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1、Top picks,Buy,Buy,Buy,Hold,Hold,Hold,Buy,Buy,Hold,Hold,Hold,Deutsche BankMarkets Research,North AmericaUnited StatesIndustrialsIntegrated Oil,IndustryGlobal Oils,Date6 January 2013Forecast ChangePaul SankeyDavid T.Clark,CFA,Welcome to the$110+/bbl world;,Research Analyst(+1)212 250-6137,Research Ana
2、lyst(+1)212 250-8163,upgrading HESS to BUYUpgrading Hess to BUY on operational inflection and WTI rallyWe think the near term market relative outlook,certainly for Q1 2013,for oilequities as opposed to natgas equities is strong,based on an expectedrelative rally in WTI prices that is already under-w
3、ay.As we show in this note,illogical or not,it is WTI that drives oils relative performance to the S&P500,and with demand&prices rising simultaneously into spring,we expect a goodstart of the year.We think Brent markets look well under-pinned and we areclosing the under-weight on oil/oil equities we
4、 launched on Labor Day 2012.Over-weight oil,upgrade HESS to buy.Re-iterate BUY Chevron and MarathonOil.We like OSX HAL&BHI,and oily E&Ps such as APC,CLR and XEC.Refer to our December note“Future of US Oil 2013 Preview:The Bucket List”We outlined in some detail in our recent note that we expect a con
5、tinuednarrowing of US vs global crude differentials,over the next six months.Beyond that is a totally different outlook,and our long term view isincreasingly that US crude discounts long term could structurally settle as highas$30/bbl(Brent/WTI)being the difference between the new Saudi pricetarget
6、for Brent($110/bbl)&the marginal cost of US supply($80/bbl WTI),assuming that the US crude export ban stays in place.In this note we brieflyhighlight key global issues for oil,and why after last years all-time Brentrecord average of$111/bbl,even with Saudi at all-time production highs andChina deman
7、d weak,we see another average price high(albeit barely)in 2013.Key bull under-pinning is Saudi policy now supporting$110/bbl Brent,andChina demand re-strengthening.Emerging markets continue to represent theentirety of world oil demand growth,and total Non-OECD is now surpassingOECD demand for the fi
8、rst time ever.With US gasoline demand in secular,david-Silvio Micheloto,CFAResearch Analyst(+1)212 250-Winnie NipResearch Associate(+1)212 250-Marathon Oil(MRO.N),USD32.01Hess Corporation(HES.N),USD55.02Companies FeaturedChevron(CVX.N),USD110.50ExxonMobil(XOM.N),USD88.96ConocoPhillips(COP.N),USD59.8
9、3Occidental Petroleum(OXY.N),USD79.84Marathon Oil(MRO.N),USD32.01Hess Corporation(HES.N),USD55.02Murphy Oil(MUR.N),USD60.93Suncor Energy(SU.TO),CAD33.58Canadian Natural(CNQ.TO),CAD30.15,decline,the effect is that China now sets global oil prices,which supports theidea of a sustainable$110+/bbl with
10、a peak$130/bbl as the new paradigm.Also new,given the new balance,the downside demand uncertainties areJapan and Europe.Japans boost in demand is expected to abate in 2013 withthe relatively mild winter and nuclear/coal capacity return in 2013.In OECDEurope,demand could get even weaker on record ret
11、ail prices&recession.Primary supply uncertainty,in our view,is IraqIraq dominates the supply growth story in global oil.Performance is becomingthe major issue we predicted in our note“The Mother of All Oil Stories”(Oct 4,2010),when we forecasted growth to 4mb/d by 2015 with high risk.Thatforecast ho
12、lds,but it is highly subject to Iraqi politics,as is exploration hotspotKurdistan which adds/subtracts around 100kb/d of oil supply.We seecapitulation from Iran re:nuclear or even full revolution as far more likely thanany shutting of the Straits of Hormuz.In Venezuela we may not see aPresidential I
