Petrochina (857 HK)-OW: Shared Acquisition of Petrobras' Peru

Company report Nat Resources & Energy Oil & Gas abc

Equity – China Global Research

PetroChina (857 HK)

Overweight OW: Shared acquisition of Petrobras’ Peru assets; Target minimally accretive price (HKD) 11.40 Share price (HKD) 8.71  CNODC, the PetroChina/CNPC 50/50 JV, acquired three Peru Potential return (%) 30.9 blocks from Petrobras for USD2.6bn Note: Potential return equals the percentage difference between the current share price and  the target price Production is minimally accretive at <1% via 100% interest in Dec 2012 a 2013 e 2014 e two blocks and 46.16% interest in a third block HSBC EPS 0.63 0.73 0.72 HSBC PE 10.9 9.4 9.5  Maintain OW with TP of HKD11.40 Performance 1M 3M 12M Absolute (%) -2.2 -5.3 -15.8 Relative^ (%) -3.9 -11.6 -17.3 Event: Two indirect subsidiaries of PetroChina acquired Petrobras Energia Peru from its Note: (V) = volatile (please see disclosure appendix) parent Petrobras, via purchase of 145mn shares for USD2.6bn. The purchasers, CNPC Holdings and CNODC International, are overseas subsidiaries of CNPC Exploration and Development (CNPC E&D), a 50/50 JV by PetroChina and parent CNPC. The transaction price is c.4x book and c.4.3x sales of the acquired corporate entity. The opportunity is for 14 November 2013 Enhanced Oil Recovery, deep and difficult exploration drilling through hard rock below 3,000m, and a large prospective gas resource. The deal looks good on an NPV work down Thomas Hilboldt*, CFA Head of Oil, Gas & Petrochemical of the two producing blocks but will require substantial investment to extract full value, Research, Asia-Pacific raising the risks. The Hongkong and Shanghai Banking Corporation Limited Another Latin American notch: Following the commitment for 10% of Brazil’s Libra +852 2822 2922 thomaschilboldt@hsbc.com.hk development consortium, this deal shows CNPC/PetroChina’s intent to expand its upstream portfolio in Latin America and beyond. Total 2P+Contingent reserves of the Tingting Si* Analyst three blocks are 12.5bn boe, with an acquisition cost of USD0.21/boe. PetroChina said it The Hongkong and Shanghai Banking knows these assets well as it and CNPC have operated in nearby fields. Corporation Limited +852 2996 6590 Details: CNPC E&D acquires: a) full interest in Block X and Block 58 and b) 46.16% [email protected] interest in Kinteroni (Block 57). Block X (producing) has remaining 2P reserve of

125mmbbl of oil and 94bcf of gas. Block 58 (under development) has contingent reserve View HSBC Global Research at: http://www.research.hsbc.com of 2tcm of gas and 114mmbbl of condensate. Block 57, operated by Repsol, started *Employed by a non-US affiliate of production in mid-2013 and has 2P reserve of 107mmbbl of liquids and 1,996bcf of gas. HSBC Securities (USA) Inc, and is not Total output is 0.8mmtoe, or c.0.4% PetroChina’s 2012 production. registered/qualified pursuant to FINRA regulations Valuation and risks: Our TP of HKD11.4 is derived using a 15% discount to our DCF- Issuer of report: The Hongkong and Shanghai Banking based NAV per share of HKD13.4, with a cross-check to historical PE ratio ranges. Our Corporation Limited target price implies 12.4x 2014e EPS, within the range of the historical average trailing Disclaimer & PE of approximately 11.8x in 2003-13 and 12.4x over 2009-13. Downside risks include Disclosures on-going corporate governance issues, lower-than-expected oil prices, regulatory reverse This report must be read course on pricing reform and unfavourable injection of international acquisitions. with the disclosures and

the analyst certifications in Index^ HSCEI Enterprise value (USDm) 280,751 the Disclosure appendix, Index level 10,637 Free float (%) 11 RIC 0857.HK Market cap (USDm) 230,159 and with the Disclaimer, Bloomberg 857 HK Market cap (HKDm) 1,784,397

