Global Research Published by Raymond James & Associates
July 14, 2015
Energy
Industry Brief Pavel Molchanov, RJA, (713) 278-5270,
[email protected] J. Marshall Adkins, RJA, (713) 789-3551,
[email protected] Andrew Bradford, CFA, RJL, 403.509.0503,
[email protected] Bertrand Hodée, Research Analyst, RJEE, (33 1) 45 64 05 46,
[email protected] Santiago Wesenack, CFA, RJ LatAm, (54 11) 4850-2537,
[email protected]
Energy: Quarterly News _________________________________________________________________________________________
Raymond James Quarterly Global Energy Report for 2Q15 This quarterly report aggregates energy research highlights from Raymond James & Associates and our affiliates: Raymond James Ltd. (Canada), Raymond James European Equities, and Raymond James Latin America.
Quarterly Highlights Crude Oil After 1Q15 marked the bottom of the oil price meltdown – with both WTI and Brent averaging their lowest levels since the first half of 2009 – 2Q15 was not as bleak, albeit hardly bullish. Until the very end of the quarter, when the Greek debt crisis and Chinese equity selloff suddenly escalated, oil price volatility was subdued, with prices mostly range-bound. The 2Q averages came in at $62/Bbl for Brent (up 13% sequentially) and $58/Bbl for WTI (up 19% sequentially). The Brent-WTI price spread, $4/Bbl, was slightly narrower than in 1Q. Following the recovery since January’s trough, we anticipate prices will remain broadly on par with recent levels through year-end 2015, followed by further gains in 2016. Barring a truly major economic crisis (to be clear, “Grexit” in and of itself would not count), we don’t envision oil prices falling back to the lows of 1Q. See page 4 for details on our oil price assumptions.
Natural Gas With 1Q15 being considerably warmer than the year-ago winter, the quarterly Henry Hub average came in at $2.97/Mcf – down not just year-over-year but again sequentially as well. Not surprisingly, seasonality in 2Q15 exerted further pressure on gas prices, and the quarterly average of $2.67/Mcf was the lowest since 2Q12. Production growth is still outstripping demand growth for the time being – even with collapse in liquids drilling activity and the resulting effect on gas volumes from liquids-rich resource plays. Growth in industrial gas demand has been frustratingly slow, and LNG exports will not be needle-moving until 2017 at the earliest. We project flattish prices through year-end 2015, with only modest recovery in 2016. See page 4 for details on our gas price assumptions.
Stocks During most of 2Q15, similar to 1Q, broader U.S. markets were mostly range-bound, with low-volatility action in equities. At the end of June, however, volatility reared its head again, as troubling headlines from Greece and China caused a global sell-off in equities and commodities alike, with some spillover into July. Even so, the S&P 500 edged down merely 0.2% for the full quarter, essentially canceling out 1Q’s gain of 0.4%. Energy stocks were mixed – in the wake, of course, of having been the S&P 500’s worst-performing sector in 2014. The two broadest energy subsector indices, E&P and oil service, posted a 2Q loss of 6% and gain of 5%, respectively. See the chart on page 3 for details on the performance of various energy indices. Please read domestic and foreign disclosure/risk information beginning on page 37 and Analyst Certification on page 37. © 2015 Raymond James & Associates, Inc., member New York Stock Exchange/SIPC. All rights reserved.
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Raymond James
Global Research
Contents
Stats of the Week .................................................................... 5 Global Research Highlights ...................................................... 6 Exploration and Production..................................................... 7 Oilfield Services ..................................................................... 15 Integrated Oil and Gas / Independent Refiners .................... 18 Renewable Energy and Clean Technology ............................. 23 Canadian Oil and Gas............................................................. 31 European Oil and Gas ............................................................ 34 Argentinean Oil and Gas ........................................................ 36
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International Headquarters: The Raymond James Financial Center | 880 Carillon Parkway | St. Petersburg, Florida 33716 | 800-248-8863
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20%
Global Research
Energy Indices vs. Broader Market Trailing 12 Months and Quarterly Index Performance
10%
0% -10% -20% -30% -40%
E&P Index
Oilservice Index
Coal Index TTM Performance
Source: Thomson Reuters
Clean Tech Index
MLPs Index
S&P 500
Quarterly Performance
Oil and Gas Price Trends 12-Month Crude Oil and Natural Gas Futures Strips January 2010 - June 2015
Natural Gas (Henry Hub)
Crude Oil (WTI)
$120
$6.00
$120 Natural Gas (Henry Hub)
Crude Oil (WTI)
$110
$5.50
$110
$5.00
$100
$5.00
$100
$4.50
$90
$4.50
$90
$4.00
$80
$4.00
$80
$3.50
$70
$3.50
$70
$3.00
$60
$3.00
$60
$2.50
$50
$2.50
$50
$2.00
$40
$2.00
$40
Source: Bloomberg, Thomson Reuters
* Pricing as of 6/30/2015
$/Mcf
$5.50
$/Bbl
$/Mcf
$6.00
Source: Bloomberg, Thomson Reuters
$/Bbl
Front-Month Crude Oil and Natural Gas Futures Contracts January 2010 - June 2015
* Pricing as of 6/30/2015
Source: Bloomberg, Thomson Reuters.
As of June 30, 2015
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International Headquarters: The Raymond James Financial Center | 880 Carillon Parkway | St. Petersburg, Florida 33716 | 800-248-8863
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Global Research RJ&A Oil Price Forecast (as of July 2015) 2014 Q1 14A Q2 14A Q3 14A WTI $99.00 $103.00 $98.00 Brent $108.00 $110.00 $102.00 Brent-WTI Spread $9.00 $7.00 $4.00
Q4 14A $73.00 $76.00 $3.00
2014A $93.25 $99.00 $5.75
2015 WTI Futures Old RJ Oil Est. WTI New RJ Oil Brent Futures Old RJ Oil Est. Brent New RJ Oil Brent-WTI Spread
Q1 15A $48.49 $58.00 $48.49 $55.13 $63.00 $55.13 $6.64
Q2 15A $57.85 $50.00 $57.85 $62.06 $59.00 $62.06 $4.21
Q3 15E $58.70 $55.00 $55.00 $63.19 $62.00 $62.00 $7.00
Q4 15E $58.92 $60.00 $60.00 $64.03 $67.00 $67.00 $7.00
2015E $55.99 $55.75 $55.00 $61.10 $62.75 $62.00 $7.00
2016 WTI Futures WTI New RJ Oil Brent Futures Brent New RJ Oil Brent-WTI Spread
Q1 16E $59.92 $61.00 $65.28 $68.00 $7.00
Q2 16E $60.57 $64.00 $66.74 $71.00 $7.00
Q3 16E $61.09 $67.00 $68.14 $74.00 $7.00
Q4 16E $62.11 $68.00 $67.85 $75.00 $7.00
2016E $60.92 $65.00 $67.00 $72.00 $7.00
2017-2020 Long-Term Forecast Old RJ Oil Est. WTI New RJ Oil Old RJ Oil Est. Brent New RJ Oil Brent-WTI Spread Source: Bloomberg, Thomson Reuters, Raymond James research
$80.00 $70.00 $87.00 $77.00 $7.00
RJ&A Henry Hub Natural Gas Price Forecast (as of July 2015) 2014 H Hub Actual
Q1 $4.93
Q2 $4.57
Q3 $4.08
Q4 $3.94
2014 $4.38
2015 Bloomberg Consensus NYMEX Futures Old RJ Gas Current RJ Gas
Q1 15A $2.97 $2.97 $2.97 $2.97
Q2 15A $2.67 $2.67 $2.65 $2.67
Q3 15E $2.94 $2.79 $2.55 $2.55
Q4 15E $3.35 $2.97 $3.00 $3.00
2015E $2.98 $2.85 $3.00 $2.80
2016 NYMEX Futures Old RJ Gas Current RJ Gas
Q1 16E $3.23 $3.20 $3.20
Q2 16E $3.06 $3.50 $3.50
Q3 16E $3.12 $3.75 $3.75
Q4 16E $3.24 $3.75 $3.75
2016E $3.16 $3.55 $3.55
2017-2020 NYMEX Futures Old RJ Gas RJ Long-Term Gas
2017E $3.34 $3.75 $3.75
2018E $3.42 $3.75 $3.75
2019E $3.48 $3.75 $3.75
2020E $3.60 $3.75 $3.75
Source: Bloomberg, Thomson Reuters, Raymond James research
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International Headquarters: The Raymond James Financial Center | 880 Carillon Parkway | St. Petersburg, Florida 33716 | 800-248-8863
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Stats of the Week In Case You Missed It… Here is a Recap of All the Energy Stats of the Week from 2Q15 April 6: Bakken Production Outlook; Estimating Timing of Roll-Over and Rebound April 13: U.S. Rig Count - When Will It Bottom and Is There Anything to Get Excited About? April 20: Oil's "Junk Rally" Can't Hide the Near-Term Risk; Lowering 2015, 2016, L-T Price Deck April 27: Despite Shell/BG Record, Don't Bank on a Surge in Corporate Upstream M&A May 4: Waiting for a Rebound in U.S. Gas Prices? Industrial Demand Will Keep You Waiting May 11: OTC - Market Uncertainty Still Pulls Sizeable Crowd Despite Downturn May 18: Despite Oil Meltdown, Frontier Exploration Is More Robust Than You Might Think May 26: NAPTP MLP Conference Bolsters Confidence in Continued LT Infrastructure Development June 1: Small-Cap Managers Do Your Homework, Benchmark Energy Weighting Set to Increase June 8: Permian Conference Takeaways - This Basin Is Hot With 2H15 Activity Set to Climb June 15: What Are "Missing Barrels" and What Do They Mean for Oil Prices? June 22: Missing Barrels, Part Deux - Zeroing in on Chinese Demand and Floating Storage June 29: When Will U.S. Crude Production Roll Over? It Already Has!
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International Headquarters: The Raymond James Financial Center | 880 Carillon Parkway | St. Petersburg, Florida 33716 | 800-248-8863
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Global Research
Global Research Highlights In Case You Missed It… The List Below Highlights One Featured 2Q15 Report from Each RJ Energy Analyst Marshall Adkins: Newpark: Upgrading to Strong Buy; Sell-Off on Revised Guidance Excessive Andrew Bradford: Enerflex: Record Low Bookings Overshadow Largely In-Line 1Q15 Andrew Coleman: RRC: Upgrading to Outperform; Truing up 2Q15 on Commodity Prices Chris Cox: Initiating Coverage on Canada's Midstream Players John Freeman: Memorial Resource: Thoughts from the Road; Remains a Top Pick Cory Garcia: Refining Monthly Crack Check, June 2015: Despite Margin Strength, Stocks Still Stuck in a Rut Bertrand Hodee: Saipem: Strong deleveraging in sight, intrinsic recovery story, upgrade to Outperform Darren Horowitz: NGL Update: Reconciling 1H15 Volatility in Attempt to Manage 2H15 Expectations Pavel Molchanov: A Letter from Prison: Highlights from a Tour of the Alcatraz Microgrid with Princeton Power Kurt Molnar: Boulder Energy: A Hefty Opportunity Praveen Narra: Lack of Contracting Should Put Lid on Offshore Drilling Rally Kevin Smith: Black Stone Minerals: Delivering 'Stone' Cold Dist. Growth; Initiating With an Outperform Santiago Wesenack: YPF & Petronas to Invest Jointly in Shale Oil at La Amarga Chica
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Global Research
Exploration and Production Stock Performance in 2Q15 and YTD 2Q15 Stock Price Performance
YTD Stock Price Performance
4-REN 3-ROSE 2-IOC 3-CWEI 2-RSPP 2-WPX 2-OAS 2-TGA 2-MRD 2-PE 3-COG 4-WTI 2-WLL 1-OXY 3-KOS 3-EGN 4-BBG S&P 500 3-NFX 2-MRO 3-SWN 3-COP 2-FANG S&P Energy 2-AR 3-NFG 2-HES 2-DVN 2-CXO 2-EOG 2-RRC 2-APA 3-XEC 3-LPI 4-SFY 4-CRK 2-APC 2-CLR 2-QEP 3-SM 3-NBL 4-MUR 4-DNR 3-SGY 2-PQ 3-NOG 2-PXD 3-UPL 3-CNX 3-CHK 3-CRC 2-BCEI 4-HK 3-EXXI 3-GDP 4-SD
-60%
2-FANG 2-CXO 3-SM 3-LPI 2-RSPP S&P 500 2-IOC 3-NOG 3-COG 3-XEC 3-EGN 2-WPX 3-CRC 2-CLR 3-ROSE 3-KOS S&P Energy 2-APC 2-EOG 2-DVN 1-OXY 2-PXD 2-WLL 2-HES 2-MRO 2-TGA 3-COP 2-RRC 2-APA 3-NBL 3-NFG 3-UPL 4-MUR 2-QEP 3-SWN 2-AR 3-CWEI 2-OAS 3-EXXI 4-DNR 3-SGY 4-BBG 4-WTI 4-HK 3-CNX 2-BCEI 4-REN 3-CHK 2-PQ 4-SD 4-SFY 3-GDP 4-CRK
-40%
-20%
0%
20%
40%
60%
80%
-80%
-60%
-40%
-20%
0%
20%
40%
RJ Ratings: 1 = Strong Buy, 2 = Outperform, 3 = Market Perform, 4 = Underperform, S = Suspended This analysis does not include transaction costs and tax considerations. If included, these costs would reduce an investor’s return. It should not be assumed that recommendations made in the future will be profitable or will equal the performance of the securities in this list. A complete record of our Exploration & Production stock recommendations for the trailing 12 months is available upon request.
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International Headquarters: The Raymond James Financial Center | 880 Carillon Parkway | St. Petersburg, Florida 33716 | 800-248-8863
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Global Research
Last Quarter’s E&P Results In 2Q15, the EPX was down 7%, whereas oil was up 19% and S&P 500 ended up settling flat. The best performers during the quarter were Resolute Energy (REN), Rosetta Resources (ROSE), InterOil (IOC), and Clayton Williams (CWEI). The worst performers for the quarter were SandRidge (SD), Goodrich Petroleum (GDP), Energy XXI (EXXI), and Halcon (HK).
E&P Outlook and Investment Thesis Following the oil price collapse of late 2014 to early 2015, the second quarter was witness to a strong rally in crude markets. West Texas Intermediate was up 19% on the quarter, settling around $60. While crude prices give us an understanding of where top-line levels will materialize, we believe rig count is a strong proxy for where well costs are headed in the E&P space. Watching the Baker Hughes rig count, we have seen a 55% decline in U.S. onshore rigs from the peak in October of last year. While not completely in lock-step, well costs have largely followed this decline throughout the major U.S. basins, particularly in the Permian and Bakken. Coupled with well cost reduction has been a tide of companies focused on high-grading and improving efficiency across basins. Higher IP-30’s and EURs throughout the majority of unconventional plays is largely a result of these efforts. As such, while U.S. E&P’s have cut spending nearly 40% y/y, production is expected to remain largely flat due to the dual effects of lower costs and higher well productivity. The paradigm shift has helped differentiate acreage in terms of grading for most of the plays. We have seen the focus shift toward the Permian as companies re-structure their drilling activity toward the play because of its immense stacked pay potential and the prospective upside in the form of efficiency improvements. Accordingly, Permian-heavy names have witnessed stock outperformance relative to peers. We expect to see this play help drive a significant portion of the U.S. oil production growth in the coming years. Oil prices have been falling for over three quarters now, and the futures curve has been forced from being backwardated to being in contango. On the hedging front, the E&P companies have not had enough time to engage in 2015 and 2016 hedges since the mid-2014 oil price collapse; however, some companies are still well hedged for 2015 (e.g., Bill Barrett-100%, Laredo-99%, Pioneer-92%, Antero-97%, and Memorial-89%). On a cumulative basis, ~22% of our E&P coverage universe’s 2015E oil production is hedged; however, large caps are not as well-hedged as SMid caps, and quite a few companies have no hedges at all. Therefore, for companies involved in hedges, on average, ~57% of their 2015E oil production is hedged. Similarly, on a cumulative basis, 23% of our coverage universe’s 2015E gas production is hedged. For companies involved in hedges, ~48% of their 2015E gas production is hedged. During the second half of 2015, we expect oil prices to solidify around $60 and gas prices to approach $3 by year’s end. Therefore, commodity price pressure remains high in the second quarter, and the stocks should rebound once prices start firming up in the second half of the year. In our coverage universe, our only Strong Buy-rated E&P name is Occidental Petroleum (OXY). We currently have the following Outperform-rated E&P names: Anadarko Petroleum (APC), Antero (AR), Apache (APA), Cimarex (XEC), Concho Resources (CXO), Continental Resources (CLR), Devon Energy (DVN), EOG Resources (EOG), Hess Corp. (HES), Marathon Oil (MRO), Pioneer Natural Resources (PXD), QEP Resources (QEP), Range Resources (RRC), Whiting Petroleum (WLL), Bonanza Creek (BCEI), Diamondback Energy (FANG), InterOil Corp. (IOC), Memorial Resource Development (MRD), Oasis Petroleum (OAS), Parsley Energy (PE), PetroQuest Energy (PQ), RSP Permian (RSPP), TransGlobe Energy (TGA), and WPX Energy (WPX).
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The large-cap stocks trading at the lowest 2015E EV/EBITDA multiples are Whiting (WLL), QEP Resources (QEP), Murphy (MUR), Apache Corp (APA). The small-cap stocks trading at the lowest 2015E EV/EBITDA multiples are TransGlobe Energy (TGA), SM Energy (SM), Northern Oil and Gas (NOG), and Bill Barrett (BBG).
16.0x
48 44 40 36 32 28 24 20 16 12 8 4 0
14.0x 12.0x 10.0x 8.0x 6.0x
4.0x 2.0x
EV / 2015E EBITDA
AR
COG
PXD
EOG
XEC
DVN
CHK
OXY
COP
CXO
DNR
CLR
NBL
RRC
MRO
HES
APC
SWN
APA
MUR
QEP
WLL
0.0x
Years
Large Caps: EV/EBITDA Multiples vs. Reserve Life
Reserve Life
Source: FactSet, Raymond James research.
As of July 10, 2015.
35.0x
35
30.0x
30
25.0x
25
20.0x
20
15.0x
15
10.0x
10 5
0.0x
0
TGA SM NOG BBG SGY NFX OAS BCEI ROSE CRC CRK GDP SD HK WTI PQ UPL LPI EGN CWEI KOS EXXI SFY NFG RSPP REN FANG MRD PE
5.0x
Years
Small and Mid-Caps: EV/EBITDA Multiples vs. Reserve Life
EV / 2015E EBITDA
Reserve Life
Source: FactSet, Raymond James research.
As of July 10, 2015.
