Oil Integrated Majors

By pjain      Published Aug. 3, 2020, 7:24 p.m. in blog Invest   

XOM Xx c41.9 T $34 - y5% M=320b

  • Fracking is highly unprofitable done to pay huge debt loads - yet only reason for US product jump to 10m barrels/day
  • Global Nationalism antagonism against US oil companies is severely high with Trump bullying Venezuela, Saudis and Iran

Exxon Mobil Energy sector as a whole and XOM significantly underperformed the S&P 500 over the past 5 years. XOM recently posted very strong 4Q earnings. XOM is focusing on creating value via increases in cash flows and earnings versus the previous focus on production growth. 4.2% dividend yield.

Q2'2020 M184b y=7.9% de=0.34 pef=30x 5y$-9% e=-16% n=4.6% PAY=130%

  • FORCED to Cut Capex - $10b down to $23b since original 2020Jan-plan - this is lowest in four years Slow to cut CEO Woods has been a horror - stock is down 50% since his Jan 2015 BUT CEO WANTED TO KEEP SPENDING COUNTER-CYCLICAL TO BOOST PRODUCTION at assumed $40 bl price! CEO projected $4b increase in earnings in 2020 yoy - BUT DUE TO COVID DID NOT HAPPEN!
  • Has an internal forced ranking - could be used to cut from its 75k jobs to preserve dividends
  • Borrowed $18b to boost cash reserves
  • It had planned $15b asset sales by 2021 - not timed right with sharp drop in oil prices
  • CURRENT FCF cannot cover dividend - to preserve 8% shareholder dividend costing $15b /yr? payout
  • First MASSIVE $2.63b multi-billion Quarterly Loss in Decades, Capex Slashed, Borrowing at very low rates to pay divs
    • Refining to lose $1b Q2

Q1'2020 -610m loss

  • It lost $610 million this quarter and CEO Woods called the challenges from the pandemic “unprecedented.”
  • Slashed planned capital expenditures by 30% this year and is taking a scalpel to expenses.
  • It has raised borrowing to bolster its cash pile even as it faced recent ratings downgrades from Standard & Poor’s and Moody’s.
  • With interest rates so low and with its profitability on a firm downtrend in the past several years, it makes sense to borrow prudently to return cash rather than using it for capital spending

  • Exxon was yet to take asset impairment like EU majors shell/bp and CVX.

ROIC fell on Shale -11% down to 14% from historical 25%

Exxon’s return on invested capital has averaged barely 14% since 2011, or 11 percentage points less than the rate from 2000 through 2010.

Its missteps such as the acquisition of gas producer XTO Energy and a bet on Canada’s oil sands explain some of it,

Competition from Supply boost on Shale Fracking Hurt Exxon

The shale revolution is the main reason for poor ROI.

Short-cycle shale allowed a flood of capital into the business and eroded supermajors’ competitive advantage in making big, multiyear bets on megaprojects. * Fracking is highly unprofitable done to pay huge debt loads - yet only reason for US product jump to 10m barrels/day

Balance Sheet strength - will emerge stronger as Shale mid-caps fail

Exxon has long taken a conservative approach to the energy space, relying on a strong balance sheet as a financial backstop during tough times. Its de is 0.35 which is conservative. However, its LTDebt jumped from near 5% to 32% in Q1'2020. Overall DE doubled from 0.15% to 0.35x.

But, despite the increase in debt, Exxon managed to cover its trailing interest expenses by roughly 18 times in the first quarter.

C19 Demand cut ALSO hurts diversified refining, retail

Exxon's diversified operating model, with businesses across the entire energy industry, is normally a net benefit as oil prices decline, in Covid-19 the very sharp demand decline hit its refining and chemicals very hard as well. So reopening is backfiring as lockdowns repeat - hurting hope in peak season.

Is its div Safe - Into Covid-19 Oil Slump? - 35yr~6%/yr/since1882

  • Safest div in oil? continued to raise their annual dividends through the 2008-2009 financial crisis. Both managed to do the same when oil pries crashed 67%, from a high (for that cycle) of $107.68 on June 13, 2014 through a cycle bottom of $26.05 on Feb. 11, 2016.

