global oil & gas dailypg.jrj.com.cn/acc/res/cn_res/indus/2014/4/30/fabf13b8-f7b9-4ae… ·...

www.jpmorganmarkets.com

Europe Equity Research29 April 2014

Global Oil & Gas DailyRussia sanctions, ExxonMobil PNG LNG production, Statoil's Russia delay and more...

Global Oil & Gas

Fred Lucas AC

(44-20) 7134-5943

[email protected]

Bloomberg JPMA LUCAS <GO>

J.P. Morgan Securities plc

Nitin Sharma

(44-20) 7134-5947

[email protected]

Bloomberg JPMA SHARMA1 <GO>


James Thompson

(44-20) 7134-5942

[email protected]


Joseph Allman, CFA

(1-212) 622-4864

[email protected]

Bloomberg JPMA ALLMAN <GO>

J.P. Morgan Securities LLC

J. David Anderson, PE, CFA

(1-212) 622-6684

[email protected]

Bloomberg JPMA ANDERSON <GO>

J.P. Morgan Securities LLC

Benjamin Wilson

(61-2) 9003-8612

[email protected]

Bloomberg JPMA WILSON <GO>

J.P. Morgan Securities Australia Limited

Caio M Carvalhal

(55-11) 4950-3946

[email protected]

Bloomberg JPMA CARVALHAL <GO>

Banco J.P. Morgan S.A.

Scott L Darling

(852) 2800 8578

[email protected]

Bloomberg JPMA DARLING <GO>

J.P. Morgan Securities (Asia Pacific) Limited

Andrey Gromadin, CFA

(7-495) 967-1037

[email protected]

J.P. Morgan Bank International LLC

For Specialist Sales advice, please contact:

Jessica Saadat

(44-20) 7134-5941

[email protected]

See page 32 for analyst certification and important disclosures, including non-US analyst disclosures.J.P. Morgan 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.

In the News Today

WTI rises Oil (WTI) was up 0.2% yesterday and was up 0.2% in early trade this

morning.

US and EU impose additional sanctions on Russia The US and EU have imposed a fresh round of sanctions against Russian

individuals and companies. As per news reports the US has imposed sanctions against 7 Russian individuals and 17 companies. The list of sanctioned individuals includes Mr. Igor Sechin, CEO of Rosneft. The EU has also imposed sanctions on 15 individuals whose identities are expected to be revealed on Tuesday. US Republicans have urged the US to take stronger action against Russia.

Shell and BP to comply with international sanctions on Russia As per news reports on Reuters and Bloomberg, Shell and BP have

announced that they will comply with all international sanctions on Russia following the imposition of additional sanctions by the US and the EU on Monday. Shell had last week announced that it was planning to expand the Sakhalin-2 oil and gas project in Russia after receiving support from Russian President Vladimir Putin (Bloomberg). BP announced that it remained committed to being a long-term investor in Russia. BP holds a 19.75% stake in Rosneft. A news report on Bloomberg indicates that the sanctions imposed on Mr. Sechin do not apply to Rosneft.

ExxonMobil begins production at PNG LNG project ExxonMobil in a press release last night announced that it had started LNG

production in Papua New Guinea (PNG) project. The company announced that LNG production from the first train will increase over the coming weeks and the first cargo is expected to be shipped to Asia before midyear. The company also announced that work on the second LNG train is progressing and production from the unit is expected to start in the next several weeks. It is estimating production of 9trn cubic feet of gas from the PNG LNG project over 30 years of operations.

Statoil to delay drilling campaign with Rosneft As per a news report on Bloomberg, Statoil has delayed the start of the

drilling program in North Komsomolskoye, Western Siberia. As per the news report, the companies have postponed the start of the drilling campaign to next year due to weather conditions making it difficult to transport rigs.

Source for above: Bloomberg, Upstreamonline, Reuters.

2


Fred Lucas(44-20) [email protected]

Figure 1: Global coverage - upside/downside heat map

Source: J.P. Morgan. Prices at c.o.b 28-Apr-2014

SQZ.L BRU.AX SFY CNE.L O2C.F QGEP3.SA TATN_p.MM GTE ROSNq.L EDCLq.L

160% 91% 83% 79% 73% 58% 57% 55% 52% 50%

0196.HK LKOHq.L GAZP.RTS NVTKq.L SNGS_p.MM TATN.MM SM ROC.AX CIE ENQ.L

48% 48% 47% 44% 40% 40% 39% 38% 38% 37%

OPHR.L SNGS.MM LPI WLL LUPE.ST 3337.HK APC PRE.TO 2883.HK 1251.HK

37% 36% 32% 31% 31% 30% 30% 29% 26% 26%

DNR 0857.HK SIBN.MM NFX 096770.KS AWE.AX GENL.L AFR.L PXD QEP

26% 26% 26% 26% 25% 25% 23% 22% 22% 21%

NBL 0883.HK ECO.CN EC PDCE 0386.HK COG CLR CAIL.BO LAM.L

21% 20% 19% 18% 16% 16% 16% 15% 15% 15%

JONE 5020.T 9532.T BG.L BP.L PTTE.BK 5012.T TOP.BK AR RDSa.L

14% 14% 13% 13% 13% 12% 11% 10% 10% 10%

GDP EOG BANE.MM TUPRS.IS SOLJ.J EQT TS RELI.BO XCO 5007.T

9% 8% 8% 8% 7% 7% 6% 6% 6% 5%

TOTF.PA STL.OL 010950.KS RRC DVN 5019.T AREX STO.AX PTT.BK AUT.AX

4% 4% 3% 3% 2% 2% 2% 1% 1% 1%

SXY.AX BPCL.BO RDSb.L WPL.AX SIA.L XEC BANE_p.MM GALP.LS 9531.T REP.MC

-1% -1% -3% -4% -4% -4% -4% -5% -5% -5%

5002.T HK DNO.OL ONGC.BO HOIL.L CXO ENI.MI OMVV.VI SWN CHK

-5% -5% -6% -7% -7% -7% -8% -8% -8% -10%

UPL DLS.AX WPX OSH.AX TRNFP.MM IOC.BO BPT.AX HPCL.BO

-10% -11% -15% -18% -21% -28% -28% -34%

3



Table 1: J.P. Morgan – Global Oil & Gas Stock Recommendations:

Sector/Region OVERWEIGHT NEUTRAL UNDERWEIGHT NOT RATED

Integrateds/ Refiners

Europe Statoil Tupras BG Group GALP OMV Essar Energy

BP TOTAL RD Shell ENI

Repsol

Rest of World Tatneft com. Sasol HPCL Surgutneftegaz com. Petrobras

Rosneft SK Innovation TNK-BP Holding Ecopetrol Transneft

Lukoil Surgutneftegaz pref. Cosmo Oil Bashneft Indian Oil

Sinopec Tatneft pref. Gazprom Neft TNK-BP Holding pref. Bashneft pref.

Gazprom BPCL Thai Oil Public Co. Essar Oil

Reliance Ind. PetroChina Idemitsu Kosan Showa Shell Sekiyu

JX Holdings S-OilTonenGeneral Sekiyu

Sinopec Shanghai Petrochemical

E&P

North America Denbury Resources Newfield Exploration Chesapeake QEP Resources Approach Resources Apache

Antero Resources Laredo Petroleum EXCO Resources Halcón Resources Sandridge Energy

Cabot Oil & Gas Noble Energy WPX Energy SM Energy

Cimarex PDC Energy PetroQuest Energy Swift Energy

Goodrich Petroleum Southwestern Energy Concho Resources Ultra Petroleum

Whiting Petroleum Continental Res. Devon Energy

Jones Energy Cobalt Intl.

EOG Resources Pioneer Natural

EQT Corp Range Resources

RSP Permian EP Energy Corp.

Anadarko

Europe Tullow Cairn Energy DNO Heritage Oil Afren

Enquest Lundin Petroleum Genel Energy SOCO Serica

Ophir Energy

Rest of World Buru Energy Pacific Rubiales PTT Public Co. CNOOC Beach Energy

AWE PTTEP HRT Senex Energy Oil Search

QGEP Woodside ONGC Santos Drillsearch Energy

Gran Tierra ROC Oil Novatek

Cairn India GeoPark Aurora Oil & Gas

Oilfield Services

North America Diamond National Oilwell Baker Hughes Lufkin Industries

Weatherford Bristow Dril-Quip Dresser-Rand

Ensco Schlumberger Exterran Transocean

Forum Energy Tech Hornbeck Offshore C&J Energy Services

Halliburton Superior Energy Noble Corp

Rowan CHC Group Cameron

Europe Lamprell Eurasia Drilling Co. C.A.T. Oil Tenaris

Rest of World China Oilfield Ser. Anton Oilfield Ser. Honghua Grp.

Hilong Holdings SPT Energy Grp.

Source: J.P. Morgan.

4



J.P. Morgan Global Energy Research

BG Group: CEO resigns with immediate effect, 2014 production lowered, 2015 points of guidance retracted – ALERT

National Oilwell Varco: After Order Guidance Reset, Stock Selloff Overdone

National Oilwell Varco: In-Line 1Q14 Earnings, Order Book a Touch Light, Stock Likely Underperforms

National Oilwell Varco: 1Q14 Earnings by the Numbers

ROC Oil Company Limited: Proposed "merger of equals" a play for scale and relevance

PTT Exploration & Production: Growth broadly on track; asset management ongoing; remain OW

PetroChina: Refining and natural gas to improve; chemicals a challenge; asset recycling at the edges

Sinopec Corp - H: Retail reform on track, E&P/downstream in line, chemicals risks remain

China oil and gas: Over the worst for oil demand growth; refining margins improving; OW Sinopec/PetroChina

Sinopec Corp - H: Retail stake to be priced in 3Q14; refining improving in 2Q14, shutting in marginal chemical capacity

Tupras: Key product spreads likely to improve in 2Q & 3Q; reiterate OW

Table 2: Global oil & gas: Macro data points and indices

c.o.b. WTI OSX XLE SXEP S&P500

28-Apr-14 100.84 292.47 93.39 348.09 1869.4325-Apr-14 100.60 295.66 93.23 347.25 1863.40% Change 0.2% -1.1% 0.2% 0.2% 0.3%

Source: Bloomberg

Figure 2: Front Month Brent Crude PricesUS $/bbl

Source: Bloomberg.

Figure 3: Henry Hub spot pricesUS$/mcf

Source: Bloomberg

95

101

107

113

31-Mar 7-Apr 14-Apr 21-Apr 28-Apr

3.7

3.9

4.1

4.3

4.5

4.7

4.9

31-Mar 7-Apr 14-Apr 21-Apr 28-Apr

5



Calendar of Upcoming Events

Date* Company EventApril29 Galp 1Q14 results

Statoil 1Q14 resultsBP 1Q14 resultsENI 1Q14 results

30 Subsea 7 1Q14 resultsRD Shell 1Q14 resultsTOTAL 1Q14 resultsTullow Oil IMSAker Solutions 1Q14 resultsDet Norske 1Q14 results

Source: Company calendars, Bloomberg;* denotes subject to change

6



Latest Global Energy Research

This note includes excerpts from previously published research. For access to the full reports, including analyst certification and important disclosures, investment thesis, valuation methodology, and risks to rating and price targets, please contact your salesperson or the covering analyst’s team or visit www.jpmorganmarkets.com.

BG Group: CEO resigns with immediate effect, 2014 production lowered, 2015 points of guidance retracted -ALERT

Analyst: Fred Lucas(44-20) 7134-5943, [email protected], This report can be accessed by clicking here, or at www.morganmarkets.com BG Group has announced that its CEO, Chris Finlayson, has resigned with immediate effect due to ‘personal reasons’. He became CEO on 1 January 2013, so resigns after just 16-months. Andrew Gould, the Chairman, will be interim Executive Chairman until a replacement CEO is in place. The search for an external candidate is now underway. Sam Laidlaw (Centrica’s ex-CEO, aged 58) might expect a call, in our view. BG Group also provided two negative updates to its guidance framework: (i) 2014 - due to a further deterioration in Egypt (Q1 2014 volumes downs 35% on Q4 to 66 kboepd versus H2 2013A 109 kboepd and JPMe FY 2014 79 kboepd or 13% of FY group forecast – this implies Q3 2013 Egypt volumes were 117 and Q4 2013 volumes were 102 kboepd), FY 2014 group production is now expected to be at the lower end of the guidance range 590-630 kboepd (JPMe 600 kboepd and consensus 608 kboepd – source company). (ii) 2015 –guidance is retracted. BG is reviewing its operational, investment and portfolio management plans and will not provide 2015 guidance until its full year results in February 2015. Prior 2015 production guidance was 710-750 kboepd versus JPMe 709 kboepd and consensus 717 kboepd – source company.

On balance, we expect the shares to underperform early today as consensus for 2014 recalibrates down and the market becomes more anxious about 2015. BG Group reports Q1 2014 results this Thursday, 1 May – we understand from the company that Andrew Gould will host the call.

What defines the immediate share price downside – (i) The scale of the 2014 EPS downgrade – IBES consensus is 111 cents versus JPMe 97 cents. We believe that consensus 2014 EPS may fall by around 5%. (ii) The scale of the NAV downgrade – our last published NAV of 1483 pence included just over 90 pence (5-6%) for Egyptian cash flows (upstream and LNG related). Given higher domestic market gas diversions (much lower margin than LNG exports) and deteriorating reservoir performance (causes not specified) that estimate may need to be reduced. However, we suspect the market has already ‘hair cut’ the value of this position. (iii) The increased uncertainty in 2015 – by retracting its guidance framework for 2015, the market may be concerned that there is downside to the production guidance range (710-750 kboepd) which may trigger pre-emptive volume / EPS downgrades. (iv) Management dislocation - When a CEO resigns under these circumstances, there are often follow-on senior management changes.