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Global Research
The large-cap stocks trading at the lowest proved reserve multiples are Chesapeake (CHK), QEP Resources (QEP), Denbury (DNR), and Range Resources (RRC). The small-cap stocks trading at the lowest proved reserve multiples are Swift (SFY), Resolute (REN), Energy XXI (EXXI), and Goodrich Petroleum (GDP).
Large Caps: Enterprise Value/Proved Reserves vs. Reserve Life
$8.00
45
$7.00
40
$6.00
35 25
$4.00
20
$3.00
Years
30
$5.00
15
$2.00
10
Enterprise Value/Mcfe
PXD
CXO
EOG
XEC
OXY
APC
HES
COG
CLR
NBL
WLL
MUR
COP
DVN
MRO
APA
SWN
AR
RRC
0
QEP
$0.00
DNR
5
CHK
$1.00
Reserve Life (Years)
Source: Company Reports , FactSet and RJ&A Estimates. Source: FactSet, Raymond James research.
As of July 10, 2015.
Small and Mid-Caps: Enterprise Value/Proved Reserves vs. Reserve Life $12.00
35
$10.00
30
20
$6.00
15
$4.00
Years
25
$8.00
10 5
$0.00
0
SFY EXXI REN GDP CRK BBG PQ UPL CRC WTI NOG SGY HK ROSE SD OAS SM NFX LPI BCEI CWEI TGA EGN NFG MRD PE RSPP FANG KOS
$2.00
Enterprise Value/Mcfe
Reserve Life (Years)
Source: Company Reports , FactSet and RJ&A Estimates.
Source: FactSet, Raymond James research.
As of July 10, 2015.
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International Headquarters: The Raymond James Financial Center | 880 Carillon Parkway | St. Petersburg, Florida 33716 | 800-248-8863
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Global Research
The large-cap stocks trading at the lowest percentage of proved NAV/share are Murphy (MUR), Marathon (MRO), Hess (HES), and QEP (QEP). The small-cap stocks trading at the lowest percentage of proved NAV/share are InterOil (IOC), Northern Oil and Gas (NOG), Energy XXI (EXXI), and California Resources (CRC).
Large Caps: % of Proved NAV/Share 700% 600%
500% 400% 300% 200% 100%
Source: FactSet, Raymond James research.
CXO
PXD
XEC
WLL
CLR
EOG
COG
NBL
DVN
OXY
CHK
APC
COP
RRC
SWN
APA
QEP
HES
MRO
MUR
0%
As of July, 2015.
Small and Mid-Caps: % of Proved NAV/Share
700%
600% 500% 400% 300% 200% 100%
Source: FactSet, Raymond James research.
PE
ROSE
MRD
RSPP
KOS
SM
WTI
BCEI
FANG
EGN
CWEI
NFG
TGA
EXXI
CRC
NOG
IOC
0%
As of July 10, 2015.
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International Headquarters: The Raymond James Financial Center | 880 Carillon Parkway | St. Petersburg, Florida 33716 | 800-248-8863
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Production Growth per Debt-Adjusted Share The following chart ranks our coverage universe on production growth per debt-adjusted share over the time period indicated. We suggest investors use this tool to screen for potentially top-performing stocks, in addition to other relevant factors, including: 1) absolute and relative valuations; 2) leverage to changes in commodity prices; and 3) company-specific financial and operational risk profiles. According to our analysis, the companies with the highest projected production growth per debt-adjusted share over the 2014-2016 period are Memorial Resource Development (MRD), RSP Permian (RSPP), Antero (AR), and Diamondback (FANG).
Raymond James E&P Research Universe – Market Valuation Database Raymond James E&P Comps Sheet - Large Caps Name Caps Large Anadarko Petroleum Corp. Antero Resources Apache Corporation Cabot Oil & Gas Chesapeake Energy Cimarex Energy Concho Resources ConocoPhillips Continental Resources Denbury Resources Devon Energy EOG Resources Hess Corp. Marathon Oil Murphy Oil Noble Energy Occidental Petroleum Pioneer Natural Resources QEP Resources Range Resources *Southwestern Whiting Petroleum Median Mean
Priced Enterprise EV / EBITDA Multiples (RJ) EV / EBITDA Multiples (Consensus) Ticker Analyst Rating 7/10/2015 Value ($mm) 2014 2015 2016 2014 2015 2016
Y/Y Production Growth 2014 2015 2016
APC AR APA COG CHK XEC CXO COP CLR DNR DVN EOG HES MRO MUR NBL OXY PXD QEP RRC SWN WLL
7% 93% -15% 29% 6% 25% 22% 1% 28% 6% -3% 17% -2% -12% 10% 0% -7% 9% 4% 24% 17% 22% 8% 13%
AC JF JF AC JF AC JF PM AC AC AC AC PM PM PM JF PM JF AC AC AC JF
MO-2 MO-2 MO-2 MP-3 MP-3 MP-3 MO-2 MP-3 MO-2 MU-4 MO-2 MO-2 MO-2 MO-2 MU-4 MP-3 SB-1 MO-2 MO-2 MO-2 MP-3 MO-2
$75.71 $30.19 $52.94 $29.30 $11.37 $105.28 $108.44 $59.13 $37.36 $5.30 $55.85 $84.54 $64.34 $24.46 $40.06 $39.06 $73.31 $134.46 $16.18 $45.27 $20.92 $30.11
59,711 12,097 29,220 13,190 23,670 10,720 17,731 110,156 20,490 5,222 48,282 51,728 26,557 25,182 10,572 21,353 62,263 22,451 4,830 12,241 13,490 11,753 20,922 27,860
5.0x 10.3x 3.6x 9.4x 3.7x 6.9x 8.4x 5.1x 5.4x 3.9x 4.7x 5.5x 3.8x 4.2x 2.7x 5.8x 5.5x 9.0x 3.1x 9.1x 5.8x 5.5x 5.4x 5.7x
12.0x 9.6x 6.6x 13.9x 11.2x 14.3x 11.5x 8.6x 9.6x 6.0x 10.0x 11.1x 7.9x 7.7x 5.5x 9.9x 10.5x 13.2x 5.7x 12.5x 7.3x 8.7x 9.8x 9.6x
9.1x 7.4x 5.6x 10.0x 10.6x 11.1x 9.0x 6.2x 6.9x 7.6x 9.6x 8.9x 5.7x 5.7x 4.8x 6.6x 7.8x 10.7x 4.6x 10.7x 6.0x 5.5x 7.4x 7.7x
5.2x 10.5x 3.0x 9.0x 4.7x 6.6x 8.8x 5.4x 5.7x 3.9x 6.8x 5.8x 4.1x 4.5x 3.0x 5.9x 4.7x 8.9x 3.1x 9.7x 5.9x 5.5x 5.6x 5.9x
11.5x 10.1x 6.6x 13.7x 9.0x 12.9x 10.3x 9.8x 10.3x 5.3x 9.4x 11.4x 8.2x 9.1x 7.0x 8.2x 10.2x 13.1x 5.4x 13.0x 7.8x 8.3x 9.6x 9.6x
9.3x 8.4x 5.7x 10.8x 10.1x 9.5x 9.6x 6.9x 7.8x 6.7x 10.4x 8.9x 6.8x 7.1x 5.8x 6.7x 7.6x 11.1x 5.4x 12.1x 6.7x 6.5x 7.7x 8.2x
-1% 41% -15% 14% -9% 8% 20% 2% 22% 0% -1% -3% 10% 0% -11% 12% -7% 8% -7% 19% 24% 42% 5% 8%
1% 28% -12% 14% -4% -6% 6% 6% 10% -1% 0% 8% 4% 2% -1% 10% 3% 15% 7% 16% 11% 5% 5% 6%
Debt Adjusted Production Growth 2014 - 2016
Oil
Commodity Mix Gas NGLs
-10.2% 15.8% -6.2% 12.5% -26.0% -4.7% 5.6% -2.1% 4.4% -24.5% 4.1% 1.7% 4.1% -4.9% -13.7% -5.7% -2.9% 7.4% -15.1% 8.1% -4.8% -10.5% -3.8% -3.1%
36% 2% 50% 6% 18% 32% 68% 58% 71% 95% 40% 51% 73% 71% 68% 33% 76% 51% 36% 6% 1% 81% 50% 46%
49% 84% 40% 94% 71% 47% 32% 42% 29% 5% 40% 37% 27% 29% 32% 57% 24% 31% 57% 67% 94% 12% 40% 45%
15% 15% 10% 0% 11% 20% 0% 0% 0% 0% 20% 13% 0% 0% 0% 10% 0% 18% 8% 27% 5% 7% 7% 8%
Value per Flowing Barrel $64,390.54 $48,875.73 $45,197.39 $41,563.13 $34,489.65 $67,941.19 $134,136.13 $68,441.28 $105,913.94 $70,225.81 $70,467.60 $85,186.81 $73,634.17 $54,861.66 $47,715.49 $67,148.99 $96,582.28 $115,830.31 $34,693.30 $55,321.68 $31,282.58 $70,407.03 $67,545.09 $67,468.49
Source: Thomson Reuters, Raymond James research.
© 2015 Raymond James & Associates, Inc., member New York Stock Exchange/SIPC. All rights reserved.
International Headquarters: The Raymond James Financial Center | 880 Carillon Parkway | St. Petersburg, Florida 33716 | 800-248-8863
12
Raymond James
Global Research Raymond James E&P Comps Sheet - SMID Caps
Name
0 Ticker Analyst Bill Barrett BBG JF Bonanza Creek BCEI AC California Resources CRC PM Clayton Williams CWEI AC Comstock Resources CRK JF Diamondback Energy FANG JF Energen Corporation EGN JF Energy XXI EXXI AC Goodrich Petroleum GDP JF Halcon Resources HK AC InterOil Corp. IOC PM Kosmos Energy KOS PM Laredo Petroleum LPI JF Memorial Resource Development MRD JF Northern Oil and Gas NOG JF Newfield Exploration NFX AC National Fuel Gas NFG KS Oasis Petroleum OAS AC Parsley Energy PE JF PetroQuest Energy PQ AC Resolute Energy REN JF Rosetta Resources ROSE JF RSP Permian RSPP JF SandRidge Energy SD JF SM Energy SM AC Stone Energy SGY JF Swift Energy SFY AC TransGlobe Energy TGA PM Ultra Petroleum UPL AC W&T Offshore WTI JF WPX Energy WPX AC Median Mean
Priced Enterprise EV / EBITDA Multiples (RJ) EV / EBITDA Multiples (Consensus) Rating 7/10/2015 Value ($mm) 2014 2015 2016 2014 2015 2016
Y/Y Production Growth 2014 2015 2016
MU-4 MO-2 MP-3 MP-3 MU-4 MO-2 MP-3 MP-3 MP-3 MU-4 MO-2 MP-3 MP-3 MO-2 MP-3 MP-3 MP-3 MO-2 MO-2 MO-2 MU-4 MP-3 MO-2 MU-4 MP-3 MP-3 MU-4 MO-2 MP-3 MU-4 MO-2
-37% 45% 4% 10% -8% 166% 1% 13% -10% 27% 0% 11% 23% 84% 29% -1% 33% 35% 184% 14% 4% 32% 63% -11% 14% -8% 5% -12% 7% -2% -9% 11% 26%
$7.39 $13.76 $5.26 $48.55 $2.01 $70.89 $61.72 $2.22 $1.57 $1.12 $50.60 $7.87 $11.19 $17.62 $5.82 $35.47 $55.19 $12.51 $16.65 $1.72 $0.74 $21.14 $26.65 $0.71 $42.47 $10.93 $1.41 $3.62 $10.44 $4.67 $11.22
1,046 1,400 9,118 1,441 1,306 3,438 5,557 4,847 750 4,446 1,915 3,352 3,252 4,076 1,133 7,771 7,207 4,091 2,969 686 838 3,214 2,475 5,006 5,462 1,768 1,309 156 5,384 1,804 4,323 3,214 3,316
5.9x 3.6x 3.8x 4.8x 3.1x 8.5x 5.1x 5.9x 6.4x 5.7x N/A 5.3x 6.1x 13.3x 3.7x 5.2x 7.6x 4.4x 14.2x 4.8x 6.2x 4.5x 11.5x 5.1x 3.4x 3.7x 3.9x 0.8x 6.6x 3.1x 3.8x 5.1x 5.7x
3.9x 5.1x 9.1x 13.5x 6.9x 7.9x 8.1x 10.0x 7.4x 6.6x N/A 6.8x 6.0x 10.4x 4.3x 5.7x 8.2x 5.4x 16.4x 13.2x 6.0x 7.4x 10.0x 8.0x 4.5x 5.1x 11.3x 3.5x 8.4x 6.9x 4.4x 7.4x 7.9x
4.3x 4.8x 6.3x 10.2x 6.6x 6.8x 9.9x 8.5x 8.9x 7.6x N/A 5.4x 6.3x 6.7x 5.0x 5.5x 7.3x 6.7x 9.5x 11.9x 6.9x 5.7x 8.2x 10.4x 4.3x 4.7x 9.3x 2.2x 7.2x 4.6x 5.4x 6.8x 7.1x
3.7x 3.6x 3.7x 4.8x 3.0x 8.6x 6.2x 6.7x 5.4x 5.8x N/A 5.5x 6.2x 12.0x 3.7x 5.5x 7.5x 4.4x 14.2x 4.5x 5.7x 3.9x 11.5x 5.4x 3.3x 3.8x 3.7x 0.9x 6.6x 3.2x 3.7x 5.4x 5.7x
4.3x 5.3x 9.6x 12.8x 7.5x 7.8x 7.7x 7.5x 6.8x 6.5x N/A 10.5x 7.4x 10.2x 4.2x 6.5x 8.7x 5.7x 15.6x 10.8x 7.0x 7.7x 9.6x 9.0x 5.0x 5.2x 12.1x N/A 8.4x 8.7x 4.7x 7.7x 8.3x
5.2x 5.1x 7.1x 9.9x 6.4x 7.0x 8.0x 10.9x 8.4x 8.0x N/A 6.0x 8.2x 6.8x 5.7x 5.4x 8.0x 7.1x 10.1x 11.0x 8.5x 8.2x 8.6x 10.9x 4.9x 6.0x 9.6x N/A 8.0x 5.9x 6.2x 8.0x 7.8x
-32% 23% 0% -6% 2% 59% -14% 14% -21% -3% 0% 0% 14% 55% -1% 14% 12% 6% 45% -21% -2% -9% 54% 3% 17% -4% -7% -11% 15% -1% -18% 0% 8%
13% 2% -2% -15% 4% 13% 0% -3% -20% -1% 0% 21% -3% 59% -3% -7% -2% -4% 39% -13% 3% -1% 29% -15% -7% -1% -4% 3% 2% 0% -7% -1% 3%
Debt Adjusted Production Growth 2014 - 2016
Oil
-36.8% -19.7% -8.4% -27.4% -59.6% 28.7% -16.7% -58.7% -67.2% -44.1% 0.0% -2.6% -8.6% 56.4% -35.4% 3.2% -5.1% -29.1% 21.9% -29.3% -56.2% -21.1% 24.8% -60.3% -6.5% -37.6% -61.4% 0.3% -15.6% -33.4% -13.9% -19.7% -19.6%
71% 60% 76% 76% 43% 77% 51% 69% 56% 81% N/A 100% 51% 7% 87% 48% 10% 89% 59% 9% 72% 28% 48% 34% 32% 39% 22% 100% 8% 43% 20% 51% 53%
Commodity Mix Gas NGLs 19% 24% 24% 15% 57% 10% 35% 31% 44% 10% N/A 0% 26% 81% 13% 37% 90% 11% 23% 76% 20% 38% 43% 50% 45% 45% 64% 0% 92% 47% 70% 36% 38%
10% 16% 0% 9% 0% 13% 14% 0% 0% 8% N/A 0% 23% 12% 0% 15% 0% 0% 18% 15% 8% 34% 9% 16% 23% 16% 14% 0% 0% 10% 10% 9% 10%
Value per Flowing Barrel $59,556.98 $50,881.36 $54,816.71 $83,797.75 $48,906.23 $112,210.52 $79,274.84 $80,830.65 $86,545.93 $96,507.98 N/A $158,841.30 $68,470.76 $88,349.81 $66,666.19 $57,070.87 $82,540.22 $81,588.76 $156,922.23 $35,686.41 $62,079.19 $48,880.43 $99,652.09 $57,075.01 $31,069.68 $38,203.62 $38,437.66 $10,285.84 $41,287.68 $36,940.79 $25,581.05 $64,372.69 $69,779.30
Source: Thomson Reuters, Raymond James research.
© 2015 Raymond James & Associates, Inc., member New York Stock Exchange/SIPC. All rights reserved.
