Equity Research 29 April 2014 Barclays Capital Inc. and/or one of its affiliates does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision. This research report has been prepared in whole or in part by equity research analysts based outside the US who are not registered/qualified as research analysts with FINRA. PLEASE SEE ANALYST CERTIFICATION(S) AND IMPORTANT DISCLOSURES BEGINNING ON PAGE 48. Global Oil & Gas Weekly Seasonal drop in LNG prices Over the past 12 weeks, North East Asia LNG prices have dropped 34% from $19.7/mBtu to $14.7/mBtu currently. This should not, in our opinion, be viewed as a sudden glut in supply in the LNG market but more a reflection of normal seasonality – prices are virtually unchanged y/y and so far during 2014 LNG prices in Asia have averaged $17.6/ mBtu, 2% higher than at this point in 2013. Post the seasonal lull over 2Q and 3Q we would expect to see a sharp recovery in LNG prices towards the end of the year. Demand remains robust particularly in China and Japan and supply additions, at least short term, are limited. The rate of new LNG projects coming on stream accelerates from 2015 onwards, particularly in Australia and the US, and this is likely to limit upside in prices later in the decade but there also remains risk to the performance of the existing LNG stock. We estimate that over 20% of the current LNG production capacity is over 25 years old and as a result may become more susceptible to declines – as has been the case in 2014 with Eni and BG’s Egyptian LNG assets. Of the Global Integrateds, BG (EW, PT 1250p), Shell (OW, PT 2660p), Total (OW, PT EUR55) and Chevron (EW, PT $130) have the most material exposure to the LNG market. Demand-supply dynamics support near-term LNG prices: We see limited new LNG supply additions in 2014 and with the 5% increase in demand we forecast, pricing is likely to remain robust in 2014. Beyond 2016, there are several large LNG projects scheduled to come on stream, which could put some pressure on spot prices later in the decade. However, it should be noted that the majority of new start-ups that are expected to come on stream typically have volumes that are committed under long- term agreements which are still linked to oil prices. Our long-run LNG price assumption in Asia remains $14/mbtu. Movement in Asian LNG prices Source: Energy Intelligence, Barclays Research 5 10 15 20 Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 $/mBtu European Integrated Oil Lydia Rainforth, CFA +44 (0)20 3134 6669 [email protected]Barclays, London Joshua Stone +44 (0)20 3134 6694 [email protected]Barclays, London Americas Integrated Oil Paul Y. Cheng, CFA 1.212.526.1884 [email protected]BCI, New York European Oil Services & Drilling Mick Pickup +44 (0)20 3134 6695 [email protected]Barclays, London European Oil & Gas: E&P Alessandro Pozzi +44 (0)20 7773 4745 [email protected]Barclays, London CEEMEA Oil & Gas Matthew Thomas +44 (0)20 7773 3640 [email protected]Barclays, London Caroline Learmonth +27 11 895 6080 [email protected]Absa Capital, Johannesburg Asia ex-Japan Oil & Gas Somshankar Sinha +91 22 6719 6031 [email protected]BSIPL, Mumbai
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Equity Research29 April 2014
Barclays Capital Inc. and/or one of its affiliates does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report.
Investors should consider this report as only a single factor in making their investment decision.
This research report has been prepared in whole or in part by equity research analysts based outside the US who are not registered/qualified as research analysts with FINRA.
PLEASE SEE ANALYST CERTIFICATION(S) AND IMPORTANT DISCLOSURES BEGINNING ON PAGE 48.
Global Oil & Gas Weekly Seasonal drop in LNG prices Over the past 12 weeks, North East Asia LNG prices have dropped 34% from $19.7/mBtu to $14.7/mBtu currently. This should not, in our opinion, be viewed as a sudden glut in supply in the LNG market but more a reflection of normal seasonality – prices are virtually unchanged y/y and so far during 2014 LNG prices in Asia have averaged $17.6/ mBtu, 2% higher than at this point in 2013. Post the seasonal lull over 2Q and 3Q we would expect to see a sharp recovery in LNG prices towards the end of the year. Demand remains robust particularly in China and Japan and supply additions, at least short term, are limited. The rate of new LNG projects coming on stream accelerates from 2015 onwards, particularly in Australia and the US, and this is likely to limit upside in prices later in the decade but there also remains risk to the performance of the existing LNG stock. We estimate that over 20% of the current LNG production capacity is over 25 years old and as a result may become more susceptible to declines – as has been the case in 2014 with Eni and BG’s Egyptian LNG assets. Of the Global Integrateds, BG (EW, PT 1250p), Shell (OW, PT 2660p), Total (OW, PT EUR55) and Chevron (EW, PT $130) have the most material exposure to the LNG market.
Demand-supply dynamics support near-term LNG prices: We see limited new LNG supply additions in 2014 and with the 5% increase in demand we forecast, pricing is likely to remain robust in 2014. Beyond 2016, there are several large LNG projects scheduled to come on stream, which could put some pressure on spot prices later in the decade. However, it should be noted that the majority of new start-ups that are expected to come on stream typically have volumes that are committed under long- term agreements which are still linked to oil prices. Our long-run LNG price assumption in Asia remains $14/mbtu.
Movement in Asian LNG prices
Source: Energy Intelligence, Barclays Research
5
10
15
20
Jan-12 Jul-12 Jan-13 Jul-13 Jan-14
$/mBtu
European Integrated Oil Lydia Rainforth, CFA +44 (0)20 3134 6669 [email protected] Barclays, London
GLOBAL EMERGING MARKET OILS ....................................... 41 Valuations........................................................................................................................ 42 Share price performance .............................................................................................. 44 The data source for all charts and tables is “Company data, Barclays Research”, unless otherwise stated. Share prices are as of 25 April 2014 at market close, unless otherwise stated.