which forms part of it Source: HSBC Source: HSBC

PetroChina (857 HK) Oil & Gas abc 14 November 2013

Financials & valuation

Financial statements Key forecast drivers Year to 12/2012a 12/2013e 12/2014e 12/2015e Year to 12/2012a 12/2013e 12/2014e 12/2015e Profit & loss summary (CNYm) Brent Crude ($/bbl) 112 101 90 91 Realized Oil Price ($/bbl) 104 93 86 87 Revenue 2,195,296 2,520,935 2,570,471 2,820,796 Gas Price ($/Mcf) 5.0 5.4 5.9 6.4 EBITDA 317,145 379,642 393,411 424,355 Total Production (mmboe) 1,343 1,387 1,437 1,491 Depreciation & amortisation -142,626 -180,631 -193,625 -205,605 Lifting costs ($/bbl) 11.7 13.0 13.1 13.4 Operating profit/EBIT 174,519 199,011 199,786 218,750 Gross Marketing Margin ($/bbl) 12.3 12.5 12.6 12.6 Net interest -16,101 -19,473 -19,440 -21,973 PBT 166,811 189,692 190,339 207,780 HSBC PBT 166,811 189,692 190,339 207,780 Taxation -36,191 -40,784 -40,923 -44,673 Valuation data Net profit 115,326 132,849 132,554 145,402 Year to 12/2012a 12/2013e 12/2014e 12/2015e HSBC net profit 115,326 132,849 132,554 145,402 Cash flow summary (CNYm) EV/sales 0.8 0.7 0.7 0.6 EV/EBITDA 5.4 4.5 4.4 4.2 Cash flow from operations 239,288 352,170 361,341 388,945 EV/IC 1.1 1.0 1.0 0.9 Capex -352,516 -355,000 -355,000 -355,000 PE* 10.9 9.4 9.5 8.6 Cash flow from investment -332,226 -295,077 -355,016 -355,283 P/Book value 1.2 1.1 1.0 1.0 Dividends -51,897 -59,782 -59,649 -65,431 FCF yield (%) -3.2 -2.9 -1.7 -0.2 Change in net debt 144,425 -11,025 53,324 31,769 Dividend yield (%) 4.1 4.8 4.8 5.2 FCF equity -41,858 -38,383 -22,240 -2,847 Note: * = Based on HSBC EPS (fully diluted)

Balance sheet summary (CNYm) Intangible fixed assets 41,521 44,664 48,257 51,534 Price relative Tangible fixed assets 1,631,201 1,751,705 1,887,902 2,017,862 16 16 Current assets 414,332 440,049 442,135 478,968 15 15 Cash & others 43,395 59,080 59,080 59,080 14 14 Total assets 2,168,896 2,327,079 2,479,150 2,660,165 13 13 Operating liabilities 520,841 540,921 549,776 599,132 12 12 Gross debt 445,021 449,682 503,006 534,775 11 11 Net debt 401,626 390,601 443,925 475,695 10 10 Shareholders funds 1,064,010 1,150,791 1,223,696 1,303,667 9 9 Invested capital 1,522,818 1,636,417 1,769,438 1,890,151 8 8 7 7 2011 2012 2013 2014 Ratio, growth and per share analysis PetroChina Rel to HSCEI Year to 12/2012a 12/2013e 12/2014e 12/2015e Source: HSBC

Y-o-y % change Note: price at close of 12 Nov 2013 Revenue 9.6 14.8 2.0 9.7 EBITDA -1.1 19.7 3.6 7.9 Operating profit -4.4 14.0 0.4 9.5 PBT -9.4 13.7 0.3 9.2 HSBC EPS -13.3 15.2 -0.2 9.7 Ratios (%) Revenue/IC (x) 1.6 1.6 1.5 1.5 ROIC 9.7 9.9 9.2 9.4 ROE 11.2 12.0 11.2 11.5 ROA 7.1 7.4 6.9 7.1 EBITDA margin 14.4 15.1 15.3 15.0 Operating profit margin 7.9 7.9 7.8 7.8 EBITDA/net interest (x) 19.7 19.5 20.2 19.3 Net debt/equity 34.0 29.7 31.6 31.7 Net debt/EBITDA (x) 1.3 1.0 1.1 1.1 CF from operations/net debt 59.6 90.2 81.4 81.8 Per share data (CNY) EPS reported (fully diluted) 0.63 0.73 0.72 0.79 HSBC EPS (fully diluted) 0.63 0.73 0.72 0.79 DPS 0.28 0.33 0.33 0.36 Book value 5.81 6.29 6.69 7.12