International Headquarters: The Raymond James Financial Center | 880 Carillon Parkway | St. Petersburg, Florida 33716 | 800-248-8863
13
Raymond James
Global Research Raymond James E&P Debt Comps - Large Caps
Name
Ticker
Analyst
Rating
Priced 7/10/2015
Anadarko Petroleum Corp. Antero Resources Apache Corporation Cabot Oil & Gas Chesapeake Energy Cimarex Energy Concho Resources ConocoPhillips Continental Resources Denbury Resources Devon Energy EOG Resources Hess Corp. Marathon Oil Murphy Oil Noble Energy Occidental Petroleum Pioneer Natural Resources QEP Resources Range Resources Southwestern Whiting Petroleum Median Mean
APC AR APA COG CHK XEC CXO COP CLR DNR DVN EOG HES MRO MUR NBL OXY PXD QEP RRC SWN WLL
AC JF JF AC JF AC JF PM AC AC AC AC PM PM PM JF PM JF AC AC AC JF
MO MO MO MP MP MP MO MP MO MU MO MO MO MO MU MP SB MO MO MO MP MO
$75.71 $30.19 $52.94 $29.30 $11.37 $105.28 $108.44 $59.13 $37.36 $5.30 $55.85 $84.54 $64.34 $24.46 $40.06 $39.06 $73.31 $134.46 $16.18 $45.27 $20.92 $30.11
Market Cap ($MM)) 38,358 8,009 19,958 12,111 8,823 9,030 12,721 73,648 13,844 1,859 23,066 46,074 18,240 16,511 7,140 14,569 56,419 20,035 2,851 7,518 7,857 6,242 13,282 19,313
Net Debt ($MM) 14,057 3,987 9,446 1,863 10,740 1,379 3,396 19,847 5,971 3,590 9,891 4,266 4,474 5,268 1,633 5,278 4,686 2,285 1,718 3,261 4,646 5,130 4,560 5,764
Net Debt / TTM EBITDA Most Recent 2014 2015 1.6x 1.3x 0.4x 1.4x 1.9x 1.0x 1.8x 1.1x 1.6x 3.0x 1.0x 0.5x 0.8x 1.2x 0.5x 1.8x 0.5x 0.8x 1.2x 1.0x 2.1x 1.2x 1.2x 1.3x
0.7x 3.5x 1.3x 1.2x 1.6x 0.7x 1.7x 0.8x 1.6x 2.6x 1.0x 0.4x 0.5x 0.7x 0.5x 1.4x 0.3x 0.7x 0.7x 2.3x 0.8x 2.6x 0.9x 1.2x
3.1x 3.8x 0.7x 2.0x 5.6x 2.0x 2.2x 1.8x 3.3x 4.0x 1.4x 0.8x 1.6x 1.6x 1.1x 2.5x 0.9x 1.2x 2.2x 3.3x 2.3x 3.9x 2.1x 2.3x
2016
Interest Coverage
2.6x 3.5x 0.5x 1.5x 5.6x 1.5x 2.0x 1.4x 2.5x 5.0x 1.1x 0.8x 1.4x 1.2x 1.4x 2.2x 0.8x 1.3x 1.9x 2.8x 2.1x 2.4x 1.7x 2.1x
4.1x 6.9x 61.1x 16.4x 55.4x 31.9x 8.7x 26.6x 13.3x 7.0x -18.6x 16.3x 18.0x 19.3x 29.1x -13.6x 111.9x 12.6x 8.5x 7.2x 22.8x 9.7x 14.8x 20.7x
2016
Interest Coverage
2.8x 3.0x 4.2x 5.6x 6.1x 1.2x 3.9x 7.4x 7.8x 7.0x -7.2x 1.6x 1.5x 1.0x 3.9x 1.4x 2.6x 3.9x 2.2x 3.8x 5.6x 3.0x 2.6x 8.3x 1.9x 3.7x 8.5x -0.8x 4.4x 3.6x 1.6x 3.7x 3.5x
4.4x 3.1x 12.4x 4.8x 5.4x 11.2x 24.2x 2.9x 2.8x 5.4x -2.3x 12.1x 4.3x 7.1x -7.0x 9.4x 10.7x 5.9x 4.8x 4.1x 4.3x 7.9x 13.0x 3.5x 16.5x 13.3x 3.7x 18.6x 5.2x 6.5x 8.6x 5.4x 7.4x
Net Debt / Boe Net Debt / Proved Developed PV-10 $4.92 $1.89 $3.94 $1.51 $4.01 $2.64 $5.33 $2.22 $4.42 $8.20 $3.59 $0.85 $3.13 $2.40 $2.14 $4.14 $1.66 $2.86 $2.62 $1.90 $2.59 $11.70 $2.75 $3.58
$7.14 $6.29 $5.72 $2.48 $5.94 $3.44 $9.01 $3.47 $11.88 $10.60 $4.79 $1.58 $5.87 $3.58 $3.42 $6.53 $2.36 $3.54 $4.69 $5.25 $4.68 $22.43 $5.02 $6.12
0.3x 0.4x 0.2x 0.2x 0.5x 0.2x 0.3x 0.1x 0.3x 0.4x 0.4x 0.1x 0.1x 0.2x 0.1x 0.3x 0.1x 0.2x 0.2x 0.3x 0.5x 0.6x 0.3x 0.3x
Raymond James E&P Debt Comps - SMID Caps Name
Ticker
Analyst
Rating
Priced 7/10/2015
Bill Barrett Bonanza Creek California Resources Clayton Williams Comstock Resources Diamondback Energy Energen Corporation Energy XXI Goodrich Petroleum Halcon Resources InterOil Corp. Kosmos Energy Laredo Petroleum Memorial Resource Development Northern Oil and Gas Newfield Exploration National Fuel Gas Oasis Petroleum Parsley Energy PetroQuest Energy Resolute Energy Rosetta Resources RSP Permian SandRidge Energy SM Energy Stone Energy Swift Energy TransGlobe Energy Ultra Petroleum W&T Offshore WPX Energy Median Mean
BBG BCEI CRC CWEI CRK FANG EGN EXXI GDP HK IOC KOS LPI MRD NOG NFX NFG OAS PE PQ REN ROSE RSPP SD SM SGY SFY TGA UPL WTI WPX
JF AC PM AC JF JF JF AC JF AC PM PM JF JF JF AC KS AC JF AC JF JF JF JF AC JF AC PM AC JF AC
MU MO MP MP MU MO MP MP MP MU MO MP MP MO MP MP MP MO MO MO MU MP MO MU MP MP MU MO MP MU MO
$7.39 $13.76 $5.26 $48.55 $2.01 $70.89 $61.72 $2.22 $1.57 $1.12 $50.60 $7.87 $11.19 $17.62 $5.82 $35.47 $55.19 $12.51 $16.65 $1.72 $0.74 $21.14 $26.65 $0.71 $42.47 $10.93 $1.41 $3.62 $10.44 $4.67 $11.22
Market Cap ($MM)) 356 613 2,010 591 93 4,156 4,495 210 89 604 2,502 2,993 1,818 3,361 352 5,143 4,698 1,248 2,224 111 55 1,355 2,084 392 2,868 614 62 297 1,626 354 2,310 1,248 1,621
Net Debt ($MM) 769 737 6,476 739 1,180 579 1,237 3,994 581 3,703 (221) 434 731 741 790 2,363 1,605 2,654 530 421 766 1,831 397 4,470 2,366 883 1,124 (61) 3,345 1,256 1,918 883 1,574
Net Debt / TTM EBITDA Most Recent 2014 2015 2.5x 1.9x 3.5x 3.0x 3.3x 1.3x 1.2x 5.2x 4.4x 4.7x 3.9x 0.9x 1.4x 2.5x 2.6x 1.7x 0.8x 2.8x 2.6x 3.5x 2.0x 2.8x 0.7x 5.1x 1.5x 0.6x 4.1x -0.4x 4.5x 2.4x 1.8x 2.6x 2.6x
3.6x 2.1x 2.7x 2.3x 2.5x 1.6x 0.9x 4.7x 4.9x 4.7x 12.2x 0.4x 3.3x 2.5x 1.4x 1.9x 1.7x 2.8x 3.0x 2.9x 5.7x 2.8x 2.1x 3.0x 1.5x 1.7x 3.2x -0.4x 4.0x 2.2x 2.0x 2.5x 2.9x
3.7x 2.9x 6.2x 7.1x 5.9x 1.1x 2.0x 8.3x 6.0x 5.8x 1.3x 1.6x 1.6x 1.7x 2.9x 1.6x 2.3x 3.1x 3.1x 4.1x 5.0x 4.1x 2.4x 5.8x 1.9x 3.1x 9.6x -1.4x 5.2x 4.8x 1.4x 3.1x 3.8x
Net Debt / Boe Net Debt / Proved Developed PV-10 $9.89 $8.22 $8.44 $9.80 $11.41 $5.14 $3.32 $16.50 $12.75 $19.58 N/A $5.76 $2.96 $2.72 $56.31 $3.66 $5.03 $9.75 $5.83 $6.36 $10.32 $6.50 $3.73 $212.81 $4.32 $5.79 $5.80 -$2.74 $3.74 $10.47 $2.64 $6.09 $16.22
$20.06 $15.92 $11.73 $15.04 $14.30 $8.72 $4.68 $25.38 $19.62 $33.15 N/A $9.75 $7.27 $8.30 $133.56 $6.98 $5.20 $18.14 $11.53 $10.62 $18.47 $13.23 $9.47 $336.92 $8.73 $10.72 $16.96 -$3.48 $8.12 $17.32 $4.24 $11.63 $28.44
0.3x 0.5x 0.4x 0.5x 1.0x 0.2x 0.2x 0.8x 0.9x 0.8x N/A 0.1x 0.2x 0.3x 0.5x 0.3x 0.5x 0.5x 0.4x 0.7x 0.8x 0.6x 0.3x 0.8x 0.4x 0.5x 0.6x -0.1x 0.5x 0.5x 0.4x 0.5x 0.5x
Source: Thomson Reuters, Raymond James research.
© 2015 Raymond James & Associates, Inc., member New York Stock Exchange/SIPC. All rights reserved.
International Headquarters: The Raymond James Financial Center | 880 Carillon Parkway | St. Petersburg, Florida 33716 | 800-248-8863
14
Raymond James
Global Research
Oilfield Services Stock Performance in 2Q15 and TTM RJ Oilservice Universe - 12 Month Trailing Stock Performance
RJ Oilservice Universe - 2Q15Stock Performance MO2-CELP
DJIA
MO2-RDC
SB1-BHI
MU4-PES
MO2-EXLP
MO2-CAM
MO2-USAC
MP3-FTI
MO2-CAM
MU4-RIG
MP3-SLB
MP3-BAS
MO2-CELP
MP3-NE
SB1-NR
MO2-NBR
SB1-CCLP
MP3-ESV
MP3-FTI
OSX
MO2-RDC
MP3-SLB
OSX
MO2-TTI
SB1-HAL
SB1-PTEN
MO2-OIS
MP3-WFT
SB1-SPN
DJIA
MO2-TTI
MP3-KEG
MO2-NOV
SB1-HAL
SB1-PTEN
SB1-BHI
MP3-WFT
MP3-UNT
MP3-NE
MO2-NOV
MP3-DO
MP3-DO
MP3-HLX
SB1-SPN
MP3-ATW
MP3-ATW
MO2-NBR
MO2-OIS
MO2-HCLP
MO2-USAC
MP3-ESV
SB1-CCLP MO2-EXLP
MP3-UNT
-28%
MU4-RIG
SB1-NR
MU4-PES
MP3-HLX
MP3-ORIG
MP3-ORIG
MP3-BAS
MP3-PACD
-35% Source: Thomson Reuters
-84%
MP3-PACD
MO2-HCLP
MP3-KEG
-25%
-15%
-5%
5%
15%
25%
-90%
-80%
-70%
-60%
-50%
-40%
-30%
-20%
-10%
0%
10%
Source: Thomson Reuters
This analysis does not include transaction costs and tax considerations. If included these costs would reduce an investor’s return. It should not be assumed that recommendations made in the future will be profitable or will equal the performance of the securities in this list. A complete record of our Oil Service stock recommendations for the trailing 12 months is available upon request.
On average, oil service stocks gained modestly in 2Q15 but have since backtracked with oil to around 52-week lows. For 2Q15, the OSX gained 5%, as oil prices grew towards a plateau of ~$60 throughout the quarter. As oil prices rose early in the quarter, oil service stocks recovered quickly; however, as oil prices hit a plateau of $60 and began to show signs of weakness, stocks dipped late in the quarter. Investors remained very selective throughout the last quarter, with some names seeing strong performances and others remaining weak. The top performer in the quarter in our coverage was CELP, up 28%. The manufacturing group held up pretty well, with CAM (+15%) and FTI (+12%) as two of the top five performers in our coverage. There were strong and weak performers across most oil service subgroups, but companies more exposed to commodity prices, such as PES, KEG, and some offshore drillers, received a boost in the quarter from the uplift in crude prices. Not surprisingly, many stocks that were the best performers in 2Q15 are some of the worst performers over the past 12 months. Valuations are less stretched since retracement; North American onshore recovery still looks like the best play. We believe a bottom has formed within North American land activity, but the upturn will be slow and largely dependent on commodity prices. There has been substantial pricing pressure and overcapacity in many business lines (drilling and pressure pumping come to mind) that will take quite some time to work though; however, robust cost reduction efforts should begin to take hold in 2Q and 3Q to relatively maintain margins, and we believe margins begin to improve in the back half of the year. While we believe most investors understand that a U.S. land recovery is a matter of time, many remain concerned that low oil prices may delay a recovery. Internationally, we expect a much less sharp but somewhat more prolonged downturn. In 1Q, we saw pricing take a larger toll than activity, but throughout the remainder of the year we expect reduced activity levels to slowly slide before a late 2016 recovery. Offshore activity, on the other hand, is unlikely to see even a moderate uptick in activity for several years without severe changes to the cost structure. While valuations aren’t quite as attractive on 2015/2016
© 2015 Raymond James & Associates, Inc., member New York Stock Exchange/SIPC. All rights reserved.
International Headquarters: The Raymond James Financial Center | 880 Carillon Parkway | St. Petersburg, Florida 33716 | 800-248-8863
15
Raymond James
Global Research
numbers, investors must understand they are not only buying the land-oriented group for service recovery, but also for a commodity price recovery. Oil price movements are the single largest driver of service stock performances, and although we remain cautious in the short-term due to dollar-based movements and strong OPEC production, we are optimistic on the intermediate-/long-term outlook. Keeping these factors in mind, our key oil service themes are: 1) activity will be decidedly weak in 2015, with substantial rig count declines and price concessions across all oil service sectors; 2) cost reductions for service companies from wage/headcount reductions and supply chain optimization should counteract much of this pricing weakness; 3) we believe a recovery in U.S. onshore is inevitable and timing remains largely dependent on commodity prices; and 4) capital spending declines and an oversupplied offshore rig market are likely to put substantial downward pressure on the offshore space for several years.
What are the most attractive oil service stocks in our view? In today’s market, we believe the top names to own are high quality, North American land-oriented names with good balance sheets. These names include: 1) Strong Buy-rated Baker Hughes/Halliburton, given leverage to the North American land recovery and positive long-term trends from the acquisition; 2) Strong Buy-rated Newpark Resources, given strong growth avenues and market share gain potential; 3) Strong Buy-rated Superior, given a strong balance sheet and its free cash flow generation; 4) Strong Buy-rated CSI Compressco Partners, given its distribution growth outlook, high yield, and stable contract compression services, and 5) other North American land-leveraged names with strong ties to commodity prices, including Strong Buy-rated Patterson-UTI.
7/10/2015
To tal
Symbo l
Co mpany
Tho mso n Estimates
7/10/2015
Fisc.
Ent.
Revs
Cap./
P rice
Year
Value
LTM
Revs
2014
2015E
$ 59.71
Dec.
28,423
$ 23,414
1.2
3.86
(0.09)
Tho mso n Estimates
-Fiscal EP S-
P /E Ratio
2016E
Enterprise Value/
-Fiscal EB ITDA -
EB ITDA
To tal
To tal Debt to EB ITDA
2014
2015E
2016E
2014
2015E
2016E
2014
2015E
2016E
Debt
2014
2015E
2016E
1.11
15.4
NM
53.6
4,662
2,109
4,969.6
6.1
13.5
5.7
4,055
0.9x
1.9x
0.8x
DIVERSIFIEDS B HI
B HI*
B A KER HUGHES
HA L
HA L*
HA LLIB URTON
$ 41.33
Dec.
40,636
$ 32,572
1.2
3.94
1.37
1.83
10.5
30.2
22.6
7,168
4,316
10,618.9
5.7
9.4
3.8
7,841
1.1x
1.8x
SLB
SLB *
SCHLUM B ERGER
$ 83.96
Dec.
112,527
$ 47,642
2.4
5.51
3.45
3.82
15.2
24.3
22.0
13,694
10,044
2,140.8
8.2
11.2
52.6
12,726
0.9x
1.3x
5.9x
WFT
WFT*
WEA THERFORD INTERNA TIONA L
$ 11.33
Dec.
16,084
$ 14,109
1.1
1.00
(0.17)
0.33
11.4
NM
34.8
3,005
1,673
0.0
5.4
9.6
NA
7,832
2.6x
4.7x
N/A
13.1
27.2
33.2
6.3
10.9
20.7
1.4x
2.4x
2.5x
8.0
271.0
GROUP M ean
1.5
0.7x
MANUFACTURERS CA M
CA M *
CA M ERON INTERNA TIONA L
$ 50.86
Dec.
1.0
4.09
3.13
2.89
12.4
16.2
17.6
1,629
1,359
40.0
2,844
1.7x
2.1x
71.2x
CRR
CRR
CA RB O CERA M ICS
$ 35.74
Dec.
811
$ 574
1.4
3.26
(2.07)
(0.55)
11.0
NM
NM
159
-20
444.7
5.1
NA
1.8
75
0.5x
-3.8x
0.2x
DRC
DRC*
DRESSER RA ND GROUP
$ 85.18
Dec.
7,458
$ 2,630
2.8
2.42
2.47
2.63
35.2
34.5
32.4
461
446
227.3
16.2
16.7
32.8
1,019
2.2x
2.3x
4.5x
DRQ
DRQ
DRIL QUIP
$ 70.43
Dec.
2,368
$ 953
2.5
5.02
4.80
3.88
14.0
14.7
18.2
300
278
224.1
7.9
8.5
10.6
0
0.0x
0.0x
0.0x
FET
FET
FORUM ENERGY TECHNOLOGIES
$ 18.50
Dec.
2,050
$ 1,684
1.2
1.86
0.84
1.01
10.0
22.0
18.3
347
200
996.1
5.9
10.3
2.1
469
1.3x
2.3x
0.5x
FTI
FTI*
FM C TECHNOLOGIES
$ 37.45
Dec.
9,008
$ 7,797
1.2
2.85
2.53
2.22
13.1
14.8
16.9
1,313
1,065
2,311.4
6.9
8.5
3.9
1,316
1.0x
1.2x
0.6x
NOV
NOV*
NA TIONA L OILWELL VA RCO
$ 44.99
Dec.
18,945
$ 21,371
0.9
6.00
2.98
2.53
7.5
15.1
17.8
4,573
2,668
694.1
4.1
7.1
27.3
4,245
0.9x
1.6x
6.1x
OII
OII
OCEA NEERING INTERNA TIONA L
$ 44.30
Dec.
4,820
$ 3,606
1.3
3.99
2.87
2.94
11.1
15.4
15.1
858
682
219.7
5.6
7.1
21.9
750
0.9x
1.1x
3.4x
OIS
OIS*
OIL STA TES INTERNA TIONA L
$ 34.14
Dec.
1,896
$ 1,752
1.1
3.62
0.66
1.03
9.4
51.4
33.3
447
192
49.7
4.2
9.9
38.2
206
0.5x
1.1x
4.2x
TESO TESO
TESCO
$ 10.02
Dec.
314
$ 513
0.6
0.91
(0.18)
0.12
11.0
NM
NM
99
35
25.0
3.2
8.9
NA
0
0.0x
0.0x
0.0x
TWIN
TWIN DISC
$ 17.88
Dec.
190
$ 272
0.7
0.43
1.08
0.92
41.6
16.6
19.4
21
27
0.0
NA
7.0
NA
12
0.6x
0.5x
N/A
16.0
22.3
21.0
6.6
9.2
45.5
0.9x
0.8x
9.1x
TWIN
10,829
$ 10,396
GROUP M ean
1.3
6.6
ONSHORE DRILLERS HP
HP
HELM ERICH & P A YNE
$ 64.11
Dec.
6,755
$ 3,877
10.2
22.1
71.4
1,568
1,131
1,144.9
4.3
6.0
5.9
572
0.4x
0.5x
0.5x
NB R
NB R*
NA B ORS INDUSTRIES
$ 13.36
Dec.