Europe Equity Research

https://jpmorganmarkets.com/research/content/GPS-1378199-0

7



What may then limit the share price downside – (i) Given the absence of a CEO, a new CFO and a weaker share price, the company may now be seen to more be vulnerable to an opportunistic bid approach. We note increased levels of sector M&A more recently per Glencore’s recommended cash offer for Caracal and, as reported in the weekend press, Ophir’s rebuffed merger approaches to Premier Oil. (ii) By retracting its 2015 guidance framework, the company may be preparing the ground for a quicker monetization of parts of its portfolio e.g. a further dilution in QC LNG and the first sell-down in the pre-salt Santos assets. We note the Chairman’s comments: ‘The Company must accelerate the creation and delivery of the longer-term value for our shareholders.' (iii) Today’sstatement also confirms that key projects remain on schedule.

National Oilwell Varco: After Order Guidance Reset, Stock Selloff Overdone

Analyst: J. David Anderson, PE, CFA(1-212) 622-6684, [email protected], This report can be accessed by clicking here, or at www.morganmarkets.com Considering what has actually changed in the story, the 7% selloff in National Oilwell Varco yesterday was overdone (S&P +0.3%). Leading into earnings, a short covering rally in NOV was driven by investor (irrational, in our view) confidence that the company could keep book/bill ratios above 1.0x…but mgmt commentary of $14-15bn in yearend backlog gave it all back. Although seemingly coming as a shock to the market, we note the lower order book guidance effectively implies no newbuild floater orders in 2H – a rather conservative assumption considering the potential demand out of non-traditional customers (China, spec builders, shipyards). While the company doesn't provide explicit earning guidance, revenue and EBIT margin results were spot-on with our model and we didn't change 2014 or 2015 earnings. The order deck is cleared and the next 2 years of earnings look quite strong…of course, what about 2016?

We don’t think the newbuild replacement cycle is over, but it needs to take a pause to absorb the ramp in new capacity over the next 2 years. As we wait, NOV should continue to see strong order intake from growing land and FPSO markets, as well as capital upgrade/maintenance orders for a record installed base of aging rigs, which is also driving mid-teens Aftermarket revenue growth (+25% Y-Y in 1Q14). Much will be made of CEO Clay Williams opening the door to buybacks on the call today, and while it would be a catalyst (especially if also means levering up), we'd be surprised to see such an abrupt shift in policy from predecessor Pete Miller before year end. Despite all the noise – the only thing that changed was the 2H order book – we’ve kept 2014 EPS unchanged at $6.20 and only lowered ’15 by $0.10 to $7.10 as margins and revenue estimates remained largely intact. As investor focus shifts to ‘16 EPS (we introduce $7.20 estimate), the North American market could be the key to offsetting the impact from slowing orders (especially if the orders don’t pick up by early 2015). With a dividend increase expected, the Street is begging for a buyback, but more likely gets M&A, which gets little credit after the RBN acquisition (even though they now dominate mud motors). If done right (cash, accretive), this could be a catalyst for the stock, which seems to be perpetually undervalued. Our unchanged $97 PT is based on 7.5x ’15 EBTIDA.

Americas Equity Research


8



M&A to resume, but opened to the door to buybacks. When pressed about use of NOV’s $3.7bn of cash (88% outside US), Mr. Williams reiterated his preference for sustainable dividends (we expect it to double to $0.52/qtr, or 2.7% yield, in May), but also opened the door to buybacks or “some other use of cash” to be discussed at the May Board meeting. This is somewhat of a change from our discussion with Mr. Williams in February, in which he indicated willingness to lever up to 2x EBITDA for ~$6-7bn of additional capital but downplayed buybacks, particularly levered ones. Does this mean NOV can’t find an attractive acquisition of considerable size? Perhaps, but it’s interesting to note that NOV took a pause from M&A early last year to digest ~20 deals completed 16-17 months, including RBN, but now has full pipeline as deals are “looking pretty good now”, though most are smaller but based internationally (can use int’l cash).

Details provide insight into non-offshore newbuild orders. Of the $2.3bn in 1Q14 orders (1.1x book-to-bill), $1.2bn (52%) comprised offshore newbuild rig packages (3 floaters, 17 jackups). The $1.1bn balance gives us a bit of look at possible trough orders if offshore newbuild rig packages were to completely dried up. However, we note that 1Q14 includes a drop in FPSO orders from “timing” vs. ~$250mm/qtr last year but is expected to improve, and ignores the momentum for land rig and pressure pumping and well invention equipment demand. We’re conservatively modeling $1.6bn/qtr of orders in 2H, which assumes ZERO floater awards (can’t go any lower). Mgmt believes 2Q14 book-to-bill could approach 1.0x on ~$2.2bn of revenue out of backlog with fairly steady orders for both offshore and land rig equipment packages.

National Oilwell Varco: In-Line 1Q14 Earnings, Order Book a Touch Light, Stock Likely Underperforms

Analyst: J. David Anderson, PE, CFA(1-212) 622-6684, [email protected], This report can be accessed by clicking here, or at www.morganmarkets.com

We view the NOV print as largely in line but think the stock may underperform slightly today. NOV reported $1.40 adjusted EPS, above $1.36/$1.38 JPM/cons though includes $0.02/sh from lower below-the-line corporate items vs. our estimate, as $880mm EBIT was only a 1% above our $869mm target and in line with $884mm consensus. Rig Tech performance was in line with revenue +2% Q-Q to $3.00bn vs. our $3.05bn target and margins relatively flat Q-Q at 21.1% vs. our 21.0% target. However, $2.33bn of orders (1.1x book-to-bill) was a bit light vs. $2.6bn/$2.5bn JPM/cons, and the release provided no color on offshore rig mkt, only noting strength in domestic land drilling and well service demand and int’l growth potential. During the call at 9am ET (800-447-0521), we expect to get a better sense of the order mix (# of floaters & jackup packages vs. land equipment) and whether mgmt alters its tune on offshore rig demand.


9



National Oilwell Varco: 1Q14 Earnings by the Numbers

Analyst: J. David Anderson, PE, CFA(1-212) 622-6684, [email protected], This report can be accessed by clicking here, or at www.morganmarkets.com National Oilwell Varco reported adjusted $1.40 EPS vs. JPM/cons $1.36/$1.38. See below for details.

ROC Oil Company Limited: Proposed "merger of equals" a play for scale and relevance

Analyst: Benjamin Wilson(61-2) 9003-8612, [email protected], This report can be accessed by clicking here, or at www.morganmarkets.com Today ROC and HZN (HZN.AX; Not Covered) announced a nil premium “merger of equals” which will unite their Chinese asset interests, and give the combination more financial firepower and sufficient size to increase investor attention. We are Overweight ROC based on a deep discount to fair value. The merger ratio is equal based on market cap, but we are not convinced that the merger is equals in terms of asset value. We see approximately 45% upside potential in ROC (based on our published NPV) but perhaps only 25-30% upside in HZN (based on a first glance using the simple metrics outlined below). This suggests some potential dilution of ROC upside under the merger ratio.

Deal terms. ROC and HZN have proposed a scrip only “merger of equals”. ROC shareholders will own 42% of new company and HZN holders will own 58% after receiving 0.724 ROC shares for each HZN share. The deal will be executed via a Scheme of Arrangement. Management will be split equally too, with the ROC Chair and the HZN CEO staying in their roles. The HZN Chair will stay on as a director, and ROC CEO Alan Linn will stay on as head of Malaysia for one year.

Rationale. This appears to be a play for scale, relevance and critical mass. The two companies share Chinese interests, however the primary asset there (Beibu Gulf) is operated by CNOOC so uniting the interests does not offer much in the way of synergies. HZN has a more attractive growth pipeline than ROC with PNG based wet gas discoveries (in JV with Talisman, Osaka Gas, Mitsubishi) but ROC has the higher current production base. So looks like a marriage between production and growth creating a larger entity with a bit more investor relevance.

Valuation metrics. The deal is a merger of equals at the market cap of each company prior to takeover reports in The AFR. However at that price ROC had ~45% upside potential to our valuation, and HZN had ~25-30% upside to our first glance “back of the envelope” valuation. The details of this valuation are on the next page in Table 2. It looks as though ROC holders may be giving away some of their upside in the merger. However it is not cut and dried, because ROC has a very high percentage of its value in sanctioned and producing assets – in contrast, HZN has a lot in PNG gas which is less certain to be developed, yet also offers greater blue sky potential.

Australia Equity Research



10



Scheme dates: first court date – June; Scheme Booklet release - late June; Scheme Meeting (HZN holders only) – late July; merger implementation –August.

PTT Exploration & Production: Growth broadly on track; asset management ongoing; remain OW

Analyst: Scott L Darling(852) 2800 8578, [email protected], This report can be accessed by clicking here, or at www.morganmarkets.com PTTEP's management update re-assured us that the company remains on track to deliver double-digit production growth, despite some recent delays to Zawtika natural gas imports into Thailand. KKD re-structuring seems to be progressing better than expected, and there seems to be some investor interest in its Australian portfolio, although no timing on a potential deal was provided. Key points from the update:

Sales growth supported by Hess acquisition: While official production guidance remains 325kboed (+c11% y/y) as reiterated at the 1Q analyst briefing, we sensed the output could be slightly higher after the Hess transaction (around 330kboed), which provides c5% production accretion on an annualized basis. Montara may ramp up to c25kbl/d in 2H14, although average sales are expected to be below 20kbl/d. Zawtika has started gas-supply to Myanmar, although sales to Thailand have been delayed to 3Q due to difficulties in pipeline completion. Production from Algeria remains on track for 20 kbopd by end 2014, while guidance for Mozambique FID remains end-2014 or early 2015.

c5% core EPS uplift for 2015. We account for the acquisition of Hess Corp's Thai assets and revise upwards our core EPS estimates for 2015 by c5%. Our 2014 estimates remain broadly unchanged, as earnings accretion from Hess assets is likely to be offset by delays in ramp-up for Montara and Zawtika, and higher opex from Montara. KKD re-structuring is progressing better than expected and impairment guidance has been revised down to US$50 million. We expect the company to maintain positive FCF through the medium term, given the latest acquisition of producing assets and improved portfolio rationalization.

Maintain OW with Dec-14 PT of Bt180/share, based on our DCF valuation (WACC = 8.0%, LT oil price = US$90/bbl). Our PT includes cBt45/sh of risked exploration. Key downside risks: 1) lower oil prices; ,2) asset integration/project execution, and 3) value-destructive M&A.

PetroChina: Refining and natural gas to improve; chemicals a challenge; asset recycling at the edges

Analyst: Scott L Darling(852) 2800 8578, [email protected], This report can be accessed by clicking here, or at www.morganmarkets.com J.P. Morgan’s investor lunch with PetroChina reinforced our positive view that the company is moving in the right strategic direction this year. Refining continues to improve, partly on fuel specification tightening with 1Q being the third consecutive profitable quarter, natural gas prices are likely to rise with the company having

Asia Equity Research



11



“made some progress [on contract adjustment]” after the hikes last year and progress continues on asset management via divestments and/or JVs.

Asset recycling to continue; pipeline rather than upstream/downstream initially: PetroChina’s more “asset light” strategy was reiterated, and we sensed further divestment and/or JV arrangement was more likely from its pipeline assets within a similar spirit to last year’s transaction. In contrast, it is likely to take time within the upstream owing to no current framework from government and low profitability within its downstream limiting investors at the moment, although some national oil companies were cited as possible partners (PDVSA, Saudi Aramco, Gazprom and Rosneft).

Natural gas price increases: PetroChina is hopeful of further natural gas price increases this year and suggests an additional Rmb11.8bn at the operating line could be achieved should an Rmb0.4/cm3 natural gas price hike between legacy and incremental natural gas be realized in the year. Development emphasis continues to remain conventional and tight gas rather than shale gas despite recent news comments (see Bloomberg “PetroChina Changqing Shale Gas Block Starts Commercial Output”, 28th April 2014).

Downstream profitability improvement; not for chemicals: The company sees its refining business remaining profitable for the remainder of 2014. This profitability trend should be supported this quarter by the NDRC’s recent price hikes on April 25 (gasoline and diesel raised Rmb155/ton and Rmb145/ton, respectively). In contrast, chemicals remain a challenge from both weak demand and lower margins, and we expect this segment to remain loss making in 2Q. The company also guides that Rmb depreciation may have a slightly positive impact on its business largely from refining/marketing partly offset by natural gas, and suggests a 1% FX deprecation impacts the operating line by +Rmb4bn.

Sinopec Corp - H: Retail reform on track, E&P/downstream in line, chemicals risks remain

Analyst: Scott L Darling(852) 2800 8578, [email protected], This report can be accessed by clicking here, or at www.morganmarkets.com We expect Sinopec’s 1Q14 results to be taken slightly negatively by the market, with earnings below consensus expectations, although slightly above our estimates, possibly driven by a weak chemicals segment and non-operating items. The shares have outperformed the HSI by c14% (up c9% in absolute terms), and while we appreciate some macro headwinds that may yield further share price weakness in the near term, we believe that obtaining the right strategic investors for its retail network, visibility on the re-allocation of capital toward higher-return projects and the possibility of opening up other segments are likely to lead the shares to outperform the market this year. We remain OW.

