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25 August 2017 Global Equity Research Natural Gas Global LNG Summary – Vol.12 Research Analysts MONTHLY David Hewitt 416 352 4583 [email protected] More from Doha (literally…) Mark Samter 61 2 8205 4537 ■ Qatar announces plan to increase capacity by 30% (23MTpa): [email protected] Following the blockade the current largest LNG producer announced plans Thomas Adolff to raise capacity to 100MTpa. (Link) 44 20 7888 9114 [email protected] ■ Our views: a) hard for Qatar to capture that much future market share, but b) Bhavesh Lodaya debottlenecking (circa 10MTpa) is likely and c) long term contract pricing is key; 212 325 2337 major price effect if Qatar softens its current contract price approach. [email protected] Gregory Lewis, CFA ■ Japanese Fair Trade Commission (FTC) publishes seminal paper on 212 325 6418 LNG procurement: challenging destination restriction and questioning [email protected] Take or Pay post project financing. (Link) Phillip Lindsay 44 20 7883 1644 ■ Our view: Some of the drafting appears balanced but some ideas appear less [email protected] ‘fair’. We expect sellers to comply with the balanced elements. Gregory Brown 44 20 7888 1440 ■ Korean FTC also now reviewing LNG contracts: Using the Japanese [email protected] FTC report as a template, it was reported in early August. (Link) ■ Our view: Buyer contagion re destination clauses was inevitable following the JFTC report. Asian spot liquidity will increase to some degree. ■ Sabine Pass Train 4 1st LNG: commissioning began in March and 1st LNG was achieved in July 2017. (Link) ■ Our view: Cheniere continues smooth construction execution as 4th train starts- up. The customer (GAIL) contract starts in 2019, so expect production in the spot market for the interim. ■ Cameron Train 1 timing slips: Sempra advised that Train 1 start-up could be delayed into 2019. (Link) ■ Our view: Slightly softens our 2018 export forecast to 3.3bcf/d (from 3.5). ■ Asian spot prices US$6.2/mmBtu (Aug 11th): prices higher basis Peru disruption, hot weather and early stockpiling. (Link) ■ Our view: temporary summer lift basis outages, supply ramps will soften prices in the latter part of the Asian summer. ■ Wheatstone T1 nearing 1st cargo: Woodside, in its quarterly earnings report commented that T1 is “well advanced and nearing completion.” (Link) ■ Our view: Start-up on schedule, expect commissioning cargoes in the spot market until Q4 2017. ■ Fortuna FLNG announces off-take agreement: Commercial terms have been agreed for Gunvor to take the full capacity. ■ Our view: Another milestone toward FID…slope will be important. DISCLOSURE APPENDIX AT THE BACK OF THIS REPORT CONTAINS IMPORTANT DISCLOSURES, ANALYST CERTIFICATIONS, LEGAL ENTITY DISCLOSURE AND THE STATUS OF NON-US ANALYSTS. US Disclosure: Credit Suisse does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the Firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision. 