The dividend aristocrat that have raised their dividends annually for at least a quarter-century—maintained it this week, diverging from Shell its European peer, which cut its payout for the first time in decades.

  • Exxon paid $14.65 billion in dividends during 2019,

  • XOM has had VERY consistent financials since 2000 - total paid out as divs/buybacks averaged 59$, initially higher buybacks through 2005-2009 depths. But then as coupon rose gradually buybacks have been cut since 2015 to near none by 2019.

  • Exxon has restricted lumpier buybacks ever since the last oil bear market as oil crashed from 2009 highs to 2014.

With its debt manageable and returns on invested capital dropping steadily over that time frame, there is good reason to stay the course.

CEO Darren Woods on Friday defended the company’s decision to keep the same payout, saying that about 70% of its investor base comprises retail and long-term investors that look to Exxon’s dividends.

CVX

2020-08 y6% Multi-top - little upside to stock

  • Chevron faced a rough second quarter with an adjusted loss of $3 billion on revenue of $13.5 billion
  • $2.6 B write-off 100% of its stake in its Venezuela business.
  • $1.8 b low price of crude oil resulted in another since oil was trading at a low of $19 a barrel.
  • Capex cut to $14b
  • Lowering opex by another $1b
  • OIL 3.2m bpd - RESERVES 11.4b bl equiv
  • GAS 7.6mcuft gas pd, 2m lng pd - Reserves (included in oil equiv) 29.5 tcugas, 6.5b lng

BE oil price div is key cost '19=$55

  • For 2019, Chevron's dividend break-even was at $55 per barrel. The company is taking steps to bring this down. During its annual stockholder meeting in May, Chevron also noted that even if Brent crude oil prices -- the international benchmark -- remain under $30 per barrel for two years, it intends to maintain its dividends by reducing share repurchases and capital and operating expenses and using borrowed funds. Whether it does that remains to be seen. However, the company is better positioned than its peers to lean on its balance sheet if needed.

Is its dividend safe? On Acq - could cut - Oil BE $55/bbl

  • Unlike XOM< Chevron has stood out as producing enough cash from operations to cover its dividend.
  • It is hard to see how Chevron can justify maintaining its dividend at such a high cost with the economy now reversing and demand for energy products likely to falter in the back half of the year.
  • Despite the considerable losses for Q4'19 through Q2'20, Wirth claimed the company would "protect the dividend, invest for long term value, and maintain a strong balance sheet." - July 31,2020.
  • As a dividend aristocrat, has mainted a zero over 5yr TSY since 1980, but now with even 10Ts at 0.5% it has a 6% over it.

Management, Buybacks, Capex, Bench strength

Buy on smart NBL $5b offer -8% down - 7/20/2020

  • CVX got it for all stock ie no drawdown on its balance sheet (other than added $8b debt assumed)

    • Southern Delaware (Reeves County) portion of Texas's Permian Basin
    • A solid position in near-ready to produce Colorado's DJ basin
    • A 40% operating interest in the Leviathan natural gas play in the Mediterranean Sea off the coast of Israel.
    • West Africa interests
  • Jul'20 buying NBL for $5 all stock +$8b debt assumption - Generally seen as hugely smart deal!

    • NBL shafted - got value in another low valued energy company - risky - WITH NO CASH
    • Noble Energy owned 62.6% of the limited partner units of Noble Midstream Partners NBLX
    • NBL was NOT in default or in trouble - bonds were depressed - on this cvx offer went back to par - "we will get paid"
    • 2 yrs ago NBL $34.7, NBLX $52 - now CVX buying for $10.4/$$9 now

2020 Tracking

Q3'20 outlook bad

Chevron warned July 31,2020 "demand and commodity prices have shown signs of recovery, they are not back to pre-pandemic levels, and financial results may continue to be depressed into the third quarter of 2020."

