Summary of Key Points from the Conference Call Industry Overview - The conference call focused on the **Global Oil and Gas** industry, discussing various companies and macroeconomic factors affecting the sector [2][10]. Core Insights and Arguments - **Commodity Prices**: - Brent front month price is projected to be **$79.95** per barrel for 2024, with a forecast of **$82.18** for 2023 [9][10]. - WTI front month price is expected to be **$75.76** for 2024, with **$77.56** for 2023 [9][10]. - **Refining Margins**: - European composite margin is expected to average **6.12** in 2024, with a peak of **35.53** in 2022 [9][10]. - US composite margin is projected to be **5.84** in 2024, down from **9.04** in 2023 [9][10]. - **Market Dynamics**: - The Brent-Ural spread is forecasted to be **10.93** in 2024, indicating a significant change from previous years [9][10]. - The Asian spot price (JKM) is expected to average **11.99** in 2024, reflecting a decrease from **14.23** in 2023 [9][10]. Important but Overlooked Content - **Analyst Certifications**: The report includes a disclaimer about potential conflicts of interest due to UBS's business relationships with companies covered in the research [2][10]. - **Definitions and Metrics**: Key financial metrics such as EV/DACF, EBITDAX, and refining capacity are defined, providing clarity on the financial analysis used in the report [12][13]. Company Mentions - The report mentions several major companies in the oil and gas sector, including **BP**, **Hess Corporation**, **Shell**, and **ExxonMobil**, indicating a broad coverage of the industry [2][10]. This summary encapsulates the essential insights and data points from the conference call, providing a comprehensive overview of the current state and projections for the global oil and gas industry.

Summary of Global Oil Fundamentals Conference Call Industry Overview - The report focuses on the global oil market, specifically analyzing supply and demand dynamics for 2024 and 2025 [9][10]. Key Points Market Balance - The overall implied balance for 2024 remains unchanged at a surplus of 0.10 million barrels per day (Mb/d) [9]. - A tighter market is expected in the fourth quarter of 2024, with a projected deficit of -0.37 Mb/d due to higher demand and lower supply from OPEC+ [9]. - The 2025 market balance is forecasted to be in a surplus of 0.95 Mb/d, reduced from +1.15 Mb/d previously [9]. Demand Projections - The International Energy Agency (IEA) cut 2024 demand growth estimates by 78,000 barrels per day (kb/d) to 0.84 Mb/d, while raising 2025 growth estimates by 90 kb/d to 1.08 Mb/d [10]. - The absolute demand forecast for 2025 is slightly higher at 103.89 Mb/d, reflecting an increase of 80 kb/d [10]. - Chinese demand for 2024 remains unchanged at 0.14 Mb/d but is revised up by 30 kb/d for 2025 to 0.22 Mb/d [10]. Supply Dynamics - Non-OPEC+ supply growth estimates are unchanged at 1.48 Mb/d for both 2024 and 2025 [11]. - US supply growth for 2024 was raised by 20 kb/d to 0.71 Mb/d, while the 2025 estimate remains at 0.63 Mb/d [11]. - Canadian supply growth for 2024 was increased by 30 kb/d to 0.21 Mb/d, offset by a reduction in Brazil's projection by 20 kb/d to -45 kb/d [11]. OPEC+ Compliance and Output - OPEC+ output increased by 80 kb/d month-over-month in November, reaching 34.40 Mb/d, which is 0.68 Mb/d above the targeted level [12]. - Kazakhstan led the increase with an output rise of 0.13 Mb/d, while Iraqi compliance improved with a reduction of 50 kb/d [12]. - The IEA forecasts incremental supply from OPEC+ in 2025 driven by Kazakhstan (+0.21 Mb/d), Russia (+0.11 Mb/d), Libya (+90 kb/d), and the UAE (+60 kb/d) [12]. Additional Insights - The IEA's forecasts assume that OPEC+ cuts remain in place while still increasing crude production by 0.63 Mb/d over the next year [9]. - Global observed oil inventories fell by 39.3 million barrels month-over-month in October, with preliminary data for November indicating a rebound [9]. Conclusion - The oil market is expected to experience a mixed outlook, with a neutral stance for 2024 and a bullish perspective for 2025, driven by demand growth primarily from non-OECD countries and adjustments in OPEC+ supply [9][10].