Miss to market estimates; slightly higher than JPMe: Sinopec 1Q14 reported net income at Rmb14.1bn, down 15% y/y and missing consensus (Bloomberg) by c10%, although slightly higher than our forecast (see table


12



below). The miss to market expectations may have been driven by slightly lower oil realizations, weakness in chemicals and an increase in foreign currency exchange losses (Rmb1.5bn), in our view.

Recovering upstream, although cost concerns remain: Upstream operating profit of Rmb13.2bn was up 64% q/q, although down c19% y/y, driven by lower realizations and increased exploration costs. Oil/gas production was up c9% y/y, including Sinopec's recent asset injections. Realized oil realizations were down 3.5%, and natural gas realizations were up c19%. The company points to Fuling as a key project (22 wells drilled at 1Q-end) with the development of the North Block in 2014 requiring 91 wells to produce 1.8 bcm/yr (Fuling full development plan is for 5.0 bcm/yr).

Fuel spec improves refining despite lower volumes: Refining operating profit of Rmb3.7bn, up 92% q/q and 70% y/y, reflects the positive impact from fuel spec reform, partly offset by lower demand for oil products (refining throughput down 2.5% y/y). While we forecast that May theoretical GRMs will remain negative despite the 25 April NDRC gasoline/diesel price hikes and some improvement since April, our recent lunch with PetroChina suggests that refining profitability may continue into 2Q (see update - here).

Robust marketing profitability; banks mandated: Marketing operating profit was Rmb8.8bn, down 3% y/y (up 9% q/q), owing to broadly flat sales of refined products and an 11% y/y increase in non-fuel turnover. The company has established Sinopec Easy Joy Sales Co., Ltd., to hold the retail assets, with investment banks mandated as advisors, and we expect the process to be complete by year-end.

Chemicals losses; more downside risks: Chemicals reported an operating loss of Rmb1.3bn from lower margins from oversupply, particularly commodity chemicals (PE/PX/BD), which now are loss-making. Chemicals remains challenging with increased competition, while demand seems to be robust.

Upstream asset injections to continue; still no timeline: In line with earlier announcements that Sinopec’s parent would divest assets so as not to put it in direct competition with Sinopec Corp, the company reiterates the parent’s plans to divest its chemicals assets. Additionally, Sinopec’s parent will extend a 10-year option to Sinopec Corp to acquire any of its overseas E&P assets, although no specific mention of a timeline or process is outlined. We have previously flagged that Sinopec has been evaluating its parent's upstream assets, but we sense that not many assets of a specific size have met the company's return hurdle rate.

Analyst briefing on 29 April at 9am HK time (dial-in +852 3056 2688, PW 770130#).

China oil and gas: Over the worst for oil demand growth; refining margins improving; OW Sinopec/PetroChina

Analyst: Scott L Darling(852) 2800 8578, [email protected], This report can be accessed by clicking here, or at www.morganmarkets.com


https://jpmm.com/research/content/GPS-1378357-0

13



Chinese oil demand grew by only c1% y/y in March, with 1Q14 oil demand down c2% – the worst quarterly y/y growth for almost a decade in China. We expect improvement in demand as we progress through 2Q14 on agricultural activity (spring planting), although the headline apparent oil demand data (refining throughput + net product imports) may continue to be flat to down because refining throughput could fall on peak refinery maintenance. May refining margins have recovered slightly with the official price rise last week, albeit partly offset by the c3% depreciation of the Rmb since February.

1Q14 oil demand growth – the lowest since 2Q05: Apparent oil demand grew c1% y/y in March to 9.9mn BOPD (vs. c4% y/y growth in Feb), mainly due to lackluster refining run growth (up c3% y/y). Higher gasoline demand (up 15% y/y – biggest growth since Mar-13) was a bright spot, but diesel demand remains anemic with a 1% y/y retraction in demand in March. Refining utilization remained around the historical average at 82%, a result of stockpiling prior to peak refining maintenance season in 2Q14 and better gasoline demand, in our view. China was a net exporter of refined products in March (c0.4mn tons), the first time since Jan-10.

Gasoline demand growth at 15% in March; inventories rising: End-March commercial inventories for gasoline and jet fuel were the highest since 2010, according to OGP data. Diesel inventories dropped by c6% y/y with apparent consumption improving to 14.3 mn tons (up c3% q/q,). Among the oil products, gasoline production was a record 9.3 mn tons in March, with diesel and jet fuel also reporting production gains q/q (+3% and +6%, respectively).

Refining margins still negative, but improving in May: Our theoretical Chinese refining margins continue to be in negative territory going into May at minus cUS$0.7/bbl, mainly due to a depreciation of the local currency, although a slight improvement to April’s GRM at minus cUS$1.5/bbl. China imported c60% of its crude oil supplies in March which are priced on a US$ basis, while oil product sales are mostly in Rmb and net product imports were only 1% of refining throughput.

Weak chemical market evident in naphtha demand: Apparent demand of naphtha was down 2% y/y in 1Q14, the largest y/y contraction since 4Q11, with domestic production at 7.5 mn tons, down 6% y/y, a sign that weakness in the chemicals market and continued high costs have reduced demand for feedstock, in our view.

Double-digit natural gas demand growth continues; higher import costs: Natural gas supplies grew 9% y/y in March, which consist of 10% y/y growth in domestic production and 5% y/y growth in imports (import dependence remained near the historical 30% mark at 26% in March). Pipeline import costs were 11% y/y higher in March at Rmb2.5/m³ (US$11.7/mcf), compared to an average Rmb2.2/ m³ (US$10.3/mcf) in 2013.

14



Sinopec Corp - H: Retail stake to be priced in 3Q14; refining improving in 2Q14, shutting in marginal chemical capacity

Analyst: Scott L Darling(852) 2800 8578, [email protected], This report can be accessed by clicking here, or at www.morganmarkets.com Management gave a mixed macro picture for 2Q14, guiding that refining continues to improve, while chemicals has “severe challenges” from low cost imports and weak pricing. Retail segment stake sale remains on track, management guides to meaningful updates beginning in June and pricing sometime in 3Q14. In our view, the 2Q14 oil products environment should improve on recovering demand and upward product pricing adjustments to support GRMs; we remain OW Sinopec. Key takeaways from 1Q14 analyst briefing:

Chemicals remain challenging; shutting down marginal capacity –Management highlighted that competition from low cost producers in the Middle East and North America is pushing down the prices of chemicals in the domestic market. In response, Sinopec has taken steps in 1Q14 to take offline marginal and unprofitable capacity, citing that ethylene cracker capacity was running at high rates but 5-10% of other downstream capacity was offline during the period.

Refining margins improving on new gasoline specs; no change to maintenance schedule: The company stated that the move to higher spec gasoline (China IV) has been supportive of 1Q margins. Steps have been taken to adjust the refining production profile towards higher octane gasoline and to diesel in order to improve margins. There is no change to the current refining maintenance schedule and the company believes that 2Q14 should see an improved refining environment (see our China Oil & Gas update - here).

Retail stake sale on track; pricing in 3Q14; proceeds for domestic shale and de-leveraging: The company indicated that it will announce the participants in the investment negotiations in June ’14 and that pricing will likely be a 3Q14 event. Currently, proceeds from the stake sale are planned to be used for further development of domestic shale gas projects and debt reduction, although no specifics on amounts were given (announcement to follow).

Asset injections still on the table; but not financed by retail proceeds –Management highlighted it is still in the process of assessing the overseas assets of the parent, in which a 10-year option to purchase (includes right of first refusal) was announced. No specific details were mentioned on the process used to value the assets, although they did mention independent financial advisors could be used to assist in the process. Any acquisitions of overseas upstream parent assets would need to meet the company’s 12% IRR hurdle rate according to management. The company stated that using proceeds from the retail asset stake sale to acquire parent upstream assets would prove complicated as the nature of a related-party transaction would complicate the distribution of this capital; therefore, the company has focused retail stake sale proceeds to domestic shale and debt repayments.

Miss to market estimates; slightly higher than JPMe: Sinopec 1Q14 reported net income at Rmb14.1bn, down 15% y/y and missing consensus



15



(Bloomberg) by c10%, although slightly higher than our forecast (see table below). The miss to market expectations may have been driven by slightly lower oil realizations, weakness in chemicals and an increase in foreign currency exchange losses (Rmb1.5bn, relating to US$ debt), in our view.

Recovering upstream, although cost concerns remain: Upstream operating profit of Rmb13.2bn was up 64% q/q, although down c19% y/y, driven by lower realizations and increased exploration costs. Oil/gas production was up c9% y/y, including Sinopec's recent asset injections. Realized oil realizations were down 3.5%, and natural gas realizations were up c19%. The company points to Fuling as a key project (22 wells drilled at 1Q-end; 36 wells currently being drilled; producing at wells ~100k m3/d) with the development of the North Block in 2014 requiring 91 wells to produce 1.8 bcm/yr (Fuling full development plan is for 5.0 bcm/yr).

Fuel spec improves refining despite lower volumes: Refining operating profit of Rmb3.7bn, up 92% q/q and 70% y/y, reflects the positive impact from fuel spec reform, partly offset by lower demand for oil products (refining throughput down 2.5% y/y; “modest” inventory gains, per management guidance). While we forecast that May theoretical GRMs will remain negative despite the 25 April NDRC gasoline/diesel price hikes and some improvement since April, our recent lunch with PetroChina suggests that refining profitability may continue into 2Q (see update - here).

Robust marketing profitability; banks mandated: Marketing operating profit was Rmb8.8bn, down 3% y/y (up 9% q/q), owing to broadly flat sales of refined products and an 11% y/y increase in non-fuel turnover. The company has established Sinopec Easy Joy Sales Co., Ltd., to hold the retail assets, with investment banks mandated as advisors, and we expect the process to be complete by year-end.

Chemicals losses; more downside risks: Chemicals reported an operating loss of Rmb1.3bn from lower margins from oversupply, particularly commodity chemicals (PE/PX/BD), which now are loss-making. Chemicals remains challenging with increased competition, while domestic demand seems to be supportive.

Upstream asset injections to continue; still no timeline: In line with earlier announcements that Sinopec’s parent would divest assets so as not to put it in direct competition with Sinopec Corp, the company reiterates the parent’s plans to divest its chemicals assets. Additionally, Sinopec’s parent will extend a 10-year option to Sinopec Corp to acquire any of its overseas E&P assets, although no specific mention of a timeline or process is outlined. We have previously flagged that Sinopec has been evaluating its parent's upstream assets, but we sense that not many assets of a specific size have met the company's return hurdle rate.


16



Tupras: Key product spreads likely to improve in 2Q & 3Q; reiterate OW

Analyst: Neeraj Kumar(971) 4428-1740, [email protected], This report can be accessed by clicking here, or at www.morganmarkets.com We believe Tupras is likely to benefit from better product spreads in 2Q & 3Q14 on a seasonal uptick in fuel demand as summer approaches, a relatively low level of petroleum products inventory with OECD countries (Figure 9), as more refineries go into maintenance in 2Q14 (Figure 10) and given healthy domestic demand growth for middle distillate so far (Figure 11-12). However, we expect some moderation in the domestic fuel demand growth as we move through the year. Key product spreads were relatively stable in 1Q14 (Figure 1-4). We forecast gross margins will improve by ~200bps by 2016 due to Residuum Upgrade Project (RUP), which will start in Nov2014 and adds ~$550m in EBITDA. Tupras trades on 17.5x 2014 P/E (adj.) and 8.7x for 2015e vs its peer average of 12.5x/12x on Bloomberg estimates. We reiterate OW.

Changes to our 2014/15 estimates. We increase our 2014 EPS to TRY2.7 (from TRY1.9) as we remove the provision of TRY309m for the fine levied by Turkish competition authority (See complete note). The company provisioned for this in 4Q13. We expect a limited impact on earnings due to the capping of fuel prices mainly diesel/gasoline at 1% (vs 1.5-2% previously) for 2 months (Mar/April) by the Turkish energy regulator. However, we reduce our margin assumption for 2015 and now forecast 2015 EPS of TRY5.41 (prev. 5.94) and, hence, reduce our Dec14 PT to TRY51 (from TRY51.6).

Stable product spreads. Spreads for key products improved /remained stable in Jan-Feb14 though there was some moderation in March. Overall, there was an improvement in gasoline and fuel oil spread in 1Q14 and a slight moderation in diesel and jet fuel spread. Gasoline spread averaged about $165/t in 1Q14 (vs $151/t: 4Q13; and $207/t: 1Q13) and diesel spread $127/t (vs $134/t: 4Q13; and $134/t: 1Q13). Domestic fuel demand growth remained healthy in 2012 and 2013 but we expect some moderation through 2014 given our economics team forecasts 2014 GDP growth of 1.9% for Turkey, vs 4% in 2013, before it returning to 4% in 2015.