Q2'2020 - (52 c86 125) -8.3b on Asset impairment R5 c118 y4% 3yr/ M230b 32yr/

COVID-19 significantly reduced demand for our products and lowered commodity prices."

  • EPS -$1.59 per share y $2.27
  • $13.49 b y $36.32b .
  • Collapse in demand for the company's energy products
  • 60% YoY plunge in its average price per barrel of oil and natural gas liquids.
  • Writeoffs continued in Q2 with $1.8b writedowns including fully impaired $2.6b Venezuela operations on US sanctions.

Q1'2020 $11b writeoffs

  • Chevron took an $11 billion hit in December related to its U.S. natural gas assets.

2019 Tracking @ y7.5% ytd-60%

  • More conservative management - did not payup like oxy for anadarko - earliest to cut capex
  • Chevron has the strongest positioning in the integrated oil sector," with one of the lowest production break-even points and "the strongest balance sheet by far.

  • Safest div in oil? continued to raise their annual dividends through the 2008-2009 financial crisis. Both managed to do the same when oil pries crashed 67%, from a high (for that cycle) of $107.68 on June 13, 2014 through a cycle bottom of $26.05 on Feb. 11, 2016.

Chevron paid out $9b in dividends in 2019.

  • Steal at discounted prices because of the companies’ high quality. Pavel Molchanov, an analyst with Raymond James, said two weeks ago that it would be “virtually unthinkable” for either company to cut their dividend.

---- Canada Oil and Energy

IMO Canada y=2.6% M=20b

Other US, Canadian Majors and Midsize, E&P xxx--TOO RISKY---

ECA y=1.4% M=6.5b

COP R5 c51.8\\ - too low?

APC

  • 30 top holdings by hedgies

British, EU Majors

RDS-A Xx 0 divs cut!

  • cut div of 6%+ 66% after 75 years of div-growth

Secretive oil-trading businesses of Royal Dutch Shell Plc and Total SE saved both European majors from posting losses in the second quarter, bringing a torrent of cash that countered the impact of the coronavirus crisis. Shell took advantage of its sprawling infrastructure that allowed it to capitalize on the market’s volatility -- from storing oil cheaply to adapting its refineries to meet changes in demand. Shell benefited from “all sorts of arbitrages that opened up in unusual parts of the world. With its vast access to data from its shipping network, its refining positions and high flow of trades, Shell was able to capitalize on the market structure more extensively than the average trader, finding contango plays in more obscure non-benchmark crudes.

Q2'20 divs cut as EU rates NIRP

  • Massive losses => Expect 30-60% dividend cut - just like shell did despite paying since WWII.
  • NEED to reduce debt leverage
  • Greening needs billions in investments - to eliminate carbon emissions Shell and BP got the bad news out of the way in June by disclosing they would write down as much as $22 billion and $17.5 billion respectively in the second quarter as the pandemic hammered the long-term valuations of everything from oil to liquefied natural gas.

R5 y6% M235b or RDS-B c56

Royal Dutch Shell – Supermajor oil producers are a good way to avoid trade tensions because their products are essential to economies – few can afford to block their import. Shell is one of my favored oil supermajors. Supermajors take some of the x-factor out of investing in oil companies. They tend to diversify beyond just oil production, into natural gas and oil refining. They also tend to own assets in the cheapest areas for production. That gives them a lot of cushion against oil price volatility, of which we’ve seen plenty since 2015.

July 1, 2020 - To writeoff $20b as oil, gas to remain low.

Royal Dutch Shell published its second-quarter 2020 outlook Tuesday morning, warning that it would write down up to $22 billion worth of assets and revise its long-term energy price outlook.

This is an update to the second quarter 2020 outlook provided in the first quarter results announcement on April 30, 2020. The impacts presented here may vary from the actual results and are subject to finalisation of the second quarter 2020 results.

Unless otherwise indicated, presented post-tax earnings impacts relate to earnings on a current cost of supplies basis, attributable to shareholders, excluding identified items.