Summary of OPEC+ Conference Call on December 5, 2024 Industry Overview - **Industry**: Oil and Gas - **Key Organization**: OPEC+ (Organization of the Petroleum Exporting Countries and its allies) Core Points and Arguments 1. **Production Cuts Extension**: OPEC+ has agreed to extend the 2.2 million barrels per day (mbd) voluntary cuts by three months, now set to last until April 1, 2025, marking the third postponement of the unwinding of cuts that have been in place for over two years [2][7][9] 2. **Phased Unwinding of Cuts**: The unwinding of the 2.2 mbd cuts will now occur over 18 months instead of 12, extending to September 2026. This adjustment is seen as marginally supportive for supply and demand balances [2][9][30] 3. **Market Surplus Projections**: The expected market surplus for 2025 has been reduced to 0.2 mbd, down from a previous estimate of 0.5 mbd. However, the surplus is projected to grow to 1.2 mbd in 2026 due to returning OPEC+ barrels and faster non-OPEC production growth [2][30][29] 4. **Oil Price Forecast**: The Brent crude oil price forecast remains at USD 70 per barrel for 2025 and beyond, indicating a stable outlook despite the production adjustments [2] 5. **Spare Capacity**: OPEC+ is expected to have considerable spare capacity of around 5.2 mbd by the end of 2026, which is above long-term averages. This indicates that the group may struggle to unwind cuts effectively due to non-OPEC production growth outpacing demand [2][30] 6. **Iran's Role**: The potential for reduced Iranian oil exports due to stricter sanctions under a new US administration is seen as a wildcard that could provide OPEC+ with some leeway to increase its output [2][30] Additional Important Content 1. **Compliance Improvements**: Recent improvements in compliance by Iraq and alignment from the UAE regarding production increases have helped maintain cohesion within OPEC+ [2][30] 2. **Production Baseline Discussions**: Discussions on production baselines have been postponed from November 2025 to November 2026, indicating ongoing complexities in managing production levels [2][9] 3. **Monthly Production Increases**: The monthly increases in production from the OPEC+ "Voluntary Eight" have been adjusted to 120,000 barrels per day, down from 180,000 previously, reflecting a more cautious approach to output increases [30][32] 4. **Impact of Non-OPEC Production**: Non-OPEC production is expected to grow faster than demand over the next two years, which poses a challenge for OPEC+ in managing its output effectively [2][30] This summary encapsulates the key discussions and implications from the OPEC+ conference call, highlighting the strategic decisions made regarding production cuts and the anticipated market dynamics in the oil industry.

