We upgrade 2008, 2009 and 2010 WTI oil
price forecasts to USD81/bbl (+27%),
USD76/bbl (+36%) and USD61/bbl (+7%).
Our long-term normalised WTI price is
raised to USD61/bbl (+9%)
As a result, we lift our DCF estimates for
the sector by an average of 10%, but
keep earnings largely unchanged due to
higher cost assumptions
Current valuations of Asian oil stocks
do not fully reflect higher oil price
assumption. Risk appears on the
upside. Top picks: CNOOC Ltd, ONGC
Oil prices to remain high near term
We expect the oil price to revert to a lower mean in the long
run (i.e. USD61/bbl). Yet, strong Chinese demand and
global supply disruptions should support a strong oil price
near term. Oil is a hedge against inflation and currency risk.
Only USD48/bbl priced in for Asian oils
We believe Asian oil equities do not fully reflect the current
high oil price environment and are currently only pricing in a
USD48/bbl long-term oil price. Consistently underestimated
oil price leads to underestimated DCF estimates and
dividend yield. We see on average 25% upside in the sector.
Investment implications
Our top picks are CNOOC Ltd and ONGC. While CNOOC
Ltd shows the highest earnings leverage to oil price changes
over 2008-09 among the Chinese oil patch, ONGC remains
the value buy with current market price not reflecting even
the core value. We keep our ratings but our target prices
increase only 3% on average after applying HSBC’s lower
FY08e PE multiples for MSCI China and India.
目录
What’s new? 3
Summary 4
China oils 7
Indian oils 14
Valuations 16
Macro view 18
Company profiles 24
CNOOC Ltd 25
Sinopec Corp 29
PetroChina 33
Oil & Natural Gas Corp 37
Cairn India Limited 40
GAIL 43
Bharat Petroleum 46
Hindustan Petroleum 48
Reliance Industries 50
Reliance Petroleum 53
Disclosure appendix 56
Disclaimer 59