Sinopec Capex % Upstream Capex % Downstream Capex
China 2015 Outlook Cleaner Fuel, Lower Oil Aids Refiners
China 2015 Outlook P/E Valuations more resilient today
Agenda 01 02 03 04 A Recap of 2014 Oil 2015: Will Prices Fall Further? China: Performance and Valuations India Outlook: Performance and Valuations
India 2015 Outlook Reform Optimism
India 2015 Outlook India: More Deregulation?
India 2015 Outlook India: More Deregulation?
India 2015 Outlook India: More Deregulation? Note: 2013 refer to FY14 fiscal year and so forth
Price to Book (x) India 2015 Outlook Forward P/B valuations 1.8 1.6 1.4 1.2 1 0.8 0.6 0.4 Santos Inpex Beach Energy Japex Senex Oil Search Woodside PTTEP CNOOC Drillsearch Cairn India ONGC Oil India 0.2 y = 0.0697x + 0.1755 4.0 6.0 8.0 10.0 12.0 14.0 R² = 16.0 0.501818.0 20.0 Return On Equity (%)itle
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