Summary of EEMEA Oil and Gas Chartbook Equities Industry Overview - **Industry**: Oil and Gas - **Region**: EEMEA (Eastern Europe, Middle East, and Africa) Key Points 1. **OPEC+ Output Decisions**: OPEC+ has agreed to postpone output hikes due to weak oil demand, extending the unwinding of 2.2 million barrels per day (mbpd) of voluntary cuts over 18 months instead of 12 months previously [15][15][15] 2. **Saudi Arabia's Jack-Up Rigs**: The active jack-up rig count in Saudi Arabia is expected to drop to 61 by mid-December 2024 from 88 rigs in February 2024, approaching pre-2020 levels [12][12][12] 3. **China's Oil Imports**: Crude oil imports to China increased by 9% month-on-month (mom) and 4% year-on-year (yoy), primarily driven by stockpiling rather than actual demand [14][14][14] 4. **Global Oil Demand**: Overall global oil demand growth remains weak, with notable declines in diesel and gasoline demand in the US and China [14][14][14] 5. **European Refining Margins**: European refining margins have weakened, averaging USD 6.3 per barrel but dropping to USD 3-4 per barrel in early December 2024, influenced by increased output from Nigeria's Dangote refinery [17][17][17] 6. **Freight Rates**: Clean tanker day rates have seen a modest increase, but remain significantly lower than in the first half of 2024 due to oversupply [18][18][18] Additional Insights - **Market Dynamics**: The third wave of rig suspensions in Saudi Arabia may affect between five and ten rigs, which is an increase from the previously expected five [12][12][12] - **Regional Production Compliance**: Iraqi oil production has declined to comply with OPEC+ quotas, while Kazakhstan's output rebounded significantly in November 2024 [15][15][15] - **Economic Impact**: Weaker refining margins have led to economic cuts in operations, with some refineries, like Gunvor's Rotterdam facility, facing closures [17][17][17] Conclusion The EEMEA oil and gas sector is currently facing challenges due to weak demand, regulatory decisions from OPEC+, and fluctuating refining margins. The situation is compounded by geopolitical factors and market dynamics that continue to evolve.

Summary of Global Integrated Oil & Gas Conference Call Industry Overview - The conference call focused on the **Global Integrated Oil & Gas** industry, discussing market dynamics and forecasts for 2025 and beyond [9][26]. Key Points and Arguments Market Conditions - **Overcapacity in Oil Markets**: The global oil market is expected to remain in overcapacity, with an estimated **8 million barrels per day (mbpd)** (approximately **8%**) of capacity sidelined due to OPEC+ production cuts [11]. - **Valuation Support**: The sector is currently discounting **$62 per barrel** for Brent oil, which is **15% below** forward curve prices, indicating better valuation support compared to previous years [12][51]. - **Political Changes**: A changing political landscape, particularly in the US, is anticipated to lower the cost of equity (CoE) for the sector, potentially benefiting investment [13]. Regional Performance - **US vs Europe**: The US energy sector has outperformed the European sector by an average of **10% per annum** since 2010, with expectations for continued outperformance in 2025 due to favorable political and capital allocation conditions [14][53]. Company-Specific Insights - **Chevron (CVX)**: The company is currently undervalued relative to peers, with potential upside linked to the mid-2025 arbitration regarding Guyana. The downside risk appears protected [15]. - **ConocoPhillips (COP)**: The company is viewed positively due to its growth prospects and portfolio depth, enhanced by synergies from Marathon [15]. - **Galp (GALP)**: The company is considered undervalued, particularly in light of its exploration potential in Namibia [15]. Gas Market Dynamics - **LNG Supply Growth**: Global LNG supply is projected to expand by **40%** from 2025 to 2028, which may impact pricing dynamics. European prices for 2025 are expected to average **$13.6 per MMBtu**, significantly above long-run marginal costs (LRMC) of **$7-8 per MMBtu** [16][40]. Refining Sector - **Refining Margins Normalization**: After peaks in 2022/23, refining margins have normalized and are expected to align with historical averages. A **25% year-over-year decline** in margins is anticipated for 2025 due to increased refining capacity and lower global oil demand [41]. Investment Outlook - **Equity Performance**: Historical trends suggest that oil equities underperform during periods of spare capacity. The expectation for 2025 is that the oil market will still face overcapacity unless valuation support is found [42]. - **Capital Allocation Trends**: US integrated oil companies are allocating a significant portion of their capital towards hydrocarbon monetization, while European companies are focusing on transition investments [56]. Additional Important Insights - **Risks in Gas Pricing**: The gas market is currently elevated, with traders overly concerned about winter risks, which may not materialize as expected [40]. - **Long-term Growth Prospects**: Companies like ConocoPhillips and Chevron are expected to see growth driven by upcoming projects and synergies, although the overall market remains cautious due to overcapacity concerns [57]. This summary encapsulates the critical insights and forecasts discussed during the conference call, providing a comprehensive overview of the current state and future outlook of the Global Integrated Oil & Gas industry.