7,089
$ 6,641
1.1
1.16
(0.21)
(0.12)
11.5
NM
NM
1,774
1,154
102.3
4.0
6.1
69.3
3,825
2.2x
3.3x
37.4x
P ES
P ES*
P IONEER DRILLING
$ 4.71
Dec.
697
$ 1,010
0.7
1.7
6.29 0.38
(0.80)
2.90
(0.87)
0.90
12.4
NM
NM
261
114
570.9
2.7
6.1
1.2
430
1.7x
3.8x
0.8x
P DS
P DS
P RECISION DRILLING
$ 5.79
Dec.
3,256
$ 2,190
1.5
0.76
(0.28)
(0.10)
7.7
NM
NM
811
485
149.4
4.0
6.7
21.8
2,010
2.5x
4.1x
13.5x
P KD
P KD
P A RKER DRILLING
$ 3.03
Dec.
842
$ 944
0.9
0.29
(0.30)
(0.14)
10.3
NM
NM
256
141
532.7
3.3
6.0
1.6
585
2.3x
4.1x
1.1x
P TEN P TEN*
P A TTERSON UTI ENERGY
$ 17.71
Dec.
3,387
$ 3,162
1.1
1.55
(0.85)
(0.91)
11.4
NM
NM
988
530
461.5
3.4
6.4
7.3
880
0.9x
1.7x
1.9x
UNT
UNIT
$ 24.61
Dec.
2,170
$ 1,440
1.5
4.31
(0.37)
0.28
5.7
NM
89.2
767
385
0.0
2.8
5.6
NA
957
1.2x
2.5x
N/A
9.9
22.1
80.3
3.5
6.1
17.9
1.6x
2.9x
9.2x
UNT*
GROUP M ean
1.2
OFFSHORE DRILLERS A TW
A TW*
A TWOOD OCEA NICS
$ 24.30
Dec.
3,079
$ 1,318
2.3
7.14
4.70
5.0
3.4
5.2
746
699.3
5.7
4.1
4.4
1,607
3.0x
2.2x
DO
DO*
DIA M OND OFFSHORE DRILLING
$ 24.32
Dec.
11,770
$ 2,725
4.3
3.14
1.98
0.44
7.8
12.3
55.3
1,093
926
1,618.0
10.8
12.7
7.3
2,245
2.1x
2.4x
1.4x
ESV
ESV*
ENSCO
$ 20.39
Dec.
7,814
$ 2,980
2.6
6.00
3.95
2.69
3.4
5.2
7.6
2,376
1,916
60.2
3.3
4.1
129.7
4,138
1.7x
2.2x
68.7x
$ 766
1.3
(0.15)
(1.59)
(1.26)
NM
NM
NM
238
-14
1,319.9
4.3
NA
0.8
1,211
5.1x
-84.5x
0.9x
HERO HERO*
HERCULES OFFSHORE
$ 0.21
Dec.
1,026
NE
NE*
NOB LE
ORIG
ORIG*
4.91
2.3x
$ 14.29
Dec.
8,588
$ 3,678
2.3
2.98
1.16
4.8
6.6
12.3
2,017
1,594
796.8
4.3
5.4
10.8
5,212
2.6x
3.3x
6.5x
OCEA N RIG
$ 4.71
Dec.
4,503
$ 12,579
0.4
2.29
1.45
0.96
2.1
3.3
4.9
933
890
437.5
4.8
5.1
10.3
4,377
4.7x
4.9x
10.0x
P A CD P A CD*
P A CIFIC DRILLING
$ 2.61
Dec.
3,264
$ 919
3.6
0.84
0.54
(0.36)
3.1
4.9
NM
557
545
896.7
5.9
6.0
3.6
2,835
5.1x
5.2x
3.2x
RDC
RDC*
ROWA N COM P A NIES
$ 19.41
Dec.
5,172
$ 1,994
2.6
2.14
2.76
2.34
9.1
7.0
8.3
694
914
1,545.0
7.5
5.7
3.3
2,807
4.0x
3.1x
RIG
RIG*
TRA NSOCEA N
$ 14.62
Dec.
12,650
$ 8,878
1.4
4.79
2.33
(0.34)
3.1
6.3
NM
3,696
2,731
2,390.7
3.4
4.6
5.3
10,020
2.7x
3.7x
4.2x
SDRL
SDRL
SEA DRILL
$ 9.38
Dec.
15,968
$ 5,020
3.2
2.68
2.33
1.99
3.5
4.0
4.7
2,685
2,512
279.9
5.9
6.4
57.0
12,558
4.7x
5.0x
44.9x
VTG
VTG
VA NTA GE DRILLING
$ 0.16
Dec.
2,620
$ 861
3.0
0.14
0.10
(0.28)
NM
NM
NM
422
397
0.0
6.2
6.6
NA
2,650
6.3x
6.7x
N/A
4.6
5.9
14.0
5.6
6.1
23.3
3.8x
-4.2x
14.4x
8.3
NM
GROUP M ean
2.17
544
2.5
1.8x
OFFSHORE CONSTRUCTION GIFI
GIFI*
GULF ISLA ND FA B RICA TION
$ 11.24
Dec.
113
0.15
0.10
NM
57
29
280.4
2.0
3.9
0.4
0
0.0x
0.0x
HLX
HLX*
HELIX ENERGY SOLUTIONS GROUP
$ 12.36
Dec.
1,440
$ 1,043
1.4
1.95
0.67
0.87
6.3
18.4
14.2
396
218
241.9
3.6
6.6
6.0
546
1.4x
2.5x
2.3x
M DR
M DR
M CDERM OTT INTERNA TIONA L
$ 5.07
Dec.
1,269
$ 2,248
$ 471
0.6
(0.48)
(0.14)
0.08
NM
NM
NM
53
176
0.0
23.8
7.2
NA
861
16.1x
4.9x
N/A
7.3
18.4
14.2
9.8
5.9
2.2
5.8x
2.5x
0.8x
8.2
7.8
15.7
939
3.0x
2.8x
GROUP M ean
0.2
1.36
0.7
0.0x
OFFSHORE SUPPLY/TRANSPORT B RS
B RS
B RISTOW GROUP
$ 50.58
Dec.
2,597
$ 1,771
1.5
4.34
4.13
4.12
11.6
12.3
12.3
316
334
165.3
HELI
HELI*
CKH
CKH
CHC GROUP
$ 0.63
SEA COR HOLDINGS
$ 68.42
Dec.
1,713
$ 1,708
1.0
(1.44)
(1.53)
(2.19)
NM
NM
NM
240
207
248.0
7.1
8.3
6.9
1,219
5.1x
5.9x
4.9x
Dec.
1,624
$ 1,270
1.3
1.60
2.02
3.45
42.8
34.0
19.8
236
199
74.3
6.9
8.2
21.9
880
3.7x
4.4x
11.8x
GLF
GLF
GULFM A RK OFFSHORE
HOS
HOS
KEX
KEX
P HII
$ 10.30
Dec.
765
$ 465
1.6
2.37
(1.40)
(1.20)
4.3
NM
NM
171
54
211.2
4.5
14.2
3.6
561
3.3x
10.4x
HORNB ECK OFFSHORE SERVICES
$ 19.24
Dec.
1,483
$ 633
2.3
2.47
0.95
0.66
7.8
20.2
29.0
292
215
619.7
5.1
6.9
2.4
1,076
3.7x
5.0x
1.7x
KIRB Y
$ 77.26
Dec.
5,118
$ 2,565
2.0
4.91
4.23
4.67
15.7
18.3
16.6
640
581
N/A
8.0
8.8
NA
819
1.3x
1.4x
N/A
P HII
P ETROLEUM HELICOP TERS
$ 30.60
Dec.
435
$ 843
0.5
N/A
N/A
NA
NA
NA
N/A
N/A
247.9
NA
NA
1.8
540
N/A
N/A
2.2x
TDW
TDW
TIDEWA TER
$ 22.35
Dec.
2,462
$ 1,539
1.6
3.55
3.32
6.3
6.7
34.9
413
421
0.0
6.0
5.9
NA
1,491
3.6x
3.5x
N/A
14.8
18.3
22.5
6.5
8.6
8.7
3.4x
4.8x
4.8x
GROUP M ean
1.5
N/A 0.64
5.7x
2.7x
Source: Thomson Reuters, Raymond James research.
© 2015 Raymond James & Associates, Inc., member New York Stock Exchange/SIPC. All rights reserved.
International Headquarters: The Raymond James Financial Center | 880 Carillon Parkway | St. Petersburg, Florida 33716 | 800-248-8863
16
Raymond James
Global Research
So urce: Tho mso n One
COMPLETION BAS
B A S*
B A SIC ENERGY SERVICES
$ 6.29
Dec.
1,088
$ 1,416
0.52
(4.05)
(3.06)
12.1
NM
NM
319
63
328.6
3.4
17.3
3.3
925
2.9x
14.7x
CJES
CJES
C&J ENERGY SERVICES
$ 11.66
Dec.
2,477
$ 1,693
1.5
1.39
(1.63)
(0.54)
8.4
NM
NM
248
132
249.6
10.0
18.7
9.9
1,129
4.6x
8.5x
4.5x
SSE
SSE
SEVENTY SEVEN ENERGY
$ 3.45
Dec.
1,800
$ 2,001
0.9
0.48
(3.16)
(2.29)
7.2
NM
NM
443
190
121.1
4.1
9.5
14.9
1,613
3.6x
8.5x
13.3x
KEG
KEG*
KEY ENERGY SERVICE
$ 1.37
Dec.
$ 1,339
0.7
(0.38)
(0.78)
(0.53)
NM
NM
NM
51
112.9
6.2
18.9
8.5
778
5.1x
15.4x
6.9x
NR
NR*
NEWP A RK RESOURCES
$ 7.91
Dec.
756
$ 1,084
0.7
0.80
0.07
0.44
9.8
NM
18.1
167
68
326.1
4.5
11.0
2.3
182
1.1x
2.7x
RES
RES
RP C
$ 12.92
Dec.
2,945
$ 2,242
1.3
1.10
(0.18)
0.18
11.8
NM
NM
626
198
734.1
4.7
14.9
4.0
156
0.2x
0.8x
0.2x
SP N
SP N*
SUP ERIOR ENERGY SERVICES
$ 19.73
Dec.
4,196
$ 4,412
1.0
1.80
(0.79)
(0.09)
11.0
NM
NM
1,216
575
0.0
3.5
7.3
NA
1,644
1.4x
2.9x
N/A
10.0
NM
18.1
5.2
13.9
7.2
2.7x
7.6x
4.7x
0.7x
956
GROUP M ean
0.8
1.0
154
2.8x
0.6x
PROPPANTS CRR
CA RB O CERA M ICS
$ 35.74
Dec.
811
$ 574
1.4
3.26
(2.07)
(0.55)
11.0
NM
NM
159
-20
108.7
5.1
NA
7.5
75
0.5x
-3.8x
EM ES EM ES
CRR
EM ERGE ENERGY SERVICES
$ 31.10
Dec.
973
$ 1,041
0.9
3.80
1.62
2.44
8.2
19.2
12.7
126
84
156.8
7.7
11.6
6.2
242
1.9x
2.9x
HCLP HCLP *
HI-CRUSH P A RTNERS
$ 25.77
Dec.
1,159
$ 418
2.8
2.97
2.11
2.93
8.7
12.2
8.8
143
107
180.7
8.1
10.8
6.4
212
1.5x
2.0x
1.2x
SLCA
U.S. SILICA
$ 24.35
Dec.
1,473
$ 901
1.6
2.44
0.67
1.20
10.0
36.3
20.3
247
140
0.0
6.0
10.5
NA
501
2.0x
3.6x
N/A
9.5
22.6
13.9
6.7
11.0
6.7
1.7x
2.5x
2.0x
SLCA
GROUP M ean
1.7
1.5x
PRODUCTION & WORKOVER A RCHER A RCHER
A RCHER
$ 2.72
Dec.
2,358
$ 2,250
1.0
0.01
(0.11)
(0.05)
NM
NM
NM
223
144
42.6
10.6
16.3
55.4
824
3.7x
5.7x
19.4x
FES
FES
FORB ES ENERGY SERVICES
$ 1.24
Dec.
283
$ 424
0.7
(0.36)
(1.23)
(1.16)
NM
NM
NM
73
40
40.1
3.9
7.1
7.1
295
4.0x
7.4x
7.4x
FTK
FTK
FLOTEK INDUSTRIES
$ 13.33
Dec.
758
$ 429
1.8
0.94
(0.14)
0.24
14.2
NM
NM
95
11
121.1
8.0
NA
6.3
48
0.5x
4.2x
0.4x
KEG
KEG*
KEY ENERGY
$ 1.37
Dec.
956
$ 1,339
0.7
(0.38)
(0.78)
(0.53)
NM
NM
NM
154
51
112.9
6.2
18.9
8.5
778
5.1x
15.4x
NR
NR*
NEWP A RK RESOURCES
$ 7.91
Dec.
756
$ 1,084
0.7
0.80
0.07
0.44
9.8
NM
18.1
167
68
244.7
4.5
11.0
3.1
182
1.1x
2.7x
0.7x
TTI
TTI*
TETRA TECHNOLOGIES
$ 6.07
Dec.
1,390
$ 1,116
1.2
0.24
0.00
0.22
NM
NM
NM
185
197
0.0
7.5
7.1
NA
950
5.1x
4.8x
N/A
12.0
# DIV/0!
18.1
6.8
12.1
16.1
3.3x
6.7x
7.0x
N/A
GROUP M ean
1.0
6.9x
TUBULARS & DISTRIBUTION DNOW DNOW
DNOW
$ 19.74
Dec.
2,129
$ 3,891
0.5
1.24
(0.24)
0.39
16.0
NM
50.4
-11
N/A
9.5
NA
NA
135
0.6x
-12.2x
M RC
M RC*
M RC GLOB A L
$ 15.01
Dec.
2,857
$ 5,920
0.5
1.70
0.73
0.85
8.8
20.7
17.7
435
264
2,076.2
6.6
10.8
1.4
1,373
3.2x
5.2x
0.7x
TS
TS
TENA RIS
$ 25.81
Dec.
15,741
$ 10,012
1.6
2.58
1.27
1.68
10.0
20.4
15.4
2,677
1,739
0.0
5.9
9.0
NA
1,182
0.4x
0.7x
N/A
11.8
16.3
16.5
7.3
9.9
1.4
2.5x
1.0x
3.8x
GROUP M ean
0.9
225
MISC CELP
CELP
CYP RESS ENERGY P A RTNERS
CLB
$ 15.52
Dec.
0
-
NM
NM
NM
0.0
NA
NA
NA
0
N/A
N/A
N/A
$ 109.78
Dec.
753
$ 401
1.9
1.12
1.02
1.31
98.0
107.6
83.6
20
24
29.8
NA
NA
25.3
130
6.5x
5.3x
4.4x
DWSN DWSN*
CLB
CORE LA B ORA TORIES DA WSON GEOP HYSICA L
$ 4.47
Dec.
522
$ 825
$0
0.6
5.79
3.34
4.09
0.8
1.3
1.1
376
227
269.5
1.4
2.3
1.9
348
0.9x
1.5x
1.3x
RNET RNET
RIGNET
$ 30.11
Dec.
631
$ 144
4.4
0.45
(1.38)
(0.65)
66.9
NM
NM
26
24
51.4
24.3
NA
12.3
30
1.2x
1.3x
0.6x
55.2
54.5
42.4
12.8
2.3
13.2
2.3x
2.0x
2.5x
N/A
N/A
N/A
GROUP M ean
# DIV/0!
-
-
2.3
0
0
COMPRESSION EXH
EXH
EXTERRA N HOLDINGS
$ 29.28
Dec.
0
$0
# DIV/0!
NM
NM
NM
0
0
0.0
NA
NA
NA
EXLP
EXLP *
EXTERRA N P A RTNERS
$ 22.60
Dec.
1,568
$ 2,986
0.5
0.79
0.64
0.52
28.7
35.4
43.5
649
645
625.6
2.4
2.4
2.5
0
0.0x
0.0x
0.0x
GSJK
GSJK*
COM P RESSCO P A RTNERS
$ 16.81
Dec.
2,930
$ 624
4.7
0.91
1.09
1.07
18.5
15.5
15.8
272
317
342.7
10.8
9.3
8.6
# N/A
N/A
N/A
N/A
NGS
NGS
NA TURA L GA S SERVICES GROUP
$ 21.79
Dec.
2,065
$ 356
5.8
0.77
0.48
0.50
28.4
USA COM P RESSION P A RTNERS
$ 19.29
Dec.
770
$ 99
7.7
1.10
0.90
0.87
USA C USA C*
GROUP M ean
4.7
-
-
-
0
45.4
43.6
70
127
134.6
29.6
16.2
15.3
1,343
19.2x
10.6x
10.0x
17.6
21.3
22.2
43
42
40.5
17.8
18.4
19.0
553
12.8x
13.2x
13.6x
23.3
29.4
34.3
15.1
11.6
11.4
10.7x
7.9x
7.9x
Source: Thomson Reuters, Raymond James research.
© 2015 Raymond James & Associates, Inc., member New York Stock Exchange/SIPC. All rights reserved.
International Headquarters: The Raymond James Financial Center | 880 Carillon Parkway | St. Petersburg, Florida 33716 | 800-248-8863
17
Raymond James
Global Research
Integrated Oil and Gas / Independent Refiners Stock Performance in 2Q15 and TTM RJ Integrated Oil & Gas and Refiners Universe Quarterly Stock Price Performance
TTM Stock Price Performance
RJ Integrateds and Refiners Universe Quarterly Stock Price Performance
RJ Integrateds and Refiners Universe TTM Stock Price Performance
MP3 - PBR
MP3 - TSO
MP3 - HFC
MO2 - MPC
MO2 - PSX
MP3 - DK
MO2 - MPC
MO2 - VLO
MP3 - BP
MP3 - WNR
S&P 500
MP3 - PBF
MO2 - VLO
S&P 500
MP3 - XOM
MO2 - PSX
MP3 - DK
MP3 - HFC
MP3 - TSO
MP3 - XOM
MO2 - CVX
MP3 - BP
MP3 - WNR
MO2 - CVX
MP3 - EC
MP3 - PBR
MP3 - EC
MP3 - PBF
-20%
0%
20%
40%
60%
Source: Thomson Reuters
-80%
-60%
-40%
-20%
0%
20%
40%
60%
Source: Thomson Reuters
This analysis does not include transaction costs and tax considerations. If included these costs would reduce an investor’s return. It should not be assumed that recommendations made in the future will be profitable or will equal the performance of the securities in this list. A complete record of our stock recommendations for the trailing 12 months is available upon request.