2 PetroChina (857 HK) Oil & Gas abc 14 November 2013

Acquisition vehicles remaining reserves are small, at 125mmbbl of gas and 94bcf of gas. Production in 2012 totalled CNPC E&D –the buyer 14.2kb/d of oil and 10.6mmcfd of gas. CNPC E&D is a 50/50 JV subsidiary formed in 2005 and is held by: Block 58- 100% Block 58 is an exploration-stage asset located in  PetroChina, and the Department of Cuzco, near Camisea. The  China National Oil and Gas Exploration and block has contingent resource of 2tcm gas and Development Corporation (CNODC), the 113.7mmbbl of condensate. Petrobras has 100% overseas E&P investment vehicle of CNPC. interest in the block.

CNPC E&D has operations in Kazakhstan, Kinteroni (Block 57) – 46.16%, NPV Venezuela, Indonesia, Peru, Algeria, Azerbaijan, USD1.4bn Chad, Canada, the PRC, Ecuador, Niger and Oman. The block is a large gas/condensate field located These are the non-sanctioned country assets. in the Ucayali Basin of southeast Peru. The Petrobras Energia Peru – the seller partners are Repsol (53.85% stake) and Petrobras (46.16% stake). The target company is an indirect wholly-owned subsidiary of Petrobras, Brazil’s national Production commenced mid-2013. The petroleum company. Total assets of Petrobras exploration upside is huge in the block as it Energia Peru stood at USD1.42bn with net assets possesses 2P reserve of 48mmbbl of condensate, of USD660mn as of end-2012. Revenue was 59mmbbl of LPG and 1,996bcf of gas. 2013 USD600mn with net profit of USD102m. output is expected to reach 0.9kb/d liquids and Asset profile 12.5mmcfd gas. Block X – 100%, NPV USD2.2bn In 2012, the partners made a second large discovery – Sagari – which is estimated by Block X is a mature producing asset with Woodmac to have c1.5tcf of gas reserves. The recoverable 2P reserve of 1,191mmbbl of oil and discovery is currently under appraisal. 92bcf of gas. Petrobras holds 100% stake in the block. Production started in early 1900s and

Block X and Block Kinteroni production profile, mmboe, PetroChina’s production profile, mmboe, 2002-2015e 2013-2020e 150 1,500 1,387 1,387 1,343 1,343 1,437 1,437 1,491 1,491 1,286 1,286 120 1,200 1,228 1,196 1,196 1,181 1,181 1,064 1,064 90 900 1,117 11.9 11.9 12.0 12.0 12.0 12.0 12.0 12.0 60 9.8 600 8.6 6.6 6.6 7.4 7.4 30 300

0 0 2006 2007 2008 2009 2010 2011 2012 2013e 2014e 2015e 2013e 2014e 2015e 2016e 2017e 2018e 2019e 2020e Liquid (mmboe) Gas (mmboe) Total (mmboe) Oil (mmboe) Gas (mmboe) O&G production (mmboe)

