汇丰银行-全球-石油服务与设备行业-全球油服：为2019年回顾大问题-2019.1.13-57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:/ We update our OFS sector and stock views to align with our revised lower framework for crude oil prices Cutting estimates and target prices for short cycle exposure for SLB,HAL,BHGE,WEIR,other assumptions unchanged Gradual recovery in oilfield activity set to continue,especially offshore;preferred names Buy-rated SLB,WG,SPM and RIG Postponing the inevitable:The wealth&prosperity associated with the Chinese Year of the Pig has clearly been absent from the oilfield in recent months,but we think OFS could be at an inflection point in market sentiment.We do not foresee a super-cycle by any means,and our new oil price framework lowers our view on the pace of short cycle OFS recovery.However,we think this de-rated sector offers good opportunities,supported by a gradual pick-up in crude prices and oilfield investment.Whats changed:Weve reflected our revised oil price framework(Oil in 2019,13 January)by cutting our recovery assumptions for short-cycle businesses(mostly US unconventionals);this leads us to reduce our EPS estimates for the Big 3(Schlumberger,Halliburton,Baker Hughes GE)on average by 15%for 2019 and 12%for 2020,and our target prices for this group are on average 11%lower.Weve also updated our forecasts for Weir and TechnipFMC,but left most other assumptions unchanged.We think the outlook for offshore in particular will change little,given its bias towards long-term oil price assumptions.Spotting the opportunity:We see good bottom-line and cashflow growth from most of the oilfield supply chain.Over 2018-2020 we expect 25-30%EBITDA growth and 40-60%EPS growth from Schlumberger,Halliburton,Wood and Weir.Exposure to this diversified growth looks attractive at 15x 2020e EPS for Schlumberger and c.10 x for Halliburton,Wood and Weir and we note 5%dividend yields at Schlumberger and Wood.Were less positive on the oversupplied subsea value chain but believe the consolidating offshore drilling sector offers deep value;Transocean is our preferred name,with 73%implied upside to our target price.Self-help remains a key differentiator we see specific opportunities with Saipem,Wood and Baker Hughes.13 January 2019 David Phillips*Head of Equity Research,Developed Europe HSBC Bank plc +44 20 7991 7558 Tarek Soliman*,CFA Analyst HSBC Bank plc +44 20 3268 5528 Abhishek Kumar*Analyst HSBC Securities and Capital Markets(India)Private Limited abhishek.kumarhsbc.co.in+91 80 4555 2753 Scott Cagehin*Analyst HSBC Bank plc +44 20 7992 1444 Anshak Singhal*Associate Bangalore Click here to enter text.*Employed by a non-US affiliate of HSBC Securities(USA)Inc,and is not registered/qualified pursuant to FINRA regulations Global Oilfield Services EQUITIES ENERGY EQUIPMENT&SERVICES Global Key investment ratings and valuations Company Ticker Curr Price Mkt cap(USDm)Rating Old TP New TP Up/downside EV/EBITDA 2019e EV/EBITDA 2020e PE 2019e PE 2020e Schlumberger SLB US USD 40.67 56,320 Buy 60.00 56.00 37.7%9.6x 7.6x 24.2x 15.4x Halliburton HAL US USD 29.20 25,581 Buy 43.00 38.00 30.1%8.2x 5.6x 19.0 x 10.1x Baker Hughes GE BHGE US USD 23.21 11,916 Buy 37.00 32.00 37.9%9.8x 7.5x 27.2x 14.3x Transocean RIG US USD 8.42 3,889 Buy 14.60 14.60 73.4%8.8x 8.6x na na Diamond DO US USD 11.19 1,538 Buy 17.20 17.20 53.7%10.2x 14.3x na na Noble Corp.NE US USD 3.34 824 Buy 6.10 6.10 82.6%11.3x 9.1x na na Saipem SPM IM EUR 3.66 4,228 Buy 4.50 4.50 23.1%5.7x 4.9x 51.0 x 25.5x Subsea 7 SUBC NO NOK 93.78 3,590 Hold 105.00 105.00 12.0%5.0 x 3.4x na 47.4x TechnipFMC FTI US USD 22.33 10,059 Hold 25.00 24.00 7.5%5.4x 5.1x 17.8x 19.1x Wood Group WG/LN GBp 567.00 4,920 Buy 745.00 745.00 31.4%7.9x 6.7x 