Outlook on the Refining Industry The U.S. refining industry has been one of the primary beneficiaries of growing domestic crude supply. As such, we are structurally constructive on the space, given the competitive advantage afforded by the discounted U.S. crude landscape, which should serve to moderate some of the industry’s cyclicality – some, not all. In the coming months, we fully expect that the WTI-Brent spread will continue to experience volatility as oil inventories continue to balloon and the dramatic fall in oil prices affects regional production characteristics. We envision WTI trading at a continued discount to seaborne international crudes, albeit to a more modest degree. Meanwhile, global cracks priced off seaborne crudes remain relatively strong, particularly on the gasoline front. Indeed, the gasoline market has defied the typical seasonality and cracks continue to surprise to the upside, particularly against fears that the worldwide crude oil glut would soon turn into a refined product glut. A strongerthan-expected demand response (at least relative to consensus), especially in the U.S., has kept gasoline inventories from ballooning despite high refinery runs; however, lower crude oil differentials and weaker diesel cracks have reined in some – not all – of the strength in gasoline. Furthermore, the global refining arena still faces fundamental headwinds on an intermediate-term basis: structural overcapacity in weaker markets (i.e., Europe) and a wave of new refinery projects (mainly in Asia-Pacific and the Mid-East). A greater degree of refinery shutdowns, above and beyond the recent examples of rationalization and project delays (especially in Latin America), is a must to stave off the creep towards overcapacity. As shown in the following chart, the U.S. benchmark crack spread has tracked above historical averages for much of the past two-plus years, largely driven by the disconnect in crude pricing between WTI and Brent; however, crack spreads have recently been nicely above year-ago levels for much of 2015 (after rebounding from the January lows). We continue to expect the Brent-WTI spread to be volatile in 3Q15, particularly as the global crude oil market remains in oversupply and inventories continue to need to find a market – in other words, expect the roller coaster ride to continue.
© 2015 Raymond James & Associates, Inc., member New York Stock Exchange/SIPC. All rights reserved.
International Headquarters: The Raymond James Financial Center | 880 Carillon Parkway | St. Petersburg, Florida 33716 | 800-248-8863
18
Raymond James
Global Research
U.S. - NYMEX WTI 3-2-1 Crack Spread $45 $40
$35
$ / Bbl
$30 $25
$20 $15 $10 $5
Source: Bloomberg
5-Yr. Range
2013
2014
Dec-15
Nov-15
Oct-15
Sep-15
Aug-15
Jul-15
Jun-15
May-15
Apr-15
Mar-15
Feb-15
Jan-15
$0
2015
With the competitive advantage of discounted U.S. crudes and strong crack spread environment, refiners are poised to generate significant free cash flow. The difference in free cash flow yields among the companies largely reflects the varying degrees of leverage to discounted crudes. It’s worth noting that in addition to the discount in U.S. crudes, the low natural gas pricing environment in the U.S. also serves as a competitive advantage for domestic refiners, given that natural gas is a primary source of power generation. When product demand is robust, refineries can run at average utilization rates in excess of 90%. When demand is weak, and product inventories are high as a result, refiners cut back on throughput. As shown in the following graphic, U.S. refinery utilization was on a generally downward trend from 2005 to 2010 but has sinc e stabilized and arguably even trended up. Regional trends can vary considerably, particularly between the Mid -Continent region and lower-margin East Coast.
U.S. Refinery Utilization
Capacity utilization (%)
100%
90%
80%
70% Hurricanes Katrina and Rita
Hurricanes Gustav and Ike
60% Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Source: EIA
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19
Raymond James
Global Research
Our benchmark crack spread assumptions are shown in the following table. We would caution that these crack spreads (left table) are based off Brent and do not represent the actual margin capture expected for any given refinery.
U.S. East Coast Seaborne-based 3-2-1 Crack Spread Estimates
Gasoline Diesel
Q1 '02-'12
Q2 '02-'12
Q3 '02-'12
Q4 '02-'12
FY '02-'12
$7.50
$13.50
$11.00
$7.00
$9.75
Q1 13A
Q2 13A
Q3 13A
Q4 13A
2013A
$14.33
$16.01
$14.72
$8.15
$13.30
Q1 14A
Q2 14A
Q3 14A
Q4 14A
2014A
$12.80
$12.59
$14.27
$14.84
$13.63
$7.45 $23.51
$11.87 $14.04
$13.16 $16.49
$11.33 $21.86
$10.95 $18.98
Q1 15A
Q2 15A
Q3 15E
Q4 15E
2015E
Current RJ est.
$14.92
$18.03
$14.50
$9.00
$14.11
Gasoline
$10.68
$18.32
$13.75
$5.50
$12.06
Diesel
$23.41
$17.44
$16.00
$16.00
$18.21
Q1 16E
Q2 16E
Q3 16E
Q4 16E
2016E
Current RJ est.
$10.00
$13.50
$12.00
$9.50
$11.25
Gasoline
$6.50
$11.75
$9.75
$6.00
$8.50
Diesel
$17.00
$17.00
$16.50
$16.50
$16.75
Actual and Forecasted Refining Margins
2008 2009 2010 2011 2012 2013 2014 2015E
U.S. - NYMEX WTI 3-2-1 Crack Spread ($/Bbl) $10.20 $8.62 $9.96 $25.09 $29.54 $23.69 $19.21 $20.11
Europe - Spot Brent 2-1-1 Crack Spread ($/Bbl) $14.10 $8.48 $9.27 $9.48 $12.61 $10.82 $11.03 $15.14
Source: Bloomberg, Raymond James research Note: Actuals are calculated by averaging w eekly closing margins
Source: Bloomberg, Thomson Reuters, Raymond James research Note: Actuals are calculated by averaging w eekly closing prices
Outlook on Independent Refiners The earnings uplift generated by the WTI discount has been a massive tailwind for the independent refining group, with the benefit extending beyond those refiners in the Mid-Continent. While we expect continued volatility in the WTI-Brent spread (currently ~$5-6/Bbl), we expect the spread to gradually widen throughout the year, with the growth in higher value cash flow streams (i.e., midstream and retail) and the associated sum of the parts valuation providing a solid backstop. Thus, we remain structurally bullish on most of the stocks. While a hazy outlook for continued global oil demand and rising refining capacity in emerging markets could present longer-term headwinds, we believe the competitive advantage afforded by the discount in onshore crudes outweighs these potential challenges. While it is tough to wrap a precise band around the forward P/E multiples of independent refiners, given the sharp volatility of crack spreads (and hence earnings), we believe a range of about 6-10x reflects average historical valuations, as shown in the chart that follows. Currently, refiners are trading at median 2015 and 2016 EPS multiples of roughly 11.7x and 12.4x (based on consensus estimates).
© 2015 Raymond James & Associates, Inc., member New York Stock Exchange/SIPC. All rights reserved.
International Headquarters: The Raymond James Financial Center | 880 Carillon Parkway | St. Petersburg, Florida 33716 | 800-248-8863
20
Raymond James
Global Research Independent Refiners: Consensus Forward-Year P/E Multiples 24
P/E multiple
20 16
12 8 4 0 Jan-00
Jan-02
Jan-04
Jan-06
Jan-08
Jan-10
Valuation Range
Source: FactSet, Thomson Reuters
Jan-12
Median
Jan-14
Priced as of 7/10/2015
The following valuation table provides more detail on individual company multiples as well as our ratings.
Raymond James - Independent Refiners Research Universe Market Valuation Database Market Valuation
Raym ond Jam es Valuation Ratios
($ MM) Com pany
Enterprise Value /
Price
3-Month
Equity
Ent.
Ticker
Rating
07/10/15
Volum e
Value
Value
Alon USA Energy
ALJ
NC
$18.77
902,930
1,320
CVR Energy
CVI
NC
$39.65
287,842
3,443
Delek US Holdings
DK
MP3
$37.84
981,481
HollyFrontier Corp.
HFC
MP3
$45.26
Marathon Petroleum
MPC
MO2
PBF Energy
PBF
Phillips 66
PSX
Bbl of Daily
Ent. Value /
EPS
EBITDA
EBITDA 2015
2016
Consensus Valuation Ratios
Price /
Capacity
EDC
2015
1,713
6,851
3,078
26,763
2,213
2,356
5,319
936
5.6x
4.4x
12.8x
2,527,709
8,831
8,365
18,883
3,324
4.9x
5.2x
$54.49
4,518,255
29,969
33,229
20,213
1,699
4.8x
MP3
$31.10
1,543,473
2,851
3,191
5,910
523
MO2
$81.49
3,078,495
45,010
47,644
21,656
2016
Price / EPS
2015
2016
2015
2016
1,124
5.1x
5.1x
21.5x
25.0x
3,253
4.6x
5.0x
14.7x
20.9x
10.8x
5.5x
4.7x
13.7x
12.3x
10.7x
11.3x
5.0x
5.6x
11.1x
12.4x
5.5x
8.8x
10.9x
5.0x
5.8x
9.4x
10.9x
3.7x
2.9x
9.0x
6.9x
3.7x
3.6x
8.7x
7.8x
1,900
6.3x
5.7x
11.5x
10.2x
7.0x
6.7x
12.6x
11.5x
Tesoro Corp.
TSO
MP3
$98.40
2,213,559
12,487
15,674
23,588
2,470
5.6x
5.4x
13.1x
12.7x
5.9x
6.1x
12.3x
13.2x
Valero Energy
VLO
MO2
$65.85
5,870,018
33,979
33,049
12,815
1,068
4.3x
4.5x
9.1x
9.8x
4.3x
4.8x
9.2x
10.5x
Western Refining
WNR
MP3
$46.54
1,369,759
4,453
5,060
33,510
6,571
4.3x
4.5x
10.2x
10.9x
4.9x
5.6x
10.6x
12.6x
Median
$6,642
$6,713
19,548
1,799
4.8x
4.8x
10.4x
10.8x
5.0x
5.3x
11.7x
12.4x
Mean
$14,456
$15,336
17,551
2,287
4.9x
4.8x
10.6x
10.4x
5.1x
5.3x
12.4x
13.7x
SB 1= Stro ng B uy; M O2 = Outperfo rm; M P 3 = M arket P erfo rm; M U4 = Underperfo rm; NC = No t Co vered
EDC = Equivalent Distillatio n Capacity
So urce: Tho mso n Reuters, Oil & Gas Jo urnal, Raymo nd James research
Lo ng-term debt o n a GA A P basis includes no n-reco urse debt asso ciated with respective M LP s
Outlook on Integrated Oil and Gas Integrated oil and gas companies are certainly not immune from oil price weakness, and many tend to trade in tandem with larger-cap E&Ps, though their downstream operations tend to provide a natural hedge. Furthermore, these companies – Petrobras being a notable exception – typically generate significant free cash flow (at least in less-challenged oil price environments) that supports above-average dividend yields and share buyback. These factors support relative outperformance vs. more aggressive energy stocks amid volatile markets, especially on a total return basis. On the flip side, these companies face structural challenges, including 1) constrained access to resources, especially amid resource nationalism and greater competition from state-controlled oil and gas companies, and 2) pressures on downstream divisions from a secular decline in oil demand in developed economies. Our ratings reflect mainly thematic differences between individual companies, including business segment weightings (upstream vs. downstream), commodity mix (oil/ overseas gas vs. North American gas), cash flow allocation (capital spending vs. dividends/share buyback), and balance sheet quality. We also take high-impact exploration and other potential catalysts into account. © 2015 Raymond James & Associates, Inc., member New York Stock Exchange/SIPC. All rights reserved.
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21
Raymond James
Global Research
While recognizing a significant amount of variance among the integrated companies, we can peg a historical average P/E multiple range of 8-12x. Currently, the group is trading at median EPS multiples of roughly 15.7x for 2015 and 13.4x for 2016 (based on consensus estimates).
Integrated Oil and Gas: Consensus Forward-Year P/E Multiples 32 28
P/E multiple
24 20 16 12 8
4 0 Jan-00
Jan-02
Jan-04
Jan-06
Jan-08 Valuation Range
Source: FactSet, Thomson Reuters
Jan-10
Jan-12
Median
Jan-14
Priced as of 7/10/2015
The following valuation table provides more detail on individual company multiples as well as our ratings.
Raymond James - Integrated Oil and Gas Research Universe Market Valuation Database Equity Com pany BP plc **
Ticker
Raym ond Jam es Valuation Ratios
Price
3-Month
Value
EV / EBITDA
Price / EPS
Rating
07/10/15
Volum e
($ MM)
2015
2015
2016
2016
Price / Proved NAV
Consensus Valuation Ratios EV / EBITDA
Price / EPS
2015
2016
2015
2016
BP
MP3
$39.90
5,184,038
121,553
5.3x
4.5x
15.9x
13.6x
Cenovus Energy *
CVE
MO2
$14.36
2,057,391
11,896
8.7x
7.3x
NM
268.8x
Chevron Corp.
CVX
MO2
$94.41
6,869,005
177,160
6.3x
5.0x
23.3x
15.1x
China Petroleum & Chemical
SNP
NC
$80.07
166,262
70,293
4.5x
3.8x
14.1x
10.8x
CNOOC Ltd.
CEO
NC
$131.29
172,105
58,618
4.1x
3.7x
12.3x
8.3x
Ecopetrol S.A.
EC
MP3
$12.17
781,592
25,019
6.0x
4.4x
12.3x
7.4x
Eni SpA *
E
MO2
$35.23
535,899
64,016
3.6x
3.0x
21.3x
14.2x
Exxon Mobil Corp.
XOM
MP3
$82.22
10,628,877
346,228
7.7x
6.6x
18.7x
15.4x
Imperial Oil *
IMO
MP3
$36.71
285,617
31,115
12.5x
12.8x
23.2x
16.4x
Petrobras Argentina *
PZE
MP3
$6.64
108,796
1,341
-
-
-
-
PetroChina Co.
PTR
NC
$104.54
164,529
191,330
5.7x
5.0x
18.5x
13.4x 7.5x
Petróleo Brasileiro
6.4x
6.4x 8.2x
5.0x 6.8x
36.2x 21.7x
14.0x
17.4x
13.8x 17.6x
14.4x
168.8%
224.5% 240.9%
PBR
MP3
$8.38
35,260,190
54,656
6.1x
5.5x
9.8x
MO2
$56.84
2,533,390
174,184
-
-
-
-
STO
NC
$17.23
2,227,078
54,940
3.0x
2.7x
15.4x
11.8x
Suncor Energy *
SU
MO2
$26.80
3,706,093
38,752
7.4x
6.3x
43.1x
19.8x
Total S.A. *
TOT
MO2
$49.74
1,174,916
119,164
5.0x
4.5x
13.4x
13.0x
YPF S.A. *
YPF
MO2
$25.71
1,056,405
10,111
3.3x
2.8x
11.1x
8.1x
Statoil ASA
5.9x
24.4x
RDS'A
Royal Dutch Shell plc *
6.0x
5.4x
90.8%
Median
$58,618
6.4x
5.6x
23.1x
15.9x
196.7%
5.7x
4.5x
15.7x
13.4x
Mean
$91,199
6.8x
5.7x
24.1x
15.8x
181.3%
5.9x
5.2x
18.0x
29.6x
SB 1= Stro ng B uy; M O2 = Outperfo rm; M P 3 = M arket P erfo rm; M U4 = Underperfo rm; NC = No t Co vered ** B P is co -co vered with RJ Euro Equities. So urce: Tho mso n Reuters, Raymo nd James research
* CVE, IM O and SU are co vered by RJ Ltd. P ZE and YP F are co vered by RJ Latin A merica. *E, RDS.A and TOT are co vered by RJ Euro Equities.
© 2015 Raymond James & Associates, Inc., member New York Stock Exchange/SIPC. All rights reserved.
International Headquarters: The Raymond James Financial Center | 880 Carillon Parkway | St. Petersburg, Florida 33716 | 800-248-8863
22
Raymond James
Global Research
Renewable Energy and Clean Technology Stock Performance in 2Q15 and TTM RJ Clean Tech Universe Quarterly Stock Price Performance
RJ Clean Tech Universe TTM Stock Price Performance
MO2 - SSNI MP3 - WPRT MO2 - SZYM SB1 - AEIS MU4 - CLNE MO2 - SCTY MO2 - GTLS ECO Index MP3 - TSL MO2 - SPWR MO2 - EVA MO2 - CAFD SB1 - ENOC MP3 - AMRS MP3 - FSLR MP3 - ENPH
SB1 - AEIS MO2 - SSNI MP3 - TSL MO2 - EVA MP3 - ENPH MO2 - CAFD ECO Index MO2 - SCTY MO2 - SPWR MP3 - FSLR MP3 - AMRS SB1 - ENOC MU4 - CLNE MO2 - GTLS MO2 - SZYM MP3 - WPRT
-40%
-20%
0%
20%
40%
Source: Thomson Reuters
-100%
-50%
0%
50%
Source: Thomson Reuters
This analysis does not include transaction costs and tax considerations. If included these costs would reduce an investor’s return. It should not be assumed that recommendations made in the future will be profitable or will equal the performance of the securities in this list. A complete record of our stock recommendations for the trailing 12 months is available upon request.
Outlook on Solar Power The global photovoltaic (PV) industry is exhibiting secular growth in electricity market penetration, albeit with volatile margins across the value chain. While Europe has historically comprised the bulk of global PV demand, the European market has markedly slowed down, and growth is increasingly coming from China, Japan, the U.S., and other geographies. Capacity rationalization in China and elsewhere has reduced overcapacity, though import tariffs (e.g., the U.S.-China solar trade war) and other trade barriers can further complicate supply/demand dynamics. Policy support for PV demand is evolving. The European Union and over 25 U.S. states have renewable portfolio standards, and some jurisdictions have “carve-out” mandates for PV. Tax credits or rebates, such as the federal Investment Tax Credit (ITC), provide more direct financial support. The most effective policy structure is the feedin tariff, which is most common in Europe but has materialized elsewhere, including China and Japan. Widespread feed-in tariff reductions in Europe have forced developers and manufacturers to adapt to the lower economics.
Global PV Demand
Global PV Supply
60,000
40,000
Megawatts
Megawatts
40,000
60,000
Rest of World China Japan U.S. Other Europe Italy Spain Germany
20,000
Rest of World China U.S. Germany Japan
20,000
0
0
2008
2009
2010
2011
2012
Source: SolarPower Europe, Raymond James research
2013
2014 2015E 2016E
2008
2009
2010
2011
2012
2013 2014E 2015E 2016E
Source: Earth Policy Institute, Raymond James research
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23
Raymond James
Global Research Average levelized power prices of PV, in general, remain higher than that of conventional power (in the U.S., mainly coal and natural gas). As PV becomes a more mainstream component of the U.S. electricity market, installed system costs will need to drop from $1.75-3.50 per watt to $1.252.75 per watt. Cheaper polysilicon drove much of the cost reductions from 2008 to 2012, but future reductions will need to come mainly from a combination of 1) increasing conversion efficiency; 2) decreasing processing costs; and, most importantly, 3) decreasing balance of system costs. The latter includes installation, customer acquisition and financing costs (e.g., via securitization and “yieldcos”). Ahead of the continental U.S., grid parity has materialized in markets with high power prices (such as Japan and Hawaii). Cheaper and more widely available grid storage solutions are also important for PV adoption, since rising levels of PV (and wind) penetration can periodically destabilize the grid.