1Q14 preview – Tupras to report 1Q14 on 9th May. We forecast 1Q14 revenue of TRY9.86bn, gross profit of TRY345m, operating profit of TRY141m, profit before tax of TRY123m and net profit of TRY296m.

https://markets.jpmorgan.com/research/email/-7s9jmrd/GPS-1299668-0.pdf


17



Refining marker marginsFigure 4: US North West ($/bbl) Figure 5: US Mid West ($/bbl)

Figure 6: NW Europe ($/bbl) Figure 7: Mediterranean ($/bbl)

Figure 8: Australia ($/bbl)

Source for all charts: Bloomberg

0.0

5.0

10.0

15.0

20.0

25.0

30.0

35.0

98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13E 14E 15E

1998 7.91999 10.12000 13.62001 13.72002 8.02003 11.62004 17.32005 21.02006 22.82007 23.32008 17.12009 13.12010 13.92011 14.1

16 year average$15.0/bbl

2012 18.02013 15.22014E 18.52015E 19.1

0.0

5.0

10.0

15.0

20.0

25.0

30.0

35.0

40.0

98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13E 14E 15E


1998 3.61999 3.22000 6.22001 8.22002 5.12003 6.52004 7.82005 12.02006 13.62007 17.82008 17.22009 11.22010 8.62011 9.3

2012 27.82013 21.82014E 19.12015E 18.3

0.0

5.0

10.0

15.0

20.0

25.0

98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13E 14E 15E

16 year average$10/bbl

1998 4.21999 3.62000 7.22001 6.42002 4.32003 6.62004 11.02005 13.22006 12.12007 14.42008 17.22009 9.02010 10.42011 11.9

2012 16.12013 12.92014E 13.92015E 14.3

0.0

5.0

10.0

15.0

20.0

98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13E 14E 15E


1998 3.91999 3.72000 7.82001 5.52002 3.62003 5.52004 10.42005 12.42006 11.92007 13.02008 14.32009 7.92010 8.82011 9.0

2012 12.72013 10.62014E 11.72015E 11.9

0.0

5.0

10.0

15.0

20.0

25.0

98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13E 14E 15E


1998 3.61999 2.32000 4.32001 3.32002 3.12003 5.22004 9.02005 11.02006 12.52007 13.22008 16.22009 9.52010 10.42011 12.2

2012 14.82013 13.42014E 14.92015E 14.7

18



Global Sub-Sector IndicesFigure 9: European Integrateds v/s Global Integrateds Figure 10: European E&P v/s Global E&P

Figure 11: North American Integrateds v/s Global Integrateds Figure 12: North American E&P v/s Global E&P

Figure 13: Emerging market Integrateds v/s Global Integrateds Figure 14: Emerging market E&P v/s Global E&P

Source for all charts: J.P. Morgan, Bloomberg

90

95

100

105

110

115

70

75

80

85

90

95

100

105

110

115

2010 2011 2012 2013 2014

European Integrateds (LHA) Relative to Global Integrateds (RHA)

80

85

90

95

100

105

110

115

120

125

70

80

90

100

110

120

130

140

150

2010 2011 2012 2013 2014

European E&P (LHA) Relative to Global E&P (RHA)

95

100

105

110

115

120

125

130

135

140

145

80

90

100

110

120

130

140

2010 2011 2012 2013 2014

North American Integrateds (LHA) Relative to Global Integrateds (RHA)

90

95

100

105

110

115

120

80

90

100

110

120

130

140

2010 2011 2012 2013 2014

North American E&P (LHA) Relative to Global E&P (RHA)

70

75

80

85

90

95

100

105

65

75

85

95

105

115

2010 2011 2012 2013 2014

Emerging Market Integrateds (LHA) Relative to Global Integrateds (RHA)

70

75

80

85

90

95

100

105

110

115

120

75

85

95

105

115

125

135

2010 2011 2012 2013 2014

Emerging E&P (LHA) Relative to Global E&P (RHA)

19



Global Sub-Sector IndicesFigure 15: European OFS v/s Global OFS Figure 16: North American OFS v/s Global OFS

Figure 17: Emerging market OFS v/s Global OFS

Source for all charts: J.P. Morgan, Bloomberg

90

95

100

105

110

115

120

125

130

60

80

100

120

140

160

180

2010 2011 2012 2013 2014

European OFS (LHA) Relative to Global OFS (RHA)

90

95

100

105

70

80

90

100

110

120

130

140

150

2010 2011 2012 2013 2014

North American OFS (LHA) Relative to Global OFS (RHA)

90

95

100

105

110

115

120

125

80

90

100

110

120

130

140

150

160

170

2010 2011 2012 2013 2014

Emerging market OFS (LHA) Relative to Global OFS (RHA)

20



Oil & gas pricesFigure 18: UK natural gas (pence/therm) Figure 19: Brent oil ($/bbl)

Figure 20: US natural gas ($/mmbtu) Figure 21: CFTC non commercial long/short oil positions & WTI oil price

Figure 22: CFTC net non-commercial positions & WTI oil price Figure 23: CFTC non-commercial long/short US gas positions & Henry Hub gas price


10

20

30

40

50

60

70

80

90

100

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

UK

Ga

s f

orw

ard

pri

ce

(p

/th

erm

, m

on

thly

av

era

ge

)

Actual 25.9p

Actual 41.6p

Actual 45.5p

Actual 30.0p

Actual 61.8p

Actual 31.8p

Actual 58.3p

Actual 41.5p

Actual 59.1p

Actual 67.1p

2014Curve 55.8pJPM 67.4p

2015Curve 62pJPM 55.2p

20

30

40

50

60

70

80

90

100

110

120

130

140

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Bre

nt F

orw

ard

Oil

Pri

ce

($/b

bl, m

on

thly

ave

rag

e)

Source: IPE

Actual $38.0

Actual$55.3

Actual $28.5

2008Actual $98.4

2009Actual $62.7

Actual$66.1

2012Actual $111.7

2011Actual $110.9

2007Actual $72.7

2010Actual $80.3

2013Actual $108.8

2014Curve $108.1JPM $105.5

2015Curve $103.3JPM $100.25

2016Curve $98.6JPM $90.0

2017Curve $95.4JPM $90.0

2018Curve $93.3JPM $90.0

2

3

4

5

6

7

8

9

10

11

12

13

14

Jan/03 Jan/04 Jan/05 Jan/06 Jan/07 Jan/08 Jan/09 Jan/10 Jan/11 Jan/12 Jan/13 Jan/14 Jan/15

He

nry

Hu

b fo

rwa

rd g

as p

ric

e ($

/mm

btu

, mo

nth

a

vg)

Source: Nymex

Actual $5.50

Actual $6.25

Actual$9.02

Actual$7.12

Actual$7.01

Actual $4.12Actual $4.03

Actual $2.82

Actual$8.90

Actual $4.38

Actual $3.73

JPM $4.75vs

Curve $4.70

JPM $4.39vs

Curve $4.35

30

50

70

90

110

130

150

-280,000

-240,000

-200,000

-160,000

-120,000

-80,000

-40,000

0

40,000

80,000

120,000

160,000

200,000

240,000

280,000

320,000

360,000

400,000

440,000

480,000

11/10 05/11 11/11 05/12 11/12 05/13 11/13

Nu

mbe

r of c

on

tracts

Source: CFTC, NYMEX

Long commitments Short commitments Long commitments

Short commitments WTI ($/bbl) WTI ($/bbl)

30

40

50

60

70

80

90

100

110

120

130

140

150

40

80

120

160

200

240

280

320

360

400

440

480

Dec '10 Apr '11 Aug '11 Dec '11 Apr '12 Aug '12 Dec '12 Apr '13 Aug '13 Dec '13 Apr '14

$/b

bl

millio

n b

arr

els

Net futures Net combined WTI ($/bbl, RHS)Source: CFTC 1

2

3

4

5

6

7

8

-500,000

-450,000

-400,000

-350,000

-300,000

-250,000

-200,000

-150,000

-100,000

-50,000

0

50,000

100,000

150,000

200,000

250,000

300,000

350,000

400,000

11/10 05/11 11/11 05/12 11/12 05/13 11/13

Nu

mb

er o

f con

tracts

Long commitments Short commitments Henry Hub ($/mmbtu, RHA)

21



Share price chartsGlobal Integrateds and E&Ps: Top 10 and bottom 10 performers

Figure 24: Integrateds– 1 Week Figure 25: Integrateds - 1 Month

Figure 26: E&P - 1 Week Figure 27: E&P - 1 Month


-9.9%

-4.8%

-4.8%

-3.4%

-2.6%

-2.3%

-2.2%

-1.4%

-1.3%

-1.3%

0.9%

1.1%

1.1%

1.2%

1.3%

1.5%

1.9%

2.1%

2.1%

2.8%

-12% -10% -8% -6% -4% -2% 0% 2% 4%

Ecopetrol

Rosneft

Gazprom Neft

Gazprom

ENI

Husky Energy

Baytex Energy

Sinopec

PTT Pcl

Lukoil

Repsol

BG

Petrobras

Chevron

BP

Cenovus Energy

Petrochina

Total

Suncor

OMV

-4.8%

-3.6%

-2.2%

-1.5%

-1.3%

-0.9%

-0.7%

-0.2%

-0.1%

0.0%

3.1%

3.3%

3.6%

4.7%

4.8%

5.4%

5.7%

6.1%

6.1%

8.9%

-6% -4% -2% 0% 2% 4% 6% 8% 10%

Gazprom Neft

Gazprom

Baytex Energy

Sasol

Lukoil

Tatneft

Surgutneftegaz

Galp

Sinopec

Bashneft

BG

RDS A

ExxonMobil

Total

Hess

Petrochina

Petrobras

Chevron

ConocoPhillips

Husky Energy

-23.6%

-18.6%

-6.5%

-6.3%

-5.3%

-4.8%

-4.7%

-4.3%

-4.1%

-3.7%

2.3%

2.5%

2.7%

2.7%

3.8%

4.1%

5.3%

6.3%

7.3%

10.6%

-30% -25% -20% -15% -10% -5% 0% 5% 10% 15%

HRT

Pacific Rubiales

Gran Tierra

Penn Virginia

EOG Resources

Hardy Oil & Gas

Whiting Petroleum

Pioneer Natural Resources

Concho Resources

Swift Energy

Oil India

Heritage Oil

Woodside Petroleum

Drillsearch Energy

Beach Petroleum

Quicksilver Resources

AWE Limited

Cairn Energy

Premier Oil

Cabot Oil

-23.6%

-18.6%

-15.6%

-6.5%

-4.6%

-4.1%

-3.3%

-3.1%

-2.8%

-2.6%

6.8%

7.3%

9.0%

11.9%

12.3%

12.7%

14.8%

17.0%

23.3%

27.8%

-30% -20% -10% 0% 10% 20% 30% 40%

HRT

Pacific Rubiales

DNO International

Gran Tierra

Penn Virginia

Concho Resources

SandRidge Energy

Continental Resources

QEP Resources

Novatek

Devon Energy

Range Resources

Dragon Oil

Tullow Oil

Heritage Oil

Premier Oil

Cabot Oil

Anadarko Petroleum

Quicksilver Resources

Halcón Resources

22



Global Oil Services and Refiners: Top 10 and bottom 10 performers

Figure 28: Oil Services– 1 Week Figure 29: Oil Services- 1 Month

Figure 30: Refiners- 1 Week Figure 31: Refiners - 1 Month


-12.5%

-6.2%

-4.0%

-2.7%

-1.6%

-1.3%

-0.5%

-0.4%

-0.2%

-0.1%

3.8%

4.1%

4.8%

5.4%

6.5%

7.0%

7.8%

8.4%

9.0%

13.3%

-15% -10% -5% 0% 5% 10% 15%

Core Laboratories

National Oilwell Varco

C&J Energy Services

Exterran Holdings

C.A.T. Oil

Baker Hughes

Schlumberger

Nabors

Halliburton

Bristow Group

Noble Corp.

Saipem

John Wood Group

Transocean Inc.

CGG Veritas

Technip

Aker Solutions

Subsea 7

Diamond Offshore

Weatherford

-7.5%

-5.1%

-4.1%

-3.9%

-3.8%

-1.6%

-1.1%

-0.5%

-0.5%

0.5%

8.2%

8.7%

9.1%

9.3%

9.6%

10.7%

11.4%

13.6%

14.8%

19.1%

-10% -5% 0% 5% 10% 15% 20% 25%

Rowan Companies

Core Laboratories

Noble Corp.

