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发帖数: 2063 | 1 【 以下文字转载自 Stockcafeteria 俱乐部 】
发信人: Nanji (Ninja), 信区: Stockcafeteria
标 题: Oil & Gas Industry Stock Review - July 2010
发信站: BBS 未名空间站 (Fri Jul 23 06:26:06 2010, 美东)
By: Zacks Equity Research
July 22, 2010 | Comments: 0
Recommended this article (2)
PBR | PTR | ACGY | CLB | FTI | PTEN | HP | RIG | DO | ESV | RDC | PDE | NE
OUTLOOK
Crude Oil
The improving economic scene, both here in the U.S. as well as worldwide,
had been the main driver of the oil rally that saw the commodity zoom past
the $85 per barrel level in late April/early May 2010.
However, in recent days, concerns about the European debt crisis and China’
s growth outlook have renewed apprehensions about the global growth and
energy demand. As a result, oil prices have slumped to around $76 per barrel
. Additionally, high levels of product inventories (gasoline and distillate
stocks remain above the upper boundary of the average range for this time of
year), along with soaring commercial oil supplies, has further dragged down
crude prices, in our view.
But far too many factors weigh on oil prices -- from OPEC decisions and
geostrategic tensions to the value of the U.S. dollar and seasonal variables
-- to definitively size up each one of them for their respective impact on
prices.
In its latest release, the Energy Information Administration (EIA) reported
a higher-than-anticipated decrease in crude stockpiles, which fell by 5.1
million barrels for the week ending July 9. Though the weekly plunge in oil
supplies makes for a bullish reading of the EIA report, at 353.1 million
barrels, crude supplies are 8.6 million barrels above the year-earlier level
and remain over the upper limit of the average for this time of the year.
Additionally, we remain concerned in light of the high gasoline inventory
build and a sequential distillate inventory build. During the reporting week
, domestic gasoline volumes hit an all-time high, while production of middle
distillates climbed to their highest level in six months, even as demand
tapered off for both the products.
As such, crude oil’s near-term fundamentals remain weak, to say the least.
According to the EIA, world crude demand for 2009 was below the 2008 level,
which itself was below the 2007 level -- the first time since the early 1980
’s of two back-to-back negative growth years.
However, the agency also provided some positive news in this otherwise bleak
supply-demand picture. According to the EIA, the decline in oil demand
bottomed out in the middle of 2009, as the world economy began to rebound in
the latter half of the year. The agency, in its Short-Term Energy Outlook,
said that it expects this recovery to continue in 2010 and 2011,
contributing to global oil demand growth of 1.5 million barrels per day in
each of the years.
Recently, the Organization of the Petroleum Exporting Countries (OPEC), an
intergovernmental organization that supplies around 35% of the world's crude
, gave its first assessment for 2011, forecasting global oil demand to grow
at about the same rate as this year. In its latest monthly oil report, OPEC
said it expects world oil demand to grow by 0.95 million barrels per day in
2010 and 1.05 million barrels per day in 2011, representing growth of 1.1%
and 1.2%, respectively.
However, the third major energy consultative organization, the Paris-based
International Energy Agency (IEA), the energy-monitoring body of 28
industrialized countries, said that global oil demand growth will slow next
year on the back of less government money being pumped into the economy by
the advanced Western countries. IEA predicts that oil demand will average 86
.5 million barrels a day in 2010 (or 1.8 million barrels a day increase from
2009) and 87.8 million barrels a day in 2011 (or 1.3 million barrels a day
increase from 2010).
We expect crude oil to trade in the $75 – $85 per barrel range in the near
future, supported by the rising consumption in emerging and developing
economies, led by Asia. But this does not mean that we will not see any
short-term pullbacks. On the whole, we expect oil prices in 2010 to be
higher than 2009 levels, but remain significantly below 2008 peak levels.
Natural Gas
Though the ongoing surge in natural gas demand has erased a hefty surplus
over last year’s inventory level, following a high of 101 billion cubic
feet (Bcf) for the week ending April 23, the specter of a continued glut in
domestic gas supplies still exists, with storage levels remaining 11% above
their five-year average. In fact, the latest build, though in-line with
market expectations, has sent natural gas inventories to a level not
normally reached until the second week of August.
Further pressurizing the commodity is the rapid rise in the number of
drilling rigs working in the U.S. (the natural gas rig count has climbed 47%
from the seven-year low reached last July) that signals a supply glut later
this year in the face of consumer worries about high unemployment and the
economic recovery.
More importantly, production from dense rock formations (shale) through
novel techniques of horizontal drilling and hydraulic fracturing remain
robust. In fact, the share of shale gas in the country’s natural gas
production has shot up from zero to 8% in the last decade. This has created
a massive oversupply, compelling natural gas prices to slash from $13 per
million Btu (MMBtu) four years ago to just around $4.5 per MMBtu today (
referring to Henry Hub spot prices). As there are more technological
breakthroughs, shale gas has become viable in some cases at just $3 per
MMBtu.
There are concerns among traders that the market will be oversupplied in the
short-to-medium term, with rig counts going up and onshore production
increasing. Even a continuing decline in the Gulf of Mexico (GoM) production
(following the huge oil spill accident) is being offset by onshore volume
gains.
As per the U.S. Energy Department, domestic gas production will average 61.
