1、Hold,Buy,Deutsche BankMarkets Research,Global Emerging MarketsBrazilOil & Gas,IndustryLatam Energy,Date17 September 2012Industry UpdateMarcus Sequeira,Tenaris, Petrobras and Braskem:notes from meetings at DB GEMsNotes from meetings at DB GEMs conferenceSenior management from Tenaris, Petrobras and B
2、raskem attended our GEMsConference in New York. In this report, we provide the main highlights fromthe meetings. We remain neutral in the energy sector. Our top picks arecomprised mostly of defensive names: Tenaris, QGEP and Ultrapar.Tenaris: remains our top pick among Latin energy stocksSo far, 201
3、2 has been exactly what management indicated: strong demandrecovery but weak pricing power. Going forward, demand should remain firm,while lackluster prices should be offset by lower COGS as metal prices aredeclining and better mix. As such, margins should remain unchanged. Long-term outlook remains
4、 strong, driven by drilling in more complex areas. Hence,Tenaris plans to build additional capacity in the US.Petrobras: the tale of the 4 Ps: pricing, production, pre-salt and politicsWe remain cautious on Petrobras. The outlook in the short and medium term isnot favorable: lack of definition on ga
5、soline and diesel prices, lacklusterproduction (and the expectation that growth in oil output should only come in2014). However, the main concern remains corporate governance. Theinfluence of Petrobras controller on pricing, local content and refininginvestments has been very detrimental to the stoc
6、k. Although known, these,Research Analyst(+1) 212 250-Luiz FonsecaResearch Analyst(+55) 11 2113-Top picksTenaris (TS.N),USD43.94 BuyQueiroz Galvao E&P (QGEP3.SA),BRL11.98 BuyUltrapar (UGP.N),USD22.12 BuyCompanies FeaturedBraskem (BAK.N),USD15.98 Hold2010A 2011E 2012EEPS (BRL) 1.04 -0.65 -0.84P/E (x)
7、 14.2 EV/EBITDA (x) 5.3 6.3 7.0Petrobras (PBR.N),USD23.852011A 2012E 2013E,risks should continue to weigh on financial and stock performance. The mainshort-term trigger continues to be gasoline and/or diesel price increases.Braskem: low demand visibility,EPS (USD)P/E (x)EV/EBITDA (x),2.9410.97.5,1.9
8、612.28.0,2.708.87.1,While demand in 3Q is expected to show strong sequential growth (due toseasonality), visibility on demand trends in 4Q and 2013 remains poor.,Tenaris (TS.N),USD43.94,2011A 2012E 2013E,Stimulus initiatives recently announced by the Brazilian government shouldhelp improve domestic
9、demand for petrochemicals, but they are unlikely tofully compensate for lackluster global economic activity. Naphtha price,EPS (USD)P/E (x)EV/EBITDA (x),2.2618.19.7,3.0914.28.6,3.1414.08.6,spreads should improve marginally from 1H12 levels, but the sustainability ofany improvement is questionable at
10、 this point.Valuation and risksOur valuation is DCF-based. Main upside risks: improvement in the economicactivity and higher commodity prices, lower government interference in bothArgentina and Brazil, main downside risks: weaker commodity prices, lowerE&P spending, unfavorable exploration results.