Ensco

Eurasia Drilling

Exterran Holdings

Bristow Group

Nabors

National Oilwell Varco

Honghua Group

Dresser-Rand

Vallourec

Technip

CGG Veritas

Anton Oilfield Services

Diamond Offshore

Amec

Saipem

SPT Energy

Weatherford

-9.1%

-4.3%

-3.5%

-2.5%

-2.3%

-1.9%

-1.7%

-1.6%

-1.5%

-0.5%

2.2%

2.3%

2.7%

2.8%

3.1%

3.1%

3.4%

4.4%

4.8%

5.0%

-10% -8% -6% -4% -2% 0% 2% 4% 6%

Hellenic

Essar Oil

S-oil

Motor Oil Hellas

Saras

Thai Oil

SK Innovation

BPCL

Reliance

Cosmo Oil

Idemitsu Kosan

ERG

Phillips 66

Western Refining

Marathon Petroleum

Valero Energy

HollyFrontier Corp

PKN

Tesoro Corporation

Showa Shell Sekiyu

-17.6%

-7.8%

-4.3%

-3.9%

-3.5%

-1.9%

-1.7%

-1.6%

-1.5%

-0.5%

7.5%

8.0%

9.3%

9.6%

9.7%

10.2%

10.5%

10.9%

12.7%

15.0%

-20% -15% -10% -5% 0% 5% 10% 15% 20%

Hellenic

Motor Oil Hellas

Essar Oil

Saras

S-oil

Thai Oil

SK Innovation

BPCL

Reliance

Indian Oil

ERG

PKN

JX Holding

Idemitsu Kosan

Valero Energy

Western Refining

Tesoro Corporation

HollyFrontier Corp

Showa Shell Sekiyu

Alon

23



Sector Performance

Figure 32: MSCI World - 1 Week Figure 33: MSCI World - 1 Month

Figure 34: MSCI Euro - 1 Week Figure 35: MSCI Euro - 1 Month


-1.0%

-0.7%

-0.5%

-0.5%

-0.4%

-0.3%

0.0%

0.2%

0.9%

1.1%

1.4%

-2% -1% -1% 0% 1% 1% 2% 2%

Consumer Discretionary

Telecom

IT

Industrials

Financials

Materials

World

Energy

Utilities

Consumer Staples

Health Care

-1.5%

-1.0%

-0.7%

-0.4%

0.1%

0.4%

0.4%

0.7%

1.8%

2.5%

4.2%

-2% -1% 0% 1% 2% 3% 4% 5%


IT

Telecom

Financials

Health Care

World

Industrials

Materials

Utilities

Consumer Staples

Energy

-2.2%

-0.4%

-0.4%

-0.2%

0.0%

0.2%

0.5%

0.7%

1.0%

1.1%

4.2%

-3% -2% -1% 0% 1% 2% 3% 4% 5%

IT


Utilities

Financials

Industrials

Euro

Materials

Consumer Staples

Energy

Telecom

Health Care

-5.1%

-1.2%

-0.9%

-0.3%

-0.3%

-0.2%

0.0%

1.2%

1.3%

1.5%

2.9%

-6% -5% -4% -3% -2% -1% 0% 1% 2% 3% 4%

IT

Utilities

Industrials

Telecom


Euro

Financials

Consumer Staples

Materials

Health Care

Energy

24



Coverage stocks – % Upside/ (Downside) to Target Price

Figure 36: Global Integrateds

Figure 37: Global Oil Services & Equipment

Figure 38: Global E&P’s

Source for all charts: Bloomberg, JP Morgan estimates

-20%

-10%

0%

10%

20%

30%

40%

50%

60%

RD

SA

EN

I

RE

P

Ga

lp

RD

SB

S-O

il

ST

L

TO

T

RIL

Sa

sol

BP

BG

Sin

op

ec

EC

OP

ET

L

SK

EN

ER

SIB

N

PT

R

SG

GD

TA

TN

GA

ZP

LU

K

RO

SN

-20%

-10%

0%

10%

20%

30%

40%

50%

DR

C

DO

RIG

DR

Q

BH

I

EX

H

PD

E

CA

M

LA

M

FT

I

HA

L

SL

B

NO

V

ES

V

WF

T

NE

-40%

-20%

0%

20%

40%

60%

80%

100%

120%

140%

160%

180%

BP

T

OS

H

HO

IL

ON

GC

DN

O

SIA

WP

L

ST

O

PT

TE

P

CA

IR

CN

OO

C

AF

R

AW

E

PR

E

TLW

EN

Q

RO

C

NV

TK

QG

EP

CN

E

SQ

Z

25



Global Integrateds valuations

Table 3: Summary valuation multiples

Source: Company Reports, Bloomberg, J.P. Morgan estimates. Prices at c.o.b 28-Apr-2014

Global Integrated Oils - Analyst Team

UK Integrateds European Integrateds Emerging Oils - Asia Emerging Oils - LatAm Emerging Oils -South Africa

Fred Lucas (AC) Nitin Sharma Scott Darling Caio Carvalhal Alex Comer(44-20) 7134 5943 (44-20) 7134 5947 (852) 2800 8578 (55-11) 3048 3946 (44-20) 7325 1964

[email protected] [email protected] [email protected] [email protected] [email protected]

Emerging Oils - Russia For specialist sales advice please contact:

Andrey Gromadin, CFA Jessica Saadat(7-495) 967-1037 (44-20) 7134 5941

[email protected] [email protected]

Prices as of c.o.b. 28-Apr-14

Company Reporting Trading Share Rec Shares in MV MV EV EPS DPS Post tax CFPS

Currency Currency price issue (m) ($ m) (m) (m) 13E 14E 15E 13E 14E 15E 13E 14E 15E

OECD

BP $ £ 488.4 OW 18,611 156,900 93,371 108,365 0.72 0.90 0.88 0.4 0.4 0.5 1.1 1.8 1.8

RD Shell B $ £ 2,409.0 N 6,295 254,885 151,657 172,402 3.10 3.24 3.04 1.8 1.9 1.9 6.4 6.3 6.6

BG Group $ £ 1,146.0 N 3,402 65,398 38,918 76,008 1.3 1.0 1.2 0.29 0.32 0.35 2.2 1.7 2.4

ENI € € 18.4 UW 3,562 92,124 66,587 82,015 1.22 1.29 1.48 1.10 1.12 1.12 3.1 3.7 4.0

GALP € € 12.6 N 829 14,417 10,421 12,594 0.37 0.38 0.45 0.29 0.32 0.36 1.3 1.5 1.5

OMV € € 32.5 UW 326 14,665 10,600 14,626 3.58 3.83 3.94 1.22 1.25 1.27 11.1 7.8 8.0

Repsol € € 18.9 UW 1,212 31,683 22,901 34,231 1.39 1.26 1.31 0.96 0.96 0.96 5.0 3.3 3.7

Statoil Nkr Nkr 173.7 OW 3,182 91,757 552,453 616,353 14.76 15.22 14.66 7.00 7.35 7.72 31.9 37.6 41.8

TOTAL € € 50.3 OW 2,378 164,646 119,006 142,618 6.29 6.92 7.10 3.16 3.38 3.57 12.3 13.1 14.1

Emerging Market

Sinopec CNY HK$ 6.9 OW 116,565 103,740 804,299 1,169,300 0.53 0.67 0.70 0.24 0.28 0.30 1.3 1.2 1.3

PetroChina CNY HK$ 9.0 OW 183,021 211,278 1,638,038 2,188,765 0.71 0.71 0.73 0.32 0.32 0.33 1.5 1.6 1.7

S-Oil KRW KRW 60,300 N 113 6,520 6,789,780 9,507,184 2494 4388 5055 1330 2194 2528 2948.5 16492.0 13685.6

SK Innovation KRW KRW 120,000 OW 92 10,655 11,095,920 16,305,517 8360 13009 14847 3200 3200 3200 27294.2 25532.4 0.0

Gazprom Rb $ 4.1 OW 23,674 96,470 96,470 125,384 1.64 1.46 1.30 0.24 0.24 0.32 2.4 2.0 2.0

Gazprom Neft $ Rb 135.3 N 4,741 17,794 641,261 896,012 1.23 1.12 0.99 0.30 0.28 0.25 1.9 1.6 1.6

Lukoil $ $ 52.1 OW 755 39,351 39,351 47,081 14.82 15.48 18.59 3.25 3.64 4.04 22.2 25.2 29.0

Rosneft $ $ 6.1 OW 9,237 64,860 64,860 135,761 1.27 1.39 1.30 0.35 0.31 0.30 2.6 3.2 3.2

Surgutneftegaz Rb Rb 25.1 N 43,428 29,953 1,079,456 583,666 0.16 0.16 0.15 0.02 0.02 0.03 0.2 0.2 0.1

Tatneft Rb Rb 207.3 OW 2,326 12,534 451,708 462,652 0.97 1.09 1.11 0.24 0.28 0.29 1.3 1.4 1.5

Sasol* ZAR ZAR 58,656 OW 605 33,060 352,699 343,487 6093 8816 6431 1900.0 2100.0 2200.0 58.8 64.9 65.6

Ecopetrol COP COP 3,450 N 40,473 71,877 139,630,200 154,568,990 345.3 345.2 441.3 252.1 186.9 238.9 439.7 518.8 594.3

Reliance Industries** INR INR 945.0 OW 3,235 50,426 3,057,075 3,624,930 64.6 72.6 80.4 10.0 10.0 11.0 110.0 83.3 104.4

NB: The reported Market Value (MV) and Enterprise Value (EV) are in trading currencies.

NB: The reported estimates are in reporting currencies except for Gazprom, Surgutneftegaz, Tatneft, MOL and Petrobras w hich are in $.

* - Fiscal year end June, ** - Fiscal year end March.

Company SOTP Premium PER (x) EV/DACF (x) Dividend Yield (%) YE Net debt / (cash) (m) Net Debt / Equity (%)

per share (Discount) 13E 14E 15E 13E 14E 15E 13E 14E 15E 13E 14E 15E 13E 14E 15E

OECD

BP 700 (30)% 11.4 9.1 9.3 8.7 5.6 5.7 4.5 5.0 5.5 25,195 29,040 30,481 19 21 21

RD Shell B 2,849 (15)% 13.1 12.5 13.3 7.2 7.4 7.3 4.4 4.6 4.6 34,866 37,945 46,399 19 20 23

Average (22)% 12.3 11.1 11.7 7.6 6.6 6.6 4.6 4.9 5.0 19 20 22

BG Group 1,483 (23)% 15.0 19.9 16.4 10.3 14.2 10.5 1.5 1.6 1.8 10,610 16,778 18,952 33 49 51

ENI 24.0 (23)% 15.0 14.3 12.4 7.5 6.4 6.2 6.0 6.1 6.1 15,428 17,028 21,209 27 29 36

GALP 16.1 (22)% 33.6 32.8 27.6 11.4 10.8 10.9 2.3 2.5 2.8 2,174 2,731 3,525 42 52 66

OMV 40.6 (20)% 9.1 8.5 8.2 4.0 5.9 6.1 3.8 3.8 3.9 4,026 4,500 5,320 32 34 39

Repsol 23.8 (21)% 13.6 15.0 14.5 5.6 7.3 6.7 5.1 5.1 5.1 11,330 6,433 7,065 43 24 25

Statoil 205.6 (16)% 11.8 11.4 11.9 6.1 5.3 4.7 4.0 4.2 4.4 63,900 87,389 102,169 18 24 26

TOTAL 56.4 (11)% 8.0 7.3 7.1 4.9 4.6 4.2 6.3 6.7 7.1 23,612 23,555 23,039 24 22 20

Average (25)% 23.4 32.3 13.0 7.1 7.7 7.1 3.6 3.8 3.9 63 72 71

Emerging Market

Sinopec 10.6 8.3 8.0 6.4 6.9 6.1 4.3 5.1 5.3 294,414 352,393 380,350 52 56 56

PetroChina 10.2 10.1 9.8 6.4 6.0 5.8 4.4 4.5 4.6 444,222 538,674 591,230 39 43 44

S-Oil 24.2 13.7 11.9 28.6 5.1 6.2 2.2 3.6 4.2 2,717,404 3,096,736 2,721,786 51 53 45

SK Innovation 14.4 9.2 8.1 6.5 6.9 NM 2.7 2.7 2.7 5,209,597 5,725,995 5,505,262 33 34 31

Gazprom 2.5 2.8 3.1 2.2 2.6 2.7 5.9 5.9 7.8 28,914 22,125 12,699 9 6 3

Gazprom Neft 3.1 3.4 3.8 2.7 3.2 3.3 8.1 7.5 6.6 254,751 326,489 358,218 28 32 32

Lukoil 3.5 3.4 2.8 2.8 2.5 2.2 6.2 7.0 7.8 7,731 6,977 2,126 9 8 2

Rosneft 4.8 4.4 4.7 5.7 4.6 4.6 5.8 5.0 5.0 70,901 73,001 71,376 83 77 68

Surgutneftegaz 4.3 4.4 4.6 2.3 2.4 2.5 2.8 3.5 4.2 -495,790 -543,101 -579,545 -22 -22 -23

Tatneft 5.9 5.3 5.2 4.3 4.1 3.8 4.2 4.9 5.0 10,944 -26,687 -65,626 2 -4 -10

Sasol* 9.6 6.7 9.1 9.7 8.7 8.6 3.2 3.6 3.8 -9,212 -7,173 20,174 -6 -4 11

Ecopetrol 10.0 10.0 7.8 8.7 7.4 6.4 7.3 5.4 6.9 14,938,790 20,063,943 19,366,855 27 34 26

Reliance Industries** 14.6 13.0 11.7 10.2 13.5 10.7 1.1 1.1 1.2 567,855 657,071 701,538 38 39 37

Average 9.0 7.3 7.0 7.3 5.7 5.3 4.4 4.7 4.9 29 31 30

26



UK & European oilfield services valuations



Pan-European Oilfield Services - Analyst Team For specialist sales advice please contact:

James Thompson Jessica Saadat(44-20) 7325 9460 (44-20) 7134 5941

[email protected] [email protected]


Company Reporting Trading Price Rec MV MV EV P/E (x) Cash Adjusted P/E (x) EV/EBITDA (x) EV/Sales (x) EBIT Margin (%) P/BV JPM Cazenove EPS

Currency Currency ($ mn) (mn) (mn) 12E 13E 14E 12E 13E 14E 12E 13E 14E 12E 13E 14E 12E 13E 14E 12E 13E 14E 12E 13E 14E

Lamprell $ £ 144.0 OW 630 375 338 nm 24.0 14.6 nm 19.8 12.1 nm 9.1 7.2 0.5 0.5 0.5 -8.6 3.5 4.9 1.6 1.5 1.3 -0.43 0.10 0.17

NB: The reported Market Value (MV) and Enterprise Value (EV 09) in trading currencies.

