GLOBAL EQUITY RESEARCH
ENERGY & POWER
EUROPE
European Refining
Industry Overview
European Refining
SECTOR VIEW
3Q 2007 European Refining Scoresheet
New: Old:
2 - Neutral 2 - Neutral
Lydia Rainforth, CFA (44) 20 7102 2558
[email protected] Lucy Haskins (44) 20 7102 1417
[email protected] Mick Pickup (44) 20 7102 1414
[email protected]
The third quarter was not, in general, a good quarter for the European refining companies, with lower refining margins, a weaker dollar and increased operating costs associated with a higher crude oil price reversing the increase in profitability we saw last quarter. On average, earnings were down 14% y-o-y and 11% q-o-q. The winners from the quarter were Neste and ORL with the CEE refiners lagging behind. Over the quarter, the refiners earned an average RoACE of 13% compared to 23% from the Integrated group. The refiners still stand on an average 2008F EV/EBIDA of 8.8x vs. an average 7.1x for the integrated group. Given the current oil price of $95/bl, the risk to our forecasts remains to the downside, all else being equal. We remain 2-Neutral on the sector, preferring instead the integrated oil and service companies.
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Scott Darling (44) 20 7102 1412
[email protected] Rahim Karim (44) 20 7102 1802
[email protected] Iqbal Nasim (44) 20 7102 3977
[email protected] Avinash Ghalke (44) 20 7102 9151
[email protected] Raiz Basheeruddin (44) 20 7102 2460
[email protected] Industry Group Leader Tim Whittaker (44) 20 7102 1416
[email protected] Sector Specialist Andrew Archer (44) 20 71023 5489
[email protected]
Petroplus price target reduced to SFR 130 per share: We have reduced our 2007 earnings for Petroplus by 25%, in part, to reflect the fire at the Coryton refinery. Correspondingly we have made a small reduction in our price target to SFR 130 from SFR 135. We continue to rate Petroplus 1-Overweight relative to the European refining sector although we recognise that share price outperformance may be unlikely until Coryton is back to optimal capacity.
Analysis of 3Q 2007 results USD
Utilisation Change % points
Change in % Change Refining in Net Marketed Income Volume
USD EPS growth
RoACE %
Refining RoACE %
Change in Corporate RoACE % points
%
CEPSA
+0.0
(0.6)
(0.8)
(13)
+13
+8
(3)
ERG
+5.4
(1.0)
+2.0
NA
+9
+0
+3
Hellenic
+5.4
(1.7)
+16.6
(12)
+9
+8
+1
Lotos
(1.5)
(3.5)
NA
(39)
+10
+8
+11
MOL
+7.6
(2.7)
+10.7
(31)
+18
+22
+6
Motor Oil
+4.1
(1.9)
NA
(44)
+15
+13
(3)
Neste
+22.4
(2.7)
+2.2
(26)
+19
+20
+1
OMV
(0.9)
(0.9)
(3.2)
+32
+18
+4
(5)
ORL
+7.2
+1.1
NA
+316
+11
+14
+1
Petroplus
+3.5
(0.5)
NA
NA
+10
+14
+7
PKN Orlen
(18.6)
(5.5)
+44.4
(49)
+10
+3
+0
Saras
+1.8
(0.7)
+28.3
(6)
+19
+11
+4
Highest
>Median