13、nauguration for Chavez,but on balance,in both Venezuela andIran risks are more bearish than bullish,in our view.On the bearish side,contrary to consensus 5 yrs ago,Russia continues to make record productionhighs with supportive government policy,and Sudan seems to be finding away towards peace,and s
14、ome 200kb/d of export return.But 2012 Non-OPECoutages were over 1mb/d,and overall the market for Brent seems balanced,with the WTI rally the strongest story we see.Risks:an enormous risk in termsof downside skew,tax change in Washington.We value integrated oils basedon top-down P/E and bottom-up NAV
15、 methodologies.For Hess see p.6._Deutsche Bank Securities Inc.Deutsche Bank does and seeks to do business with companies covered in its research reports.Thus,investors shouldbe aware that the firm may have a conflict of interest that could affect the objectivity of this report.Investors shouldconsid
16、er this report as only a single factor in making their investment decision.DISCLOSURES AND ANALYSTCERTIFICATIONS ARE LOCATED IN APPENDIX 1.MICA(P)072/04/2012.,6 January 2013Integrated OilGlobal OilsTable Of ContentsWTI is the driver.3We believe our WTI rallies argument=over-weight oil leverage.3Hess
17、 upgrade.6The company should strengthen performance through 2013.6Price Targets&EPS.82013 Highlights Supply.10North America to Non-OPECs rescue.10Summary of North American differential estimate vs.Brent.11Saudi shifts price target up again,to$110/bbl.13Biggest uncertainty at the margin:Iraq,and Iran
18、.13Venezuela and Brazil.15Russia and Kazakhstan.16Non-OPEC summary.16Global Exploration 2013.172013 Highlights Demand.18The new paradigm the dominance of Non-OECD.18The new price setter of global oil China.20Bearish:Japan and Europe.22Summary Demand and Supply.23Volume growth.27Upstream net income p
19、er barrel produced.28Downstream net income per barrel refined.28Share price premium/discount to NAV.29CEO Ownership Sensitivity to Change in Stock Price.30EV/DACF,ROCE and P/E.31Cash return to shareholders and Volume growth.32Return on capital employed.34Discounted oil price across the group.35Earni
20、ngs Momentum.38Fundamental Indicators.39Valuation and Risks.41,Page 2,Deutsche Bank Securities Inc.,Jun-01,Jun-02,Jun-03,Jun-04,Jun-05,Jun-06,Jun-07,Jun-08,Jun-09,Jun-10,Jun-11,Dec-01,Dec-02,Dec-03,Dec-04,Dec-05,Dec-06,Dec-07,Dec-08,Dec-09,Dec-10,Dec-11,Jun-12,Dec-12,6 January 2013Integrated OilGlob
21、al OilsWTI is the driverWe believe our WTI rallies argument=over-weight oil leverageAfter a weak 2011 relative,and an even weaker 2012,we believe that oil stocks canshow improved performance relative to the market in 2013 as$110+/bbl Brent holds,and WTI rallies towards that level.As shown below,ther
22、e is a high degree ofcorrelation between relative performance of energy(XLE)and absolute performance ofWTI,particularly in a positive setting of demand and prices rising simultaneously.Figure 1:XLE/SPX vs Oil Prices,10.0%,XLE/SPX,Brent$(RHS),WTI Spot$(RHS),$160,9.0%8.0%7.0%,$140$120$100,6.0%$805.0%,
23、4.0%3.0%2.0%1.0%Source:Deutsche Bank,Bloomberg Finance LPFigure 2:WTI is the driver of Oils relative performance to the S&P500,$60$40$20$0,Correlation with XLE vs SPX,Correlation,Brent,WTI,Averageof Brent,Brent vsWTI,and WTI,1 Yr2 Yr3 Yr,64%32%59%,70%45%64%,69%41%63%,89%79%89%,Source:Deutsche Bank,D
24、eutsche Bank Securities Inc.,Page 3,1977,1979,1981,1983,1985,1987,1989,1991,1993,1995,1997,1999,2001,2003,2005,2007,2009,2011,2013,6 January 2013Integrated OilGlobal OilsFigure 3:Oil Share of S&P500 and US GDP,30%,9%,8%25%7%,20%,6%,5%15%4%,10%,3%,2%5%1%,0%,Oil Share of S&P500(LHS),Oil as%of US GDP(2
25、011$GDP)(RHS),0%,Source:Deutsche BankAlthough US oil demand is basically flat,when combined with rising prices,that willeke out enough of an increase of oil in GDP for us to take off our negative stance on oilsin the S&P and go long based on rising oil in GDP,which has been a fairly strongindicator