11.0 x 9.4x Weir Group WEIR LN GBp 1,384.50 4,573 Buy 2,500.00 2,000.00 44.5%8.0 x 6.7x 12.1x 10.0 x Note:Latest prices as of close 8 January 2019.Source:HSBC estimates Revisiting the big questions for 2019 EQUITIES ENERGY EQUIPMENT&SERVICES 13 January 2019 2 Oilfield Services important soundbites and key numbers Our oil price view remains constructive for oilfield activity,despite our revised lower framework our assumptions for Brent are USD64/b for 2019e,USD70/b for 2020e and USD70/b for 2021e onwards.This is a key input into our view on the OFS space.The IOC(free)cash machine continues over 2019-2023e we see the IOCs under our research coverage generating cumulative operating cashflow of USD1,163bn and free cashflow(pre dividends)of USD502bn;this compares to free cashflow(pre dividends)of USD211bn over the prior cycle in 2010-2014.We forecast combined IOC capex in the range of USD135-141bn by 2021-2023e,up roughly 30%versus 2017-2018;the IOCs do not dominate global upstream spending but they do for offshore,especially deepwater(where we see a gradual but robust outlook).We see attractive upside across much of the oilfield value chain we see on average 35%upside to our target prices for the Big 3,and a substantial 70%upside for offshore drillers;we see less opportunity with the subsea-exposed names.Our revised assumptions in this report continue to place us below consensus on average,our target prices for the Big 3 are 11%below the street,and were 20%below for the subsea names;our target prices for the offshore drillers are 15%above the street.Good bottom line and cashflow growth from the oilfield value chain over 2018-2020e we see 25-30%EBITDA growth and 40-60%EPS growth from Schlumberger,Halliburton,Wood Group and Weir.Big 3 free cash flow a key strength on our numbers,we see free cash flow(FCF)generation from Schlumberger,Halliburton and Baker Hughes GE totalling USD21bn over 2019-21e.This is now 15%below the level we forecast three to four months ago,but is still equivalent to 23%of the current market capitalisation;FCF is included in executive KPIs at Schlumberger and Baker Hughes GE.OFS valuations at attractive levels on our revised numbers,the diversified OFS/OFS-exposed names Wood Group,Halliburton,Weir are on 10 x 2020e EPS and Schlumberger on 15x 2020e.Dividends offering selective support post the Q4 2018 sector de-rating,some names have dividend yields in the 4-5%range for 2019e;we note Wood Group and Schlumberger offer around 5%(in a sector usually not well-known for dividend support).Middle East&Asia more important than the US for SLB we still forecast Schlumberger and Halliburton on a geographic as well as divisional basis.Based on this,in terms of EBIT growth 2018-20e,we see 25%coming from North America for Schlumberger(and 65%for Halliburton),but around 40%from the Middle East/Asia for Schlumberger(and 17%for Halliburton).Our changes in this report(lower oil price effect on short cycle businesses)have shifted this balance;before we saw 40%of EBIT growth from North America for Schlumberger(and 70%for Halliburton).Subsea suffers from oversupply our own work on the installed asset base and SURF(subsea umbilicals,risers and flowlines)fleet shows little change now versus that in 2013-14;this has important implications for the likely speed of price and margin recovery.But the best parts of offshore drilling are increasingly concentrated in only a few hands based on current rig fleets,post announced or planned consolidation,we see c.60%of 7th generation floater rigs in the hands of three players(Transocean,Seadrill,and the combined ESV/RDC),c.60%of harsh environment floaters with four players(Transocean,COSL,Diamond and North Atlantic