Source: Wood Mackenzie, HSBC Source: PetroChina, HSBC estimates

3 PetroChina (857 HK) Oil & Gas abc 14 November 2013

Valuation and risks PetroChina – Downside risks to our OW investment case Oil prices – Oil prices could settle at levels well below spot due to Our PetroChina TP of HKD11.4 is derived using a US tight oil production increases and rising OPEC spare capacity. 15% discount to our DCF-based NAV per share Regulatory risks – The NDRC could reverse course on pricing reform if China’s economy slows too much with the current reform of HKD13.4, with a cross-check to historical push. M&A risk – CNPC’s recent international acquisitions may be injected ranges of price to earnings (PE) ratios. We use a into PetroChina at unfavourable prices. DCF-based, SOTP approach to value PetroChina. China/Global economic risks – China is turning away from fiscal and monetary stimulus, which may slow down economic activity. We employ DCF methodology for all existing Market risks – Volatility or dislocation in financial markets, proved oil and gas assets in the E&P sector. We currencies or interest rates that impact global trade. Geopolitical risks – OPEC member countries may come under use a global rather than company-specific WACC pressure to increase oil production in order to support their of 10% in our DCF valuation of the oil and gas government budgets, and social and investment programs. Corporate governance risks – On-going corporate governance assets, reflecting our view that it is hard to assess issues related to Chinese government’s probe into “disciplinary oil company risk on a country-by-country basis violations” by SOE management Source: HSBC estimates and the value of the asset will mirror global market rates, which are based on an industry standard benchmark discount rate of 10%. We apply a mid-cycle 6x EV/EBITDA to the other segments’ normalised EBITDA (average of 2012- 15e). We use a refining sector multiple which is 3x or half mid-cycle, which continues to reflect PetroChina’s underperforming refinery assets. This discounted valuation implies a 12.0x 2013e multiple, near PetroChina’s average PE since 2009 of 12.4x.

Reserve summary of the three blocks Interest by PetroChina Block name Remaining 2P + Net to PetroChina+CNPC + CNPC Contingent Reserves as at Jan 2013 100% Block X Oil (mmbbl) – 2P 125 125 Gas (bcf) – 2P 94 94 Subtotal (mmboe) – 2P 141 141 46.16% Kinteroni (Block 57) LPG (mmbbl) – 2P 59 27 Condensate (mmbbl) – 2P 48 22 Gas (bcf) – 2P 1,996 921 Subtotal (mmboe) – 2P 440 203 100% Block 58 Condensate (mmbbl) - Contingent 114 114 Gas (bcf) - Contingent 11,767 13,200 Subtotal (mmboe) - Contingent 11,880 11,880 Total remaining recoverable 2P + 12,461 12,224 Contingent (mmboe) Purchasing price (USDmn) 2,600 2P cost (USD/boe) 0.21

Source: Petrobras, Wood Mackenzie , HSBC estimates

4 PetroChina (857 HK) Oil & Gas abc 14 November 2013

Disclosure appendix

Analyst Certification The following analyst(s), economist(s), and/or strategist(s) who is(are) primarily responsible for this report, certifies(y) that the opinion(s) on the subject security(ies) or issuer(s) and/or any other views or forecasts expressed herein accurately reflect their personal view(s) and that no part of their compensation was, is or will be directly or indirectly related to the specific recommendation(s) or views contained in this research report: Thomas Hilboldt and Tingting Si Important disclosures Equities: Stock ratings and basis for financial analysis HSBC believes that investors utilise various disciplines and investment horizons when making investment decisions, which depend largely on individual circumstances such as the investor's existing holdings, risk tolerance and other considerations. Given these differences, HSBC has two principal aims in its equity research: 1) to identify long-term investment opportunities based on particular themes or ideas that may affect the future earnings or cash flows of companies on a 12 month time horizon; and 2) from time to time to identify short-term investment opportunities that are derived from fundamental, quantitative, technical or event-driven techniques on a 0-3 month time horizon and which may differ from our long-term investment rating. HSBC has assigned ratings for its long-term investment opportunities as described below.

This report addresses only the long-term investment opportunities of the companies referred to in the report. As and when HSBC publishes a short-term trading idea the stocks to which these relate are identified on the website at www.hsbcnet.com/research. Details of these short-term investment opportunities can be found under the Reports section of this website.

HSBC believes an investor's decision to buy or sell a stock should depend on individual circumstances such as the investor's existing holdings and other considerations. Different securities firms use a variety of ratings terms as well as different rating systems to describe their recommendations. Investors should carefully read the definitions of the ratings used in each research report. In addition, because research reports contain more complete information concerning the analysts' views, investors should carefully read the entire research report and should not infer its contents from the rating. In any case, ratings should not be used or relied on in isolation as investment advice. Rating definitions for long-term investment opportunities Stock ratings HSBC assigns ratings to its stocks in this sector on the following basis:

For each stock we set a required rate of return calculated from the cost of equity for that stock’s domestic or, as appropriate, regional market established by our strategy team. The price target for a stock represents the value the analyst expects the stock to reach over our performance horizon. The performance horizon is 12 months. For a stock to be classified as Overweight, the potential return, which equals the percentage difference between the current share price and the target price, including the forecast dividend yield when indicated, must exceed the required return by at least 5 percentage points over the next 12 months (or 10 percentage points for a stock classified as Volatile*). For a stock to be classified as Underweight, the stock must be expected to underperform its required return by at least 5 percentage points over the next 12 months (or 10 percentage points for a stock classified as Volatile*). Stocks between these bands are classified as Neutral.