In addition, given the impact of COVID-19 and the ongoing challenging commodity price environment, Shell continues to adapt to ensure the business remains resilient. In light of this, Shell is announcing today a revised long-term commodity price and margin outlook, which is expected to result in non-cash impairments in the second quarter results. Details of the outlook and impairments are provided in the later part of this document. - Shell second quarter 2020 update

The Anglo-Dutch company warned about severe virus-related impacts and the ongoing deterioration in demand for energy products and price slump, which has resulted in post-tax impairment charges of about $15 billion to $22 billion in the quarter. Based on these reviews, aggregate post-tax impairment charges in the range of $15 to $22 billion are expected in the second quarter. Impairment charges are reported as identified items and no cash impact is expected in the second quarter. Indicative breakdown per segment is as follows:

Integrated Gas $8 – $9 billion, primarily in Australia including a partial impairment of the QGC and Prelude asset values

Upstream $4 – $6 billion, largely in Brazil and North America Shales

Oil Products $3 – $7 billion across the refining portfolio

  • Shell second quarter 2020 update

Given the commodity bust and global economic downturn - Shell provides a revised outlook for spot Brent and NatGas:

Brent: $35/bbl (2020), $40/bbl (2021), $50/bbl (2022), $60/bbl (2023) and long-term $60 (real terms 2020)

Henry Hub: $1.75/MMBtu (2020), $2.5/MMBtu (2021 and 2022), 2.75/MMBtu (2023) and long-term $3.0/MMBtu (real terms 2020)

BP R5 c36 y=6.2% M=134b - b@5yr Low?

  • Massive losses => Expect 30-60% dividend cut - just like shell did despite paying since WWII.
  • NEED to reduce debt leverage
  • Greening needs billions in investments - to eliminate carbon emissions
  • Shell and BP got the bad news out of the way in June by disclosing they would write down as much as $22 billion and $17.5 billion respectively in the second quarter as the pandemic hammered the long-term valuations of everything from oil to liquefied natural gas.

TOT R5 c48 y=5% M-150b @5yr low=?

  • Secretive oil-trading businesses of Royal Dutch Shell Plc and Total SE saved both European majors from posting losses in the second quarter, bringing a torrent of cash that countered the impact of the coronavirus crisis.

Mideast Oil Producers

Politics of Oil and Dictatorships/Oligarchs

Ironically, terms are what matters, Iraq since 2003 and Iran after Shah overthrow have protested these privatization/production-sharing agreements where.

Saudi Aramco XXx SOE - 12 mbpd 15% of world

Issues and Risks

  • Corporate governance an issue - as Saudi hundreds of princes control
  • Security post Iran attack on its oil installations
  • Lack of transparency eg how big are reserves, etc.
  • Future production and profit outlook is risky - both on government control and issues on oil demand and over-supply

FY2019

  • Dec 5'19> Raised $25.6B for 1.5% in IPO at ~32 Riyals/sh or $8.5 at top end of 30-32 range, and valuation $1.7T
  • 2017 Revenues $456b on 10.2 mbpd

About

  • The country ranked as the largest oil producer in the decade from 2003 to 2012, after which it fell to second place due to surging oil production in the United States.
  • With proven oil reserves of about 337 billion barrels and relatively low production costs, Saudi Arabia should maintain its position as a top-three oil producer for the foreseeable future
  • HOLDERS are Saudi royalty though claim is to diversify Saudi Arabia's economy away from its overwhelming reliance on petroleum.
  • IPO in Dec. 2019 $2T unrealistic, arm-twisted -> fell mid'20 to <$1.2T - NOTE VERY THIN only 1.5% of the company

Iraq 4.7 mbpd

Iraq increased production since the end of the Iraq War in 2003 to 3m by 2012, but did not meet its 2011 goals, and unlikely to meet 4.5m 2013 goal, or the 5m 2014 one.

It has a stated goal of 12 mbpd by 2017 - PROBLEM is will require at least $200bn in physical and human investments.