Source: Energy Information Administration (EIA), Commitments of Traders report - US CFTC, American Petroleum Institute (API), Bloomberg, Datastream, Barclays Research
0
400
800
1,200
1,600
2,000
Mar-04 Mar-06 Mar-08 Mar-10 Mar-12 Mar-14
Gas rigs Oil rigs
Barclays | Global Oil & Gas Weekly
29 April 2014 8
Crack spreads
European Gasoline Brent Crack Spread, $/bl European Diesel Brent Crack Spread, $/bl European Naptha Brent Crack Spread, $/bl
Source: Energy Information Administration (EIA), Commitments of Traders report - US CFTC, American Petroleum Institute (API), Bloomberg, Datastream, Barclays Research
Barclays | Global Oil & Gas Weekly
29 April 2014 9
Share price performance
European Integrateds vs European Market European Services vs European Market European Refiners vs European Market
80
85
90
95
100
105
Apr-13 Jul-13 Oct-13 Jan-14 Apr-14
6065707580859095
100105
Apr-13 Jul-13 Oct-13 Jan-14 Apr-14
75
80
85
90
95
100
105
Apr-13 Jul-13 Oct-13 Jan-14 Apr-14
European E&P vs European Market European Integrateds vs European Services European Integrateds vs European Refiners
70
75
80
85
90
95
100
105
Apr-13 Jul-13 Oct-13 Jan-14 Apr-14
859095
100105110115120125130
Apr-13 Jul-13 Oct-13 Jan-14 Apr-14
60
70
80
90
100
110
120
130
Apr-13 Jul-13 Oct-13 Jan-14 Apr-14
European Integrateds vs European E&P European Services vs European Refiners European Services vs European E&P
85
90
95
100
105
110
115
120
Apr-13 Jul-13 Oct-13 Jan-14 Apr-14
50
60
70
80
90
100
110
Apr-13 Jul-13 Oct-13 Jan-14 Apr-14
70
75
80
85
90
95
100
105
110
Apr-13 Jul-13 Oct-13 Jan-14 Apr-14
Source: Datastream, Barclays Research. The European Market is the Eurostoxx, the European Integrateds, is the corresponding FTSE 300 index. The Barclays European Refining Index is calculated using arithmetic averages for companies under coverage. The Barclays European Services Index is calculated using market capitalisation weighted averaged for companies under coverage. The Barclays E&Ps Index is calculated using a free float weighted average for our coverage. Source: Datastream, Barclays Research. Relative calculations use the FTSE 300 Integrated Sector (Euro) for the European companies and the S&P500 Integrated Sector (US) for the US companies.
The price targets for the European companies are based on a sum-of-the-parts based DCF methodology. For the US they are based on return on market capitalisation under mid-cycle assumptions.
Source: Company data, Datastream, Barclays Research. * Chevron, Exxon Mobil and the US Integrateds are covered by Barclays Integrated oil research team, headed by Paul Cheng, in New York. The forecasts for these companies are based on assumptions which are aligned but may sometimes differ from those used for the European companies.
EV:EBIDA, xBarclays
2013Cons 2014
P/E, x Dividend yield, % RoACE, %FCF yield, %
Barclays | Global Oil & Gas Weekly
29 April 2014 12
Valuations Integrateds
EV:EBIDA, x P/E, x Dividend yield, %
0
5
10
15
20
BPC
VX
XO
MRD
STO
T
BG ENI
Gal
pM
OL
OM
VRE
PST
L
CO
PH
ESM
UR
EV/EBIDA 2014 Average
0
10
20
30
40
BPC
VX
XO
MRD
STO
T
BG ENI
Gal
pM
OL
OM
VRE
PST
L
CO
PH
ESM
UR
P/E 2014 Average
01234567
BPC
VX
XO
MRD
STO
T
BG ENI
Gal
pM
OL
OM
VRE
PST
L
CO
PH
ESM
UR
Dividend Yield, % 2014 Average
Free cash flow yield, % RoACE, % Gearing - Net Debt to Equity, %
-5
0
5
10
BPC
VX
XO
MRD
STO
T
BG ENI
Gal
pM
OL
OM
VRE
PST
L
CO
PH
ESM
UR
FCF Yield, % 2014 Average
0
5
10
15
20
BPC
VX
XO
MRD
STO
T
BG ENI
Gal
pM
OL
OM
VRE
PST
L
CO
PH
ESM
UR
RoACE, % 2014 Average
0102030405060
BPC
VX
XO
MRD
STO
T
BG ENI
Gal
pM
OL
OM
VRE
PST
L
CO
PH
ESM
UR
2013 2014
Datastream consensus e relative to Barclays EPS, % Dollar EPS change y/y, % EV/b, $
-10-8-6-4-202
BPC
VX
XO
MRD
STO
T
BG ENI
Gal
pM
OL
OM
VRE
PST
L
CO
PH
ESM
UR
Cons vs BC EPS (%) 2014 Average
-0.40-0.30-0.20-0.100.000.100.20
BPC
VX
XO
MRD
STO
T
BG ENI
Gal
pM
OL
OM
VRE
PST
L
CO
PH
ESM
UR
EPS Growth 2014 Average
0
5
10
15
20
25
BPC
VX
XO
MRD
STO
T
BG ENI
Gal
pM
OL
OM
VRE
PST
L
CO
PH
ESM
UR
EV: 2P reserves 2014 Average
Source: Datastream, Barclays Research estimates
Barclays | Global Oil & Gas Weekly
29 April 2014 13
Share price performance Integrateds
Change in USD share price over last week, % Change in USD share price over last month, % Change in USD share price over last three months, %
-3 -2 -1 0 1 2 3
ENISTL
XOMCOPCVX
RDSAGALP
REPTOT
BGOMVMOL
BP
0 2 4 6 8 10 12 14
OMVGALP
ENISTL
RDSAREPTOT
BPBG
CVXXOMCOPMOL
-15 -10 -5 0 5 10 15 20
BGMOLOMV
BPXOMRDSA
REPCVXENI
GALPCOPTOTSTL
Change in USD share price over last year, % European Integrateds vs Brent European Integrateds vs US Integrateds
-20 -10 0 10 20 30 40 50
MOLOMVCVXENI
GALPRDSAXOM
BGBP
REPSTL
COPTOT
80
85
90
95
100
105
110
115
Apr-13 Jul-13 Oct-13 Jan-14 Apr-1480
85
90
95
100
105
110
Apr-13 Jul-13 Oct-13 Jan-14 Apr-14
BP vs European Integrateds Chevron vs US Integrateds ConocoPhillips vs US Integrateds
400
420
440
460
480
500
520
90
95
100
105
110
Apr-13 Jul-13 Oct-13 Jan-14 Apr-14
BP vs Sector BP, p
100
105
110
115
120
125
130
85
90
95
100
105
Apr-13 Jul-13 Oct-13 Jan-14 Apr-14
CVX vs Sector CVX, $
50
55
60
65
70
75
80
9095
100105110115120125130
Apr-13 Jul-13 Oct-13 Jan-14 Apr-14
COP vs Sector COP, $
Source: Datastream, Barclays Research. Relative calculations use the FTSE 300 Integrated Sector (Euro) for the European companies and the S&P500 Integrated Sector (US) for the US companies.
