汇丰银行-全球-石油与天然气行业-雪佛龙(Chevron)正处于有利位置但埃克森美孚(Exxon)是美国主要的买入对象-2019.3.14-40页.pdf

Disclosures&Disclaimer This report must be read with the disclosures and the analyst certifications in the Disclosure appendix,and with the Disclaimer,which forms part of it.Issuer of report:HSBC Bank plc View HSBC Global Research at:https:/ Votingopens11thMarch12thAprilIf youvalueourserviceandinsight,pleasevoteClick here to voteVote in Extel 2019 Two strong growth stories,sharply different market sentiment We think sentiment on Exxon can improve substantially Reiterate Buy on XOM,Hold on CVX.Raise TPs 3%/6%Much more Permian growth:We thought the 2019 strategy updates from both Chevron and Exxon were positive,characterised by big upgrades to guidance on Permian output to 900mbd by 2023,and 1mbd by 2024 respectively.Chevron is already in its growth sweet spot,with upstream growth averaging 6%pa through 2017/18/19e,and cash flow having recovered by a sector-leading 58%in 2018.Break-even is down to the low USD50/b,and the balance sheet is in good enough shape for buybacks to have started in 2H18.The long-term outlook for continued dividend growth and share buybacks is good,in our view.Exxons cash generation was disappointing in 2018.The company is investing heavily at the optimum point in the cost cycle,and its growth prospects are extremely strong.However,this comes at the cost of less near-term financial flexibility than many.The lack of free cash for share buybacks and the perception that Exxons growth is all longer-term has led to widespread negative sentiment towards the stock.Whats the market missing?On Chevron,we dont think much.As much as this is a strong growth story with great visibility,it appears reflected in highly positive market sentiment and in valuations which we do not think offer much further room for relative upside.On Exxon,a few key things,recognition of which we think could lead to much-improved market sentiment:1)the sheer scale of long-term growth we forecast 2025e production of 4.8mbd,26%above 2018;2)growth in the near term too.We see production growth of 3%pa in 2019-20e,plus sharply higher earnings from both Downstream and Chemicals on a one-two year view;and 3)buybacks could come sooner than the market thinks,with debt down to where management wants it,and disposals likely to boost near-term free cash flow.We raise our target prices on Chevron and Exxon to USD133 and USD89.0 from USD126 and USD86.5,respectively.We reiterate our Buy on Exxon and our Hold on Chevron.We also raise our Permian output forecasts for Hold-rated Shell by 100kbd by 2025e in response to the productivity trends being seen in these peers;this pushes our target prices on Shell A/B up by c.1%to 2785p/2800p,respectively.14 March 2019 Gordon Gray*Global Head of Oil and Gas Equity Research HSBC Bank plc +44 20 7991 6787 Kim Fustier*Analyst,Oil&Gas HSBC Bank plc +44 20 3359 2136 *Employed by a non-US affiliate of HSBC Securities(USA)Inc,and is not registered/qualified pursuant to FINRA regulations Major integrated oils Equities Oil&Gas Global Key changes in this report Company/Ticker Currency Current price Old TP New TP Rating Up/Downside Div yield 2019e 2020e P/E 2020e EV/CF 2020e FC yield BP(BP/LN)GBp 535.6 660 660 Buy 23.2%5.9%10.4 5.8 9.7%Chevron(CVX US)USD 123.6 126.0 133.0 Hold 7.6%3.9%13.3 7.4 7.8%ExxonMobil(XOM US)USD 79.8 86.5 89.0 Buy 11.6%4.2%11.9 7.5 5.7%Shell A(RDSA LN)GBp 2,339 2,750 2,785 Hold 19.1%6.1%8.6 5.8 9.5%Shell B(RDSB LN)GBp 2,350 2,775 2,800 Hold 19.1%6.1%8.7 5.8 9.7%Total(FP FP)EUR 50.76 57.50 57.50 Buy 13.3%5.3%9.1 5.5 9.6%Prices are as of 11 March 2019.Source:Refinitiv Datastream,HSBC estimates Chevron is in a sweet spot,but Exxon is the US major to Buy Equities Oil&Gas 14 March 2019 2 Share price performance Exxons shares were the worst performers of the major oils by a wide margin from early 2017 through to end-1Q18,underperforming the peer group by more than 20%over the period.The shares bottomed in relative terms in April 2018 following the companys strategy update and the launch of its aggressive long-term strategy.Chevron and Exxon share prices,USD Exxon share price vs Chevron,-2y Source:Bloomberg Source:Bloomberg Chevron also underperformed the peer group for much of 2017-18,but not by as much as Exxon.Although management launched a share buyback programme following its 2Q18 results last July,this was not an immediate catalyst for the stock and in fact,it slumped to a two-year low in the subsequent weeks.In our view this was due to a combination of:a)the weakness of 2Q results particularly cash generation and b)high expectations on the share buyback leading up to the event.In relative terms,Chevrons shares bottomed in the second half of 2018.They have since recovered sharply,we believe largely because of the evidence in 3Q and 4Q18 results of the strength of the recovery in its cash generation.Following the latest strategy update,Chevrons shares hit a five-year high vs the MSCI Global Energy