NB: The reported JPM Cazenove EPS are in reporting currencies.

Company Reporting Trading Price Rec MV MV EV FCF FCF Yield (%) DPS Dividend Yield (%) Net Debt/Equity (%) ROE (%) ROCE (%)

Currency Currency ($ mn) (mn) (mn) 12E 13E 14E 12E 13E 14E 12E 13E 14E 12E 13E 14E 12E 13E 14E 12E 13E 14E 12E 13E 14E

Lamprell $ £ 144.0 OW 630 375 338 231 -27 32 36.6 -4.3 5.1 0.0 0.0 0.0 0.0 0.0 0.0 -26 -14 -17 -27.4 6.1 9.1 -29.8 9.8 13.1

27



North American oilfield services valuations



J. David Anderson, PE, CFA (AC) Samantha Hoh, CFA William Thompson

212-622-6684 212-622-5248 212-622-9978

[email protected] [email protected] w [email protected]

Prices as of c.o.b. 4/28/2014

Company Rating PT Price Mkt Cap EV EPS P/E EBITDA ($m) EV/EBITDA

FY1Serv ices ($/shr) 04/28/14 2013E 2014E 2013E 2014E 2013E 2014E 2013E 2014E 2012E 2013E 2012E 2013E 2014E

Schlumberger SLB OW $125 101.29 135.7 141.1 4.24 5.70 23.9x 17.8x 13,071 14,488 10.8x 9.7x 12% 10% 14% 15% 16%

Halliburton HAL OW $77 62.78 58.4 60.8 2.41 3.97 26.0x 14.7x 6,185 7,274 9.8x 0.3x 12% 26% 16% 15% 16%

Baker Hughes BHI N $74 69.32 30.8 34.7 2.73 3.96 25.4x 17.5x 4,070 4,999 8.5x 6.9x 18% 13% 8% 7% 9%

Weatherford WFT OW $27 20.67 16.0 24.3 0.30 1.15 69.0x 18.0x 2,653 3,261 9.2x 7.5x 49% 48% 4% 5% 8%

AVG 36.1x 17.0x 9.6x 6.1x 23% 24% 11% 11% 12%

Nat'l Oilw ell NOV OW $97 77.31 33.0 32.8 5.52 6.18 14.0x 12.5x 4,223 4,721 7.8x 7.0x -1% -1% 12% 10% 10%

Cameron CAM N $70 64.50 16.0 16.9 3.03 3.85 21.3x 16.7x 1,460 1,594 11.6x 10.6x 13% 12% 12% 10% 10%

FMC Tech. FTI OW $65 56.50 13.5 14.8 2.12 2.80 26.7x 20.2x 1,066 1,387 13.9x 10.7x 47% 27% 20% 17% 19%

Dresser-Rand DRC N $57 61.20 4.7 5.6 2.21 2.66 27.7x 23.0x 475 491 11.8x 11.5x 46% 46% 11% 12% 10%

Dril-Quip DRQ N $120 113.27 4.6 4.3 4.19 5.52 27.1x 20.5x 258 336 16.8x 12.9x -26% -33% 12% 15% 17%

AVG 23.3x 18.6x 12.4x 10.5x 16% 10% 14% 13% 13%

Transocean RIG N $42 42.74 15.4 22.7 3.91 4.58 10.9x 9.3x 3,536 3,713 6.4x 6.1x 26% 27% 7% 7% 8%

Ensco ESV OW $66 50.83 11.7 16.1 6.24 6.81 8.1x 7.5x 2,431 2,639 6.6x 6.1x 27% 27% 8% 9% 9%

Diamond DO OW $51 53.05 7.4 7.4 3.95 3.04 13.4x 17.4x 1,278 1,113 5.8x 6.6x 0% 6% 12% 10% 6%

Noble NE N $44 31.15 7.9 12.2 3.25 4.35 9.6x 7.2x 1,952 2,538 6.3x 4.8x 37% 41% 5% 7% 9%

Row an RDC OW $43 30.88 3.8 4.8 1.98 3.20 15.6x 9.6x 597 800 8.1x 6.0x 16% 23% 5% 4% 6%

AVG 11.5x 10.2x 6.6x 5.9x 21% 25% 7% 8% 7%

C&J CJES N $26 29.74 1.6 1.8 1.26 1.10 23.6x 27.2x 189 203 9.3x 8.7x 27% 18% 31% 9% 7%

Ex terran EXH N $46 43.05 2.8 4.4 1.80 1.28 23.9x 33.7x 595 613 7.3x 7.1x 49% 47% 5% 5% 5%

Small Caps

Net Debt/Cap Return on Capital (net

debt)($, bn)

Capital Equipment

Offshore Drillers

28



Global E&P valuations



Global Exploration & Production - Analyst Team

Europe E&P Emerging Oils - Asia Emerging Oils - India Emerging Oils - LatAm Emerging Oils - AustraliaJam es Thompson Scott Darling Neil Gupte Caio Carvalhal Ben Wilson(44-20) 7134 5942 (852) 2800-8578 (91-22) 6157 3592 (55-11) 3048 3946 (61-2) 9220-1384

[email protected] [email protected] [email protected] [email protected] benjamin.x.w [email protected]

For specialist sales advice please contact:

Jessica Saadat(44-20) 7134 [email protected]


Company Analyst Reporting Trading Share Rec NOSH MV MV EV EPS DPS Post tax CFPS YE Net debt / (cash) (m) ReservesCurrency Currency price (m) ($ m ) (m) (m) 12 13E 14E 12 13E 14E 12 13E 14E 12 13E 14E 2P 2P+2C JPMe

Europe

Afren Thompson $ £ 147.0 UW 1,081 2,670 1,589 1,879 0.18 0.21 0.21 0.0 0.0 0.0 0.86 0.57 0.51 489 667 1,022 286 1,096 N/A

Cairn Energy Thompson $ £ 175.9 OW 653 1,756 1,045 101 0.11 (0.16) (0.21) 0.0 0.0 0.0 -0.11 -0.09 -0.09 -1,586 -1,253 -600 30 126 N/A

EnQuest Thompson $ £ 135.3 OW 765 1,812 1,078 1,025 0.46 0.27 0.27 0.0 0.0 0.0 0.76 0.80 1.11 -90 363 296 195 316 N/A

Genel Energy Thompson $ £ 940.0 N 281 4,445 2,645 2,049 0.27 0.67 1.01 0.0 0.0 0.0 1.08 1.11 1.80 -1,001 -700 -525 453 1,541 N/A

Heritage Thompson $ £ 263.0 N 259 1,143 680 1,424 0.11 0.36 0.58 0.0 0.0 0.0 NM 0.67 0.40 472 376 341 277 431 412

Ophir Energy Thompson $ £ 241.4 OW 410 2,386 1,420 1,284 (0.10) (0.13) (0.15) 0.0 0.0 0.0 -0.08 -0.09 -0.10 -228 -627 -1,106 N/A 1,250 N/A

Serica Thompson $ £ 9.6 UW 183 30 18 4 (0.14) (0.02) (0.02) 0.0 0.0 0.0 0.02 0.02 -0.03 -22 -27 -5 N/A 6 N/A

SOCO Thompson $ £ 423.1 N 328 2,331 1,387 1,234 0.62 0.65 0.63 0.0 0.0 0.0 1.03 0.89 0.85 -258 -202 -245 130 N/A 129

Tullow Thompson $ £ 850.5 OW 908 13,044 7,763 8,751 0.68 -0.04 0.52 0.2 0.2 0.2 1.67 1.85 1.64 988 1,854 2,782 382 1,049 N/A

Lundin Petroleum Thompson $ SEK 135.8 OW 311 6,401 42,172 44,061 0.35 0.41 0.55 0.0 0.0 0.0 2.64 2.81 3.06 287 1,172 1,968 194 1,124 840

DNO International Thompson $ NOK 19.8 N 1,023 3,367 20,274 19,230 0.77 1.08 2.75 0.0 0.0 0.0 1.55 1.76 3.91 -173 86 -1,385 520 563 N/A

Asia

CNOOC Darling CNY HKD 12.7 N 44,669 73,053 566,406 569,954 1.43 1.26 1.26 0.4 0.4 0.4 2.08 2.75 2.84 2,862 117,534 174,912 N/A N/A N/A

ONGC* Darling INR INR 321.4 N 8,556 45,350 2,749,325 2,620,585 29.2 28.3 28.2 9.7 9.5 9.5 57.3 46.0 53.8 -119,188 11,188 276,569 10,453 N/A N/A

PTTEP Darling THB THB 161.0 OW 3,970 19,819 639,168 684,534 15.9 14.8 17.7 5.7 6.0 6.6 23.0 32.8 29.8 45,367 54,666 74,821 1,749 2,399 2,399

Australia

AWE** Wilson AUD AUD 1.59 OW 522 769 830 800 (0.13) 0.04 0.18 0.05 0.00 0.00 0.24 0.23 0.18 -30 35 -30 56 245 N/A

Beach Energy** Wilson AUD AUD 1.76 UW 1,269 2,072 2,234 1,969 0.14 0.12 0.22 0.02 0.03 0.04 0.17 0.21 0.41 -265 -228 -247 93 559 N/A

Oil Search Wilson $ AUD 8.80 UW 1,343 10,935 11,792 14,170 0.13 0.15 0.26 0.04 0.04 0.04 0.15 0.27 0.61 2,378 3,815 4,260 552 1,500 N/A

ROC Oil Wilson $ AUD 0.46 OW 686 291 311 254 0.09 0.07 0.08 0.00 0.00 0.00 0.18 0.15 0.19 -57 -65 -148 15 38 N/A

Santos Wilson AUD AUD 13.5 N 972 12,106 13,055 14,608 0.54 0.53 0.41 0.30 0.30 0.35 1.55 1.56 1.59 1,553 5,127 7,689 1,406 3,371 N/A

Woodside Wilson $ AUD 41.1 OW 824 31,386 33,846 35,764 3.66 2.13 2.99 1.30 2.49 2.39 4.22 4.04 4.93 1,918 1,541 1,377 1,544 3,154 N/A

Latam

Gran Tierra Carvalhal $ $ 7.1 OW 287 2,039 2,039 1,826 0.35 0.44 0.51 0.0 0.0 0.0 NM NM NM -213 -429 -276 57 N/A N/A

HRT Carvalhal BRL BRL 0.7 N 6 91 205 -641 (42.87) (4.57) 0.01 0.0 0.0 0.0 NM NM NM -846 -91 28 N/A N/A 1,888

Pacific Rubiales Carvalhal $ CAD 17.9 N 322 5,220 5,762 6,703 1.79 1.43 2.46 0.4 0.7 0.7 NM NM NM 941 3,186 3,172 588 N/A 232

QGEP Carvalhal BRL BRL 8.2 N 266 973 2,182 1,311 0.31 0.72 0.45 0.0 0.0 0.0 NM NM NM -871 -190 -215 63 169 N/A

Russia

Novatek Konchin Rb $ 98.9 N 304 30,029 30,029 33,788 7.36 8.89 11.39 0.23 0.24 0.37 NM NM NM 3,759 2,333 854 15,597 22,355 N/A

NB: The reported Market Value (MV) and Enterprise Value (EV) in trading currencies.

NB: The reported estimates are in reporting currencies except for OGX and Novatek which are in $.

NB: PTTEP reports only 1P reserves data, hence 2P and 2P+2C are necessarily JPMe.

* - Fiscal year end March, ** - Fiscal year end June.