Barclays | Global Oil & Gas Weekly
29 April 2014 14
Share price performance Integrateds
Exxon Mobil vs US Integrateds Royal Dutch Shell A vs Royal Dutch Shell B Royal Dutch Shell A vs European Integrateds
80
85
90
95
100
105
90
94
98
102
106
110
Apr-13 Jul-13 Oct-13 Jan-14 Apr-14XOM vs Sector XOM, $
94
95
96
97
98
99
100
101
Apr-13 Jul-13 Oct-13 Jan-14 Apr-14
2000
2250
2500
2750
3000
85
88
91
94
97
100
103
Apr-13 Jul-13 Oct-13 Jan-14 Apr-14RDSA vs Sector RDSA, p
Total vs European Integrateds BG Group vs European Integrateds Eni vs European Integrateds
34363840424446485052
859095
100105110115120125
Apr-13 Jul-13 Oct-13 Jan-14 Apr-14TOT vs Sector TOT, E
900
1000
1100
1200
1300
1400
70
80
90
100
110
120
130
Apr-13 Jul-13 Oct-13 Jan-14 Apr-14BG vs Sector BG, p
14
15
16
17
18
19
20
80
85
90
95
100
105
Apr-13 Jul-13 Oct-13 Jan-14 Apr-14ENI vs Sector ENI, E
Galp vs European Integrateds Repsol vs European Integrateds Statoil vs European Integrateds
101111121213131414
80
85
90
95
100
105
110
115
Apr-13 Jul-13 Oct-13 Jan-14 Apr-14GALP vs Sector GALP, E
121314151617181920
90
95
100
105
110
115
Apr-13 Jul-13 Oct-13 Jan-14 Apr-14REP vs Sector REP, E
110
120
130
140
150
160
170
180
80
85
90
95
100
105
110
115
Apr-13 Jul-13 Oct-13 Jan-14 Apr-14STL vs Sector STL, NOK
Source: Datastream, Barclays Research. Relative calculations use the FTSE 300 Integrated Sector (Euro) for the European companies and the S&P500 Integrated Sector (US) for the US companies.
Source: Datastream, Barclays Research. The European Market is the Eurostoxx, the European Integrateds, is the corresponding FTSE 300 index. The Barclays European Refining Index is calculated using arithmetic averages for
companies under coverage. The Barclays European Services Index is calculated using market capitalisation weighted averaged for companies under coverage. The Barclays E&Ps Index is calculated using a free float weighted
The price targets for the European companies are based on a sum-of-the-parts based DCF methodology. For the US they are based on an assumed discount to the estimated greenfield replacement value.
RoACE, %Barclays
2014Cons 2014
Dividend yield, %EV:EBIDA, x P/E, x FCF yield, %
Source: Company data, Datastream, Barclays Research. *The US Refiners are covered by Barclays Integrated oil research team, headed by Paul Cheng, in New York.