Our ratings are re-calibrated against these bands at the time of any 'material change' (initiation of coverage, change of volatility status or change in price target). Notwithstanding this, and although ratings are subject to ongoing management review, expected returns will be permitted to move outside the bands as a result of normal share price fluctuations without necessarily triggering a rating change.

5 PetroChina (857 HK) Oil & Gas abc 14 November 2013

*A stock will be classified as volatile if its historical volatility has exceeded 40%, if the stock has been listed for less than 12 months (unless it is in an industry or sector where volatility is low) or if the analyst expects significant volatility. However, stocks which we do not consider volatile may in fact also behave in such a way. Historical volatility is defined as the past month's average of the daily 365-day moving average volatilities. In order to avoid misleadingly frequent changes in rating, however, volatility has to move 2.5 percentage points past the 40% benchmark in either direction for a stock's status to change. Rating distribution for long-term investment opportunities As of 13 November 2013, the distribution of all ratings published is as follows: Overweight (Buy) 44% (33% of these provided with Investment Banking Services) Neutral (Hold) 38% (33% of these provided with Investment Banking Services) Underweight (Sell) 18% (28% of these provided with Investment Banking Services)

Share price and rating changes for long-term investment opportunities

PetroChina (0857.HK) Share Price performance HKD Vs HSBC rating history Recommendation & price target history From To Date

20 Neutral (V) Neutral 27 April 2011 Neutral Underweight 29 July 2011 18 Underweight Neutral 12 March 2012 16 Neutral Underweight 31 October 2012 Underweight Overweight 01 July 2013 14 Target Price Value Date 12 Price 1 11.50 23 January 2011 10 Price 2 10.50 29 July 2011 8 Price 3 8.00 23 August 2011 6 Price 4 12.30 12 March 2012 Price 5 11.70 28 June 2012 4 Price 6 10.50 23 August 2012 Price 7 9.80 31 October 2012 Price 8 9.70 21 March 2013 Nov-08 Nov-09 Nov-10 Nov-11 Nov-12 Nov-13 Price 9 11.10 01 July 2013 Source: HSBC Price 10 11.40 22 August 2013 Source: HSBC PetroChina (601857.SS) Share Price performance CNY Vs HSBC rating history Recommendation & price target history From To Date

Overweight (V) Overweight 27 April 2011 42 Overweight Overweight (V) 31 May 2011 37 Overweight (V) Overweight 12 March 2012 Overweight Neutral 23 August 2012 32 Neutral Underweight 31 October 2012 Underweight Overweight 01 July 2013 27 Target Price Value Date 22 Price 1 12.10 12 March 2012 17 Price 2 10.70 28 June 2012 12 Price 3 9.60 23 August 2012 Price 4 8.90 31 October 2012 7 Price 5 8.00 21 March 2013 Price 6 9.60 01 July 2013 Price 7 10.10 22 August 2013 Nov-08 Nov-09 Nov-10 Nov-11 Nov-12 Nov-13 Source: HSBC Source: HSBC

6 PetroChina (857 HK) Oil & Gas abc 14 November 2013

HSBC & Analyst disclosures Disclosure checklist Company Ticker Recent price Price Date Disclosure PETROCHINA 0857.HK 8.50 13-Nov-2013 4, 6, 11 Source: HSBC