Summary of the Conference Call Industry Overview - The report focuses on the oil industry, specifically the outlook for Brent crude oil prices and market dynamics for 2025 and beyond [3][12][10]. Key Points and Arguments 1. **Brent Oil Price Forecast**: - Brent oil prices are expected to average around $80 per barrel in 2024 but have recently declined to the low-to-mid $70s due to market confidence in a significant surplus in 2025 [3][12]. - The forecast for Brent in 2025 is an average of $76 per barrel, with a peak of $78 in June [24][75]. 2. **Supply and Demand Dynamics**: - A modest surplus of 0.4 million barrels per day (mb/d) is anticipated in 2025, driven by supply growth from the Americas and OPEC supply increases [5][24]. - The 2024 oil market is projected to have a deficit of 0.5 mb/d, primarily due to supply misses in Brazil and OPEC countries [12][14]. 3. **Price Range Expectations**: - The base case for Brent prices is set between $70 and $85 per barrel, with high spare capacity limiting price increases and the price elasticity of supply limiting downside risks [4][18][20]. - Short-term price risks are skewed to the upside, particularly if Iranian supply drops significantly due to sanctions [6][43]. 4. **Refining Market Outlook**: - Despite ample spare capacity in oil production, the refining market remains tight, with expectations for gasoline and diesel margins to recover further [8][57]. - Refining capacity is projected to increase by 0.45 mb/d annually from 2025 to 2027, slower than previous years due to closures and rationalizations [57][60]. 5. **Long-term Demand Growth**: - Oil demand is expected to grow for another decade, driven by rising energy demand in emerging markets and challenges in decarbonizing air travel and petrochemical products [65][66]. - The global demand growth is forecasted to pick up to 1.2 mb/d in 2025, with significant contributions from the US, China, and India [36][38]. 6. **Impact of Electric Vehicles (EVs)**: - The rise of EVs is projected to peak oil demand in China by 2025, with a significant impact on global oil demand growth [70][72]. - The drag on oil demand from EVs is expected to increase, but recent sales trends indicate potential downside risks to EV adoption [70][73]. Other Important Insights - **Hedging Recommendations**: Oil producers are advised to hedge against modest downside risks using producer three-way options strategies [7][51]. - **Market Sentiment**: The current selloff in oil prices reflects a disconnect between market sentiment and actual supply-demand fundamentals, with a wide range of forecasts for 2025 [14][18]. - **Geopolitical Risks**: Potential disruptions in Iranian oil supply could lead to significant price spikes, with estimates suggesting Brent could rise to nearly $90 per barrel under certain scenarios [49][50]. This summary encapsulates the critical insights and forecasts from the conference call, providing a comprehensive overview of the oil market's current state and future expectations.