Barclays | Global Oil & Gas Weekly
29 April 2014 19
Valuations Refiners
EV:EBIDA, x P/E, x Dividend yield, %
0
2
4
6
8
10
HEP
LOT
MO
H
NES
T
PKN
SRS
TUP
ALJ DK
TSO
VLO
EV/EBIDA 2014 Average
0
5
10
15
20
HEP
LOT
MO
H
NES
T
PKN
SRS
TUP
ALJ DK
TSO
VLO
P/E 2014 Average
0
2
4
6
8
10
HEP
LOT
MO
H
NES
T
PKN
SRS
TUP
ALJ DK
TSO
VLO
Dividend Yield, % 2014 Average
Free cash flow yield, % RoACE, % Gearing - Net Debt to Equity, %
-20
-10
0
10
20
HEP
LOT
MO
H
NES
T
PKN
SRS
TUP
ALJ DK
TSO
VLO
FCF Yield, % 2014 Average
0
5
10
15
20
HEP
LOT
MO
H
NES
T
PKN
SRS
TUP
ALJ DK
TSO
VLO
RoACE, % 2014 Average
-50
0
50
100
150
200
HEP
LOT
MO
H
NES
T
PKN
SRS
TUP
ALJ DK
TSO
VLO
2013 2014
Datastream consensus e relative to Barclays EPS, % Dollar EPS change y/y, % EV: Capital employed, x
-20
30
80
130
180
HEP
LOT
MO
H
NES
T
PKN
SRS
TU
P
ALJ DK
TSO
VLO
Cons vs BC EPS (%) 2014 Average
-100%
-50%
0%
50%
100%
HEP
LOT
MO
H
NES
T
PKN
SRS
TUP
ALJ DK
TSO
VLO
EPS Growth 2014 Average
0.0
0.5
1.0
1.5
2.0
HEP
LOT
MO
H
NES
T
PKN
SRS
TUP
ALJ DK
TSO
VLO
EV/Capital Employed 2014 Average
Source: Datastream, Barclays estimates
Barclays | Global Oil & Gas Weekly
29 April 2014 20
Share price performance Refiners
Change in USD share price over last week, % Change in USD share price over last month, % Change in USD share price over last three months, %
-6 -4 -2 0 2 4
ELPESRSORL
BrentESSRMOH
SectorNES1V
LTSTUPRS
PKN
-15 -10 -5 0 5 10 15
ELPEMOH
SRSESSR
NES1VSectorBrent
LTSORLPKN
TUPRS
-20 -10 0 10 20 30 40 50 60
ELPEORL
BrentMOHESSR
NES1VLTS
SectorPKN
TUPRSSRS
Change in USD share price over last year, % European Refiners vs Brent European Refiners vs US Refiners
-60 -40 -20 0 20 40
ESSRORL
ELPETUPRS
PKNSector
LTSBrentMOH
SRSNES1V
70
75
80
85
90
95
100
105
110
Apr-13 Jul-13 Oct-13 Jan-14 Apr-14
60
70
80
90
100
110
120
130
140
Apr-13 Jul-13 Oct-13 Jan-14 Apr-14
Essar vs European Refiners Hellenic Petroleum vs European Refiners Lotos Group vs European Refiners
50
70
90
110
130
150
170
40
50
60
70
80
90
100
110
Apr-13 Jul-13 Oct-13 Jan-14 Apr-14ESSAR vs Sector ESSR, p
2345678910
5060708090
100110120130
Apr-13 Jul-13 Oct-13 Jan-14 Apr-14ELPE vs Sector ELPE, E
20
25
30
35
40
45
80859095
100105110115120
Apr-13 Jul-13 Oct-13 Jan-14 Apr-14LTS vs Sector LTS, PLN
Source: Datastream, Barclays Research. The European Market is the Eurostoxx, the European Integrateds, is the corresponding FTSE 300 index. The Barclays European Refining Index is calculated using arithmetic averages for companies under coverage. The Barclays European Services Index is calculated using market capitalisation weighted averaged for companies under coverage. The Barclays E&Ps Index is calculated using a free float weighted average for our coverage.
Barclays | Global Oil & Gas Weekly
29 April 2014 21
Share price performance Refiners
Motor Oil vs European Refiners Neste Oil vs European Refiners ORL vs European Refiners
234567891011
50
70
90
110
130
150
Apr-13 Jul-13 Oct-13 Jan-14 Apr-14MOH vs Sector MOH, E
4
8
12
16
20
60708090
100110120130140150160
Apr-13 Jul-13 Oct-13 Jan-14 Apr-14NES1V vs Sector NES1V, E
80
100
120
140
160
180
40
50
60
70
80
90
100
110
Apr-13 Jul-13 Oct-13 Jan-14 Apr-14ORL vs Sector ORL, ILS
PKN Orlen vs European Refiners Saras vs European Refiners Tupras vs European Refiners
25
35
45
55
65
60
70
80
90
100
110
120
Apr-13 Jul-13 Oct-13 Jan-14 Apr-14PKN vs Sector PKN, PLN
0.50.60.70.80.91.01.11.21.31.4
60708090
100110120130140
Apr-13 Jul-13 Oct-13 Jan-14 Apr-14SRS vs Sector SRS, E
202530354045505560
50
60
70
80
90
100
110
Apr-13 Jul-13 Oct-13 Jan-14 Apr-14Tupras vs Sector TUPRS, TRY
Source: Datastream, Barclays Research. The European Market is the Eurostoxx, the European Integrateds, is the corresponding FTSE 300 index. The Barclays European Refining Index is calculated using arithmetic averages for companies under coverage. The Barclays European Services Index is calculated using market capitalisation weighted averaged for companies under coverage. The Barclays E&Ps Index is calculated using a free float weighted average for our coverage.
Barclays | Global Oil & Gas Weekly
29 April 2014 22
Share price performance Refiners
PKN Orlen vs Lotos Group Saras vs Motor Oil Saras vs Neste
60
70
80
90
100
110
Apr-13 Jul-13 Oct-13 Jan-14 Apr-14
40
60
80
100
120
140
Apr-13 Jul-13 Oct-13 Jan-14 Apr-14
50
60
70
80
90
100
110
120
130
Apr-13 Jul-13 Oct-13 Jan-14 Apr-14
Neste vs Tupras Tupras vs Saras Hellenic vs Motor Oil
Source: Datastream, Barclays Research. The European Market is the Eurostoxx, the European Integrateds, is the corresponding FTSE 300 index. The Barclays European Refining Index is calculated using arithmetic averages for companies
under coverage. The Barclays European Services Index is calculated using market capitalisation weighted averaged for companies under coverage. The Barclays E&Ps Index is calculated using a free float weighted average for our coverage.