1 HSBC has managed or co-managed a public offering of securities for this company within the past 12 months. 2 HSBC expects to receive or intends to seek compensation for investment banking services from this company in the next 3 months. 3 At the time of publication of this report, HSBC Securities (USA) Inc. is a Market Maker in securities issued by this company. 4 As of 31 October 2013 HSBC beneficially owned 1% or more of a class of common equity securities of this company. 5 As of 30 September 2013, this company was a client of HSBC or had during the preceding 12 month period been a client of and/or paid compensation to HSBC in respect of investment banking services. 6 As of 30 September 2013, this company was a client of HSBC or had during the preceding 12 month period been a client of and/or paid compensation to HSBC in respect of non-investment banking securities-related services. 7 As of 30 September 2013, this company was a client of HSBC or had during the preceding 12 month period been a client of and/or paid compensation to HSBC in respect of non-securities services. 8 A covering analyst/s has received compensation from this company in the past 12 months. 9 A covering analyst/s or a member of his/her household has a financial interest in the securities of this company, as detailed below. 10 A covering analyst/s or a member of his/her household is an officer, director or supervisory board member of this company, as detailed below. 11 At the time of publication of this report, HSBC is a non-US Market Maker in securities issued by this company and/or in securities in respect of this company

HSBC and its affiliates will from time to time sell to and buy from customers the securities/instruments (including derivatives) of companies covered in HSBC Research on a principal or agency basis.

Analysts, economists, and strategists are paid in part by reference to the profitability of HSBC which includes investment banking revenues.

For disclosures in respect of any company mentioned in this report, please see the most recently published report on that company available at www.hsbcnet.com/research. Additional disclosures 1 This report is dated as at 14 November 2013. 2 All market data included in this report are dated as at close 13 November 2013, unless otherwise indicated in the report. 3 HSBC has procedures in place to identify and manage any potential conflicts of interest that arise in connection with its Research business. HSBC's analysts and its other staff who are involved in the preparation and dissemination of Research operate and have a management reporting line independent of HSBC's Investment Banking business. Information Barrier procedures are in place between the Investment Banking and Research businesses to ensure that any confidential and/or price sensitive information is handled in an appropriate manner.