  • Now second-largest producer in the Middle East and sixth in world

Iraq increased production since the end of the Iraq War in 2003 to 3m by 2012, but did not meet its 2011 goals, and unlikely to meet 4.5m 2013 goal, or the 5m 2014 one.

It has a stated goal of 12 mbpd by 2017 - PROBLEM is will require at least $200bn in physical and human investments and due to its internal problems unlikely will get beyond 4-5 mbpd.

UAE 4.2 mbpd 7th largest

The United Arab Emirates (UAE) is a federation of seven emirates, including Dubai and the capital of the federation, Abu Dhabi. Each of the seven emirates controls oil production within its borders. However, Abu Dhabi is home to most of the proven oil reserves in UAE territory and, thus, it has an outsized role in establishing the federation's oil policy. Other emirates use similar production-sharing agreements like ADNOC and service contracts to organize oil production. Some of the biggest international companies involved in UAE oil production include BP, Royal Dutch Shell, Total S.A., and ExxonMobil.

Ironically, terms are what matters, Iraq since 2003 and Iran after Shah overthrow have protested these privatization/production-sharing agreements where.

Abu Dhabi National Oil Company (ADNOC) SOE

It controls oil production operations in Abu Dhabi under the direction of the emirate's Supreme Petroleum Council. Most oil production in Abu Dhabi is organized under production-sharing agreements between ADNOC and international oil companies.

National Iranian Oil Xx SOE - 4 mbpd SANCTIONS

  • It has the capacity to produce 4 million barrels of oil per day.
  • SANCTIONED - Depressed production caused primarily by international economic sanctions related to Iran's nuclear weapons program. Iran is one of the world's largest oil producer, but output is below potential due to economic sanctions.
  • Massive $500b China deal front loaded 5 of 20 years out at 20% discount supply from Iran Chabbar -> Gwadar -> Pakistan CPEC Pipeline?

  • Controls ALL upstream operations in the oil and natural gas sectors and all downstream activities in the oil sector in Iran.

  • Controlled directly by Iran's Supreme Leadership Council.

KPC Kuwait Petroleum Corp SOE Xx - 3 mbpd $252b - 9th largest

  • $252 B in revenue for 2017.
  • 3.15 mbpd as of Jan. 2018. but varied 2.5 to 3 mbpd for more than a decade.
  • Kuwait is the world's ninth-largest producer,

International oil companies have long been denied access to Kuwait because the Kuwaiti constitution does not allow foreign companies ownership stakes in Kuwaiti natural resources or the revenues associated with those resources. This means standard joint ventures and production-sharing agreements used in other countries are outlawed in Kuwait.

The state-owned Kuwait Petroleum Corporation (KPC) has a monopoly of KPC but therefore lacks resources of capital and technology of global oil majors. It has maintained consistent production of between about 2.5 million and 3 million barrels per day, but, according to the EIA, Kuwait has been struggling to raise production to 4 million barrels per day during this period, falling short due to inadequate foreign investment and related delays in new oil production projects.

State Owned International

Rosneft R7 $100b 11 mbpd

SEG: Russia ops - 99%

  • 2017 $91.7 B in revenue
  • Sept. 2018 11.35 mbpd

SEG: International ops

  • Has E&P in USA, Canada, Vietnam, Norway and Brazil, among other countries.

About

  • Originally all of Rosneft's shares were owned by the Russian government through its holding company JSC Rosneftegaz,
  • 2006 IPO
  • 2018 government maintains control of 50% of the company's stock.

EQNR Norway M=68b

  • Massive losses => dividend cut - just like shell did despite paying since WWII.
  • NEED to reduce debt leverage
  • Greening needs billions in investments - to eliminate carbon emissions
  • Said its trading division made a record $1 billion gain in the second quarter.

2019 y=5%

PBR Xx Brazil

Heavily Corrupt

Petróleos de Venezuela S.A. (PDVSA) Xx SOE - 2.5 mbpd SANCTIONS

  • Controls World's largest proven reserves of oil
  • 1976 Nationalized.
  • 2016 2.5 mbpd
  • More than a dozen international oil and gas companies maintain exploration and production operations in Venezuela under investment agreements with PDVSA.