26、of relative performance.We are upgrading Hess based on its high leverage tooil prices and relative under-performance over the past year.Figure 4:EPS Sensitivity 201245%40%35%30%25%20%15%10%5%0%,CNQ.TO,HES.N,BP.L,OXY.N,MRO.N,MUR.N,COP.N,SU.TO,CVX.N,TOTF.PA,XOM.N,RDSa.L,Source:Deutsche BankPage 4,Oil(
27、10%Change),Gas(10%change),Deutsche Bank Securities Inc.,Price(USD/bbl),Jan-08,Jan-09,Jan-10,Jan-11,Jan-12,Jan-13,Jan-14,Jan-15,Jan-16,6 January 2013Integrated OilGlobal OilsThe overall oil group looks very fairly valued relative to current oil price strips,discounting around$90/bbl long term oil pri
28、ces which are mildly conservative.We think$100/bbl would be a reasonable target,implying 10%+upside in the group as a whole,with closer to 20%for more leveraged names.Figure 5:WTI Price Curves vs Oil Price Discounted in Integrateds$1102008 oil and equities,$100,rip higher,$97,$90,$88,Fair value in 2
29、010 and,$90,$89,oils underperform in a,$80,year of tw o halves$78,$81,$70,2009 equity market totallydiscounts$40 oil only 3 years,after 2006 scepticism$60$50$40Tenor(month),Jan-13,Jan-12,Jan-11,Jan-10,Jan-09,Jan-08,Group Average Discounted Oil price,Source:Deutsche Bank,NYMEX,Deutsche Bank Securitie
30、s Inc.,Page 5,6 January 2013Integrated OilGlobal OilsHess upgradeThe company should strengthen performance through 2013We are upgrading Hess to BUY based on our view that the company is at a point ofmultiple positive operational inflections,further supported by the 2013 rally in inlandcrudes relativ
31、e to international prices,yet remains one of the cheapest names in thegroup.We raise our target from$52 to$70.In this note we also update estimates forthe integrateds.Hess has been range-bound around$49-55/sh since July,despite an aggressiverestructuring program,management pledges of capital discipl
32、ine and a shift frominvestment to harvest in Hesss marquee play,the Bakken.Hess has lagged,despite thebetter narrative,partly on weakness in Bakken/Clearbrook pricing,that is nowrecovering,but also because of shaken market confidence in management.It is a“show-me”execution-based story now,and while
33、we have questioned Hess in thepast,we do feel that the key checklist of“show-mes”in is now being met,particularlyin the aggressive disposal/focus programme.We are at a point of several key positive inflections for Hess 1)an operational shift in the Bakken to lower capital intensity growth(reducedinf
34、rastructure spending,impact from pad drilling on costs,better production growth inlater 2013,improved returns);2)reduced overall capital intensity.We see a$2Bn drop in capex YoY being confirmedby the end of January in the 2013 budget release.With strong disposal proceeds,wesee a swing towards self-f
35、unding(2012 OCF-Capex=-$2.8B shortfall,2013e=-$0.6Bonly);3)non-core disposals-to-focused exploration(Russia,ACG,declining North Sea sold;exploration in just a few key regions).$2.4bn of disposals have been announced in2012,with additional asset sales of$0.5bn-1.5bn underway according to thecompany.I
36、n particular,they are pursuing the sale of its interests in Russia.We havesupported disposal programmes as a key valuation increase trigger to over-come themajor discount of barrels on Wall St(NAV)vs barrels sold in asset markets.Hess is nowin the process of triggering that arbitrage close.4)Ghana e
37、xploration success-to-commercial development.On this last point,themarket seems to have almost ignored the organic exploration success in Ghana,whichwe believe is significant to corporate value.We have raised our NAV by$5/sh to reflectHesss emerging commercially viable oil development(Pecan/Almond/B