7 PetroChina (857 HK) Oil & Gas abc 14 November 2013

Disclaimer

* Legal entities as at 8 August 2012 Issuer of report ‘UAE’ HSBC Bank Middle East Limited, Dubai; ‘HK’ The Hongkong and Shanghai Banking Corporation The Hongkong and Shanghai Banking Limited, Hong Kong; ‘TW’ HSBC Securities (Taiwan) Corporation Limited; 'CA' HSBC Bank Canada, Corporation Limited Toronto; HSBC Bank, Paris Branch; HSBC France; ‘DE’ HSBC Trinkaus & Burkhardt AG, Düsseldorf; 000 HSBC Bank (RR), Moscow; ‘IN’ HSBC Securities and Capital Markets (India) Private Limited, Mumbai; Level 19, 1 Queen’s Road Central ‘JP’ HSBC Securities (Japan) Limited, Tokyo; ‘EG’ HSBC Securities Egypt SAE, Cairo; ‘CN’ HSBC Hong Kong SAR Investment Bank Asia Limited, Beijing Representative Office; The Hongkong and Shanghai Banking Telephone: +852 2843 9111 Corporation Limited, Singapore Branch; The Hongkong and Shanghai Banking Corporation Limited, Seoul Telex: 75100 CAPEL HX Securities Branch; The Hongkong and Shanghai Banking Corporation Limited, Seoul Branch; HSBC Fax: +852 2596 0200 Securities (South Africa) (Pty) Ltd, Johannesburg; HSBC Bank plc, London, Madrid, Milan, Stockholm, Tel Aviv; ‘US’ HSBC Securities (USA) Inc, New York; HSBC Yatirim Menkul Degerler AS, Istanbul; HSBC Website: www.research.hsbc.com México, SA, Institución de Banca Múltiple, Grupo Financiero HSBC; HSBC Bank Brasil SA – Banco Múltiplo; HSBC Bank Australia Limited; HSBC Bank Argentina SA; HSBC Saudi Arabia Limited; The Hongkong and Shanghai Banking Corporation Limited, New Zealand Branch incorporated in Hong Kong SAR This document has been issued by The Hongkong and Shanghai Banking Corporation Limited (“HSBC”) in the conduct of its Hong Kong regulated business for the information of its institutional and professional investor (as defined by Securities and Future Ordinance (Chapter 571)) customers; it is not intended for and should not be distributed to retail customers in Hong Kong. The Hongkong and Shanghai Banking Corporation Limited is regulated by the Hong Kong Monetary Authority. All enquires by recipients in Hong Kong must be directed to your HSBC contact in Hong Kong. If it is received by a customer of an affiliate of HSBC, its provision to the recipient is subject to the terms of business in place between the recipient and such affiliate. This document is not and should not be construed as an offer to sell or the solicitation of an offer to purchase or subscribe for any investment. HSBC has based this document on information obtained from sources it believes to be reliable but which it has not independently verified; HSBC makes no guarantee, representation or warranty and accepts no responsibility or liability as to its accuracy or completeness. Expressions of opinion are those of the Research Division of HSBC only and are subject to change without notice. HSBC and its affiliates and/or their officers, directors and employees may have positions in any securities mentioned in this document (or in any related investment) and may from time to time add to or dispose of any such securities (or investment). HSBC and its affiliates may act as market maker or have assumed an underwriting commitment in the securities of companies discussed in this document (or in related investments), may sell them to or buy them from customers on a principal basis and may also perform or seek to perform investment banking or underwriting services for or relating to those companies. HSBC Securities (USA) Inc. accepts responsibility for the content of this research report prepared by its non-US foreign affiliate. All U.S. persons receiving and/or accessing this report and wishing to effect transactions in any security discussed herein should do so with HSBC Securities (USA) Inc. in the United States and not with its non-US foreign affiliate, the issuer of this report. In the UK this report may only be distributed to persons of a kind described in Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005. The protections afforded by the UK regulatory regime are available only to those dealing with a representative of HSBC Bank plc in the UK. In Singapore, this publication is distributed by The Hongkong and Shanghai Banking Corporation Limited, Singapore Branch for the general information of institutional investors or other persons specified in Sections 274 and 304 of the Securities and Futures Act (Chapter 289) (“SFA”) and accredited investors and other persons in accordance with the conditions specified in Sections 275 and 305 of the SFA. This publication is not a prospectus as defined in the SFA. It may not be further distributed in whole or in part for any purpose. The Hongkong and Shanghai Banking Corporation Limited Singapore Branch is regulated by the Monetary Authority of Singapore. Recipients in Singapore should contact a "Hongkong and Shanghai Banking Corporation Limited, Singapore Branch" representative in respect of any matters arising from, or in connection with this report. In Australia, this publication has been distributed by The Hongkong and Shanghai Banking Corporation Limited (ABN 65 117 925 970, AFSL 301737) for the general information of its “wholesale” customers (as defined in the Corporations Act 2001). Where distributed to retail customers, this research is distributed by HSBC Bank Australia Limited (AFSL No. 232595). These respective entities make no representations that the products or services mentioned in this document are available to persons in Australia or are necessarily suitable for any particular person or appropriate in accordance with local law. No consideration has been given to the particular investment objectives, financial situation or particular needs of any recipient. This publication is distributed in New Zealand by The Hongkong and Shanghai Banking Corporation Limited, New Zealand Branch incorporated in Hong Kong SAR. In Japan, this publication has been distributed by HSBC Securities (Japan) Limited. It may not be further distributed in whole or in part for any purpose. In Korea, this publication is distributed by The Hongkong and Shanghai Banking Corporation Limited, Seoul Securities Branch ("HBAP SLS") for the general information of professional investors specified in Article 9 of the Financial Investment Services and Capital Markets Act (“FSCMA”). This publication is not a prospectus as defined in the FSCMA. It may not be further distributed in whole or in part for any purpose. HBAP SLS is regulated by the Financial Services Commission and the Financial Supervisory Service of Korea. In Canada, this document has been distributed by HSBC Bank Canada and/or its affiliates. Where this document contains market updates/overviews, or similar materials (collectively deemed “Commentary” in Canada although other affiliate jurisdictions may term “Commentary” as either “macro-research” or “research”), the Commentary is not an offer to sell, or a solicitation of an offer to sell or subscribe for, any financial product or instrument (including, without limitation, any currencies, securities, commodities or other financial instruments). © Copyright 2013, The Hongkong and Shanghai Banking Corporation Limited, ALL RIGHTS RESERVED. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, on any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of The Hongkong and Shanghai Banking Corporation Limited. MICA (P) 118/04/2013, MICA (P) 068/04/2013 and MICA (P) 110/01/2013