25 August 2017 Credit Suisse LNG related reports CS adjusts its crude price deck: lower and longer: We now forecast $48/b WTI in H2 2017 and H1 2018, rising into the mid $50s in H2 2018. We push out the rebalance thru 2019, with our new long term WTI forecast at US$57.5/b. (Link). Pacific NorthWest LNG: Another one bites the dust: The project announces its plan to not proceed within 1 week of the new British Columbia Government was sworn in. Petronas, in its announcement, appear committed to Progress Energy. With the PNW project not proceeding, and little momentum with the Kitimat project, that leaves one ‘major’ BC project – Shells Canada LNG, along with POG’s Woodfibre project in Squamish, BC. (Link). Ophir Energy plc – Fortuna – off-taker names, financing pending: The partners have chosen Gunvor as the preferred off-taker from Fortuna FLNG and have secured principal commercial terms. A Sales and Purchase Agreement (SPA) is expected to be signed prior to the FID in 4Q17. This was 1 of the 2 remaining milestones ahead of the FID, with project financing being the last remaining hurdle to overcome. (Link). European Gas Market: Latest trends and developments: (Link). Japanese LNG procurement: Revolution: (Link). Infrastructure Insights: LNG – three times the fun (and perspective): (Link). Australian East Coast Gas: The Horse, Hunter and Stag: (Link) Food for thought: Qatar and LNG: (Link). Cheniere: Growing LNG market capture offsets low margin environment: (Link). Energy Transfer: Breathing life into Lake Charles LNG: (Link). GLNG: Another major step forward: (Link). GLOG: Signs starting to point green: (Link). GAIL: Quick-take: 7% EBITDA miss; US LNG worries to the fore: (Link). Chiyoda: likely to book further expenses in Cameron LNG: (Link). JGC – Jordan Cove EPC update: (Link). Keppel Corp – Fuelling growth through gas solutions: (Link) Santos – But you never normally write back? (Link). CB&I – Coming clean (Link) Global LNG Summary – Vol.122 Figure 1: Global LNG comps sheet Ticker Rating Price Price Price Price Target Upside Market EV FX EPS Con EPS Credit Suisse PE ROE Dividend Yield Netdebt/ Perf Price to Target Capital IBES (Reporting Ccy) vs Consensus (Netdebt+Equity) LC 1-Jan 23-Aug YTD US$b US$b 15A 16A 17E 16A 17E 16A 17E 15A 16A 17E 15A 16A 17E 15A 16A 17E 15A 16A 17E DEVELOPERS Anadarko APC.N NR 48.6 43.0 -12% na na 24 36 BP BP.L O GBp 354 445 26% 530 20% 112 147 USD 0.3 0.1 0.3 0.1 0.3 -1% 3% 18 41 41 6% 3% 6% 7% 7% 7% 21% 26% 27% Chevron CVX.N NR 90.0 106.6 19% na na 202 247 Cheniere LNG.A O USD 37.3 41.6 12% 58.0 40% 9.9 31 USD (4.4) (2.7) (1.9) (2.4) (0.1) 12% 2020% nm nm nm 110% 44% -53% 0% 0% 0% 91% 96% 89% ConocoPhillips COP.N NR 46.7 43.7 -6% na na 54 78 Engie (GDF Suez) ENGIE.PA N EUR 16.3 14.3 -12% 13.2 -8% 41 69 EUR 1.1 1.0 1.1 1.4 1.0 -25% 10% 13 14 14 6% 6% 7% 7% 7% 5% 49% 51% 50% Eni SpA ENI.MI N EUR 13.8 13.2 -5% 14.5 10% 56 73 EUR 0.2 (0.1) 0.6 (0.1) 0.6 -20% 3% 74 nm nm 1% -1% 4% 6% 6% 6% 24% 22% 20% ExxonMobil XOM.N NR 78.0 76.6 -2% na na 318 357 Gazprom GAZPq.L U USD 3.7 3.9 4% 4.2 8% 45 na USD 1.1 1.2 0.7 4 3 3 7% 7% 4% 3% 3% 4% 16% 14% 17% Inpex 1605.T NR 1,186 1,051 -11% na na 14 14 Japex 1662.T NR 3,265 2,182 -33% na na 1.2 1.4 Liquefied Natural Gas LNG.AX NR USD 0.8 0.5 -32% na na 0.2 0.2 Marathon Oil MRO.N