Index.60708090100110120130140Mar-17Jul-17Nov-17Mar-18Jul-18Nov-18ExxonChevron80859095100105110Mar-17Sep-17Mar-18Sep-18Two strong growth outlooks Two strong growth stories,sharply different market sentiment We think sentiment on Exxon can improve substantially Reiterate Buy on XOM,Hold on CVX.Raise TPs 3%/6%CVX hit a five-year high vs the global sector recently 3 Equities Oil&Gas 14 March 2019 Chevron vs major integrated oils,past two years Exxon vs major integrated oils,past two years Source:Bloomberg Source:Bloomberg Judging from the proportion of sell-side“Buy”ratings(or equivalent)there is still a widely differing sell-side sentiment towards the two stocks,something we believe is mirrored in buy-side sentiment.On this measure,sentiment towards Chevron is among the best in the peer group.We are not too surprised by this,given the strength of its growth outlook,its low free cash breakeven and its flexibility for share buybacks.In contrast,sentiment towards Exxon remains extremely weak.We think the relative lack of improvement in its cash flow so far is one factor.However,the main issue seems to be the lack of near-term growth and the sense that,with the bulk of upstream growth set to come post-2020,it is too early to expect a catalyst for the stock.Current proportion of sell-side ratings which are Buy or equivalent Change in proportion of sell-side ratings which are Buy or equivalent,past 6 months Source:Bloomberg,HSBC Source:Bloomberg,HSBC 80859095100105Mar-17Sep-17Mar-18Sep-18707580859095100105Mar-17Sep-17Mar-18Sep-180%10%20%30%40%50%60%70%80%90%XOM EQNRREPRDSENIBPCVXTOT-2%0%2%4%6%8%10%12%14%16%18%ENIRDSXOMCVXBPREP EQNRTOT Equities Oil&Gas 14 March 2019 4 Two strong growth strategies at differing points in their cycles In our view both Chevron and Exxons 2019 investor days presented strong,positive outlooks.The main difference between the two is in the timing of the investment cycle.Chevron is now clearly in“harvest”mode from its period of high capital intensity of recent years.We have already seen this in upstream volume growth of over 7%in 2018,and it looks like upstream growth will be of a similar order of magnitude in 2018.Over the next three years,we see average growth of 4%pa in Chevrons upstream volumes,which is broadly comparable with the highest-growth peers in the sector.Exxons upstream volumes havent grown at all in recent years in fact 2018 output was 6%below 2015 levels.However,2Q18 was the low point.We think market perceptions that Exxons growth is all long-term are simply wrong,particularly in light of the companys latest update.Exxons near-term volume growth doesnt look bad at all.Management is guiding to 2020e volumes of 4.2mbd,which would be close on 10%higher than 2018s volumes of 3.83mbd.Our figures are somewhat lower,but we have raised them following the latest news flow and we see a highly respectable 2018-21 growth rate of more than 3%pa.Oil majors-annual production growth,2018 to 2019e Oil majors-annual production growth,2018 to 2021e Source:Company reports,HSBC estimates.NB:Breakdown of column height between oil and gas represents the contribution of net oil growth vs gas growth Source:NB:Breakdown of column height between oil and gas represents the contribution of net oil growth vs gas growth We can see the contrast of near-term performance very clearly in the recent cash generation of the two companies.Chevrons cash generation suffered one of the worst deteriorations in the peer group through the downturn,reflecting its high crude price leverage.However,with the aid of the strength of new growth projects,its cash flow has bounced back extremely strongly.On a per-share basis,Chevrons 12-month rolling cash flow to end-2018 is the closest to returning to previous peak levels(when crude was over USD100/b)of the five supermajors.Exxons cash flow arguably did not hold up as well as some may have expected in the downturn,given the companys reputation for defensiveness.Similarly,the recovery has lagged most of the peer group such that on a rolling 12-month basis,it is furthest from previous peak levels of its peer group.8.5%7.1%5.2%5.0%5.0%3.1%2.6%1.2%-1.0%0.0%1.0%2.0%3.0%4.0%5.0%6.0%7.0%8.0%9.0%TOT CVXBPENIXOM EQNR RDS REPOilGasCAGR 2018-2019e4.7%4.3%3.8%3.8%3.2%2.5%2.0%0.9%-1.0%0.0%1.0%2.0%3.0%4.0%5.0%EQNR TOTBPCVX XOMENIRDS REPOilGasCAGR 2018-2021eChevron has among the best volume growth in 2019e Contrary to much investor opinion Exxons volumes are growing reasonably in the next few years Chevrons cash flow has bounced back more strongly than most from the downturn,in contrast to Exxons 5 Equities Oil&Gas 14 March 2019 Rolling 12-month cash flow per share in USD,indexed from peak(12 months to 3Q/4Q14)Source:Company reports,HSBC We have raised our expectations for upstream growth at both companies following their investor updates.For Chevron,this reflects its updated Permian outlook,but also the growth prospects in other unconventionals(Argentinas Vaca Muerta,Canadas Duvernay and the US Appalachian).Chevron has guided to 4-7%volume growth in 