abc

Global Natural Resources & Energy Research Team

Metals and Mining Chemicals EMEA Europe Andrew Keen Dr Geoff Haire Global Sector Head, Metals and Mining +44 20 7991 6892 [email protected] +44 20 7991 6764 [email protected] Sebastian Satz, CFA Thorsten Zimmermann, CFA +44 20 7991 6894 [email protected] +44 20 7991 6835 [email protected] Jesko Mayer-Wegelin, CFA Emma Townshend +49 211 910 3719 [email protected] +27 21 794 8345 [email protected] Derryn Maade CEEMEA + 27 11 676 4519 [email protected] Yonah Weisz +972 3 710 1198 [email protected] North America & Latin America James Steel Sriharsha Pappu, CFA +1 212 525 3117 [email protected] +971 4 423 6924 [email protected] Patrick Chidley, CFA Nicholas Paton, CFA +1 212 525 4915 [email protected] + 971 4 423 6923 [email protected] Botir Sharipov, CFA Asia +1 212 525 5150 [email protected] Dennis Yoo, CFA Howard Wen +852 2996 6917 [email protected] +1 212 525 3726 [email protected] Leonardo A Correa Utilities +55 11 3847 5433 [email protected] Europe Luiz G Fornari Adam Dickens + 55 11 3847 5436 [email protected] +44 20 7991 6798 [email protected] Asia Verity Mitchell Simon Francis +44 20 7991 6840 [email protected] Regional Head of Metals and Mining, Asia Pacific Asia +852 2996 6620 [email protected] Jenny Cosgrove Thomas Zhu, CFA Regional Head of Utilities and Alternative Energy, Asia Pacific +852 2822 4325 [email protected] +852 2996 6619 [email protected] Chris Chen Neel Sinha +852 2822 4277 [email protected] Analyst Jeff Yuan +65 6658 0606 [email protected] +852 3941 7010 [email protected] Arun Kumar Singh Brian Cho Analyst +822 3706 8750 [email protected] +91 22 2268 1778 [email protected] Jigar Mistry, CFA +91 22 2268 1079 [email protected] Gloria Ho +852 2996 6941 [email protected] Jena Han +822 3706 8772 [email protected] Summer Y Y Huang +852 2996 6976 [email protected] Energy Europe Yeon Lee David Phillips +822 3706 8778 [email protected] Global Sector Co-head, Oil and Gas Latin America +44 20 7991 2344 [email protected] Sandra Boente Peter Hitchens +1 212 525 4441 [email protected] +44 20 7991 6822 [email protected] Osmar Camilo Phillip Lindsay +55 11 3847 9502 [email protected] +44 207 991 2577 [email protected] Kirtan Mehta, CFA CEEMEA +91 80 3001 3779 [email protected] Levent Bayar Analyst CEEMEA +90 212 376 46 17 [email protected] Bülent Yurdagül +90 212 376 46 12 [email protected] Dmytro Konovalov Ildar Khaziev, CFA +7 495 258 3152 [email protected] +7 495 645 4549 [email protected] Alternative Energy Latam Jenny Cosgrove Luiz F Carvalho Regional Head of Utilities and Alternative Energy, Asia Pacific + 55 11 3371 8178 [email protected] +852 2996 6619 [email protected] Filipe M Gouveia Charanjit Singh + 55 11 3847 5451 [email protected] +91 80 3001 3776 [email protected] Asia Gloria Ho Thomas Hilboldt +852 2996 6941 [email protected] Regional Head of Oil, Gas and Petrochemical Research, Asia Pacific +852 2822 2922 [email protected] Specialist Sales Dennis Yoo, CFA +852 2996 6917 [email protected] Annabelle O'Connor +44 20 7991 5040 [email protected] Kumar Manish +91 22 2268 1238 [email protected] James Lesser Alok P Deshpande +44 207 991 1382 [email protected] +91 22 681245 [email protected] SI Tingting +852 2996 6590 [email protected]