NR 12.6 11.0 -12% na na 9.4 14 Mitsubishi Corp 8306.T NR 757 665 -12% na na 80 na Mitsui & Co 8031.T NR 1,446 1,605 11% na na 26 54 Noble Energy NBL.N NR 32.9 23.7 -28% na na 10 16 Novatek NVTKq.L N USD 82.2 104.8 28% 110.0 6% 31 34 USD 3.9 9.5 10.1 12.8 9.0 -26% 12% 26 11 11 20% 27% 23% 1% 3% 3% 43% 20% 11% Oil Search OSH.AX O AUD 6.7 6.7 0% 6.8 -1% 8.2 11 USD 0.2 0.1 0.2 0.1 0.2 0% -6% 23 77 77 8% 2% 5% 2% 1% 1% 42% 40% 38% Ophir Energy OPHR.L O GBp 98 81 -18% 100 25% 0.7 0.6 USD (0.5) (0.1) (0.0) (0.2) (0.0) -54% -6% nm nm nm -20% -5% -1% 0% 0% 0% nc nc nc Origin Energy ORG.AX N AUD 4.7 7.5 59% 7.3 -3% 10.4 17 AUD 0.4 0.3 0.4 0.3 0.4 -2% 3% 18 28 28 4% 4% 6% 4% 1% 0% 45% 41% 40% Royal Dutch Shell RDSa.L O GBp 1,526 2,140 40% 2,500 17% 189 262 USD 1.7 0.9 1.8 1.0 1.8 -12% 1% 16 30 30 7% 4% 8% 7% 7% 7% 14% 28% 23% Santos STO.AX O AUD 3.7 3.5 -6% 4.0 15% 5.7 9 USD 0.0 0.2 0.0 0.1 0% 34% 78 78 1% 5% 0% 0% 31% 27% Statoil STL.OL U NOK 124 146 18% 130 -11% 61 88 USD 0.8 (0.1) 1.2 (0.1) 1.2 -8% 6% 24 nm nm 6% -1% 11% 5% 5% 5% 27% 36% 29% Total TOTF.PA N EUR 41.3 43.7 6% 44.5 2% 129 156 USD 4.5 3.5 4.1 3.4 4.0 3% 3% 11 15 15 11% 8% 9% 5% 5% 5% 22% 22% 15% Woodside WPL.AX U AUD 28.7 29.7 4% 25.6 -13% 19 24 USD 1.4 1.0 1.1 1.0 1.2 0% -9% 17 22 22 8% 6% 6% 5% 4% 4% 22% 23% 24% BUYERS Chubu 9502.T NR JPY 1,663 1,438 -14% na na 9.9 32.1 CNOOC 0883.HK O HKD 8.1 9.1 13% 13.2 45% 52 70 CNY 0.5 0.0 0.6 0.0 0.5 43% 33% 17 544 544 5% 0% 8% 7% 5% 4% 26% 24% 21% Gail (India) GAIL.BO U INR 277 384 39% 300 -22% 10.1 10.4 INR 14.5 18.3 25.2 20.3 26.2 -10% -4% 26 21 21 7% 8% 11% 1% 1% 2% 30% 28% 24% Kogas 036460.KS NR KRW 36,850 45,700 24% na na 3.7 25.5 PetroChina 0857.HK N HKD 5.0 4.9 -3% 5.0 4% 206 269 CNY 0.2 0.0 0.1 0.0 0.2 7% -19% 21 96 96 3% 1% 2% 2% 1% 2% 26% 23% 24% Petronet LNG PLNG.BO O INR 130 231 78% 250 10% 5.3 5.1 INR 6.0 10.2 12.6 10.2 11.9 0% 6% 37 22 22 15% 19% 21% 1% 2% 3% 8% nc nc Sinopec 0386.HK O HKD 4.7 5.7 22% 8.3 45% 104 134 CNY 0.3 0.4 0.5 0.4 0.4 1% 21% 18 13 13 5% 7% 9% 3% 5% 7% 19% 8% 6% Tokyo Electric 9501.T NR JPY 699 449 -36% na na 6.5 na Tokyo Gas 9531.T NR JPY 571 570 0% na na 12 17 ENGINEERING & CONSTRUCTION (E&C) CONTRACTORS Chicago Bridge & Iron CBI.N N USD 39.0 11.0 -72% 13.0 18% 1.1 2.8 USD 5.9 5.2 (1.7) 4.2 (1.8) 22% -3% 2 2 2 -25% 38% -15% 60% 3% 3% 49% 52% 53% Chiyoda 6366.T U JPY 923 565 -39% 520 -9% 1.4 0.1 JPY 20 (116) (114) (116) (48) 0% 137% 28 nm nm 3% -20% -22% 2% 1% 1% nc nc nc Fluor FLR.N N USD 47.2 37.6 -20% 41.0 9% 5.3 5.0 USD 2.9 2.0 1.4 2.3 1.5 -14% -7% 13 19 19 13% 9% 6% 2% 2% 2% nc nc nc Halliburton HAL.N O USD 34.0 39.0 15% na na 34 42 USD 1.6 (0.0) 1.0 (0.0) 1.1 16% -9% 25 nm nm 9% 0% 10% 0% 0% 0% 25% 47% 48% JGC 1963.T O JPY 1,863 1,731 -7% 2,500 44% 4.0 2.6 JPY 148 28 76 (24) 45 -218% 68% 12 61 61 9% 2% 5% 2% 2% 2% nc nc nc KBR KBR.N O USD 16.9 14.9 -12% 19.0 28% 2.1 2.3 USD 1.5 (0.3) 1.4 (0.3) 1.4 -3% -2% 10 nm nm 20% -6% 22% 0% 0% 0% nc nc nc Saipem SPMI.MI U EUR 9.4 3.1 -67% na na 3.6 5 EUR (0.5) 0.2 0.1 0.2 0.2 -2% -36% nm 14 14 -12% 3% 2% 0% 0% 0% 61% 24% 25% Schlumberger SLB.N O USD 69.8
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