Company Core NAV Premium RENAV Premium TNAV Premium Production (kboepd) PER (x) Dividend Yield (%) EV/DACF (x) Net Debt / Equity (%) EV per boe

per share (Discount) per share (Discount) per share (Discount) 12 13E 14E 12 13E 14E 12 13E 14E 12 13E 14E 12 13E 14E 2P 2P+2C JPMe

Europe

Afren 144 2% 211 (30)% 370 (60)% 42 47 50 13.9 11.5 11.5 0.0 0.0 0.0 3.4 5.5 6.7 34 39 53 11.0 2.9 NM

Cairn Energy 312 (44)% 389 (55)% 793 (78)% 0 0 0 26.6 NM NM 0.0 0.0 0.0 NM NM NM -44 -36 -19 5.6 1.3 NM

EnQuest 168 (19)% 218 (38)% 330 (59)% 23 23 32 4.9 8.4 8.6 0.0 0.0 0.0 3.0 3.5 2.5 -7 24 17 8.8 5.4 NM

Genel Energy 839 12% 1,252 (25)% 2,535 (63)% 44 44 67 58.1 23.7 15.7 0.0 0.0 0.0 11.3 12.0 7.8 -26 -17 -12 7.6 2.2 NM

Heritage 273 (4)% 309 (15)% 453 (42)% 2 6 10 40.2 12.3 7.7 0.0 0.0 0.0 NM 8.8 14.5 49 35 28 5.8 3.7 3.9

Ophir Energy 246 (2)% 373 (35)% 1,016 (76)% NM NM NM NM NM NM 0.0 0.0 0.0 NM NM NM -21 -34 -41 NM 1.7 NM

Serica 28 (65)% 47 (79)% 224 (96)% 1 0 0 NM NM NM 0.0 0.0 0.0 1.8 0.8 NM -25 -26 -5 NM 1.3 NM

SOCO 362 17% 407 4% 521 (19)% 15 17 18 11.4 11.0 11.3 0.0 0.0 0.0 6.2 7.3 7.5 -22 -17 -20 15.9 NM 16.1

Tullow 537 58% 1,016 (16)% 2,003 (58)% 79 84 81 20.9 NM 27.5 0.0 0.0 0.0 9.2 8.9 10.6 19 37 52 38.5 14.0 NM

Lundin Petroleum 162 (16)% 209 (35)% 335 (60)% 36 34 37 59.2 50.3 37.3 0.0 0.0 0.0 8.2 8.7 8.8 24 90 133 34.5 5.9 8.0

DNO International 15 29% 21 (4)% 28 (29)% 38 43 78 25.7 18.4 7.2 0.0 0.0 0.0 12.7 11.3 4.7 -4 2 -17 6.1 5.7 NM

Average (6)% (33)% (61)% 29.4 19.5 17.1 0.0 0.0 0.0 6.2 6.9 8.3 -2 9 19 16.0 4.3 9.3

Asia

CNOOC 13 (2)% - - - - 884 1177 1244 8.9 10.0 10.0 3.0 3.2 3.0 4.9 4.7 5.0 1 34 52 NM NM NM

ONGC* - - - - - - 1184 1231 NM 11.0 11.4 11.4 3.0 3.0 3.0 4.3 5.7 5.4 -9 1 16 4.1 NM NM

PTTEP 157 3% - - - - 276 310 340 10.1 10.9 9.1 3.5 3.7 4.1 7.5 5.3 6.0 14 14 17 12.1 8.8 8.8

Average (33)% - - 10.0 10.8 10.2 3.2 3.3 3.3 5.6 5.2 5.5 2 16 29 8.1 8.8 8.8

Australia

AWE** 1.3 26% 1.8 (14)% 2.3 (31)% 13 14 16 NM 41.5 9.1 3.1 0.0 0.0 6.5 7.3 8.4 -3 4 -3 13.2 3.0 NM

Beach Energy** 1.4 22% 1.5 15% 1.5 15% 21 24 28 11.4 13.4 7.5 1.3 1.6 2.2 9.0 7.6 3.8 -16 -13 -12 19.6 3.3 NM

Oil Search 7.2 22% 8.9 (1)% 9.5 (8)% 17 18 24 61.6 53.1 31.1 0.5 0.5 0.5 72.2 42.5 19.5 74 112 87 24.1 8.9 NM

ROC Oil 0.5 (9)% 0.7 (31)% 0.8 (45)% 6 7 7 4.8 6.5 5.3 0.0 0.0 0.0 2.0 2.4 1.2 -26 -24 -46 15.6 6.2 NM

Santos 17.0 (20)% 16.9 (20)% 19.0 (29)% 143 155 164 24.8 25.3 32.6 2.2 2.2 2.6 9.7 12.0 13.4 17 50 74 9.6 4.0 NM

Woodside 38.9 6% 45.2 (9)% 61.7 (33)% 232 254 252 10.4 17.9 12.8 3.4 6.5 6.3 10.3 10.6 8.7 13 10 9 21.6 10.6 NM

Average 8% (10)% (22)% 22.6 26.3 16.4 1.8 1.8 1.9 18.3 13.7 9.2 10 23 18 17.3 6.0 NM

Latam

Gran Tierra - - - - 4 69% 16 20 22 20.3 16.1 NM 0.0 0.0 0.0 12.5 2.9 NM -16 -30 NM 32.2 NM NM

HRT - - - - - - NM NM NM NM NM NM 0.0 0.0 0.0 NM NM NM -23 -4 NM NM NM -0.4

Pacific Rubiales - - - - 36 (50)% 100 130 141 9.0 11.3 NM 2.7 4.1 4.6 3.7 7.0 NM 24 76 74 10.5 NM 26.5

QGEP 11 0 17 (52)% 0 0 0 26.5 11.3 18.1 0.0 0.0 0.0 5.2 5.3 7.1 -39 -8 -10 1.6 0.6 NM

Average - - (33)% 18.6 12.9 18.1 0.7 1.0 1.1 7.1 5.0 7.1 -14 9 32 14.8 0.6 13.1

Russia

Novatek 58.6 69% - - - - 1106 1165 1277 13.4 11.1 8.7 2.3 2.4 3.7 14.0 10.4 8.7 39 18 5 2.2 1.5 NM

Average 69% 13.4 11.1 8.7 2.3 2.4 3.7 14.0 10.4 8.7 39 18 5 2.2 1.5 NM

29



Access to Online Research and Valuation Statistics

We would like to encourage all clients to use our online facilities to access our financial valuation statistics for the energy sector, as well as the J. P. Morgan energy equity research.

For access to all J. P. Morgan’s research on energy simply click on www.morganmarkets.com

http://www.morganmarkets.com/

30



J.P. Morgan Global Energy Coverage

UK IntegratedsFred Lucas

(44-20) 7134-5943

[email protected]

UK Exploration &Production

James Thompson

(44-20) 7134-5942

[email protected]

European Integrateds

Nitin Sharma

(44-20) 7134-5947

[email protected]

Emerging Oils – Russia & Turkey


(7-495) 967 1037

[email protected]

Neeraj Kumar

(971) 4428-1740

[email protected]

Emerging Oils – Asia + Japan

Scott Darling

(852) 2800 8578

[email protected]

Samuel Lee

(852) 2800-8536

[email protected]

Yuji Nishiyama

(81-3) 6736-8617

[email protected]

Australian Oils

Benjamin Wilson

(61-2) 9220 1384

[email protected]

Daniel Butcher

(61-2) 9220 1405

[email protected]

Indian Oils

Neil Gupte

(91-22) 6157 [email protected]

For Specialist Sales advice, please contact:

Jessica Tadj-Saadat, CFA

(44-20) 7134 5941

[email protected]

Americas Exploration and Production

Joseph Allman, CFA

(1-212) 622 4864

[email protected]

Jeanine Wai

(1-212) 622-6489

[email protected]

Jessica Lee

(1-212) 622-9812

[email protected]

Americas Oil Services & Equipment

J.David Anderson, PE, CFA

(1-212) 622-6684

[email protected]

Samantha Hoh, CFA

(1-212) 622-5248

[email protected]

William S Thompson

(1-212) 622-9978

[email protected]

Americas Integrated Oils & Refiners

Timothy Li

(1-212) 622-6490

[email protected]

Emerging Oils – LatAm

Caio Carvalhal

(55-11) 3048-3946

[email protected]

Felipe Dos Santos

(55-11) 4950-3796

[email protected]

South African Oils

Alex Comer

(44-20) 7325 1964

[email protected]

Head of Global Commodity Research

Colin Fenton

(1-212) 834-5648

[email protected]

Energy Strategy – OilDavid G Martin

(44-20) 7777-0211

[email protected]

Energy Strategy – GasScott Speaker(1-212) 834-3878

[email protected]

mailto:[email protected]







31



J.P. Morgan Oil & Gas Coverage Names

UK Integrateds - Fred Lucas

BG Group, BP, RD Shell A & B

European Integrateds - Nitin Sharma

ENI, Essar Energy, Galp Energia, OMV, Repsol, Statoil, TOTAL

UK Exploration & Production – James Thompson

Afren, Cairn Energy, Enquest, Genel Energy Plc, Heritage Oil, Ophir Energy, Serica Energy, Soco International, Tullow Oil, Lundin Petroleum, Lamprell

Emerging Oils – Russia


Alliance Oil Company, Bashneft, Bashneft (pref), Gazprom Neft, Lukoil, Rosneft, Surgutneftegaz, Surgutneftegaz Prefs, Tatneft, Tatneft Prefs, TNK-BP, TNK-BP Prefs, Transneft, Gazprom, Novatek

Emerging Oils – Turkey – Neeraj Kumar

Tupras

Emerging Oils – Asia – Scott Darling

CNOOC, China Oilfield Services Limited, Inpex Corporation, MIE Holdings, PetroChina, Sinopec, PTT, PTTEP, Sinopec Corp – H, Anton Oilfield Services, SPT Energy, Honghua Group, ONGC, Cairn India

Emerging Oils – Asia Refiners – Samuel Lee

S-OIL Crop, SK Innovation, Formosa Petrochemical, Reliance Industries Ltd., Thai Oil, Reliance Industries

Emerging Oils – Japan – Yuji Nishiyama

JX Holdings, Cosmo Oil, Idemitsu Kosan, TonenGeneral Sekiyu, Showa Shell Sekiyu

Australian Oils - Benjamin Wilson, Daniel Butcher

AWE Limited, Beach Energy, Buru Energy, Oil Search, ROC Oil, Santos, Woodside Petroleum, Aurora Oil & Gas,Drillsearch Energy, Senex Energy

Americas Exploration & Production - Joseph Allman, CFA

Anadarko Petroleum, Apache Corp., Approach Resources, Berry Petroleum, Cabot Oil & Gas, Carrizo Oil & Gas, Chesapeake Energy, Cimarex Energy Co., Cobalt International Energy, Concho Resources, Continental Resources, Denbury Resources, Devon Energy, EOG Resources, EQT Corp., EXCO Resources, Goodrich Petroleum, Halcón Resources, Jones Energy, Laredo Petroleum, Newfield Exploration, Noble Energy, PDC Energy, Penn Virginia Corp., PetroQuest Energy, Pioneer Natural Resources, QEP Resources, Quicksilver Resources, Range Resources Corp., SM Energy, SandRidge Energy, Southwestern Energy, Swift Energy, Ultra Petroleum, Whiting Petroleum Corp., WPX Energy, RPS Permian

Americas Oil Services & Equipment - J.David Anderson, PE, CFA

Baker Hughes, Bristow Group, C&J Energy Services, Cameron Int’l, Core Laboratories, Diamond Offshore, Dresser-Rand, Dril-Quip, Ensco, Exterran Holdings, FMC Technologies, Forum Energy Technologies, Halliburton,Hornbeck Offshore, National Oilwell Varco, Noble Corp, Rowan Companies, Schlumberger, Transocean, Weatherford Inernational

Emerging Oils – LatAm – Caio Carvalhal

Ecopetrol, Gran Tierra Energy, HRT, OGX, Petrobras, Pacific Rubiales, QGEP, GeoPark

South African Oils - Alex Comer

Sasol

Indian Oils – Neil Gupte

BPCL, Essar Oil, HPCL, Indian Oil

32



Analyst Certification: The research analyst(s) denoted by an “AC” on the cover of this report certifies (or, where multiple research analysts are primarily responsible for this report, the research analyst denoted by an “AC” on the cover or within the document individually certifies, with respect to each security or issuer that the research analyst covers in this research) that: (1) all of the views expressed in this report accurately reflect his or her personal views about any and all of the subject securities or issuers; and (2) no part of any of the research analyst's compensation was, is, or will be directly or indirectly related to the specific recommendations or views expressed by the research analyst(s) in this report. For all Korea-based research analysts listed on the front cover, they also certify, as per KOFIA requirements, that their analysis was made in good faith and that the views reflect their own opinion, without undue influence or intervention.

Research excerpts: This note includes excerpts from previously published research. For access to the full reports, including analyst certification and important disclosures, investment thesis, valuation methodology, and risks to rating and price targets, please contact your salesperson or the covering analyst’s team or visit www.jpmorganmarkets.com.

Important Disclosures

Company-Specific Disclosures: Important disclosures, including price charts, are available for compendium reports and all J.P. Morgan–covered companies by visiting https://jpmm.com/research/disclosures, calling 1-800-477-0406, or e-mailing [email protected] with your request. J.P. Morgan’s Strategy, Technical, and Quantitative Research teams may screen companies not covered by J.P. Morgan. For important disclosures for these companies, please call 1-800-477-0406 or e-mail [email protected].

Explanation of Equity Research Ratings, Designations and Analyst(s) Coverage Universe: J.P. Morgan uses the following rating system: Overweight [Over the next six to twelve months, we expect this stock will outperform the average total return of the stocks in the analyst’s (or the analyst’s team’s) coverage universe.] Neutral [Over the next six to twelve months, we expect this stock will perform in line with the average total return of the stocks in the analyst’s (or the analyst’s team’s) coverage universe.] Underweight [Over the next six to twelve months, we expect this stock will underperform the average total return of the stocks in the analyst’s (or the analyst’s team’s) coverage universe.] Not Rated (NR): J.P. Morgan has removed the rating and, if applicable, the price target, for this stock because of either a lack of a sufficient fundamental basis or for legal, regulatory or policy reasons. The previous rating and, if applicable, the price target, no longer should be relied upon. An NR designation is not arecommendation or a rating. In our Asia (ex-Australia) and U.K. small- and mid-cap equity research, each stock’s expected total return is compared to the expected total return of a benchmark country market index, not to those analysts’ coverage universe. If it does not appear in the Important Disclosures section of this report, the certifying analyst’s coverage universe can be found on J.P. Morgan’s research website, www.jpmorganmarkets.com.

Coverage Universe: Lucas, Frederick G: BG Group (BG.L), BP (BP.L), Royal Dutch Shell A (RDSa.L), Royal Dutch Shell B (RDSb.L)

J.P. Morgan Equity Research Ratings Distribution, as of March 31, 2014

Overweight(buy)

Neutral(hold)

Underweight(sell)

J.P. Morgan Global Equity Research Coverage 44% 44% 11%IB clients* 58% 49% 40%

JPMS Equity Research Coverage 45% 48% 7%IB clients* 78% 67% 60%

*Percentage of investment banking clients in each rating category.For purposes only of FINRA/NYSE ratings distribution rules, our Overweight rating falls into a buy rating category; our Neutral rating falls into a hold rating category; and our Underweight rating falls into a sell rating category. Please note that stocks with an NR designation are not included in the table above.