India SOE 2.5 mbpd

ndia accounts for production of about 2.5 million barrels per day. While production growth has steadied in recent years, oil consumption in India continues to grow by leaps and bounds. India ranks as the third-largest oil importer in the world after U.S. and China.

ONGC SoE

Oil and Natural Gas Corporation, which accounted for roughly 75% of domestic production.

Reliance Industries - Refiner - no E&P - mega plastics, yarn, derivatives

Cairn India

The Indian subsidiary of the British oil and gas company, Cairn Energy PLC, is the second-largest contributor to India's oil market.

Nigerian National Petro NNPC Xx SOE - 2.0 mbpd

  • Biggest oil operator in Africa,
  • 2.0 mbpd 2017
  • International oil companies work with NNPC under joint venture agreements and production-sharing contracts.

Smaller Producers and Countries

E Italy XXx y=6% M-60b

  • Massive losses and writeoffs of $10b

SSL S.Africa y=4.5% M=14b

YPF Argentina Xx c5.7 (2.7 10)

  • 20200830 y=2.5% M=3.6b deHigh=1.1x - 5yr$ 37% E-39%
    • TTM Loss of -266m or -.68/sh
    • FTM exp 0.07

About

  • YPF Sociedad Anonima Energy | Oil & Gas Integrated | Argentina The company engages in the exploration, development, and production of crude oil, natural gas, and liquefied petroleum gas (LPG). It is also involved in the refining, marketing, transportation, and distribution of oil, petroleum products, petroleum derivatives, petrochemicals, LPG, and bio-fuels, as well as in gas separation and natural gas distribution operations. It offers diesel, fertilizers, lubricants, phytosanitary products, ensiling bags, and other products; and supplies fuels, coal, asphalts, and paraffin and derivatives. The company was founded in 1977 and is based in Buenos Aires, Argentina.

  • 202001 Had interests in 127 oil and gas fields; 673 million barrels (mmbbl) of oil; and approximately 2,481 billion cubic feet of gas

  • Retail network of 1,620 YPF-branded service stations
  • 24 exploration permits, including 20 onshore and 4 offshore exploration permits, as well as 103 production concessions;
  • 35 crude oil treatment plants and 12 pumping plants
  • Owns three refineries with annual refining capacity of approximately 116 mmbbl;
  • Owns 2,800 kilometers of crude oil pipelines with approximately 640,000 barrels of aggregate daily transportation capacity of refined products
  • Crude oil tankage of approximately 7 mmbbl, as well as maintains terminal facilities at five Argentine ports
  • Sixteen power generation plants with an aggregate installed capacity of 2,614 megawatts

Indonesia 0.8 mbpd

  • 1962 joined OPEC as it was a significant oil producer
  • 1990s, it was 1.7+ mbpd but declined due to aging oil fields
  • 2009 Rising domestic demand and little domestic E&P compelled Indonesia to exit the OPEC, it rejoined only to leave again in 2016
  • 2013 production of about 835,000 barrels per day.

PT Chevron Pacific Indonesia, a subsidiary of the American energy giant Chevron Corporation, is Indonesia's biggest oil producer, accounting for an estimated 40% of production, while Indonesia's state-owned energy company, PT Pertamina, is responsible for an additional 25%. Foreign oil companies including Total SA, ConocoPhillips, and CNOOC are also significant producers in the region.

Malaysia 0.66 mbpd

Most of which is extracted from offshore fields.

  • 1991 on production ranged 650,000 - 850,000 bpd
  • Downward production due to declining output at aging oil fields
  • The Malaysian government is responding by encouraging investment in recovery technology and new field development - but its internal corruption stymies it eg 1MBD scandal.
  • China is likely to be main "partner"

Petroliam Nasional Berhad, also known as Petronas, is Malaysia's state-owned energy corporation. It controls all oil and gas resources in the country and is responsible for development of those assets. International integrated oil and gas companies, such as Exxon Mobil Corporation, Murphy Oil Corporation, and Royal Dutch Shell PLC, are involved with Petronas in oil production activities in Malaysia, including partnerships in enhanced oil recovery projects at aging oil fields.