RoACE, %EV:EBIDA, x P/E, x FCF yield, % Dividend yield, %
Barclays | Global Oil & Gas Weekly
29 April 2014 26
Valuations Services
EV:EBIDA, x P/E, x Dividend yield, %
-10-505
1015
AKS
O
CG
G
HT
G
MT
PFC
PLC
S
PGS
SPM
SBM
SUB
TEC
TR
S
TG
S
WG
EV/EBIDA 2014 Average
05
1015202530
AKS
O
CG
G
HTG M
T
PFC
PLC
S
PGS
SPM
SBM
SUB
TEC
TRS
TGS
WG
P/E 2014 Average
0
1
2
3
4
5
AKS
O
CG
G
HTG M
T
PFC
PLC
S
PGS
SPM
SBM
SUB
TEC
TRS
TGS
WG
Dividend Yield, % 2014 Average
Free cash flow yield, % RoACE, % Gearing - Net Debt to Equity, %
-10
-5
0
5
10
15
AKS
O
CG
G
HTG M
T
PFC
PLC
S
PGS
SPM
SBM
SUB
TEC
TRS
TGS
WG
FCF Yield, % 2014 Average
05
1015202530
AKS
O
CG
G
HTG M
T
PFC
PLC
S
PGS
SPM
SBM
SUB
TEC
TRS
TGS
WG
RoACE, % 2014 Average
-2000
200400600800
1000
AKS
O
CG
G
HTG M
T
PFC
PLC
S
PGS
SPM
SBM
SUB
TEC
TRS
TGS
WG
2013 2014
Datastream consensus e relative to Barclays EPS, % Dollar EPS change y/y, % EV:Capital Employed, x
-20
-10
0
10
20
AKS
O
CG
G
HTG M
T
PFC
PLC
S
PGS
SPM
SBM
SUB
TEC
TRS
TGS
WG
Cons vs BC EPS (%) 2014 Average
-100%
0%
100%
200%
300%
AKS
O
CG
G
HT
G
MT
PFC
PLC
S
PGS
SPM
SBM
SUB
TEC
TR
S
TG
S
WG
EPS Growth 2014 Average
-4
1
6
11
16
AKS
O
CG
G
HTG M
T
PFC
PLC
S
PGS
SPM
SBM
SUB
TEC
TRS
TGS
WG
EV/Capital Employed 2014 Average
Source: Datastream, Barclays Research estimates
Barclays | Global Oil & Gas Weekly
29 April 2014 27
Share price performance Services
Change in USD share price over last week, % Change in USD share price over last month, % Change in USD share price over last three months, %
-2 0 2 4 6 8 10 12
BrentSBMO
PFCHTGPGSTRE
AMCSPMWG
SectorAKSO
SUBCGGTECMT
0 5 10 15 20
PFCBrent
PGSWG
HTGSUB
AKSOTRE
SBMOSector
CGGMT
TECAMCSPM
-20 0 20 40 60
SBMOSUB
BrentAKSO
CGGPGSTRE
HTGSector
SPMWG
AMCPFCTECMT
Change in USD share price over last year, % European Services vs US Services Amec vs European Services
-50 0 50 100 150 200 250
CGGPGSSUB
AKSOSPM
SectorTECWG
BrentSBMO
PFCHTGTRE
AMCMT
50
60
70
80
90
100
110
Apr-13 Jul-13 Oct-13 Jan-14 Apr-14
700
900
1100
1300
70
80
90
100
110
120
130
140
Apr-13 Jul-13 Oct-13 Jan-14 Apr-14AMEC vs Sector AMEC, p
Aker Solutions vs European Services CGG Veritas vs European Services Maire Tecnimont vs European Services
405060708090100110120
65707580859095
100105110
Apr-13 Jul-13 Oct-13 Jan-14 Apr-14AKSO vs Sector AKSO, NOK
8
12
16
20
24
28
32
65
75
85
95
105
115
125
135
Apr-13 Jul-13 Oct-13 Jan-14 Apr-14CGG vs Sector CGG, E
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
1060
110160210260310360410
Apr-13 Jul-13 Oct-13 Jan-14 Apr-14MT vs Sector MT, E
Source: Datastream, Barclays Research. Relative calculations use the Barclays Oil Services Index calculated as a market capitalisation weighted average for companies under coverage
Barclays | Global Oil & Gas Weekly
29 April 2014 28
Share price performance Services
Petrofac vs European Services PGS vs European Services Saipem vs European Services
1000
1100
1200
1300
1400
1500
1600
60
70
80
90
100
110
120
130
Apr-13 Jul-13 Oct-13 Jan-14 Apr-14PFC vs Sector PFC, p
40
50
60
70
80
90
100
6065707580859095
100105
Apr-13 Jul-13 Oct-13 Jan-14 Apr-14PGS vs Sector PGS, NOK
10
12
14
16
18
20
22
24
10
30
50
70
90
110
130
Apr-13 Jul-13 Oct-13 Jan-14 Apr-14SPM vs Sector SPM, E
SBM Offshore vs European Services Subsea 7 vs European Services Technip vs European Services
0
5
10
15
20
25
40
60
80
100
120
140
160
Apr-13 Jul-13 Oct-13 Jan-14 Apr-14SBMO vs Sector SBMO, E
80
100
120
140
160
80
85
90
95
100
105
110
Apr-13 Jul-13 Oct-13 Jan-14 Apr-14SUB vs Sector SUB, NOK
60
65
70
75
80
85
90
95
80859095
100105110115120
Apr-13 Jul-13 Oct-13 Jan-14 Apr-14TEC vs Sector TEC, E
Tecnicas Reunidas vs European Services Wood Group vs European Services
30
32
34
36
38
40
42
44
80
90
100
110
120
130
140
Apr-13 Jul-13 Oct-13 Jan-14 Apr-14TRE vs Sector TRE, E
600
650
700
750
800
850
900
950
80859095
100105110115120125
Apr-13 Jul-13 Oct-13 Jan-14 Apr-14WG vs Sector WG, p
Source: Datastream, Barclays Research. Relative calculations use the Barclays Oil Services Index calculated as a market capitalisation weighted average for companies under coverage.