($/watt) Module cost Benchmark ASP
2015 c-Si CdTe $0.48 $0.48 $0.56 $0.49
2016 c-Si CdTe $0.45 $0.46 $0.53 $0.47
U.S. commercial systems BoS cost $1.76 All-in system cost $2.32
$1.83 $2.32
$1.68 $2.21
$1.74 $2.21
U.S. residential systems BoS cost $2.98 All-in system cost $3.54
NM NM
$2.84 $3.37
NM NM
Source: PVinsights, Raymond James research.
Of course, the flip side of the cost reduction curve is an ongoing decline in average selling prices (ASPs) of modules – down from ~$3.75/watt in 2008 to under $1.00 in 2012 and ~$0.55/watt currently (benchmark Chinese pricing). While inherently beneficial for PV project economics, ASP declines have pressured profitability of commodity module manufacturers in the industry. Margins tend to be higher among inverter manufacturers, though these are also affected by the industrywide trend of commoditization. Relative to PV, concentrating solar power (CSP), which has applications for power generation and enhanced oil recovery, carries both advantages and disadvantages. Advantages include the ability to customize power output based on time-of-day pricing, as well as integrated thermal storage options. Disadvantages include a more limited addressable market, since CSP systems require very high sunlight patterns (e.g., U.S. Southwest, the Persian Gulf, and Australia).
Outlook on Wind Power Though mainstream adoption of wind has a longer history than PV, making it a more mature industry, wind’s penetration within the overall power market remains relatively low, with the exception of a few European countries. We view the key growth drivers as the following: 1) incremental improvement in wind turbine technology, which reduces costs and facilitates more scalable systems; 2) the fact that wind power economics are already at grid parity in many markets; and 3) government support in the form of direct subsidies and other incentives, such as the U.S. Production Tax Credit (PTC). Limits on growth include: 1) constrained project financing, especially for very large projects; 2) grid interconnection bottlenecks; and 3) “not in my backyard” concerns in some areas. While offshore wind remains a small component of the overall wind market, in part due to higher costs, its growth is well above average, led by the North Sea region.
© 2015 Raymond James & Associates, Inc., member New York Stock Exchange/SIPC. All rights reserved.
International Headquarters: The Raymond James Financial Center | 880 Carillon Parkway | St. Petersburg, Florida 33716 | 800-248-8863
24
Raymond James
Global Research
Global Wind Power Installations
Global Wind Power Installations 60,000 Offshore
Megawatts
Onshore 40,000
20,000
0
2008
2009
2010
2011
2012
2013
2014
2015E
2016E
Source: WWEA, GWEC, EWEA, Raymond James research
Source: WWEA, GWEC, EWEA, and Raymond James research.
The all-in cost of wind installations has decreased over 60% since the emergence of the industry in the mid-1980s, reaching ~$2.00 per watt (for onshore wind farms). These cost reductions have been driven primarily by more efficient engineering and system designs, along with steadily greater scalability. Wind in the past has been costcompetitive with conventional generation in most regions of the U.S. (with the notable exception of the Southeast), though current natural gas pricing presents challenges. Internationally, major wind markets include China (the world’s #1 wind market), India and the North Sea region.
Outlook on Biopower Traditional baseload generation is based on fossil fuels – coal and natural gas – along with nuclear power. Hydropower is closer to baseload than wind and solar, but it is not fully predictable either. Thus, utilities seeking to 1) maintain a high amount of baseload generation while at the same time 2) reducing environmental impact do not have many options, and biopower is perhaps the most obvious one. Biopower enables sizable reductions in all major categories of emissions. Furthermore, in the context of avoiding the shutdown of coal-fired power plants – and thus preventing associated job losses – biopower, and especially utility-grade wood pellets, can be a solution. In contrast to the older, more primitive forms of biopower, wood pellets are a relatively modern product. They are used as a substitute for coal in both converted and co-fired power generation and combined heat and power (CHP) plants. The U.K. is the world’s largest pellet market. Three other northern European countries – Denmark, Sweden, and Belgium – are also major markets. The only major market that’s not in Europe is South Korea. Comparing the economics of utility-grade wood pellets versus coal is always a site-specific matter. Pellets by themselves are certainly more expensive than coal by itself. But from the standpoint of utilities, what matters is the cost structure on an all-in basis: that is to say, inclusive of all the added costs (sulfur credits, carbon credits, etc.) associated with burning coal. On this basis (or, put another way, looking at the levelized cost of electricity), the comparison is much more favorable to pellets. While there is variability, all-in pellet economics are comparable (within 20%) to all-in coal economics in the European market. In the U.S., pellets screen less attractively due to the lack of carbon pricing (outside California).
© 2015 Raymond James & Associates, Inc., member New York Stock Exchange/SIPC. All rights reserved.
International Headquarters: The Raymond James Financial Center | 880 Carillon Parkway | St. Petersburg, Florida 33716 | 800-248-8863
25
Raymond James
Global Research Global Supply and Demand for Utility-Grade Wood Pellets (thousands of metric tons) Belgium Denmark Sweden U.K. Other Europe U.S. and Canada Korea Other Asia TOTAL DEMAND
2012 1,500 1,000 1,000 1,300 1,700 0 100 60 6,660
2013 1,300 1,300 1,500 3,450 1,625 0 485 205 9,865
2014 550 1,500 1,700 4,600 910 40 1,900 250 11,450
U.S. Canada European Union All Other TOTAL SUPPLY
2015E 1,300 2,000 2,000 5,100 1,500 110 2,000 600 14,610
4,988 1,972 2,668 1,972 11,600
2016E 1,300 2,500 2,300 6,900 2,300 110 2,100 1,100 18,610
2020E 2,000 3,500 2,300 13,000 5,050 4,110 3,000 3,150 36,110
CAGR, 2014-2020 24.0% 15.2% 5.2% 18.9% 33.1% 116.4% 7.9% 52.5% 21.1%
8,000 3,000 3,300 2,600 16,900
(2016 supply projections based on projects under construction)
Source: Haw kins Wright, Raymond James research
Outlook on Natural Gas Fuels The fundamental differences between the global oil market and North American natural gas market have sustained a wide ratio between oil and gas prices, with our forecasted price ratio at 22:1 for 2015 (Brent crude vs. Henry Hub gas). While the ratio will gradually narrow – reflecting the scale-up of gas demand from the industrial and power generation sectors, as well as North American LNG exports – we expect oil and gas prices to remain disconnected for a long time. Gas has long-term potential as a mainstream transportation fuel in North America, as is already true of several gasrich countries in South America and Asia, and even such gas importers as Italy. China is a useful case study of how even a country with relatively high gas prices can become a major market for natural gas vehicles (NGVs), propelled by the government’s emissions policy. While NGVs make up less than 0.1% of U.S. vehicles on the road today, the adoption of compressed natural gas (CNG) and, to a lesser extent, liquefied natural gas (LNG) as fuels has been gaining traction. The low cost of gas compared to conventional fuel (gasoline and diesel) – even after the oil price meltdown – can incentivize commercial and institutional fuel users (such as bus fleets and waste truck operators) to switch to NGVs. Other advantages relative to petroleum include environmental benefits (lower carbon footprint and emissions) and higher octane. On the other hand, the domestic adoption curve has been constrained by high engine costs, which technology improvements can gradually address. It also hasn’t helped that fuel station development has tended to be disproportionately centered in states with favorable policy support (especially gas-producing states), though this is secondary to engine costs.
Est. North American Cost Comparison: Gasoline vs. CNG vs. Corn Ethanol $3
Processing Feedstock
$/gal
$2
$0.20 $0.50 $1 $1.48
$1.00 $1.00 $0.35
$0 Gasoline
CNG
Source: Clean Energy Fuels, Raymond James research
Corn Ethanol
Note: Based on RJ's 2015 price forecasts
© 2015 Raymond James & Associates, Inc., member New York Stock Exchange/SIPC. All rights reserved.
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26
Raymond James
Global Research
Outlook on Biofuels and Bioindustrials Conventional ethanol – produced from corn in the U.S. and sugarcane in Brazil – has long been used as a mainstream fuel component for blending into gasoline. As an oxygenate, ethanol helps reduce pollution in highdensity areas. As an octane enhancer – in, fact, the lowest-cost source of octane – ethanol is used to upgrade gasoline. While ethanol has lower energy content than gasoline, it is almost invariably cheaper to produce – even after the oil price meltdown in late 2014. Typical blending levels are 10% in the U.S. (with 15% becoming more common) and 27% in Brazil. U.S. Ethanol Production
Millions of gallons
20,000
15,000
10,000
5,000
0 2000
2002
2004
2006
2008
2010
2012
2014
2016E
Source: RFA, Raymond James research
The main economic flaw of conventional ethanol is the systemic challenge of managing the “crush spread” between the price of ethanol (an energy commodity loosely linked to gasoline) and the cost of corn/sugarcane (an agricultural commodity). Cellulosic biofuels address this problem. Since they are produced from non-food feedstocks such as wood chips, switchgrass, or municipal waste (materials that have almost no intrinsic value), the cost side of the economic equation is immune from volatility in the agricultural market. Scale-up of cellulosic and other advanced biofuels is progressing slowly for two reasons. First, commercialization involves significant execution risks. This is true both for companies using a biochemical process (fermentation), which involves a large element of biotech R&D, as well as for those using a thermochemical/catalytic process. Second, capacity expansion is highly capital-intensive. Venture funding can get companies to the proof-of-concept stage, but for commercial scale-up there are three main financing options: government loan guarantees, strategic partnerships (often with integrated oil companies, refiners, and chemical producers), and capital markets. Given the generally higher pricing for chemicals compared to fuels, many advanced biofuel developers are focusing on opportunities in renewable chemicals and other bioindustrial products. Given the higher adoption rates of diesel engines in Europe vs. the U.S., biodiesel has historically been more common in Europe. Biodiesel margins are a function of the crush spread between the price of biodiesel and the cost of feedstock. The bulk of U.S. biodiesel plants use soybean oil as the principal (or sole) feedstock, though some are able to utilize and source lower-cost feedstocks. Longer term, renewable diesel can provide a “drop-in” alternative to biodiesel, with particular benefits for cold climates. The most important U.S. policy supporting biofuels is the Renewable Fuels Standard (RFS), which provides a statutory demand floor for both conventional and advanced biofuels through 2022, although each year’s target is subject to reduction (depending on supply/demand dynamics) by the EPA. While the EPA’s annual adjustments create uncertainty from year to year, we do not envision any legislative changes to the RFS given the broad-based, bipartisan support for the overall policy. Given the slower-than-expected pace of scale-up, the cellulosic mandate of the RFS has been sharply reduced in recent years, and this is likely to continue. To clarify, the RFS and analogous policies outside the U.S. only encompass fuels – not chemicals or other specialty products.
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27
Raymond James
Global Research
U.S./Canada Advanced Biofuels (ex-Biodiesel) Production vs. RFS
750
U.S./Can. Advanced Biofuels (ex-Biodiesel) Production vs. RFS
75%
Est. Production
Millions of gallons
Est. Compliance with RFS Target 500
50%
250
25%
0
0% 2012
2013
2014
2015E
2016E
2017E
Source: RFA, Environmental Entrepreneurs, Raymond James research
Source: RFA, Environmental Entrepreneurs, and Raymond James research.
Outlook on Electric Vehicles Electric vehicles – which we define as both plug-in hybrids and all-electric vehicles – remain a niche market, both in North America and most overseas geographies. That said, their sales are growing faster than their hybrid counterparts, not to mention conventional vehicles. In contrast to natural gas vehicles, this is almost entirely a consumer market. The most obvious benefit to owning an EV is the ability to forgo filling up at the gas station. The cost of energy from petroleum is almost invariably higher than the cost of an equivalent amount of energy (on a BTU basis) from electricity. At the average U.S. retail electricity price (currently ~$0.12/kWh), a typical EV’s energy cost per mile is $0.02 to $0.03, approximately one-third the level for a conventional car at $2.75/gal gasoline. This is intuitive in the U.S., where coal represents the largest component of the power generation mix, and a significant (and rising) portion of the rest comes from cheap natural gas. While perhaps not as intuitive, it is also true of Western Europe and Japan. The environmental benefit is that EVs emit no pollutants – though, of course, the vast majority of the power plants generating the electricity have a carbon footprint. The downside is that EVs are considerably pricier than their conventional counterparts. The lithium ion batteries on which EVs generally depend remain costly, and in a broader sense, EV manufacturing has achieved only limited economies of scale. The U.S. federal tax credit of up to $7,500 and analogous policies internationally only partly cover the incremental upfront cost. In addition, an issue hindering consumer adoption is the limited number and geographic footprint of publicly accessible charging stations, in the context of cars that almost always have a shorter range compared to conventional ones.
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28
Raymond James
Global Research U.S. Sales of Hybrids and Electric Vehicles 70,000
60,000
Traditional Hybrids Plug-in Hybrids All-Electric EVs
50,000 40,000 30,000 20,000
10,000 0 Jan-11
Jul-11
Jan-12
Jul-12
Jan-13
Jul-13
Jan-14
Jul-14
Jan-15
Source: Electric Drive Transportation Association
Outlook on Smart Grid The traditional power grid has structural flaws – lack of storage, geographic constraints, and minimal monitoring and control – that diminish stability and increase the frequency of blackouts. The smart grid – an overarching framework that leverages modern communication architecture – can make the grid more efficient, stable, and economical in the long run. The smart grid value chain comprises a wide range of products and services: advanced metering infrastructure, networking equipment and software, in-home/business monitoring, smart appliances and lighting systems, and demand response (DR). Smart meters are what many people would most closely associate with the term “smart grid,” and indeed they make much of the rest possible. Traditional electric meters have no built-in remote-reading communication capability, so they require manual reading by a utility worker. Smart meters, by contrast, initiate and respond to two-way communications with the utility to frequently collect and transmit meter data, thus supporting various applications beyond monthly billings. For example, utilities gain the ability to charge customers based on time-ofday pricing, which can stimulate more efficient consumption patterns. Key markets for smart meters have historically included the U.S., Italy, and the Scandinavian countries, but growth is increasingly coming from China, Southeast Asia, and other emerging markets. In all markets, a significant challenge for smart meter providers is the length and complexity of sales cycles with utilities. Within the context of a congested grid, DR helps align the interests of electricity providers (utilities and grid operators) and end users (enterprises, public sector institutions, and, to a lesser extent, retail customers). The central idea is that power consumption can be temporarily curtailed in times of peak demand, but instead of doing it abruptly, as is the case with a blackout, it is done in a controlled manner. The role of DR service providers is to monitor electricity consumption and alert end users to reduce their usage during peak periods. This can take the form of simple demand reduction (e.g., by dimming lights or shutting down production lines), or the end user can self-generate electricity (e.g., by means of a backup generator or cogeneration). The service providers typically receive revenue from grid operators and utilities and pay end users for being “available” to reduce usage and for actually doing so when called upon. In the U.S., DR has historically been utilized mainly in the Northeast and MidAtlantic, but it is making inroads in other parts of the country, as well as internationally (e.g., Australia, Germany, and Japan).
© 2015 Raymond James & Associates, Inc., member New York Stock Exchange/SIPC. All rights reserved.
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29
Raymond James
Global Research
Raymond James - Renewable Energy and Clean Technology Research Universe Market Valuation Database Current Price Com pany
Ticker
Subsector(s)
Rating Real Tim e
Equity
Raym ond Jam es Valuation Ratios
3-Month
Value
EV / Revenue
Volum e
($ MM)
2015
2016
88.0x
36.3x
Consensus Valuation Ratios
EV / EBITDA
Price / EPS
2015
2015
2016
NM
101.0x
2016
EV / Revenue 2015
2016
EV / EBITDA
Price / EPS
2015
2015
2016
2016
Mid & Large Cap (Market Cap > $1 Bln) 8point3 Energy Partners LP
CAFD
Solar Pow er
MO2
$18.04
1,807,840
1,281
Abengoa SA
ABGB
Solar / Bioindustrials
NC
$15.77
20,528
2,270
Advanced Energy Industries
AEIS
Solar Pow er
SB1
$26.91
271,826
1,107
Canadian Solar
CSIQ
Solar Pow er
NC
$25.83
2,573,368
1,439
Chart Industries
GTLS
LNG / Nat. Gas Fuels
MO2
$33.57
628,398
1,029
Cosan Ltd.
CZZ
Bioindustrials
NC
$5.62
1,077,119
980
First Solar
FSLR
Solar Pow er
MP3
$44.03
2,103,215
4,420
Green Plains Inc.
GPRE
Bioindustrials
NC
$26.26
861,142
ITRI
Smart Grid
NC
$31.98
319,235
Pattern Energy Group *
PEGI
Wind Pow er
MO2
$29.20
705,219
2,022
SolarCity Corp.
SCTY
Solar Pow er
MO2
$53.00
2,268,150
5,124
SolarEdge Technologies
SEDG
Solar Pow er
NC
$31.89
603,431
1,248
Solar Pow er, Inc.
SOPW
Solar Pow er
NC
$1.46
236,782
878
-
-
-
-
-
-
SunEdison, Inc.
SUNE
Solar / Wind
NC
$30.41
9,422,185
8,348
11.4x
8.3x
NM
NM
NM
NM
SunPow er Corp.
SPWR
Solar Pow er
MO2
$26.29
1,422,508
4,096
1.8x
1.5x
13.5x
9.8x
26.1x
17.9x
TerraForm Pow er
TERP
Solar / Wind
NC
$39.48
1,091,693
2,223
8.5x
5.1x
11.1x
6.4x
636.8x 44.3x
Tesla Motors
5.9x
3.9x
69.5x
25.9x
NM
76.2x
0.3x
0.3x
2.9x
2.2x
10.3x
8.3x
20.0x
9.3x
NM
NM
NM
NM
Itron, Inc.