Vietnam 0.35 mbpd

  • 2000 on production was 0.35 mbpd
  • 2018 declined to 0.3 mbpd

In 2011, offshore exploration and drilling activities raised Vietnam's proven oil reserves from 600 million barrels to 4.4 billion barrels, rocketing it into third place in Asia after China and India.

However the South China sea is highly contested as China wants to benefit from oil and strategic control of these waters!

=== China Oil Sector

China State Largest Oil and Gas market - Mostly Imported

  • So China Oil Companies continue to dominate the oil and gas sector when it comes to revenues. China's biggest crude oil companies are mostly state-owned energy conglomerates with sprawling international operations in exploration and production, petroleum and chemical processing, storage and transportation, as well as many other functions along the oil and gas supply chain.

China-Iran $500b Oil@20% discount direct ship, bypass US

China State owned enterprise - profit minimized by Employee base, Loss on Regulated Gas imports

Employee SOE: - Massive employee bases - could cut 50% of its base

CCP Interference and Reward system for Posts and Corruption - in a limited manner cuts ROI

State Policy = LOSS: Forced to distribute imported gas at a loss in immense

Profit on Oil is capped price regulation

  • Populist measures cause the achievable prices and therefore profits to be far less than "fair-market" prices.
  • To avoid protests by consumers, even though gasoline is taxed at multiple government levels.

Import sanctions on Iran disrupting Chinese Oil industry

China does NOT want to rely on Russia - due to past global tensions = like gas to Europe!

Midstream: National Oil Midstream Business being taken away

China plans to create a state-held oil and gas pipeline company, combining the midstream assets of the national firms in a bid to allow energy companies to focus on boosting exploration and production. https://oilprice.com/Latest-Energy-News/World-News/China-Readies-State-Oil-Gas-Pipeline-Firm-In-Major-Asset-Shakeup.html

Bottom line, the profits of Midstream Midstream to be taken away from Chinese Oil Majors. - Pipelines from Central Asia, Russia and Mideast have become huge political footballs. - To allow this Chinese govt. is consolidating all regional pipelines, taking away from esp. PetroChina.

Downstream to Foreign Oil Companies: Refining and Value Added products being given away!

Bottom line, the profits of downstream are increasingly being taken away from Chinese Oil Majors.

  • China can appease the powerful Oil Companies who influence the "Eyes on the Prize" Political factions bought and paid for since early 1900s
  • Trade war tactic
  • But the profit on refining, etc => capacity increase and produce locally is hard
  • Downstream facilities being forced to be built in eg Ghawadar port in Pakistan as part of Saudi-Pakistan-China collaboration for CPEC corridor there.

E&P Focus is VERY Hard as very tough to find in China itself, International political barriers,

--- SNP ADR - No1 @10yr lows - c45 b42.5 my9.7% div=4.4 EPSt 2.7

  • chinese oil in hands of SOE - no logic x Avoid chinese - too much state control => policies to keep prices/profits low - PTR,SNP
  • Sinopec 360:HK - Mega Refiner

FY2020 $406b I=3.3b - M=67b P/S=0.17

  • Overall Business H120 NI--3.2b -22bY loss y 32bY The company has never posted a half-year loss since listing in Hong Kong in 2000.

SEG INTEGRATED Oil - H120 NI-30bY loss y 19bY

  • 2nd in F500 global - Sales $414b'2019
  • 300m barrels domestic + 50 mb overseas

About -

Sinopec maintains vast operations along the full length of the oil supply chain, from exploration and drilling to retail sales at more than 30,000 gasoline service stations. * Employs about 620,000 people across the world.

The company has never posted a half-year loss since listing in Hong Kong in 2000.