Summary of Key Points from the Conference Call Industry Overview - **Industry**: Asia Oil & Gas, Refining - **Key Focus**: Impact of China's reduction in export VAT rebate for oil products Core Insights 1. **Reduction in Export VAT Rebate**: The Chinese government announced a reduction in the export VAT rebate for gasoline, diesel, and jet fuel from 13% to 9%, effective December 1, 2024. This is a surprising shift given the previous reinstatement of full tax rebates since November 2016 to alleviate surplus refining capacity [1][3] 2. **Impact on Refiners**: The reduction is expected to negatively impact state-owned refiners such as Sinopec and PetroChina, with estimated full-year negative EPS impacts of approximately 3.9% for Sinopec and 1.3% for PetroChina in FY24E [1][3] 3. **Refinery Run Cuts**: Ongoing cuts in refinery runs in China (October: -6.9% YoY; YTD: -3.6%) are expected to limit further export upside, reinforcing the view of limited export support for regional Gross Refining Margins (GRM) [1][4] 4. **Used Cooking Oil (UCO) VAT Rebate**: The export VAT rebate for used cooking oil will be removed to align with biodiesel, which already has no rebate. This is part of China's strategy to promote local UCO processing and biofuel market development [1][5] Additional Considerations 1. **Domestic Competition**: The startup of the Yulong greenfield refinery, with a capacity of 200,000 b/d, may worsen domestic competition as the government reallocates crude import quotas to enhance industry competitiveness [3] 2. **Regional Refiners' Advantage**: Asian refiners such as S-Oil, SPRC, and TOP are expected to benefit from reduced Chinese competitiveness, although sentiment for TOP may remain muted due to ongoing issues with subcontractors [9] 3. **Biodiesel Exports**: China's biodiesel exports dropped by 45% YoY to 0.89 million tonnes, influenced by the EU's anti-dumping investigation, while UCO exports surged by 55% YoY to 2.12 million tonnes [5] Valuation and Risks 1. **PetroChina Valuation**: Target price for PetroChina A-share is set at Rmb10.3, based on a sum-of-the-parts valuation with an 8.0% WACC. Key risks include lower-than-expected oil prices and production volumes [18][19] 2. **Sinopec Valuation**: Target price for Sinopec A-share is Rmb5.1, with similar valuation methods applied. Risks include fluctuations in fuel demand and dividend payout ratios [24][26] Conclusion - The reduction in export VAT rebates and ongoing refinery run cuts in China are expected to have significant implications for both domestic and regional refining markets. While regional refiners may benefit, state-owned enterprises like Sinopec and PetroChina are likely to face headwinds in the upcoming fiscal year.

Summary of the Conference Call on China Energy: Oil Sector Companies Involved - **PetroChina** - **Sinopec** - **CNOOC** Key Points and Arguments Earnings Estimates Update - **PetroChina**: - 2024E EBITDA revised to RMB 469,147 million, a 2% increase from previous estimates - 2025E EBITDA revised to RMB 459,951 million, a 1% decrease - 2026E EBITDA revised to RMB 495,862 million, a 1% decrease [5][6] - **Sinopec**: - 2024E EBITDA revised to RMB 203,256 million, a 3% decrease - 2025E EBITDA revised to RMB 212,346 million, a 4% decrease - 2026E EBITDA revised to RMB 234,679 million, a 3% decrease [5][6] - **CNOOC**: - 2024E EBITDA revised to RMB 268,198 million, a 1% increase - 2025E EBITDA revised to RMB 263,099 million, a 1% decrease - 2026E EBITDA revised to RMB 285,458 million, a 1% decrease [5][6] Valuation Comparisons - **PetroChina**: - Current share price discounts a long-term Brent price of US$65/bbl - 2025E dividend yield is approximately 8% and FCF yield is around 14% [6][10] - **CNOOC**: - Current share price discounts a Brent oil price of US$57/bbl - Expected FCF yield and dividend yield both around 8% for 2025 [10][12] - **Sinopec**: - Expected to experience weak FCF due to prolonged chemical market surplus and elevated capex [12][20] Price Targets - **PetroChina**: - New 12-month price targets set at HK$8.10/Rmb12.30, down from HK$8.20/Rmb12.70 [6][18] - **CNOOC**: - New 12-month price target set at HK$23.50, up from HK$23.30 [10][12] - **Sinopec**: - New 12-month price targets set at