Barclays | Global Oil & Gas Weekly
29 April 2014 29
Share price performance Services
Amec vs Wood Group Saipem vs Technip Petrofac vs Wood Group
70
80
90
100
110
120
130
140
150
Apr-13 Jul-13 Oct-13 Jan-14 Apr-14
30
50
70
90
110
130
Apr-13 Jul-13 Oct-13 Jan-14 Apr-14
60
70
80
90
100
110
120
130
Apr-13 Jul-13 Oct-13 Jan-14 Apr-14
Maire Tecnimont vs Tecnicas Reunidas PGS vs CGG Veritas Petrofac vs Maire Tecnimont
10
60
110
160
210
260
310
Apr-13 Jul-13 Oct-13 Jan-14 Apr-14
70
80
90
100
110
120
130
Apr-13 Jul-13 Oct-13 Jan-14 Apr-14
20
40
60
80
100
120
140
160
Apr-13 Jul-13 Oct-13 Jan-14 Apr-14
Petrofac vs Tecnicas Reunidas Subsea 7 vs Saipem Subsea 7 vs Technip
Source: Datastream, Barclays. The European Market is the Eurostoxx, the European Integrateds, is the corresponding FTSE 300 index. The Barclays European Refining Index is calculated using arithmetic averages for companies under coverage. The Barclays European Services Index is calculated using market capitalisation weighted averaged for companies under coverage. The Barclays E&Ps Index is calculated using a free float weighted average for our coverage.
Source: Datastream, Barclays. The European Market is the Eurostoxx, the European Integrateds, is the corresponding FTSE 300 index. The Barclays European Refining Index is calculated using arithmetic averages for companies under coverage. The Barclays European Services Index is calculated using market capitalisation weighted averaged for companies under coverage. The Barclays E&Ps Index is calculated using a free float weighted average for our coverage.
Barclays | Global Oil & Gas Weekly
29 April 2014 32
E&Ps
Barclays | Global Oil & Gas Weekly
29 April 2014 33
Valuations E&P - EuropeChange in
Price Target Up/(Down) cons in
Company Rating 25-Apr Price side, % 13F 14F 15F 13F 14F 15F 13F 14F 15F 13F 14F 15F NAV NAV last mnth
Arithmetic average 64 7.6 7.5 6.0 18.4 16.8 11.3 (9) (4.8) (0.6) 6.3 15.5 16.8 21.0 -2Source: Company data, Datastream, Barclays Research - Price targets are based on a sum-of-the-parts based DCF methodology.
Barclays 2014
Cons 2014
EV:EBIDA, x P/E, x FCF yield, % Net Debt/Equity, %EV/2P
x
6.9
- 1.2
18.3
12.9 5.8
7.8
1.1
17.6
-
79.2
EV/2P+2Cx
8.4
-
13.5
20.8 9.2
16.8 15.8
39.9 15.9
Barclays | Global Oil & Gas Weekly
29 April 2014 34
Valuations E&P - Europe
EV:EBIDA, x P/E, x Free cash flow yield, %
-10
-5
0
5
10
15
AFR
AO
IL
BLV
N
CN
E
ENQ
OX
C
PMO
RKH
SMR
SIA
TLW
EV/EBIDA 2014 Average
-10
-5
0
5
10
15
AFR
AO
IL
BLV
N
CN
E
ENQ
OX
C
PMO
RKH
SMR
SIA
TLW
P/E 2014 Average
-10
-5
0
5
10
15
AFR
AO
IL
BLV
N
CN
E
ENQ
OX
C
PMO
RKH
SMR
SIA
TLW
FCF Yield, % 2014 Average
Gearing - Net Debt to Equity, % Dollar EPS Growth, y/y % EV:2P, x
-100%-60%-20%20%60%
100%140%180%
AFR
AO
IL
BLV
N
CN
E
ENQ
OX
C
PMO
RKH
SMR
SIA
2013 2014
-150%-100%
-50%0%
50%100%150%200%
AFR
AO
IL
BLV
N
CN
E
ENQ
OX
C
PMO
RKH
SMR
SIA
TLW
EPS Growth 2014 Average
0
10
20
30
40
50
AFR
AO
IL
BLV
N
CN
E
ENQ
OX
C
PMO
RKH
SMR
SIA
TLW
EV: 2P reserves 2014 Average
EV/2P+2C, x Datastream consensus relative to Barclays NAV, % ROACE, %
0
5
10
15
20
25
AFR
AO
IL
BLV
N
CN
E
ENQ
OX
C
PMO
RKH
SMR
SIA
TLW
EV: 3P reserves 2014 Average
-20
-10
0
10
20
AFR
AO
IL
BLV
N
CN
E
ENQ
OX
C
PMO
RKH
SMR
SIA
TLW
Cons vs BC EPS (%) 2014 Average
-20
-10
0
10
20
30
AFR
AO
IL
BLV
N
CN
E
ENQ
OX
C
PMO
RKH
SMR
SIA
TLW
RoACE, % 2014 Average
Source: Datastream
Barclays | Global Oil & Gas Weekly
29 April 2014 35
Share price performance E&P - Europe
Change in USD share price over last week, % Change in USD share price over last month, % Change in USD share price over last three months, %
-5 0 5 10 15 20 25
TLWSIA
BrentAFROXC
SectorENQCNE
BLVNRKH
PMOAOIL
SMDR
-10 -5 0 5 10 15 20
AOILRKHAFR
BrentCNE
BLVNSector
ENQOXC
SIATLWPMO
SMDR
-40 -30 -20 -10 0 10 20
CNERKH
BLVNAOILTLWAFR
SectorENQ
BrentSIA
OXCSMDR
Change in USD share price over last year, % European E&P vs Brent European E&P vs European market
-80 -60 -40 -20 0 20 40
BLVNCNE
SMDRRKHTLWPMOENQ
SectorBrent
AFRSIA
AOIL
80
85
90
95
100
105
110
Apr-13 Jul-13 Oct-13 Jan-14 Apr-14
70
75
80
85
90
95
100
105
Apr-13 Jul-13 Oct-13 Jan-14 Apr-14
Afren vs European E&P Bowleven vs European E&P Cairn Energy vs European E&P
100110120130140150160170180
80
90
100
110
120
130
Apr-13 Jul-13 Oct-13 Jan-14 Apr-14AFR vs Sector AFR, p
20
30
40
50
60
70
80
90
10
30
50
70
90
110
Apr-13 Jul-13 Oct-13 Jan-14 Apr-14BLVN vs Sector BLVN, p
140160180200220240260280300
50
60
70
80
90
100
110
Apr-13 Jul-13 Oct-13 Jan-14 Apr-14CNE vs Sector CNE, p
Source: Datastream, Barclays Research. Relative calculations use the Barclays European E&P Index for the European companies. The index is calculated using free float weighted averages for the E&P companies under coverage.