Equity Valuation and Risks: For valuation methodology and risks associated with covered companies or price targets for covered companies, please see the most recent company-specific research report at http://www.jpmorganmarkets.com, contact the primary analyst or your J.P. Morgan representative, or email [email protected].

Equity Analysts' Compensation: The equity research analysts responsible for the preparation of this report receive compensation based upon various factors, including the quality and accuracy of research, client feedback, competitive factors, and overall firm revenues.

Registration of non-US Analysts: Unless otherwise noted, the non-US analysts listed on the front of this report are employees of non-US affiliates of JPMS, are not registered/qualified as research analysts under NASD/NYSE rules, may not be associated persons of JPMS, and may not be subject to FINRA Rule 2711 and NYSE Rule 472 restrictions on communications with covered companies, public appearances, and trading securities held by a research analyst account.


http://www.jpmorganmarkets.com/



https://jpmm.com/research/disclosures

www.jpmorganmarkets.com

33



Other Disclosures

J.P. Morgan ("JPM") is the global brand name for J.P. Morgan Securities LLC ("JPMS") and its affiliates worldwide. J.P. Morgan Cazenove is a marketing name for the U.K. investment banking businesses and EMEA cash equities and equity research businesses of JPMorgan Chase & Co. and its subsidiaries.

All research reports made available to clients are simultaneously available on our client website, J.P. Morgan Markets. Not all research content is redistributed, e-mailed or made available to third-party aggregators. For all research reports available on a particular stock, please contact your sales representative.

Options related research: If the information contained herein regards options related research, such information is available only to persons who have received the proper option risk disclosure documents. For a copy of the Option Clearing Corporation's Characteristics and Risks of Standardized Options, please contact your J.P. Morgan Representative or visit the OCC's website at http://www.optionsclearing.com/publications/risks/riskstoc.pdf

Legal Entities Disclosures U.S.: JPMS is a member of NYSE, FINRA, SIPC and the NFA. JPMorgan Chase Bank, N.A. is a member of FDIC. U.K.: JPMorgan Chase N.A., London Branch, is authorised by the Prudential Regulation Authority and is subject to regulation by the Financial Conduct Authority and to limited regulation by the Prudential Regulation Authority. Details about the extent of our regulation by the Prudential Regulation Authority are available from J.P. Morgan on request. J.P. Morgan Securities plc (JPMS plc) is a member of the London Stock Exchange and is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. Registered in England & Wales No. 2711006. Registered Office 25 Bank Street, London, E14 5JP. South Africa: J.P. Morgan Equities South Africa Proprietary Limited is a member of the Johannesburg Securities Exchange and is regulated by the Financial Services Board. Hong Kong: J.P. Morgan Securities (Asia Pacific) Limited (CE number AAJ321) is regulated by the Hong Kong Monetary Authority and the Securities and Futures Commission in Hong Kong and/or J.P. Morgan Broking (Hong Kong) Limited (CE number AAB027) is regulated by the Securities and Futures Commission in Hong Kong. Korea: J.P. Morgan Securities (Far East) Ltd, Seoul Branch, is regulated by the Korea Financial Supervisory Service. Australia: J.P. Morgan Australia Limited (JPMAL) (ABN 52 002 888 011/AFS Licence No: 238188) is regulated by ASIC and J.P. Morgan Securities Australia Limited (JPMSAL) (ABN 61 003 245 234/AFS Licence No: 238066) is regulated by ASIC and is a Market, Clearing and Settlement Participant of ASX Limited and CHI-X. Taiwan: J.P.Morgan Securities (Taiwan) Limited is a participant of the Taiwan Stock Exchange (company-type) and regulated by the Taiwan Securities and Futures Bureau. India: J.P. Morgan India Private Limited, having its registered office at J.P. Morgan Tower, Off. C.S.T. Road, Kalina, Santacruz East, Mumbai - 400098, is a member of the National Stock Exchange of India Limited (SEBI Registration Number - INB 230675231/INF 230675231/INE 230675231) and Bombay Stock Exchange Limited (SEBI Registration Number - INB 010675237/INF 010675237) and is regulated by Securities and Exchange Board of India. For non local research reports, this material is not distributed in India by J.P. Morgan India Private Limited. Thailand: This material is issued and distributed in Thailand by JPMorgan Securities (Thailand) Ltd., which is a member of the Stock Exchange of Thailand and is regulated by the Ministry of Finance and the Securities and Exchange Commission and its registered address is 3rd Floor, 20 North Sathorn Road, Silom, Bangrak, Bangkok 10500. Indonesia: PT J.P. Morgan Securities Indonesia is a member of the Indonesia Stock Exchange and is regulated by the OJK a.k.a. BAPEPAM LK. Philippines: J.P. Morgan Securities Philippines Inc. is a Trading Participant of the Philippine Stock Exchange and a member of the Securities Clearing Corporation of the Philippines and the Securities Investor Protection Fund. It is regulated by the Securities and Exchange Commission. Brazil: Banco J.P. Morgan S.A. is regulated by the Comissao de Valores Mobiliarios (CVM) and by the Central Bank of Brazil. Mexico: J.P. Morgan Casa de Bolsa, S.A. de C.V., J.P. Morgan Grupo Financiero is a member of the Mexican Stock Exchange and authorized to act as a broker dealer by the National Banking and Securities Exchange Commission. Singapore: This material is issued and distributed in Singapore by or through J.P. Morgan Securities Singapore Private Limited (JPMSS) [MCI (P) 199/03/2014 and Co. Reg. No.: 199405335R] which is a member of the Singapore Exchange Securities Trading Limited and is regulated by the Monetary Authority of Singapore (MAS) and/or JPMorgan Chase Bank, N.A., Singapore branch (JPMCB Singapore) which is regulated by the MAS. This material is provided in Singapore only to accredited investors, expert investors and institutional investors, as defined in Section 4A of the Securities and Futures Act, Cap. 289. Recipients of this document are to contact JPMSS or JPMCB Singapore in respect of any matters arising from, or in connection with, the document. Japan: JPMorgan Securities Japan Co., Ltd. is regulated by the Financial Services Agency in Japan. Malaysia: This material is issued and distributed in Malaysia by JPMorgan Securities (Malaysia) Sdn Bhd (18146-X) which is a Participating Organization of Bursa Malaysia Berhad and a holder of Capital Markets Services License issued by the Securities Commission in Malaysia. Pakistan: J. P. Morgan Pakistan Broking (Pvt.) Ltd is a member of the Karachi Stock Exchange and regulated by the Securities and Exchange Commission of Pakistan. Saudi Arabia: J.P. Morgan Saudi Arabia Ltd. is authorized by the Capital Market Authority of the Kingdom of Saudi Arabia (CMA) to carry out dealing as an agent, arranging, advising and custody, with respect to securities business under licence number 35-07079 and its registered address is at 8th Floor, Al-Faisaliyah Tower, King Fahad Road, P.O. Box 51907, Riyadh 11553, Kingdom of Saudi Arabia. Dubai: JPMorgan Chase Bank, N.A., Dubai Branch is regulated by the Dubai Financial Services Authority (DFSA) and its registered address is Dubai International Financial Centre - Building 3, Level 7, PO Box 506551, Dubai, UAE.

Country and Region Specific Disclosures U.K. and European Economic Area (EEA): Unless specified to the contrary, issued and approved for distribution in the U.K. and the EEA by JPMS plc. Investment research issued by JPMS plc has been prepared in accordance with JPMS plc's policies for managing conflicts of interest arising as a result of publication and distribution of investment research. Many European regulators require a firm to establish, implement and maintain such a policy. This report has been issued in the U.K. only to persons of a kind described in Article 19 (5), 38, 47 and 49 of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (all such persons being referred to as "relevant persons"). This document must not be acted on or relied on by persons who are not relevant persons. Any investment or investment activity to which this document relates is only available to relevant persons and will be engaged in only with relevant persons. In other EEA countries, the report has been issued to persons regarded as professional investors (or equivalent) in their home jurisdiction. Australia: This material is issued and distributed by JPMSAL in Australia to "wholesale clients" only. This material does not take into account the specific investment objectives, financial situation or particular needs of the recipient. The recipient of this material must not distribute it to any third party or outside Australia without the prior written consent of JPMSAL. For the purposes of this paragraph the term "wholesale client" has the meaning given in section 761G of the Corporations Act 2001. Germany: This material is distributed in Germany by J.P. Morgan Securities plc, Frankfurt Branch and J.P.Morgan Chase Bank, N.A., Frankfurt Branch which are regulated by the Bundesanstalt für Finanzdienstleistungsaufsicht. Hong Kong: The 1% ownership disclosure as of the previous month end satisfies the requirements under Paragraph 16.5(a) of the Hong Kong Code of Conduct for Persons Licensed by or Registered with the Securities and Futures Commission. (For research published within the first ten days of the month, the disclosure may be based on the month end data from two months prior.) J.P. Morgan Broking (Hong Kong) Limited is the liquidity provider/market maker for derivative

http://www.optionsclearing.com/publications/risks/riskstoc.pdf

34



warrants, callable bull bear contracts and stock options listed on the Stock Exchange of Hong Kong Limited. An updated list can be found on HKEx website: http://www.hkex.com.hk. Japan: There is a risk that a loss may occur due to a change in the price of the shares in the case of share trading, and that a loss may occur due to the exchange rate in the case of foreign share trading. In the case of share trading, JPMorgan Securities Japan Co., Ltd., will be receiving a brokerage fee and consumption tax (shouhizei) calculated by multiplying the executed price by the commission rate which was individually agreed between JPMorgan Securities Japan Co., Ltd., and the customer in advance. Financial Instruments Firms: JPMorgan Securities Japan Co., Ltd., Kanto Local Finance Bureau (kinsho) No. 82 Participating Association / Japan Securities Dealers Association, The Financial Futures Association of Japan, Type II Financial Instruments Firms Association and Japan Investment Advisers Association. Korea: This report may have been edited or contributed to from time to time by affiliates of J.P. Morgan Securities (Far East) Ltd, Seoul Branch. Singapore: JPMSS and/or its affiliates may have a holding in any of the securities discussed in this report; for securities where the holding is 1% or greater, the specific holding is disclosed in the Important Disclosures section above. India: For private circulation only, not for sale. Pakistan: For private circulation only, not for sale. New Zealand: This material is issued and distributed by JPMSAL in New Zealand only to persons whose principal business is the investment of money or who, in the course of and for the purposes of their business, habitually invest money. JPMSAL does not issue or distribute this material to members of "the public" as determined in accordance with section 3 of the Securities Act 1978. The recipient of this material must not distribute it to any third party or outside New Zealand without the prior written consent of JPMSAL. Canada: The information contained herein is not, and under no circumstances is to be construed as, a prospectus, an advertisement, a public offering, an offer to sell securities described herein, or solicitation of an offer to buy securities described herein, in Canada or any province or territory thereof. Any offer or sale of the securities described herein in Canada will be made only under an exemption from the requirements to file a prospectus with the relevant Canadian securities regulators and only by a dealer properly registered under applicable securities laws or, alternatively, pursuant to an exemption from the dealer registration requirement in the relevant province or territory of Canada in which such offer or sale is made. The information contained herein is under no circumstances to be construed as investment advice in any province or territory of Canada and is not tailored to the needs of the recipient. To the extent that the information contained herein references securities of an issuer incorporated, formed or created under the laws of Canada or a province or territory of Canada, any trades in such securities must be conducted through a dealer registered in Canada. No securities commission or similar regulatory authority in Canada has reviewed or in any way passed judgment upon these materials, the information contained herein or the merits of the securities described herein, and any representation to the contrary is an offence. Dubai: This report has been issued to persons regarded as professional clients as defined under the DFSA rules. Brazil: Ombudsman J.P. Morgan: 0800-7700847 / [email protected].

General: Additional information is available upon request. Information has been obtained from sources believed to be reliable but JPMorgan Chase & Co. or its affiliates and/or subsidiaries (collectively J.P. Morgan) do not warrant its completeness or accuracy except with respect to any disclosures relative to JPMS and/or its affiliates and the analyst's involvement with the issuer that is the subject of the research. All pricing is as of the close of market for the securities discussed, unless otherwise stated. Opinions and estimates constitute our judgment as of the date of this material and are subject to change without notice. Past performance is not indicative of future results. This material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. The opinions and recommendations herein do not take into account individual client circumstances, objectives, or needs and are not intended as recommendations of particular securities, financial instruments or strategies to particular clients. The recipient of this report must make its own independent decisions regarding any securities or financial instruments mentioned herein. JPMS distributes in the U.S. research published by non-U.S. affiliates and accepts responsibility for its contents. Periodic updates may be provided on companies/industries based on company specific developments or announcements, market conditions or any other publicly available information. Clients should contact analysts and execute transactions through a J.P. Morgan subsidiary or affiliate in their home jurisdiction unless governing law permits otherwise.

"Other Disclosures" last revised April 5, 2014.

Copyright 2014 JPMorgan Chase & Co. All rights reserved. This report or any portion hereof may not be reprinted, sold or redistributed without the written consent of J.P. Morgan. #$J&098$#*P

global oil & gas dailypg.jrj.com.cn/acc/res/cn_res/indus/2014/4/30/fabf13b8-f7b9-4ae… ·...

Documents