John M. White, (949) 720-7115 [email protected]Sales (800) 933-6830, Trading (800) 933-6820 INDUSTRY NOTE | EQUITY RESEARCH | February 18, 2020 Resources E&P Update-Relative Value Tables On February 13 Reuters reported oil demand is set to fall this quarter for the first time since the financial crisis in 2009 due to the coronavirus outbreak in China, the IEA said on Thursday. "The consequences of Covid-19 for global oil demand will be significant," the Paris-based IEA said in a monthly report, using the new scientific name for the virus. Demand in the first quarter of 2020 is expected to fall by 435,000 b/d compared with a year earlier, it said, noting it would be "the first quarterly decrease in more than a decade". "For 2020 as a whole, we have reduced our global growth forecast by 365,000 b/d to 825,000 b/ d, the lowest since 2011," the IEA said, adding that it assumed economic activity from the second quarter would return progressively to normal. In the second quarter it said it expected oil demand to grow 1.2 million b/d before normalizing in the third quarter with growth of 1.5 million b/d on likely economic stimulus measures in China. On February 12 Reuters reported OPEC on Wednesday cut its forecast for global growth in oil demand this year due to the corona virus outbreak and said its output fell sharply in January as producers implemented a new supply-limiting pact. In a report, OPEC said 2020 demand for its crude will average 29.3 million b/d, 200,000 b/d less than previously thought. OPEC pumped below that rate in January, suggesting a 2020 supply deficit. The report could bolster the case for even more supply curbs by OPEC, which is considering whether to curb output further to offset slower demand. In the report, OPEC said world oil demand will rise by 990,000 b/d this year, down 230,000 b/d from the previous forecast. On February 14 Reuters reported falling demand from China drove Asian spot prices for prompt deliveries of LNG to new lows this week of around $2.70 per MMBtu. China's transport, commercial and industrial sectors have all been affected by the fast-spreading coronavirus outbreak. The average LNG price for March delivery into northeast Asia fell to $2.70 MMBtu this week, down 25 cents from the previous week, several industry sources said. On February 14 Bloomberg reported reported that a sudden oil buying spree by China’s independent refiners has taken Asian traders by surprise. After weeks of production cuts, cargo deferrals, and cancellations because of the deepening impact of the coronavirus on Chinese crude demand, teapots have returned to the market in a big way. The spree is probably a sign that the teapots are getting ready for an eventual rebound in demand, taking advantage of the slump in crude prices to buy cheaply, according to traders with knowledge of th situation. Reason for Report: Industry Update Roth Covered Companies Mentioned in this Report: AMPY $5.54 Buy CHAP $0.92 Buy CPE $2.88 Buy EPM $5.05 Buy ESTE $4.41 Buy FANG $74.97 Buy GDP $6.02 Buy LONE $1.44 Buy REI $1.97 Buy TALO $18.40 Buy WTI $3.64 Buy Stock prices are as of previous day's close, if not otherwise specified Important Disclosures & Regulation AC Certification(s) are located on page 35 to 35 of this report. Roth Capital Partners, LLC | 888 San Clemente Drive | Newport Beach CA 92660 | 949 720 5700 | Member FINRA/SIPC
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INDUSTRY NOTE | EQUITY RESEARCH | February 18, 2020
ResourcesE&P Update-Relative Value Tables
On February 13 Reuters reported oil demand is set to fall this quarter for the first time since thefinancial crisis in 2009 due to the coronavirus outbreak in China, the IEA said on Thursday. "Theconsequences of Covid-19 for global oil demand will be significant," the Paris-based IEA said ina monthly report, using the new scientific name for the virus. Demand in the first quarter of 2020is expected to fall by 435,000 b/d compared with a year earlier, it said, noting it would be "the firstquarterly decrease in more than a decade".
"For 2020 as a whole, we have reduced our global growth forecast by 365,000 b/d to 825,000 b/d, the lowest since 2011," the IEA said, adding that it assumed economic activity from the secondquarter would return progressively to normal. In the second quarter it said it expected oil demandto grow 1.2 million b/d before normalizing in the third quarter with growth of 1.5 million b/d on likelyeconomic stimulus measures in China.
On February 12 Reuters reported OPEC on Wednesday cut its forecast for global growth in oildemand this year due to the corona virus outbreak and said its output fell sharply in Januaryas producers implemented a new supply-limiting pact. In a report, OPEC said 2020 demand forits crude will average 29.3 million b/d, 200,000 b/d less than previously thought. OPEC pumpedbelow that rate in January, suggesting a 2020 supply deficit. The report could bolster the case foreven more supply curbs by OPEC, which is considering whether to curb output further to offsetslower demand. In the report, OPEC said world oil demand will rise by 990,000 b/d this year, down230,000 b/d from the previous forecast.
On February 14 Reuters reported falling demand from China drove Asian spot prices for promptdeliveries of LNG to new lows this week of around $2.70 per MMBtu. China's transport, commercialand industrial sectors have all been affected by the fast-spreading coronavirus outbreak. Theaverage LNG price for March delivery into northeast Asia fell to $2.70 MMBtu this week, down 25cents from the previous week, several industry sources said.