Drilling),and c.60%of harsh environment jackups with two players(combined ESV/RDC and Maersk Drilling).A lower but still supportive oil market backdrop for oilfield activity A supportive cash flow environment from the big customers We see oil capex up around 30%by the early 2020s vs 2017/18 3 EQUITIES ENERGY EQUIPMENT&SERVICES 13 January 2019 Sector strategy in OFS 4 HSBC Global Oil&Gas Research Library 11 Oilfield Services:Diversified players Schlumberger,Halliburton,Baker Hughes GE,Wood Group,Weir 13 Oilfield services:E&C and Subsea TechnipFMC,Saipem,Subsea 7 26 Oilfield services:Offshore Drilling Transocean,Noble,Diamond 35 OFS Valuation&risks 41 Disclosure appendix 53 Disclaimer 56 Contents EQUITIES ENERGY EQUIPMENT&SERVICES 13 January 2019 4 Whats changed in this report Aligning to USD60-70/b rather than USD70-80/b weve reflected the likely impact of our new lower house views on oil prices(see Oil in 2019,13 January)on our assumptions over the pace of oilfield activity growth onshore and offshore,short cycle and long cycle and what this means for the forecasts and valuations/target prices for the OFS(and OFS-related)stocks under our coverage.We now assume Brent at USD64/b for 2019e,USD70/b for 2020e,and USD70/b longer term(WTI USD57/b,USD66/b,and USD68/b respectively).In general,weve reduced growth/margins for short cycle businesses(especially those exposed to North American land)but have made no change to long cycle(offshore).Were lowering forecasts and TPs for the Big 3(again)given our lower oil price assumptions,weve taken a more cautious view on the pace of activity growth in US onshore namely with unconventionals/shale markets.For the short cycle businesses that are part of the Big 3 diversified services names,this translates into more of a decline in North American activity in 2019 and a less aggressive recovery in 2020(assuming USD70/b Brent long term means we still see short cycle activity growth in this geography in 2021e).On average,for Schlumberger,Halliburton and Baker Hughes GE,our EPS forecasts are 15%lower for 2019 and 12%lower for 2020,and our target prices are 11%lower.Weve also lowered our estimates and target price for Weir,given its related US shale value chain exposure.Weve tweaked TechnipFMC weve updated our forecasts to reflect recent 2019 guidance(weve not changed our view for the Surface Tech business,despite this having high short cycle/North American land exposure,as we are already significantly below 2019 company guidance for this business line).The net impact of its guidance for Onshore/Offshore and Subsea boosts our forecast EPS for 2019,but our target price slips slightly to USD24 from USD25 due to our assumed lower Subsea margins.Sector strategy in OFS Despite a lower oil price environment,we think gradual broad-based recovery in oilfield activity will continue in 2019,especially offshore Lower oil price view drives estimate and target price cuts for short cycle exposure for SLB,HAL,BHGE,WEIR;other assumptions unchanged See opportunity in exposure to diversified OFS at the right price,deep value in a consolidating offshore drilling sector,and stock-specific self-help;our preferred names are SLB,WG,SPM and RIG Reflecting our revised oil price assumptions across our OFS coverage Lowering our expectations for short cycle OFS mainly the Big 3,also Weir Updating TechnipFMC for 2019 guidance comments 5 EQUITIES ENERGY EQUIPMENT&SERVICES 13 January 2019 HSBC oil and gas price assumptions(as recently revised)Annual average 2014a 2015a 2016a 2017a 2018a 2019e 2020e 2021e Brent USD/b 99.4 53.6 45.1 54.8 71.6 64.0 70.0 70.0 Previous 73.0 80.0 85.0 75.0 Change -1.4-16.0-15.0-5.0 WTI USD/b 92.9 48.8 43.4 50.9 64.8 57.0 66.0 