2018,and 3-4%pa on average through 2018-25.We now expect 2019 growth of 7%,and our forecasts to 2025e point to compound growth of 2.9%.However,after the strength of 2019 growth we expect significant deceleration,with average growth from 2019-25e of 2.2%pa.For Exxon,it also mainly reflects the substantial guidance upgrade on Permian volumes.We now see 3.3%pa compound volume growth through 2018-25e,to a 2025e level of 4.8mbd.This figure compares with Exxons own figures,which imply 2025 production of 5.2mbd after netting off 0.3mbd of planned disposals.It is also worth highlighting that by 2025,the contribution on our estimates from Guyana,Mozambique,PNG or Brazil are nowhere near their full potential,indicating good growth continuing thereafter.On our estimates,Exxons volume growth through 2018-25e is the strongest in the peer group.Integrated oils:volume growth,2018-25e(indexed)Source:Company reports,HSBC estimates 304050607080901003Q/4Q143Q151Q163Q161Q173Q171Q183Q18BPCVXXOMRDSTOTENIEQNRBrent9510010511011512012513020182019e2020e2021e2022e2023e2024e2025eBPRDSTOTXOMCVXExxon has the strongest volume growth outlook in the peer group through 2025e Equities Oil&Gas 14 March 2019 6 Note:given the evidence of increased tight oil productivity at both Chevron and Exxon,we have raised our estimates of Shells US Permian volumes.We now see Shells Permian output at 440kbd by 2025e,an increase of more than 100kbd vs our previous forecasts.Shells existing guidance points to Permian output of 220-230kbd by 2020e.The effect on our 2019-21 forecasts is minimal(1%increases to EPS)and the effect on our target prices is a c.1%increase to 2785p/2800p from 2750p/2775p(see valuation and risks on pages 24-25).For Exxon,the compromise in the next few years comes in the capex line.Exxons capital expenditure is ramping up faster than any of its peers.Total capex was USD26bn in 2018,and is set to rise to USD30bn in 2019 and as much as USD33-35bn in 2020.For context,current guidance at its most comparable peer Shell is still in the range of USD25-30bn.This sharp increase in spending is firmly at odds with what we are seeing from the rest of the peer group,although there is a degree of“base effect”,which relates to Exxons underspend in 2016-17.The chart below right shows the level of capital intensity implied from current capex guidance for each company,after adjusting for planned(or our estimated)downstream spend.We show this capital intensity relative to our forecasts of longer-term(2025e)upstream growth,to fully reflect the upside from current capex.On this basis,Exxons capital intensity is by no means excessive in fact it is within the range of the peer group.This is the case despite the absolute scale of the companys planned spend because of two factors:a)the large amount of downstream growth capex in the total(c.USD9-10bn at peak)and b)the strength of the pipeline of upstream growth opportunities,which translates on our estimates to 2025 production 26%higher than in 2018.Major oils capex vs peak(2013)levels,indexed Major oils:upstream capital intensity implied from range of company capex guidance,USD per 2025e annual barrel produced Source:Company data,HSBC estimates Source:Company guidance,HSBC estimates The two companies are currently in quite different positions regarding free cash breakevens.Chevrons sharp fall in capex in recent years,coupled with the strength of recent cash flow growth,has pushed its free cash breakeven(to cover cash capex and dividends)down to little over USD50/b.Although spending is rising in 2019,management still expects this breakeven to be around the USD52/b level this year.The sharp fall in Chevrons free cash breakeven has enabled it to de-lever its balance sheet gearing was down to only 13%at end-2018,and to launch its share buyback programme as of 2Q18 results.While the buyback was initially launched at USD3bn pa,it has been increased to USD4bn for 2019 and we see scope for considerably higher payouts.On our USD70/b long-term Brent price forecast,we see buybacks rising to USD6bn in 2020e and USD9bn in 2021e.304050607080901002013 2014 2015 2016 2017 2018 2019e 2020eBPCVXXOMRDSTOT05101520TOTENIREPBPEQNRCVXRDSXOMLow guidanceHigh guidanceWe have raised our Shell volume forecasts as a result of Permian productivity trends Exxon is raising capex by more than most,but its implied capital intensity is not excessive Chevron has one of the sectors lowest free cash breakevens;Exxon is the opposite 7 Equities Oil&Gas 14 March 2019 Of course in Exxons case the high level of capex plus the earlier stage of its growth profile means its free cash breakeven is currently much higher.We calculate it at USD65/b in 2019e,but falling to USD59/b in 2020e.However,it is important to note that Exxons management believes its balance sheet gearing does not need to fall further,so debt reduction does not appear to be a major priority for future free cash.2019e organic free cash breakevens,USD/b 2020e organic free cash breakevens,USD/b Source:HSBC estimates Sour