  • 2000 listed HKO, then listed on Shanghai, NYSE
  • China Petroleum & Chemical Corp., as it’s officially known - founded 2000, HQ Beijing
  • 1998 Restructuring of China Petrochemical Corporation.

SEG: Integrated

  • Biggest by production volume.

CNPC/PTR No.2

  • chinese oil in hands of SOE - no logic x Avoid chinese - too much state control => policies to keep prices/profits low - PTR,SNP

  • $438b '2017

  • Producing 2mbpd mid 2018

About China National Petroleum Corporation

Founded: 1988 Headquarters: Beijing - Fourth spot on the Fortune 500 Global list with more than $392 billion in consolidated revenue. CNPC operates businesses along the full length of the oil supply chain, from initial exploration to retail, with about 1.4 million people working across the world. Most CNPC operations are organized under PetroChina (PTR), a subsidiary company that was established in 1999. PTR trades on both the NYSE and the HKG. Shares started trading on the Shanghai Stock Exchange in 2007.

SEG: PTR PetroChina - public subsidiary of CNPC est 1999

  • Trades on NYSE, HKG, Shanghai trading started 2007

Why it fell from>$1T 2007 to $210b in 2019 even though it has $170b of reservers

  • The $1T Market Cap was due to IPO investor exuberance

    Nov 5, 2007 Its IPO on the Shanghai Stock Exchange on, its share price almost tripled its IPO price and took its market value beyond the US$1-trillion mark Nov 2017, 10 years later it has wiped out nearly $800B of shareholder value July 2019 YTD PetroChina’s shares in Hong Kong have lost 14%, while the share prices of Exxon, Chevron, and Shell have risen by between 12 and 14%

  • Of course since the vast majority of shares are owned by the Chinese Government, this is all paper money!

Jefferies July 2019> “There is no valuation method that can validate the current share price,” Bernstein> PetroChina could revive its share price performance by cutting the money-losing business of importing natural gas at higher prices than the resale price, regulated by the state, and cut in half its excessively high workforce.

  • At a MCap/Reserve ratio of 0.8 it is lowest among 25 oil majors followed by Bernstein.

CEO x

  • chinese oil in hands of SOE - no logic x Avoid chinese - too much state control => policies to keep prices/profits low - PTR,SNP

CNOOC

SEG: Integ oil,gas

  • FY'19 $108 b in consolidated revenue, ranking in the 63rd spot on Fortune's top global companies in 2019.
  • Operations in more than 40 countries.

SEG: OFFSHORE CHINA producer - hence South China push

About

China National Offshore Oil Corporation Founded: 1982 Headquarters: Beijing

In addition to oil and gas exploration and production, CNOOC is also engaged in refining, power generation, retail marketing, and engineering. Most of the company's primary operations are organized under its subsidiary, CNOOC Limited. CNOOC is listed on the NYSE, trading as CEO, and the HKG in 2001.

Shaanxi Yanchang Petroleum

The company earned $43.9 billion in consolidated revenue, making it the 263rd biggest company in the world, according to the Global 500 list from Fortune.

About

Among the largest oil producers in China. Founded 1905, Headquarters: Xi'an, Shaanxi, China - Traces ancestry to Yanchang Oil Plant—the first oil enterprise established in China. Yanchang Petroleum's operations are organized under its subsidiary Yanchang Petroleum International, which is listed on the HKG.

Sinochem

About

Among the largest oil producers in China.

Founded: 1950 Headquarters: Beijing Sinochem Group was established during the reorganization of China's largest international trading firm, China National Chemicals Import and Export Corporation. Sinochem Group remains one of the largest chemical companies in the country, but it has expanded its operations to include energy, real estate, agriculture, and financial services.

The company earned more than $89 billion in revenue, taking the 88th spot on the Fortune 500 Global list for 2019. Although it ranked higher in revenue than Shaanxi Yanchang, its production level is much lower. In fact, the company produces more than 25 million barrels of oil daily, making it China's fifth-largest crude oil producer by volume. Sinochem owns more than 300 subsidies including Sinochem International, China Jinmao, and Sinofert.


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