26 Bcf per day in 2010, up 2.1% from 59.98 Bcf per day last year. The Agency
further added that gas inventories this year will remain very close to last
year’s record levels, with stockpiles likely to reach 3.81 Tcf by the end
of October. As a reminder, natural gas supplies rose to an all-time high of
3.84 Tcf for the week ended November 27, 2009.
We believe the weak fundamentals are going to continue to weigh on natural
gas prices in the near-to-medium term, translating into limited upside for
natural gas-weighted companies and related support plays.
OPPORTUNITIES
Despite the ongoing weakness, the current oil price environment should
benefit producers, particularly those international players having
attractive growth opportunities in their home markets. Two such standout
names are Brazil’s Petroleo Brasileiro S.A., or Petrobras (PBR - Analyst
Report) and China’s PetroChina Company Limited (PTR - Analyst Report), both
of which remain well-placed to benefit from their respective country’s
growing appetite for energy.
Petrobras, the largest integrated energy firm in Brazil, stands to benefit
from the continuous demand growth in Brazil (expected to outperform
developed countries in the next few years). Additionally, we expect the
company’s expertise in deep-water operations, huge recent discoveries (
which could double its resource base), and the growing domestic refined
products market to fuel its medium-term earnings outlook.
China’s impressive economic growth has significantly increased its demand
for oil, natural gas and chemicals. This growth momentum presents attractive
opportunities for industry players that can meet the country’s fast-
growing energy needs. Being one of the two integrated oil companies in China
, PetroChina is well-positioned to capitalize on these favorable trends.
Within the oilfield services group, we are positive on London-based Acergy S
.A. (ACGY - Analyst Report). With a healthy backlog, significant cash
balances and no near-term refinancing requirements, Acergy should weather
the challenging business environment. Our favorable recommendation on Acergy
ADRs also reflects the company’s substantial local presence in the
burgeoning conventional West African market and the quality of its client
base, which mostly includes well-capitalized oil majors or national oil
companies.
Another service provider we are a fan of is Core Laboratories N.V. (CLB -
Analyst Report). We like Core Labs’ leadership position in the reservoir
optimization niche, along with its global footprint and deep portfolio of
proprietary products and services. Furthermore, the company’s low asset
intensive operations and limited capex needs allow it to generate
substantial free cash flows.
Among the oil drilling equipment makers, we are particularly bullish on FMC
Technologies Inc. (FTI - Analyst Report). Given its dominant market share,
technology leadership and efficient execution skills, the company is poised
to benefit from the improving subsea activity levels through 2010 and beyond
. We believe order flow and backlog for subsea products and services will
continue to be healthy and trend higher as the year goes by.
Additional positives in the FMC Technologies story include continued success
on big awards, growing international operations and a solid balance sheet.
Results for the company’s fluid control business are also expected to be
higher, reflecting the pickup in drilling activity and E&P spending.
We are also positive on onshore contract drillers such as Patterson-UTI
Energy (PTEN - Analyst Report) and Helmerich & Payne (HP - Analyst Report)
due to their premium newbuild rig fleet. The demand for the newbuilds have
remained far more robust compared to older commodity units given their
ability to drill the more challenging wells in the emerging resource plays.
As such, the dayrates for these rigs are expected to hold up much better.
WEAKNESSES
Considering the potential fallout from the huge oil spill accident in the
GoM, we take a bearish stance on offshore contract drilling services
providers Transocean Inc. (RIG - Analyst Report), Diamond Offshore (DO -
Analyst Report), Ensco Plc (ESV - Analyst Report), Rowan Companies (RDC -
Analyst Report), Pride International (PDE - Analyst Report) and Noble Corp.
(NE - Analyst Report), fearing a threat to their revenue and profitability.
In particular, we remain concerned about Transocean and Noble (both have
Underperform recommendations) because of their active involvement in GoM.
For Transocean, the operator of the doomed Deepwater Horizon drill rig in
the GoM spill, earnings are likely to suffer from the uncertainty in the
near- and medium-term outlook for deepwater drilling. We further believe
that Transocean -- and the entire industry -- will be subject to more
stringent regulations in the future. The company has already warned
investors regarding the risks associated with the Horizon rig disaster,
including legal costs, government investigations and lost revenue.
While investors should be happy with Noble’s $2.16 billion Frontier
Drilling acquisition, this hardly helps the company to move into positive
territory. Noble shares currently trade at a significant discount to its
peer group, highlighting concerns over the GoM drilling uncertainties.
Another key concern is Noble’s highest concentrated jackup exposure (43 out
of total 63 rigs), which we believe will continue to face challenges in
renewing/obtaining contracts on favorable terms.
We also maintain our cautious view on oil refiners. We believe that refinery
run rates are likely to hover around the high 80's/low 90's during the near
-to-medium term, which will ensure the continuation of robust light end
product output (like gasoline, heating oil, diesel and jet fuel) from the
domestic source.
Though refining margins have rebounded from the troughs of the fourth
quarter, they remain way off the levels achieved a few years ago. We believe
that the imbalance between supply and demand will remain in place for the
next 6 - 12 months and negatively impact the bottom line.
As such, we have a cautious stance on major independent refiners like Tesoro
Corp. (TSO - Analyst Report) and Valero Energy Corp. (VLO - Analyst Report)
, given that the overall environment for refining margins is likely to
remain poor. We believe upside for these firms will be limited over the next
few months. |
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