68.0 Previous 66.1 74.0 81.0 73.0 Change -1.3-17.0-15.0-5.0 Nymex gas USD/mBtu 4.34 2.61 2.49 2.96 3.07 3.13 3.25 3.32 Previous 2.89 3.00 3.25 3.32 Change 0.18 0.13 0.00 0.00 UK spot gas USD/mBtu 8.4 6.7 4.8 5.9 8.2 7.1 7.3 7.5 Previous 8.3 8.0 8.6 7.5 Change -0.1-0.8-1.3 0.0 Quarterly average Q1 2018a Q2 2018a Q3 2018a Q4 2018a Q1 2019e Q2 2019e Q3 2019e Q4 2019e Brent USD/b 67.3 75.0 75.8 68.3 59.0 65.0 65.0 67.0 Previous 75.0 80.0 80.0 85.0 Change -16.0-15.0-15.0-18.0 WTI USD/b 62.9 67.9 69.5 59.0 51.0 57.0 59.0 61.0 Nymex gas USD/mBtu 2.85 2.83 2.87 3.73 3.50 3.00 3.00 3.00 UK spot gas USD/mBtu 8.6 8.6 8.6 9.0 7.7 6.5 6.5 7.8 Source:Bloomberg,HSBC estimates;see Oil in 2019,13 January 2019,for full details)Commercial break:Checking up on the customers health The industry is regaining some confidence,but operators especially the oil majors have shown limited appetite for a material step-up in spending(despite Brent breaking USD80/b during 2018).Instead they have preferred strategies of building resilience across their balance sheets and diversity across their portfolios,doing more for less(given deflation and the efficiency benefits from digitalisation),and only gradually moving into the next wave of new projects.Organic capex:recovery in upstream spend lags the oil price(USDm)Source:Company data,HSBC estimates This relative lack of correlation between operator spending and oil prices has been evident in the record free cashflow from the oil majors in recent quarters.Importantly,we expect this dynamic to continue through this currently weaker commodity price environment,and we continue to see a gradual expansion in spending from this financially robust customer base,supporting a gradual pick-up in oilfield activity.This is particularly important for offshore and deepwater activity,where the IOCs drive some 70-80%of the market.02040608010012005010015020025020072008200920102011201220132014201520162017 2018e 2019e 2020e 2021eUpstreamDownstreamBrent price(USD/b,RHS)Major operators have not thrown caution to the wind in terms of spending EQUITIES ENERGY EQUIPMENT&SERVICES 13 January 2019 6 In terms of IOC capex,2017 marked the bottom,and our Oil&Gas research team expects organic spending to rise modestly in 2018 by 2%for the sector.Looking into 2019,capital spending should increase faster but generally stay under control;our team forecasts a 9%increase in organic capex vs 2018 and by 2021e models capex around 28%higher than the trough in 2017.Its important to note that upstream spending was never predicated on“oil at USD80/b”.The Majors financial frameworks were devised in 2017 and reaffirmed several times through 2018 and are based on USD50/b or USD60/b long-term crude prices.Major oils moving free cash positive(sector aggregate cash flow and FCF,USDbn)Source:Company data,HSBC estimates And what to expect in 2019 from oilfield services With the exception of North American shale,we expect to see a continuation of the gradual investment recovery that started in 2018,especially for long-cycle offshore(dominated by the IOCs)where the number of FIDs(final investment decisions)should increase Volatile activity and pricing trends near term in North American unconventionals markets,as operators react to lower WTI/wellhead prices and infrastructure bottlenecks;this could imply significant near-term financial stress for smaller players in the supply chain for this region Visible&expected offtake pipeline expansions to help debottleneck production supply growth from the Permian,supporting potentially good growth in well completion kit and services from H2 2019 onwards(particularly into 2020)Signs that oilfield activity outside North America remains relatively