11、Please see detailed valuationand risk discussion on page 14._Deutsche Bank Securities Inc.All prices are those current at the end of the previous trading session unless otherwise indicated. Prices are sourcedfrom local exchanges via Reuters, Bloomberg and other vendors. Data is sourced from Deutsche
12、 Bank and subjectcompanies. Deutsche Bank does and seeks to do business with companies covered in its research reports. Thus,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
13、 factor in making their investment decision. DISCLOSURES ANDANALYST CERTIFICATIONS ARE LOCATED IN APPENDIX 1. MICA(P) 072/04/2012.,QGEP,YPF,HRT,OGX,17 September 2012Oil & GasLatam EnergyLatin America EnergyDeutsche Bank Latin American energy stocks preference listWe present our Latam Energy Preferen
14、ce List on Figure 1. We retain our choice for highquality and defensive names. QGEP is the only high risk stock in the group, but relativeto peers, we believe it has less downside due to cash flow generation.Figure 1: DB Latam Energy Preference List,Positives,Concerns,Triggers,TenarisUltraparPetrobr
15、asBraskem,* Leading position in its market* Strong balance sheet* E&P capex remains strong* Cash flow generator* Pragmatic management* Pre-salt potential* Defensive but with growth* Positive track record in creating value* Corporate governance* Dominant position in Brazils oil industry* Unparalleled
16、 access to reserves* Resilient to declining oil prices* Vertical integration of 1and 2generation* Beneficiary of secular Brazil demand* Declining exposure to naphtha* Vast unconventional resource base,* Pricing power is limited* Threat of imports* Sharp decrease in oil prices* Discovery track record
17、 is poor* Portfolio is concentrated in few areas* More “gassy” portfolio* Rich valuation* Limited sizeable acquisition targets* Demand risks* Negative cash flow* Political interference is very high* Production trends and outlook disappointing* Weak pricing and demand outlook* Deteriorating spreads d
18、ue to high oil prices* Uncompetitive versus natural gas* Recently nationalized; high political risk,* Quarterly results and managementsoutlook discussion.* Final results and possibly volumeindication for the Carcara prospect areexpected for 3Q12. New appraisal reportplanned for YE.* Quarterly result
19、s, more acquisitions andhigher risk aversion.* A pick up in domestic oil production,end of subsidies in gasoline and dieselprices, or at least more price increases.* Improvement in global economy shouldprovide support to prices.* Certainty that new management is,* Upside potential from secondary rec
20、overy * Growth plan execution risk is high,implementing a strategy that is marketfriendly.,* Valuation attractive,* Argentina macro situation is worrisome,* Vast resource base* Experienced management* Cash position enough for 2012-13Petrobras Argentina * Some exposure to unconventional* Upside poten
21、tial in natural gas* Sound balance sheet* Diversified portfolio* Positive track record on exploration* Experienced management teamSource: Deutsche Bank.Page 2,* Exposure to frontier areas* Discovery track record is poor* Need for financing could prove challenging* Some concessions are close to expir
22、e* Refining prices are controlled* Lack of strategy* Aggressive targets end up in frustration* Uncertainty regarding resource base* Turned net debt in 1Q12,* The farm down of the Namibian assetsis a minor trigger. Nimrod prospectsdrilling results (Oct). HRT needscommercial oil finds in Solimoes.* Pr
23、ice liberalization and the definition ofa growth strategy for the company.* More visibility on the companysprojects (Campos basin fields need to bedeclared commercial by Mar-13), capexand production targets.Deutsche Bank Securities Inc.,17 September 2012Oil & GasLatam EnergyTenarisRemains our top pi
24、ck among Latin energy stocksTenaris remains our top pick among the Latin American energy stocks. We believe thatamid concerns about global economy and the direction of commodity prices, Tenarisshould continue to be a relatively defensive investment. Tenaris is an industrys leaderthat is well positio