Barclays | Global Oil & Gas Weekly
29 April 2014 36
Share price performance E&P - Europe
Enquest vs European E&P Premier Oil vs European E&P Rockhopper Exploration vs European E&P
90
100
110
120
130
140
150
160
80859095
100105110115120
Apr-13 Jul-13 Oct-13 Jan-14 Apr-14ENQ vs Sector ENQ, p
260280300320340360380400420
65
75
85
95
105
115
Apr-13 Jul-13 Oct-13 Jan-14 Apr-14PMO vs Sector PMO, p
8090100110120130140150160170
60
70
80
90
100
110
Apr-13 Jul-13 Oct-13 Jan-14 Apr-14RKH vs Sector RKH, p
Salamander Energy vs European E&P Soco International vs European E&P Tullow Oil vs European E&P
80
100
120
140
160
180
200
220
40
60
80
100
120
140
Apr-13 Jul-13 Oct-13 Jan-14 Apr-14SMDR vs Sector SMDR, p
280
330
380
430
480
530
9095
100105110115120125130
Apr-13 Jul-13 Oct-13 Jan-14 Apr-14SIA vs Sector SIA, p
600
700
800
900
1000
1100
1200
60
70
80
90
100
110
120
Apr-13 Jul-13 Oct-13 Jan-14 Apr-14TLW vs Sector TLW, p
Source: Datastream, Barclays Research. Relative calculations use the Barclays European E&P Index for the European companies. The index is calculated using free float weighted averages for the E&P companies under coverage
Barclays | Global Oil & Gas Weekly
29 April 2014 37
Share price performance E&P-Europe
Tullow Oil vs Cairn Energy Bowleven vs Salamander Energy Cairn Energy vs Premier Oil
50
70
90
110
130
150
170
Apr-13 Jul-13 Oct-13 Jan-14 Apr-14
50
70
90
110
130
150
Apr-13 Jul-13 Oct-13 Jan-14 Apr-14
60
70
80
90
100
110
120
130
Apr-13 Jul-13 Oct-13 Jan-14 Apr-14
Tullow Oil vs Soco International Soco International vs Premier Oil Premier Oil vs Tullow Oil
30
50
70
90
110
130
Apr-13 Jul-13 Oct-13 Jan-14 Apr-14
80
100
120
140
160
180
Apr-13 Jul-13 Oct-13 Jan-14 Apr-14
70
80
90
100
110
120
Apr-13 Jul-13 Oct-13 Jan-14 Apr-14
Afren vs Cairn Energy Afren vs Premier Oil Afren vs Soco International
Source: Datastream, Barclays Research. The European E&P Sector is the corresponding Euro Stoxx indices and the US E&P Sector is the corresponding S&P 500 indices.
Source: Datastream, Barclays Research. The European E&P Sector is the corresponding Euro Stoxx indices and the US E&P Sector is the corresponding S&P 500 indices.
Source: Datastream, Barclays Research. The European E&P Sector is the corresponding Euro Stoxx indices and the US E&P Sector is the corresponding S&P 500 indices.
Source: Datastream, Barclays Research. The Asian Market is the Hang Seng Index, the Asian sector, is the corresponding OILSGSAJ index
Barclays | Global Oil & Gas Weekly
29 April 2014 48
ANALYST(S) CERTIFICATION(S):
We, Lydia Rainforth, CFA, Paul Y. Cheng, CFA, Mick Pickup, Alessandro Pozzi, Matthew Thomas, Caroline Learmonth and Somshankar Sinha,hereby certify (1) that the views expressed in this research report accurately reflect our personal views about any or all of the subject securities orissuers referred to in this research report and (2) no part of our compensation was, is or will be directly or indirectly related to the specificrecommendations or views expressed in this research report.
IMPORTANT DISCLOSURES CONTINUED
Barclays Research is a part of the Corporate and Investment Banking division of Barclays Bank PLC and its affiliates (collectively and eachindividually, "Barclays"). For current important disclosures regarding companies that are the subject of this research report, please send a writtenrequest to: Barclays Research Compliance, 745 Seventh Avenue, 14th Floor, New York, NY 10019 or refer to http://publicresearch.barclays.comor call 212-526-1072.