HK$4.50/Rmb5.60, down from HK$4.80/Rmb6.10 [12][15] Sensitivity Analysis - **PetroChina**: - Earnings positively correlated with oil prices, but the net positive impact on EBITDA narrows when oil exceeds US$85/bbl due to increased royalties [8][17] - **CNOOC**: - Clean exposure to oil price changes, but net benefits decrease slightly when oil prices rise above US$85/bbl due to increased royalties [11][12] Risks - **PetroChina**: - Risks include lower oil prices than expected and a more competitive gas market leading to earnings headwinds [17][19] - **Sinopec**: - Risks include fluctuations in oil prices and refining margins, as well as cost pass-through of imported LNG [20] Other Important Insights - The valuation of Chinese oil companies remains discounted compared to global peers, indicating potential investment opportunities [5][6] - The analysis suggests a preference for upstream companies like PetroChina and CNOOC over Sinopec due to expected weak FCF in the latter [12][20]

Summary of Key Points from the Conference Call Industry Overview - The report focuses on the oil industry, particularly the dynamics of crude oil prices and production forecasts in light of geopolitical tensions and supply-demand factors. Core Insights and Arguments 1. **Oil Price Sensitivity**: Oil prices are sensitive to supply disruption risks, particularly concerning potential downside risks to Iranian supply and declines in Red Sea oil flows. A significant interruption of trade through the Strait of Hormuz could lead to a large oil price spike [2][3][6]. 2. **Geopolitical Risk Premium**: Despite a 5% jump in Brent crude prices due to the Iran-Israel conflict, the geopolitical risk premium remains moderate according to valuation models and option prices [6][7]. 3. **Supply Dynamics**: - Trackable net supply decreased by 0.1 million barrels per day (mb/d) week-over-week, with Libya's production dropping by 0.4 mb/d due to disruptions, although it is preparing to restore full production [3][7][10]. - US Lower 48 crude production is at 11.1 mb/d, which is 0.1 mb/d lower than September expectations, influenced by lower crude prices and hurricane-related shutdowns [10][12]. - Russia's liquids production increased by 0.2 mb/d due to a surge in fuel oil exports [9][10]. 4. **Demand Forecasts**: - China's oil demand nowcast decreased by 0.1 mb/d to 16.0 mb/d, reflecting a slowdown in oil-intensive services sector growth [8][18]. - OECD Europe oil demand remained stable at 13.6 mb/d, but is 0.3 mb/d below August expectations [20]. 5. **Inventory Trends**: OECD commercial stocks decreased by 5 million barrels (mb) to 2,810 mb, indicating larger draws in developed market crude and US products [22][30]. Additional Important Insights 1. **Brent Timespreads**: The Brent 1M/36M timespread remains undervalued, with a gap of just over $5 per barrel despite recent price rallies [7][30]. 2. **Managed Money Positioning**: Oil net managed money positioning recovered by 88 mb last week, but remains at the 1st percentile, indicating limited financial demand recovery [8][10]. 3. **Volatility Metrics**: Brent implied volatility increased by 6 percentage points to 1 percentage point above modeled fair value, reflecting heightened market uncertainty [35][36]. 4. **Geopolitical Disruptions**: Oil flows through the Bab-El-Mandeb Strait have decreased by 2.8 mb/d (or 40%) since disruptions began, highlighting the impact of geopolitical tensions on supply routes [38]. This summary encapsulates the key points discussed in the conference call, providing a comprehensive overview of the current state of the oil industry, including production forecasts, demand trends, and the influence of geopolitical factors on pricing and supply dynamics.

2023 2024 Morgan Stanley Research 31 Source: Morgan Stanley Research. FOUNDATION M Foundation Source: Company data, Morgan Stanley Research. 2611202331142435363943474849566156 7.5% 3.8% 5.5% 7.5% 4.1% 7.0% 7.7% 8.1% 8.3% 1% 3% 5% 7% 9% 11% 0 11 22 33 44 55 66 F4Q20F1Q21F2Q21F3Q21F4Q21F1Q22F2Q22F3Q22F4Q22F1Q23F2Q23F3Q23F4Q23F1Q24F2Q24F3Q24F4Q24 (Rs Bn) EBITDA EBITDA Margin (RS) Exhibit 70: Core retail EBITDA margin improved by 20bp to 8.3% M Foundation 34 Telecom: Growing Well Exhibit 76: Reliance Jio spectr ...