On February 14 Bloomberg reported reported that a sudden oil buying spree by China’sindependent refiners has taken Asian traders by surprise. After weeks of production cuts, cargodeferrals, and cancellations because of the deepening impact of the coronavirus on Chinese crudedemand, teapots have returned to the market in a big way. The spree is probably a sign that theteapots are getting ready for an eventual rebound in demand, taking advantage of the slump incrude prices to buy cheaply, according to traders with knowledge of th situation.
Reason for Report:Industry Update
Roth Covered CompaniesMentioned in this Report:AMPY $5.54 BuyCHAP $0.92 BuyCPE $2.88 BuyEPM $5.05 BuyESTE $4.41 BuyFANG $74.97 BuyGDP $6.02 BuyLONE $1.44 BuyREI $1.97 BuyTALO $18.40 BuyWTI $3.64 BuyStock prices are as of previous day'sclose, if not otherwise specified
Important Disclosures & Regulation AC Certification(s) are located on page 35 to 35 of this report.Roth Capital Partners, LLC | 888 San Clemente Drive | Newport Beach CA 92660 | 949 720 5700 | Member FINRA/SIPC
EXPLORATION & PRODUCTION Industry Note - February 18, 2020
Regulation Analyst Certification ("Reg AC"): The research analyst primarily responsible for the content of this report certifiesthe following under Reg AC: I hereby certify that all views expressed in this report accurately reflect my personal views aboutthe subject company or companies and its or their securities. I also certify that no part of my compensation was, is or will be,directly or indirectly, related to the specific recommendations or views expressed in this report.
For important disclosure information regarding the companies in this summary report, please contact: The Director ofResearch at (800) 678-9147 or write to: ROTH Capital Partners, LLC, Attention: Director of Research, 888 San ClementeDrive, Newport Beach, CA 92660
Disclosures:ROTH makes a market in shares of Amplify Energy Corp., Chaparral Energy, Inc., Callon Petroleum Company, EvolutionPetroleum Corporation, Earthstone Energy, Inc., Diamondback Energy, Inc., Goodrich Petroleum Corp., Lonestar ResourcesUS Inc., Ring Energy, Inc., Talos Energy, Inc. and W&T Offshore, Inc. and as such, buys and sells from customers on aprincipal basis.
Shares of Chaparral Energy, Inc., Callon Petroleum Company, Lonestar Resources US Inc., Ring Energy, Inc. and W&TOffshore, Inc. may be subject to the Securities and Exchange Commission's Penny Stock Rules, which may set forth salespractice requirements for certain low-priced securities.
A Research Analyst and/or a member of the Analyst's household own(s) debt or equity securities of Goodrich PetroleumCorp. stock.
Each box on the Rating and Price Target History chart above represents a date on which an analyst made a change to arating or price target, except for the first box, which may only represent the first note written during the past three years.Distribution Ratings/IB Services shows the number of companies in each rating category from which Roth or an affiliatereceived compensation for investment banking services in the past 12 month.
Distribution of IB Services FirmwideIB Serv./Past 12 Mos.
Our rating system attempts to incorporate industry, company and/or overall market risk and volatility. Consequently, at anygiven point in time, our investment rating on a stock and its implied price movement may not correspond to the stated 12-month price target.
Ratings System Definitions - ROTH employs a rating system based on the following:
Buy: A rating, which at the time it is instituted and or reiterated, that indicates an expectation of a total return of at least10% over the next 12 months.
Neutral: A rating, which at the time it is instituted and or reiterated, that indicates an expectation of a total return betweennegative 10% and 10% over the next 12 months.
Sell: A rating, which at the time it is instituted and or reiterated, that indicates an expectation that the price will depreciateby more than 10% over the next 12 months.
Under Review [UR]: A rating, which at the time it is instituted and or reiterated, indicates the temporary removal of theprior rating, price target and estimates for the security. Prior rating, price target and estimates should no longer be reliedupon for UR-rated securities.
Not Covered [NC]: ROTH does not publish research or have an opinion about this security.
ROTH Capital Partners, LLC expects to receive or intends to seek compensation for investment banking or other businessrelationships with the covered companies mentioned in this report in the next three months. The material, information andfacts discussed in this report other than the information regarding ROTH Capital Partners, LLC and its affiliates, are fromsources believed to be reliable, but are in no way guaranteed to be complete or accurate. This report should not be usedas a complete analysis of the company, industry or security discussed in the report. Additional information is available uponrequest. This is not, however, an offer or solicitation of the securities discussed. Any opinions or estimates in this report aresubject to change without notice. An investment in the stock may involve risks and uncertainties that could cause actualresults to differ materially from the forward-looking statements. Additionally, an investment in the stock may involve a highdegree of risk and may not be suitable for all investors. No part of this report may be reproduced in any form without theexpress written permission of ROTH. Copyright 2020. Member: FINRA/SIPC.
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EXPLORATION & PRODUCTION Industry Note - February 18, 2020