-
-
-
-
-
-
1.0x
1.0x
5.9x
5.6x
10.1x
6.6x
1.5x
1.6x
7.6x
6.9x
13.6x
12.2x
0.5x
0.4x
4.0x
3.2x
9.3x
10.2x
0.8x
0.8x
6.5x
5.5x
19.6x
14.8x
0.3x
0.3x
2.6x
2.2x
8.0x
6.5x
0.7x
0.6x
4.4x
3.4x
17.2x
13.3x
997
0.3x
0.3x
5.2x
3.8x
16.6x
9.7x
1,230
0.7x
0.6x
7.1x
6.0x
24.1x
14.1x
292.0x 40.7x
TSLA
Electric Vehicles
NC
$259.15
3,956,853
32,758
Trina Solar
TSL
Solar Pow er
MP3
$10.20
2,299,896
870
Vivint Solar
VSLR
Solar Pow er
NC
$11.34
876,204
1,201
1.7x 0.8x 0.8x
18.1x
1.9x
0.4x
1.9x 0.7x 0.6x
14.2x
1.6x
0.3x
Median
$1,281
1.7x
1.6x
Mean
$3,869
15.9x
7.9x
714.4x 52.2x 9.2x 6.7x 5.8x
NM
26.0x
3.7x 7.9x
6.8x 5.2x 3.3x
NM
15.8x
3.4x
12.3x 17.5x 30.5x
NM
32.6x
15.6x
10.8x 12.0x 11.3x
NM
20.8x
14.0x
8.8x
6.4x
12.0x
8.1x
16.0x
8.5x
NM
NM
NM
NM
2.9x
2.3x
26.8x
15.9x
36.9x
21.6x
6.0x
17.5x
13.0x
1.5x
1.5x
6.8x
5.8x
17.2x
13.7x
127.6x 14.5x
21.7x
28.3x
4.8x
3.0x
12.8x
7.5x
86.2x
21.2x
NM
Sm all Cap (Market Cap < $1 Bln) American Superconductor
AMSC
Wind / Smart Grid
NC
$5.14
151,784
71
0.6x
0.5x
NM
NM
NM
Amtech Systems
ASYS
Solar Pow er
NC
$9.87
82,073
129
0.7x
-
-
-
NM
-
Ballard Pow er Systems
BLDP
Fuel Cells
NC
$1.43
1,181,358
190
2.3x
1.6x
NM
NM
NM
NM
BioAmber Inc.
BIOA
Bioindustrials
NC
$7.81
91,872
202
13.3x
4.5x
NM
NM
NM
NM
Broadw ind Energy
BWEN
Wind Pow er
NC
$3.70
73,409
55
0.1x
0.1x
3.7x
2.6x
NM
21.4x
0.3x
-
NM
-
NM
-
2.1x
1.8x
NM
18.0x
NM
NM NM
China Ming Yang Wind Pow er
MY
Wind Pow er
NC
$2.30
1,137,600
354
CLNE
Natural Gas Fuels
MU4
$6.18
2,280,520
564
Echelon Corp.
ELON
Smart Grid
NC
$0.69
66,858
30
EnerNOC, Inc.
ENOC
Smart Grid
SB1
$9.50
468,989
Enphase Energy
ENPH
Solar Pow er
MP3
$5.99
Enviva Partners, LP
EVA
Biopow er
MO2
FuelCell Energy
FCEL
Fuel Cells
NC
Fuel Systems Solutions
FSYS
Natural Gas Fuels
Hanw ha Q CELLS
HQCL
Ideal Pow er
IPWR
JA Solar Holdings
JASO
Solar Pow er
JinkoSolar Holding
JKS
Solar Pow er
OPWR
Pacific Ethanol
PEIX
Plug Pow er Renew able Energy Group
Clean Energy Fuels
Opow er, Inc.
Silver Spring Netw orks
2.1x
1.6x
NM
256.4x
NM
NM
0.1x
0.1x
NM
NM
NM
266
0.6x
0.5x
NM
120.9x
NM
NM
0.6x
0.6x
NM
NM
NM
NM
925,135
263
0.5x
0.4x
23.8x
8.3x
34.2x
13.5x
0.5x
0.4x
11.5x
4.7x
26.3x
8.3x
$16.64
#VALUE!
396
0.9x
0.6x
6.7x
4.7x
16.2x
12.5x
0.9x
0.7x
6.5x
5.1x
15.9x
12.6x
$0.88
3,156,802
269
1.3x
0.7x
NM
19.7x
NM
NM
NC
$7.13
140,007
133
NM
NM
NM
NM
NM
237.7x
Solar Pow er
NC
$14.33
60,016
1,192
-
-
-
-
NM
-
Pow er Storage
NC
$8.28
38,157
75
14.3x
8.6x
NM
NM
NM
NM
NC
$7.50
1,689,642
378
0.2x
0.1x
1.5x
1.2x
6.7x
5.2x
NC
$25.34
972,088
788
0.8x
0.7x
4.7x
3.8x
7.5x
6.4x
Smart Grid
NC
$11.93
230,670
609
3.6x
3.0x
NM
NM
NM
NM
Bioindustrials
NC
$9.35
924,625
231
0.1x
0.1x
4.1x
1.2x
11.8x
4.1x
PLUG
Fuel Cells
NC
$2.28
2,731,153
395
2.4x
1.6x
NM
NM
NM
NM
REGI
Bioindustrials
NC
$11.31
451,915
497
0.5x
0.4x
31.7x
5.9x
NM
10.9x
SSNI
Smart Grid
MO2
$12.17
330,134
619
1.5x
1.7x
32.0x
NM
99.2x
53.5x
2.2x
1.9x
87.8x
21.1x
NM
43.6x
Solazyme, Inc.
SZYM
Bioindustrials
MO2
$3.22
735,795
256
4.3x
1.5x
NM
NM
NM
NM
4.2x
1.7x
NM
NM
NM
NM
Westport Innovations
WPRT
Natural Gas Fuels
MP3
$4.64
527,247
296
2.1x
1.8x
NM
NM
NM
NM
2.3x
1.8x
NM
NM
NM
NM
Yingli Green Energy
YGE
Solar Pow er
NC
$0.99
2,915,397
180
0.9x
0.8x
7.8x
6.2x
NM
NM
Median Mean SB 1= Stro ng B uy; M O2 = Outperfo rm; M P 3 = M arket P erfo rm; M U4 = Underperfo rm; NC = No t Co vered
$265
1.8x
1.6x
23.8x
64.6x
34.2x
13.5x
0.9x
0.8x
6.5x
5.1x
11.8x
10.9x
$330
2.0x
1.3x
20.8x
97.6x
49.9x
26.5x
2.5x
1.6x
17.7x
8.1x
13.6x
38.9x
* P EGI is co vered by RJ Ltd.
So urce: Tho mso n, Raymo nd James research
Raymond James ratings: 1 = Strong Buy, 2 = Outperform, 3 = Market Perform, 4 = Underperform, S = Suspended, NC = not covered. PEGI is covered by Raymond James Ltd.
Source: Thomson Reuters and Raymond James research.
Priced July 10, 2015.
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30
Raymond James
Global Research
Canadian Oil and Gas Few clues gleaned from first Throne Speech by Alberta's new government. On June 17, the RJ Ltd. energy research team discussed the new political landscape in Alberta. The newly elected NDP government delivered its first “Speech from the Throne,” setting the tone and outlining some of the initial measures that the new government plans to implement in the coming months. With the markets keenly looking for any tea leaves or outright indications regarding the next steps the government might take regarding the fiscal regime, there were, unfortunately, few details in the speech. Instead, the speech confined itself largely on less contentious issues such as campaign reform, raising corporate taxes (from 10% to 12%, and already promised in the campaign), reinstituting a progressive personal tax system (also a key platform plank), and increased funding for public services such as healthcare and education. In fact, the only pertinent touching point relating to the oil and gas fiscal regime (aside from the aforementioned corporate taxes) was an indication that the new government would work collaboratively with the rest of the country on a national energy policy while concurrently conducting a review of the current royalty framework. Following the speech, Premier Notley indicated that a panel to review the royalty framework would not be announced until the end of summer, prolonging the uncertainty that, in our view, continues to weigh on energy shares. All in all, the much anticipated speech proved to be a non-event. The tumultuous path towards an FID for Pacific Northwest LNG. On June 10, RJ Ltd. provided an update on LNG export projects in British Columbia, focusing on the Petronas-operated Pacific Northwest project. We have perceived a heightened level of interest from investors in LNG project probability, timelines, and potential economic impacts. We’ve noted this directly through conversations with investors and the press, as well as indirectly via movements in certain stocks, particularly certain accommodations providers. On the whole, we still envision a better than 50% chance of at least one positive final investment decision (FID), though the timing of a potential announcement has shifted toward year-end. To clarify, Pacific Northwest LNG has declared a “conditional” FID – the first B.C. project to get that far – but is not yet moving forward with actual construction. Propane – Canada's ethane? On May 13, RJ Ltd. highlighted the depressed price environment for propane in Alberta. While no commodity has been left unscathed in this downturn, there is perhaps no other commodity that has suffered to the magnitude that propane in Alberta has. As of mid-May, propane in Alberta was trading shockingly below C$2/Bbl – a far cry from the C$64/Bbl it averaged during the first half of 2014. Certainly, the largest contributor to the fall in Alberta propane pricing has been the broader sell-off in the entire crude oil complex. Liquids of all forms in North America have seen a considerable decline, although it has been surprising to see counter-seasonal weakness in propane prices vs. other components of the NGL barrel. In this regard, an abnormally warm winter in Western Canada didn’t help, with propane inventories well above the five-year range. Natural gas firm sales access is an issue. On April 29, RJ Ltd. discussed midstream capacity constraints in parts of Alberta and British Columbia. With the exception of newly emerging hydrocarbons basins, Canadian producers have historically had little difficulty in finding bidders for all their hydrocarbon volumes on any given day and securing access to markets/infrastructure into which to sell said volumes of production; however, gas producers in northwest Alberta and northeast B.C. may face an incremental challenge for the balance of this year and into next when it comes to accessing markets. The share of total capacity that is being taken up by firm transportation consumers is leaving less interruptible gas service capacity on the Spectra and Alliance pipeline systems. At the same time, the TCPL system in western Alberta is facing artificial constraints on operating capacity, as integrity testing and systems upgrades/improvements are also severely limiting the amount of interruptible gas transportation capacity that is available in the system.
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Junior Producers Company Name
Boulder Chinook Delphi Granite Leucrotta RMP Energy Storm Resources Median
Symbol
Closing Price
Stock Rating
Mkt Cap ($mln)
BXO CKE DEE GXO LXE RMP SRX
$7.50 $0.85 $1.24 $5.62 $1.12 $2.06 $4.72
OP 2 OP 2 SB 1 OP 2 OP 2 OP 2 OP 2
$341 $183 $193 $171 $185 $252 $563
Intermediate Producers Company Name
ARC Athabasca Baytex Birchcliff Crescent Point Crew Energy Kelt NuVista Paramount Pengrowth Peyto Seven Generations Tourmaline Oil Trilogy Median
Symbol
ARX ATH BTE BIR CPG CR KEL NVA POU PGF PEY VII TOU TET
Current Yield
NAV
0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
NA NA NA NA NA NA NA
$0.90 $0.05 $0.28 $1.57 $0.01 $0.82 $0.43
$2.03 $0.11 $0.35 $1.46 $0.04 $0.90 $0.61
44
11
110
2
3000
38
7
Closing Price
Stock Rating
Mkt Cap ($mln)
Current Yield
$20.98 $1.86 $17.69 $6.70 $23.94 $5.48 $8.26 $6.03 $26.29 $2.87 $29.87 $15.95 $35.88 $4.96
MP 3 OP 2 MP 3 OP 2 OP 2 SB 1 OP 2 OP 2 SB 1 MP 3 OP 2 OP 2 OP 2 MP 3
$7,119 $748 $2,990 $1,020 $10,689 $768 $1,393 $836 $2,756 $1,572 $4,591 $3,912 $7,747 $624
NAV
5.7% NA 0.0% $2.98 6.8% $21.83 0.0% NA 11.5% $37.26 0.0% NA 0.0% NA 0.0% NA 0.0% NA 9.8% $3.81 3.8% NA 0.0% NA 0.0% NA 7.8% NA
CFPS 15E
CFPS 15E
$1.93 ($0.11) $2.89 $0.92 $3.93 $0.62 $0.58 $0.87 $2.90 $0.99 $3.55 $1.43 $4.17 $0.88
16E
16E
P/CF 15E
8.4x 18.3x 4.4x 3.6x nmf 2.5x 11.1x 6.4x
P/CF 15E
16E
3.7x 7.9x 3.5x 3.8x 25.5x 2.3x 7.8x 3.8x
16E
$2.16 ($0.04) $2.52 $1.27 $3.88 $0.63 $0.97 $1.01 $5.45 $0.73 $4.16 $1.92 $5.51 $1.01
10.9x nfm 6.1x 7.3x 6.1x 8.9x 14.2x 6.9x 9.1x 2.9x 8.4x 11.2x 8.6x 5.7x 7.9x
9.7x nfm 7.0x 5.3x 6.2x 8.7x 8.5x 6.0x 4.8x 3.9x 7.2x 8.3x 6.5x 4.9x 6.3x
16E
15E
16E
6.0x 6.2x 5.7x 12.1x 6.8x 6.2x
5.5x 7.5x 5.3x 9.4x 6.6x 6.6x
Senior Producers Company Name
Symbol
Canadian Natural Cenovus Energy Husky Energy Imperial Oil Suncor Median
CNQ CVE HSE IMO SU
Closing
Stock
Mkt Cap
Price
Rating
($mln)
$33.01 $18.19 $23.50 $46.53 $34.00
MP 3 OP 2 MP 3 MP 3 OP 2
$36,058 $14,278 $23,119 $39,574 $49,130
Dividends $/sh
$0.92 $1.06 $1.20 $0.52 $1.12
CFPS Yield
2.8% 5.9% 5.1% 1.1% 3.3% 3.3%
15E
$5.52 $2.94 $4.12 $3.85 $4.99
P/CF
$6.03 $2.44 $4.41 $4.96 $5.19
Oil Sands Company Name
Symbol
Canadian Oil Sands MEG Energy Median
COS MEG
Closing
Stock
Mkt Cap
Price
Rating
($mln)
$8.89 $17.35
UP 4 OP 2
$4,308 $3,884
Dividends $/sh
$0.20 $0.00
CFPS Yield
2.2% 0.0%
15E
$1.04 $1.01
P/CF 16E
$1.56 $2.40
Source: Bloomberg and Raymond James Ltd.
15E
16E
8.6x 17.3x 12.9x
5.7x 7.2x 6.5x
Priced July 10, 2015.
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International Headquarters: The Raymond James Financial Center | 880 Carillon Parkway | St. Petersburg, Florida 33716 | 800-248-8863
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Energy Services Company Name
Symbol
Contract Drillers Ensign Precision Savanna Trinidad Western
ESI PD SVY TDG WRG
Pressure Pumpers Calfrac Canyon Trican
Closing Price
Stock Rating
Mkt Cap ($mln)
$11.50 $7.33 $1.39 $3.84 $5.66
MP 3 MP 3 OP 2 OP 2
$1,757 $2,146 $125 R $422
CFW FRC TCW
$6.70 $5.54 $3.11
MP 3 MP 3 UP 4
Well Site & Other Services Essential ESN Mullen MTL Strad SDY
$1.18 $19.17 $2.85
Facilities & Infrastructure Black Diamond BDI Enerflex EFX Horizon North HNL Secure SES
$16.93 $13.15 $3.74 $12.15
Dividends $/sh Yield
EPS (fd) 15E
16E
P/E (fd) 15E
16E
$0.48 $0.28 $0.00 R $0.30
4.2% 3.8% 0.0% R 5.3%
$0.40 ($0.50) ($0.07) R $0.23
$0.38 $0.16 $0.14 R $0.53
28.5x nmf nmf R 24.9x
30.4x 45.2x 9.7x R 10.6x
$640 $381 $464
$0.25 $0.30 $0.30
3.7% 5.4% 9.6%
($1.13) ($0.35) ($1.29)
($0.21) $0.38 ($0.56)
nmf nmf nmf
nmf 14.7x nmf
OP 2 UP 4 OP 2
$148 $1,757 $106
$0.12 $1.20 $0.28
10.2% 6.3% 9.8%
($0.06) $0.65 ($0.19)
$0.14 $1.12 $0.12
nmf 29.6x nmf
8.2x 17.1x 23.3x
OP 2 MP 3 MP 3 OP 2
$695 $1,035 $494 $1,651
$0.96 $0.34 $0.32 $0.24
5.7% 2.6% 8.6% 2.0%
$0.63 $1.44 $0.07 ($0.02)
$0.78 $1.32 $0.16 $0.31
26.7x 9.1x 51.1x nmf
21.8x 9.9x 23.2x 38.7x
($0.02)
$0.31
26.7x
17.1x
R
Median
Energy Infrastructure Company Name
AltaGas Gibson Energy Inter Pipeline Keyera Pembina Pipeline Veresen
Symbol
ALA GEI IPL KEY PPL VSN
Closing Price
$37.66 $22.01 $27.97 $40.39 $39.41 $15.36
Stock Rating
Mkt Cap ($mln)
OP 2 MP 3 MP 3 OP 2 OP 2 MP 3
$5,098 $2,749 $9,272 $6,822 $13,399 $4,398
Dividends $/sh Yield
$1.84 $1.28 $1.48 $1.40 $1.76 $1.00
Median
4.9% 5.8% 5.3% 3.5% 4.5% 6.5%
AFFO/sh 15E
$3.03 $1.77 $1.97 $2.98 $2.12 $1.07
16E
$3.53 $2.09 $2.05 $2.81 $2.59 $1.00
5.1%
Source: Bloomberg and Raymond James Ltd.
AFFO Yield 15E
16E
8.0% 8.0% 7.0% 7.4% 5.4% 7.0%
9.4% 9.5% 7.3% 7.0% 6.6% 6.5%
7.2%
7.1%
Priced July 10, 2015
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International Headquarters: The Raymond James Financial Center | 880 Carillon Parkway | St. Petersburg, Florida 33716 | 800-248-8863
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European Oil and Gas Stock Performance in 2Q15 and TTM RJEE Integrated Oil and Gas Universe Quarterly Stock Price Performance
TTM Stock Price Performance
Shell
-8%
OMV
Repsol
-8%
Eni
Total
-14%
BG
-14%
Total
-14%
Repsol
-14%
-4%
OMV
-1%
Eni
1%
BG
Shell
25%
-15%
-5%
5%
15%
25%
-16%
BP
-5%
BP
-21%
35%
-25%
-12% -20%
-15%
-10%
-5%
0%
Source: Datastream.