25、ned to enjoy the growth in E&P spending and the increased demandfor high-end pipes and connections. In retrospect, 2012 has been exactly whatmanagement indicated late 2011: strong demand recovery but weak pricing power.Offsetting lackluster pricing, the recent decline in metal costs should help stab
26、ilizeoperating margins going forward.OCTG demand should remain firmTenaris expects global OCTG demand to grow next year by around 5% (lower end) and10% (higher end pipes). Demand for more complex pipes has shown strong recoveryYDT, growing 50%, led by activity in unconventional areas in the US. Rig
27、count in theUS has declined but it is in line with peak historical levels, Figure 2 while rig count inCanada is below historical levels, Figure 3. Going forward, growth should continue tocome from the US (shale and at a lesser extent offshore) and the Middle East (especiallySaudi Arabia, Iraq and Ku
28、wait).,Figure 2: Rig count US2,2002,000,Figure 3: Rig count Canada800700,1,8006001,600,1,4001,2001,000,500400300,800200600,400200,1000,Jan,Feb,Mar,Apr,May,Jun,Jul,Aug,Sep,Oct,Nov,Dec,Jan,Feb,Mar,Apr,May,Jun,Jul,Aug,Sep,Oct,Nov,Dec,2002-2011 Range,5 Yr Average,2008,2009,2010,2011,2012,2002-2011 Range
29、,5 Yr Average,2008,2009,2010,2011,2012,Source: Deutsche Bank and Baker Hughes.,Source: Deutsche Bank and Baker Hughes.,Importantly, lower rig count in the US has not been followed by a similar fall in pipesales. In fact, we note an increase in productivity that resulted in higher footage drilledper
30、well, but we note the significant downward revision of historical data by the DoEsince our September 4 report. On average, footage drilled this year remained aroundthe 24k feet mark, although more recent data shows a gradual increase, Figure 4.Moreover, the number of horizontal wells has been consis
31、tently rising since mid 2009,reaching a level above 1,100 units, Figure 5. Horizontal wells need more OCTGproducts. According to management, while a vertical well usually requires 80-90 tons,horizontal / directional wells require 150-200 tons.,Deutsche Bank Securities Inc.,Page 3,Jan-99,Jan-00,Jan-0
32、1,Jan-02,Jan-03,Jan-04,Jan-05,Jan-06,Jan-07,Jan-08,Jan-09,Jan-10,Jan-11,Jan-12,Jul-99,Jul-00,Jul-01,Jul-02,Jul-03,Jul-04,Jul-05,Jul-06,Jul-07,Jul-08,Jul-09,Jul-10,Jul-11,1Q02,3Q02,1Q03,3Q03,1Q04,3Q04,1Q05,3Q05,1Q06,3Q06,1Q07,3Q07,1Q08,3Q08,1Q09,3Q09,1Q10,3Q10,1Q11,3Q11,1Q12,0,0,17 September 2012Oil
33、& GasLatam Energy,Figure 4: US footage drilled and ton per well,Figure 5: US - horizontal, vertical and directional wells,40,000,Usage of pipes per well,180,1,400,35,00030,00025,000,has increased, offsettinglower rig count,160140120100,1,2001,000800,20,000,80,600,15,00010,0005,000,604020,400200,0Apr
34、-07,Oct-07,Apr-08,Oct-08,Apr-09,Oct-09,Apr-10,Oct-10,Apr-11,DIR.Footage drilledUsage (ton) per well drilledSource: Deutsche Bank and Pipelogix.Source: Deutsche Bank and Baker Hughes.Lackluster prices offset by lowering costsTenaris expects average realization prices to be flattish in 2H12. Prices of
35、 low end pipesshould remain under pressure while prices of high end products should see limitedincreases until YE. Figure 6, shows pricing history of both products from Pipelogix: thefall in welded pipe price is more pronounced than that of seamless pipes (we note thatseamless pipe prices have actua
36、lly remained flat in August). We also note that Tenarisaverage realization prices have a lag versus Pipelogixs, and therefore we should seethe decline in prices over the next few quarters, Figure 7.Seamless pipe price of $1,999/ton is 40% below peak price of $3,333/ton in September2008 but 26% above
37、 bottom price of $1,591/ton seen in January 2008. Similar variationto peak and bottom prices is seen in welded pipe prices.,HORZ.,VERT.,Figure 6: Seamless and welded pipe prices130,Figure 7: Average pipelogix prices versus Tenaris3,500,3,000,Pipelogix avg.,120,welded,seamless,average,2,5002,0001,500