38、eechdiscoveries,which we estimate at 500Mbbl combined).Valuation looks relatively attractive,Hess is trading at 3.2x 2013 EV/EBITDA,well belowthe integrated average of 4.4x and US E&Ps at 3.9x.Our target is an average of a NAVof$80/sh(discounted by 10%)and a mid-cycle P/E of 10 x.But above all this
39、is aninflection and rate of change story at Hess with which we like to start 2013.We aregoing long oil leverage,and with it,Hess is clearly a preferred play alongside existingbuys MRO and CVX.,Page 6,Deutsche Bank Securities Inc.,l,e,.,e,.,.,6 January 2013Integrated OilGlobal OilsFigure 6:HES NAV,Ri
40、sked,Absolute,Risked,Absolute,Value,Value,2P,2P,Value/2P,%of,Value,UpstreamAlgeria,CommentGassi E Agreb,($Million)($Million)Reserves Reserves Reserves Total EV per Share244 354 47 68 5.2 0.6%0.7,Upside in Australiacould be$3/sharedepending on,AzerbaijanAustraliaBrazilDenmarkEgyptEquatorial GuineaFra
41、nce,2.72%in AIOCNorth West Shelf explorationBM-S-22 plugged and abandonedSouth Arne one of the companys most valuable assets55%in Deep West Med Block 1(purch fromApache)Exploration upside,85%OkumParis Basin,1mgross acres,heavily risked due to politics,8621,155411,738333,512100,1,0921,500501,811504,5
42、60500,632500600133na,805000630173na,13.74.60.028.80.026.4na,2.2%3.0%0.1%4.5%0.1%9.0%0.3%,2.53.40.15.10.110.30.3,monetizationGhana upside could beanother$6+/share,GhanaIndonesiaLibyaMalaysia-ThailandJDA,Five discoveries,three oil finds in pre-developmentDeveloping Pangkah oil and gas,50%Natuna ACivil
43、 war creates uncertain value of legacy asset50%of Block A-18,PM301 growth opportunity,3,4801,4344983,871,4,3501,9657554,140,125100156502,125137236537,27.814.43.27.7,8.9%3.7%1.3%9.9%,10.24.21.511.4 GOM one of the highest,NorwayRussiaThailand,Valhall,Snoehvit LNGPailin gas,3,9457671,018,4,5889361,235,
44、3529678,41011795,11.2 10.1%8.0 2.0%13.0 2.6%,11.62.33.0,value regionsandgrowing,thoughregulatory issues continuepost-Macondo,United States Permian,Permian Basin,1,503,1,709,408,463,3.7,3.9%,4.4,UnitedStates Gulf of Mexico,Stampede,Shenzi,Llano,Conger,Tubular Bells,5,740,7,603,301,398,19.1 14.7%,16.9
45、,UnitedStates Rocky Mount,Primarily Bakken,2,125,2,388,173,194,12.3,5.5%,6.3,USGulf Coast,Eagle Ford acreage$8k/acre,328,364,0.8%,1.0,UnitedKingdom,Large acreage holder,342,450,21,28,16.1,0.9%,1.0,32,738,40,398,2,865,3624,11.4 84.0%,96.3,Implied per barrel of booked reserves,1,438,$22.8/bbl,Implied
46、PERon 2008-11 avg earnings$M,$1,979,16.5x,20.4x,Large NOL position,NOL carried forward3PPossible ReservesUpstream Sub-TotalMid-StreamMLPpotential uplift,$1204mat YE11,will assum 50%utilized in 2012Bakken infrastructure/unit train line 8x EV/EBITDA uplift,6023,70337,043960,1.5%9.5%95.0%2.5%,1.7710.89
47、109.02.8,relative to sizeHas invested$1B+inBakken infrastructure,Refining and Marketing,NorthAmerica RefiningNorthAmerica MarketingSub-TotalImplied PERon 2008-11 avg earnings$MTotal Enterprise ValueAdjusted 3Q12 Net DebtValue before adjustmentsCorporateExpensesPensionUnderfundingNet Asset ValueMarke
48、t CapitalisationPremium to NAVImplied PERon 2008-11 avg earnings$M,Port Reading(Cat Cracker),$98$1,709,10587197610.0 x38,9807,31331,6673,66972527,27218,707-31%16.0 x,0.3%2.2%2.5%100.0%18.8%81.2%9.4%1.9%70.0%,0.32.62.9114.621.593.110.82.180.2155.02-31%,Memo:,Number of Shares in IssueSource:Deutsche B
49、ank,Wood MackenzieDeutsche Bank Securities Inc.,340,Page 7,l,a,u,l,a,u,l,a,u,6 January 2013Integrated OilGlobal OilsPrice Targets&EPSFigure 7:Price Targets,Price Targets,Derivation of New Price Target-Top down,P/E,=Multiple,CurrUSDUSDUSDUSDUSDUSDUSDCADCAD,TickerXOM.NCVX.NCOP.NOXY.NMRO.NHES.NMUR.NSU.
50、TOCNQ.TO,CompanyExxonMobilChevronConocoPhillipsOccidentaM rathonHessM rphySuncorCNQ,Current Price,88.96110.5059.8379.8432.0155.0260.9333.5830.15,Current PT,9614062804052683632,Employed,12118.51110109.51110,x New Mid Cycle EPS8.4013.406.006.803.656.606.003.602.60,Implied PT10114651733766574026,Price