As 2Q15 proved to be a volatile period for major environment variables (Brent prices and €/$ forex), European Big Oils’ share price performance was flat q/q on average. BG was expectedly far ahead of its peers, with a total Shareholder return at 25% boosted by the proposed bid by Shell. On the other hand, it seems the Shell proposed premium for BG, along with its leading position on the weakened LNG market, has weighed on investors’ sentiment over the quarter. Over the last 12 months, however, the stock proved the most defensive, with total shareholder return at minus 12%, vs. our universe at minus 15%. On April 8, 2015, the boards of Shell and BG recommended a cash and share offer to be made by Shell on BG, whereby BG shareholders will be entitled to receive 383p in cash and 0.4454 Shell B shares, a 50% premium to BG's closing price as of April 7. This deal represents a dream combination in our view, as we believe BG's meaningful exposure to Brazil Deepwater and LNG is a natural and unique fit to Shell's strategy and capabilities. Although this is not a 2Q15 event, per se, it is worth mentioning that on July 2 BP announced a full $18.7 billion settlement (payable over 17 years) with federal, state, and local governments. Overall, BP will provision another $10 billion on top of the 1Q15 $43.8 billion Macondo provisions (excluding any further rise on the PSC settlement cost estimates). A positive settlement (sentiment wise) but slightly negative valuation-wise: the headline number obviously represents a massive payout, but it is spread over 15-18 years, making it quite manageable from a cash flow standpoint (~$1.1 billion p.a.). Most importantly, this settlement finally draws a line under the Macondo disaster, lifting the legal overhang once and for all (almost!).
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Global Research
As we highlighted in our latest sector report (Keeping Royal Dutch Shell as our top pick despite LNG headwinds) It is already well flagged that the LNG market is entering a difficult period, with weak Asian spot prices on the back of a surge in Australian and U.S. LNG supply combined with weak Asian demand growth. The bad news doesn't stop here. The surge in Australian LNG is likely to displace at least 15 mtpa of Qatari cargoes from Asia to the Atlantic Basin. The uncontracted new U.S. LNG to Asia may also have to find a home in the Atlantic Basin. For European oil and gas companies, there are three negative implications to be factored in: lower arbitrage, lower European gas upstream profits, and potential losses on LNG supply contracts. Royal Dutch Shell remains our European top pick, and five key reasons underpin our positive stance on the stock: 1) planned combination with BG a step-up deal (LNG, deepwater); 2) we expect the combined company to enjoy a best-in-class cash neutrality point (at $76/Bbl) while offering the most attractive FCF and dividend yields; 3) as oil prices rise progressively, perception of the price paid for the BG transaction should change; 4) potential for lower capex is underappreciated; and 5) dividend is sacrosanct at Shell. Exposure to weak Asian spot pricing should not be overestimated, as the theoretical net long positions stay below 10% for 2015-17, according to our estimates. Shell has already committed to keeping its dividend in 2016 unchanged at $1.88, to cancelling the scrip scheme by 2017, and also to a $25 billion buyback program for the period 2017-2020E, which are three very reassuring features for shareholders, in our view. We also reiterate our Outperform rating on Eni (organic cash break-even 2017 at just Brent $72/Bbl). Total (Outperform) is attractive, in our view, although LNG spot exposure could rise significantly by 2020.
Cash neutrality point $90/Bbl (2015)
Cash neutrality point $84/Bbl (2016E)
Organic cash break-even point (Brent $/bbl) 120
100
96
86
95 85
80
80
Cash neutrality point $79/Bbl (2017E)
Organic cash break-even point (Brent $/bbl)
Organic cash break-even point (Brent $/bbl) 120
120
103
100
84
90 75
80
86 72
81
88
86
92
100
60
60
60
40
40
40
20
20
20
0
0 BG
BP
Eni
2015E
OMV
Repsol
Shell
83 72
77
80
85
76
0
Total
BG
2015E average ($90/bbl)
BP
Eni
2016E
Source: RJEE estimates, Repsol stand-alone (excluding Talisman).
87 72
80
BG
OMV Repsol Shell Shell + Total BG 2016E average ($84/bbl)
Source: RJEE estimates, Repsol stand-alone (excluding Talisman).
BP
Eni 2017E
OMV Repsol Shell Shell + Total BG 2017E average ($79/bbl)
Source: RJEE estimates, Repsol stand-alone (excluding Talisman).
RJEE’s Integrated Oil and Gas Coverage Universe Company
Stock ticker
ADR ticker
Rating
Currency
Spot price (local currency)
P/E
Dividend Yield
FCF Yield
Equity Value in $m
2015E
2016E
2017E
2015E
2016E
2017E
2015E
2016E
2017E
BG
BG.L
Outperform 2
£
1081
53,331
35.4x
21.1x
16.5x
1.7%
1.9%
2.2%
-2.5%
1.0%
2.6%
BP
BP.L
BP.N
Market Perform 3
£
427
123,867
16.9x
14.6x
12.6x
6.1%
6.0%
6.0%
3.2%
3.2%
4.2%
Eni
ENI.MI
E
Outperform 2
€
15.9
60,286
23.2x
15.5x
12.9x
5.0%
5.0%
5.2%
2.5%
6.3%
7.9%
OMV
OMW.VI
Outperform 2
€
24.9
8,528
11.4x
11.0x
8.9x
5.0%
5.0%
5.0%
-2.6%
1.9%
5.7%
Repsol
REP.MC
Market Perform 3
€
16.3
23,724
12.7x
12.4x
10.7x
5.9%
5.9%
5.9%
2.5%
3.9%
5.8%
RD Shell
RDSA
RDS.A
Outperform 2
€
25.4
169,260
12.4x
10.6x
9.3x
6.7%
6.7%
6.7%
0.9%
3.8%
6.3%
Total
TOTF.PA
TOT
Underperform 4
€
44.3
110,710
11.9x
10.6x
9.3x
5.5%
5.5%
5.5%
0.4%
2.0%
4.1%
17.7x
13.7x
11.5x
5.1%
5.2%
5.2%
0.6%
3.2%
5.2%
Average European peers
Source: Thomson Reuters, RJEE research.
Priced July 10, 2015.
© 2015 Raymond James & Associates, Inc., member New York Stock Exchange/SIPC. All rights reserved.
International Headquarters: The Raymond James Financial Center | 880 Carillon Parkway | St. Petersburg, Florida 33716 | 800-248-8863
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Argentinean Oil and Gas According to the latest data published by Argentina’s Energy Secretariat, total hydrocarbon output in the country rose 2.8% y/y in May 2015. The country’s oil production rose 1.7% y/y, while gas output rose 3.6%. YPF’s production increased in the same period, while Petrobras Argentina’s output fell. The 1Q15 run-rate was 584 MBoe/d at YPF and 77 MBoe/d at Petrobras Argentina.
YPF (YPF/$25.40/Outperform) YPF’s consolidated output increased 9.8% y/y in May to 14.2 MMBoe. Oil production rose 6.7% y/y, and gas output th rose 13.3% y/y. On a y/y basis, May was the 26 consecutive month in which YPF posted positive y/y growth for oil th output (and the 25 for gas).
Petrobras Argentina (PZE/$6.40/Market Perform) (including Petrolera Entre Lomas) Petrobras Argentina’s total output fell 24.6% y/y in May, to 2.3 MMBoe. Oil and gas production declined 23.7% and 25.0%, respectively. To clarify, April was the start of the first quarter following the sale of assets in the Austral basin, which represented close to 20% of the company’s production.
Neuquen Basin Highlights In the Neuquen Basin (as a proxy for the Vaca Muerta resource play), YPF increased its oil output by 14.7% y/y in May, with associated gas output rising 14.0% y/y. We project year-end 2016 oil production at Vaca Muerta will reach 41 MBbls/d. Petrobras Argentina’s gas output increased 6.2% y/y but declined 8.9% for oil.
Oil Production in Argentina (May 2013 – May 2015)
Gas Production in Argentina (May 2013 – May 2015)
Source: Argentina’s Energy Secretariat and Raymond James Latin America.
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Important Investor Disclosures Raymond James & Associates (RJA) is a FINRA member firm and is responsible for the preparation and distribution of research created in the United States. Raymond James & Associates is located at The Raymond James Financial Center, 880 Carillon Parkway, St. Petersburg, FL 33716, (727) 567-1000. Non-U.S. affiliates, which are not FINRA member firms, include the following entities that are responsible for the creation and distribution of research in their respective areas: in Canada, Raymond James Ltd., Suite 2100, 925 West Georgia Street, Vancouver, BC V6C 3L2, (604) 659-8200; in Latin America, Raymond James Latin America, Ruta 8, km 17, 500, 91600 Montevideo, Uruguay, 00598 2 518 2033; in Europe, Raymond James Euro Equities SAS (also trading as Raymond James International), 40, rue La Boetie, 75008, Paris, France, +33 1 45 64 0500, and Raymond James Financial International Ltd., Broadwalk House, 5 Appold Street, London, England EC2A 2AG, +44 203 798 5600. This document is not directed to, or intended for distribution to or use by, any person or entity that is a citizen or resident of or located in any locality, state, country, or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation. The securities discussed in this document may not be eligible for sale in some jurisdictions. This research is not an offer to sell or the solicitation of an offer to buy any security in any jurisdiction where such an offer or solicitation would be illegal. It does not constitute a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual clients. Past performance is not a guide to future performance, future returns are not guaranteed, and a loss of original capital may occur. Investors should consider this report as only a single factor in making their investment decision. For clients in the United States: Any foreign securities discussed in this report are generally not eligible for sale in the U.S. unless they are listed on a U.S. exchange. This report is being provided to you for informational purposes only and does not represent a solicitation for the purchase or sale of a security in any state where such a solicitation would be illegal. Investing in securities of issuers organized outside of the U.S., including ADRs, may entail certain risks. The securities of non-U.S. issuers may not be registered with, nor be subject to the reporting requirements of, the U.S. Securities and Exchange Commission. There may be limited information available on such securities. Investors who have received this report may be prohibited in certain states or other jurisdictions from purchasing the securities mentioned in this report. Please ask your Financial Advisor for additional details and to determine if a particular security is eligible for purchase in your state. The information provided is as of the date above and subject to change, and it should not be deemed a recommendation to buy or sell any security. Certain information has been obtained from third-party sources we consider reliable, but we do not guarantee that such information is accurate or complete. Persons within the Raymond James family of companies may have information that is not available to the contributors of the information contained in this publication. Raymond James, including affiliates and employees, may execute transactions in the securities listed in this publication that may not be consistent with the ratings appearing in this publication. Additional information is available on request.
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The views expressed in this report accurately reflect the personal views of the analyst(s) covering the subject securities. No part of said person's compensation was, is, or will be directly or indirectly related to the specific recommendations or views contained in this research report. In addition, said analyst has not received compensation from any subject company in the last 12 months.
Ratings and Definitions Raymond James & Associates (U.S.) definitions Strong Buy (SB1) Expected to appreciate, produce a total return of at least 15%, and outperform the S&P 500 over the next six to 12 months. For higher yielding and more conservative equities, such as REITs and certain MLPs, a total return of at least 15% is expected to be realized over the next 12 months. Outperform (MO2) Expected to appreciate and outperform the S&P 500 over the next 12-18 months. For higher yielding and more conservative equities, such as REITs and certain MLPs, an Outperform rating is used for securities where we are comfortable with the relative safety of the dividend and expect a total return modestly exceeding the dividend yield over the next 12-18 months.
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International Headquarters: The Raymond James Financial Center | 880 Carillon Parkway | St. Petersburg, Florida 33716 | 800-248-8863
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Market Perform (MP3) Expected to perform generally in line with the S&P 500 over the next 12 months. Underperform (MU4) Expected to underperform the S&P 500 or its sector over the next six to 12 months and should be sold. Suspended (S) The rating and price target have been suspended temporarily. This action may be due to market events that made coverage impracticable, or to comply with applicable regulations or firm policies in certain circumstances, including when Raymond James may be providing investment banking services to the company. The previous rating and price target are no longer in effect for this security and should not be relied upon. Raymond James Ltd. (Canada) definitions Strong Buy (SB1) The stock is expected to appreciate and produce a total return of at least 15% and outperform the S&P/TSX Composite Index over the next six months. Outperform (MO2) The stock is expected to appreciate and outperform the S&P/TSX Composite Index over the next twelve months. Market Perform (MP3) The stock is expected to perform generally in line with the S&P/TSX Composite Index over the next twelve months and is potentially a source of funds for more highly rated securities. Underperform (MU4) The stock is expected to underperform the S&P/TSX Composite Index or its sector over the next six to twelve months and should be sold. Raymond James Latin American rating definitions Strong Buy (SB1) Expected to appreciate and produce a total return of at least 25.0% over the next twelve months. Outperform (MO2) Expected to appreciate and produce a total return of between 15.0% and 25.0% over the next twelve months. Market Perform (MP3) Expected to perform in line with the underlying country index. Underperform (MU4) Expected to underperform the underlying country index. Suspended (S) The rating and price target have been suspended temporarily. This action may be due to market events that made coverage impracticable, or to comply with applicable regulations or firm policies in certain circumstances, including when Raymond James may be providing investment banking services to the company. The previous rating and price target are no longer in effect for this security and should not be relied upon. Raymond James Europe (Raymond Euro Equities SAS & Raymond James Financial International Limited) rating definitions Strong Buy (1) Expected to appreciate, produce a total return of at least 15%, and outperform the Stoxx 600 over the next 6 to 12 months. Outperform (2) Expected to appreciate and outperform the Stoxx 600 over the next 12 months. Market Perform (3) Expected to perform generally in line with the Stoxx 600 over the next 12 months. Underperform (4) Expected to underperform the Stoxx 600 or its sector over the next 6 to 12 months. Suspended (S) The rating and target price have been suspended temporarily. This action may be due to market events that made coverage impracticable, or to comply with applicable regulations or firm policies in certain circumstances, including when Raymond James may be providing investment banking services to the company. The previous rating and target price are no longer in effect for this security and should not be relied upon. In transacting in any security, investors should be aware that other securities in the Raymond James research coverage universe might carry a higher or lower rating. Investors should feel free to contact their Financial Advisor to discuss the merits of other available investments. Rating Distributions Coverage Universe Rating Distribution* RJA
RJL
RJ LatAm RJ Europe
Strong Buy and Outperform (Buy)
55%
66%
50%
Market Perform (Hold)
40%
33%
Underperform (Sell)
5%
2%
Investment Banking Distribution RJA
RJL
RJ LatAm RJ Europe
44%
22%
44%
0%
0%
50%
34%
9%
23%
0%
0%
0%
22%
2%
0%
0%
0%
* Columns may not add to 100% due to rounding.
Suitability Categories (SR) Total Return (TR) Lower risk equities possessing dividend yields above that of the S&P 500 and greater stability of principal. Growth (G) Low to average risk equities with sound financials, more consistent earnings growth, at least a small dividend, and the potential for long-term price appreciation. Aggressive Growth (AG) Medium or higher risk equities of companies in fast growing and competitive industries, with less predictable earnings and acceptable, but possibly more leveraged balance sheets. High Risk (HR) Companies with less predictable earnings (or losses), rapidly changing market dynamics, financial and competitive issues, higher price volatility (beta), and risk of principal. Venture Risk (VR) Companies with a short or unprofitable operating history, limited or less predictable revenues, very high risk associated with success, and a substantial risk of principal. © 2015 Raymond James & Associates, Inc., member New York Stock Exchange/SIPC. All rights reserved.
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Raymond James
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Raymond James Relationship Disclosures Raymond James expects to receive or intends to seek compensation for investment banking services from the subject companies in the next three months.
Stock Charts, Target Prices, and Valuation Methodologies Valuation Methodology: The Raymond James methodology for assigning ratings and target prices includes a number of qualitative and quantitative factors including an assessment of industry size, structure, business trends and overall attractiveness; management effectiveness; competition; visibility; financial condition, and expected total return, among other factors. These factors are subject to change depending on overall economic conditions or industry- or company-specific occurrences. Only stocks rated Strong Buy (SB1) or Outperform (MO2) have target prices and thus valuation methodologies.
Risk Factors General Risk Factors: Following are some general risk factors that pertain to the projected target prices included on Raymond James research: (1) Industry fundamentals with respect to customer demand or product / service pricing could change and adversely impact expected revenues and earnings; (2) Issues relating to major competitors or market shares or new product expectations could change investor attitudes toward the sector or this stock; (3) Unforeseen developments with respect to the management, financial condition or accounting policies or practices could alter the prospective valuation; or (4) External factors that affect the U.S. economy, interest rates, the U.S. dollar or major segments of the economy could alter investor confidence and investment prospects. International investments involve additional risks such as currency fluctuations, differing financial accounting standards, and possible political and economic instability.
Additional Risk and Disclosure information, as well as more information on the Raymond James rating system and suitability categories, is available at rjcapitalmarkets.com/Disclosures/index. Copies of research or Raymond James’ summary policies relating to research analyst independence can be obtained by contacting any Raymond James & Associates or Raymond James Financial Services office (please see raymondjames.com for office locations) or by calling 727-567-1000, toll free 800-237-5643 or sending a written th request to the Equity Research Library, Raymond James & Associates, Inc., Tower 3, 6 Floor, 880 Carillon Parkway, St. Petersburg, FL 33716. For clients in the United Kingdom: For clients of Raymond James & Associates (London Branch) and Raymond James Financial International Limited (RJFI): This document and any investment to which this document relates is intended for the sole use of the persons to whom it is addressed, being persons who are Eligible Counterparties or Professional Clients as described in the FCA rules or persons described in Articles 19(5) (Investment professionals) or 49(2) (High net worth companies, unincorporated associations etc) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (as amended) or any other person to whom this promotion may lawfully be directed. It is not intended to be distributed or passed on, directly or indirectly, to any other class of persons and may not be relied upon by such persons and is therefore not intended for private individuals or those who would be classified as Retail Clients. For clients of Raymond James Investment Services, Ltd.: This report is for the use of professional investment advisers and managers and is not intended for use by clients. For purposes of the Financial Conduct Authority requirements, this research report is classified as independent with respect to conflict of interest management. RJA, RJFI, and Raymond James Investment Services, Ltd. are authorised and regulated by the Financial Conduct Authority in the United Kingdom. For clients in France: This document and any investment to which this document relates is intended for the sole use of the persons to whom it is addressed, being persons who are Eligible Counterparties or Professional Clients as described in “Code Monétaire et Financier” and Règlement Général de l’Autorité des Marchés Financiers. It is not intended to be distributed or passed on, directly or indirectly, to any other class of persons and may not be relied upon by such persons and is therefore not intended for private individuals or those who would be classified as Retail Clients. For clients of Raymond James Euro Equities: Raymond James Euro Equities is authorised and regulated by the Autorité de Contrôle Prudentiel et de Résolution and the Autorité des Marchés Financiers. For institutional clients in the European Economic Area (EEA) outside of the United Kingdom: This document (and any attachments or exhibits hereto) is intended only for EEA institutional clients or others to whom it may lawfully be submitted.
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International Headquarters: The Raymond James Financial Center | 880 Carillon Parkway | St. Petersburg, Florida 33716 | 800-248-8863
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© 2015 Raymond James & Associates, Inc., member New York Stock Exchange/SIPC. All rights reserved.
International Headquarters: The Raymond James Financial Center | 880 Carillon Parkway | St. Petersburg, Florida 33716 | 800-248-8863
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