38、,1101,000500,100,0,ERW,SML,All,Tenaris,All,Source: Deutsche Bank and Pipelogix.Page 4,Source: Deutsche Bank and Pipelogix.,Deutsche Bank Securities Inc.,1Q03,3Q03,1Q04,3Q04,1Q05,3Q05,1Q06,3Q06,1Q07,3Q07,1Q08,3Q08,1Q09,3Q09,1Q10,3Q10,1Q11,3Q11,1Q12,17 September 2012Oil & GasLatam EnergyRaw material c
39、osts for OCTG manufacturing are declining for some items. Rolled coiland iron ore prices are lower, Figure 8. Some of these cost changes have been passedthrough the market with flat to slightly lower OCTG pricing. Growing OCTG supplyagainst slowing demand growth and lower manufacturing costs may pro
40、ve to weakenOCTG prices in the near term. Again, the impact of lower costs is expected to be shownin Tenaris with a lag, Figure 9.,Figure 8: Metal price trends1601501401301201101009080,Figure 9: Tenaris COGS versus metal pricing trendsCOGS/ton2,0001,8001,6001,4001,2001,0008006004002000,Pig iron,Scra
41、p,Hot rolled,Iron Ore,Tenaris,Pig iron,Scrap,Hot rolled,Source: Deutsche Bank and Bloomberg.,Source: Deutsche Bank and Bloomberg.,As such, margins should be little impacted in 2H12 and 2013 as the softening ofwelded pipe prices should be offset by an improvement of sales mix and lower costs.Strategy
42、: greenfield growth and revamping of existing unitsM&A management does not see acquisition opportunities at this point,especially after the changes introduced by the unconventional hydrocarbons inthe US. Growth will continue to be via new greenfield projects.Capacity additions: the 450k ton Veracruz
43、 facility should end the year at 75%capacity utilization rate. We note recent announcement by Tenaris of a newseamless pipe plant 650k ton in the US. Meanwhile, the company continues torevamp existing units to add high end production capacity. During 3Q12, plantsin Italy and NA will undergo longer t
44、han normal maintenance shutdowns sofulfill this goal. Management is not concerned about the impact new capacitybeing added globally: demand should remain strong (company noted thathigher end capacity utilization is currently close to 100% while customers aresuffering from bottlenecks of selected pro
45、ducts). Management also noted thatthere have been capacity shutdowns in less competitive plans globally whichsupports a positive S&D outlook.,Deutsche Bank Securities Inc.,Page 5,May-04,May-11,Mar-03,Mar-10,Oct-03,Jul-05,Sep-06,Jun-08,Oct-10,Jul-12,Dec-04,Dec-11,Jan-02,Feb-06,Jan-09,Apr-07,Nov-07,Au
46、g-02,Aug-09,May-04,May-11,Mar-03,Mar-10,Oct-03,Jul-05,Sep-06,Jun-08,Oct-10,Dec-04,Dec-11,Jan-02,Feb-06,Apr-07,Nov-07,Aug-02,Jan-09,Aug-09,Jul-12,17 September 2012Oil & GasLatam EnergyPetrobrasThe tale of the 4 Ps: pricing, production, pre-salt and politicsWe remain cautious on Petrobras. The outlook
47、 in the short and medium term is notfavorable: lack of definition on gasoline and diesel pricing, lackluster production and theexpectation that growth should only come in 2014. However, the main concern remainscorporate governance. Petrobras controller influence on pricing, higher local content andr
48、efining investment has been very detrimental to the stock. Although known, these risksshould continue to weigh on financial and stock performance. The main short-termtrigger continues to be gasoline and diesel price increase.Pricing: any relief in sight?The discount of domestic gasoline and diesel p
49、rices remain high as oil and refinedproduct prices continue to rise. As such, the gap between domestic and import parityprices continues to widen. As shown on Figure 10, the discount of gasoline prices inBrazil rose to 25% currently versus the 20% average discount YTD. Meanwhile, in thecase of diese
50、l, the gap is 11% versus the 28% YTD average, Figure 11.During the meetings, Petrobras management was frequently asked questionsregarding prices (timing, magnitude etc). Following the last diesel price increase,markets optimism grew. Expectations are that the government has finally understoodthe importance to preserve Petrobras cash flow generation. However, despite thegrowing gap versus import parity, there are no concrete signs that the pricing dilemmawill be solved soon.,