The analysts responsible for preparing this research report have received compensation based upon various factors including the firm's totalrevenues, a portion of which is generated by investment banking activities.
Research analysts employed outside the US by affiliates of Barclays Capital Inc. are not registered/qualified as research analysts with FINRA.These analysts may not be associated persons of the member firm and therefore may not be subject to NASD Rule 2711 and incorporated NYSERule 472 restrictions on communications with a subject company, public appearances and trading securities held by a research analyst’saccount.
Analysts regularly conduct site visits to view the material operations of covered companies, but Barclays policy prohibits them from acceptingpayment or reimbursement by any covered company of their travel expenses for such visits.
In order to access Barclays Statement regarding Research Dissemination Policies and Procedures, please refer tohttps://live.barcap.com/publiccp/RSR/nyfipubs/disclaimer/disclaimer-research-dissemination.html. In order to access Barclays ResearchConflict Management Policy Statement, please refer to: http://group.barclays.com/corporates-and-institutions/research/research-policy.
The Corporate and Investment Banking division of Barclays produces a variety of research products including, but not limited to, fundamentalanalysis, equity-linked analysis, quantitative analysis, and trade ideas. Recommendations contained in one type of research product may differfrom recommendations contained in other types of research products, whether as a result of differing time horizons, methodologies, orotherwise.
Exxon Mobil Corp. (XOM, 28-Mar-2014, USD 97.70), Equal Weight/Positive, A/C/D/E/J/K/L/M/N/O
Other Material Conflicts: The Corporate and Investment Banking Division of Barclays is providing investment banking services to ExxonMobilInternational Holdings Inc and ExxonMobil Energy Limited, both fully-owned subsidiaries of Exxon Mobil Corporation in relation to their proposedsale of an interest in Castle Peak Power Company Limited and in Hong Kong Pumped Storage Development Company Limited.
Galp Energia (GALP.LS, 28-Mar-2014, EUR 12.40), Overweight/Positive, D/J/L
Other Material Conflicts: The Corporate and Investment Banking division of Barclays is providing investment banking services to HellenicPetroleum SA in relation to the potential sale of their stake in DESFA SA to the State Oil Company of the Azerbaijan Republic (SOCAR). The rating,price target and estimates for Hellenic Petroleum do not incorporate the impact of this potential transaction.
Other Material Conflicts: The Corporate and Investment Banking Division of Barclays Bank Plc is providing equity advisory services to MaireTecnimont SPA
Valero Energy (VLO, 28-Mar-2014, USD 52.86), Overweight/Positive, A/C/D/J/K/L/M/N
Wood Group (WG.L, 28-Mar-2014, GBP 7.68), Overweight/Positive, C/D/E/F/J/K/L/M/N
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Guide to the Barclays Fundamental Equity Research Rating System:
Our coverage analysts use a relative rating system in which they rate stocks as Overweight, Equal Weight or Underweight (see definitions below)relative to other companies covered by the analyst or a team of analysts that are deemed to be in the same industry (the "industry coverageuniverse").
In addition to the stock rating, we provide industry views which rate the outlook for the industry coverage universe as Positive, Neutral orNegative (see definitions below). A rating system using terms such as buy, hold and sell is not the equivalent of our rating system. Investorsshould carefully read the entire research report including the definitions of all ratings and not infer its contents from ratings alone.
Stock Rating
Overweight - The stock is expected to outperform the unweighted expected total return of the industry coverage universe over a 12-monthinvestment horizon.
Equal Weight - The stock is expected to perform in line with the unweighted expected total return of the industry coverage universe over a 12-month investment horizon.
Underweight - The stock is expected to underperform the unweighted expected total return of the industry coverage universe over a 12-monthinvestment horizon.
Rating Suspended - The rating and target price have been suspended temporarily due to market events that made coverage impracticable or tocomply with applicable regulations and/or firm policies in certain circumstances including where the Corporate and Investment Banking Divisionof Barclays is acting in an advisory capacity in a merger or strategic transaction involving the company.
Industry View
Positive - industry coverage universe fundamentals/valuations are improving.
Neutral - industry coverage universe fundamentals/valuations are steady, neither improving nor deteriorating.
Barclays | Global Oil & Gas Weekly
29 April 2014 51
IMPORTANT DISCLOSURES CONTINUED
Negative - industry coverage universe fundamentals/valuations are deteriorating.
Below is the list of companies that constitute the "industry coverage universe":
Americas Integrated Oil
Cenovus Energy Inc. (CVE.TO) Chevron Corporation (CVX) ConocoPhillips (COP)
Exxon Mobil Corp. (XOM) Hess Corp. (HES) Husky Energy, Inc. (HSE.TO)
Barclays Equity Research has 2616 companies under coverage.
45% have been assigned an Overweight rating which, for purposes of mandatory regulatory disclosures, is classified as a Buy rating; 45% ofcompanies with this rating are investment banking clients of the Firm.
37% have been assigned an Equal Weight rating which, for purposes of mandatory regulatory disclosures, is classified as a Hold rating; 43% ofcompanies with this rating are investment banking clients of the Firm.
15% have been assigned an Underweight rating which, for purposes of mandatory regulatory disclosures, is classified as a Sell rating; 39% ofcompanies with this rating are investment banking clients of the Firm.
Guide to the Barclays Research Price Target:
Each analyst has a single price target on the stocks that they cover. The price target represents that analyst's expectation of where the stock willtrade in the next 12 months. Upside/downside scenarios, where provided, represent potential upside/potential downside to each analyst's pricetarget over the same 12-month period.
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Barclays Bank PLC, Hong Kong branch (Barclays Bank, Hong Kong)
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Barclays Capital Canada Inc. (BCCI, Toronto)
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