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.

Summary of Key Points from the Conference Call Industry Overview: China Oil & Gas Key Insights - **Gas Demand Growth**: The forecast for China's gas demand growth has been revised down to 4% per annum for FY25, from a previous estimate of 5.8% for FY24, due to weaker GDP growth and decelerated demand from industrial sectors [1][3][4] - **GDP Impact**: The macroeconomic team has cut the FY24 GDP forecast to 4.8%, which is expected to impact gas demand negatively [1][3] - **Demand Drivers**: Despite the slowdown, there are still solid demand drivers including: - Residential and heating supply, accounting for approximately 25% of total consumption - Increasing adoption of LNG trucks, which are economically beneficial compared to diesel trucks (RMB1.4/km lower) - Rising demand for gas power generation to support new energy initiatives [1][3][4] Production and Supply - **Production Capacity**: China's gas production capacity is expected to grow steadily, reaching 247 billion cubic meters (bcm) in FY24 and 262 bcm in FY25, reflecting a growth rate of 6.1-7.2% per annum [1][4] - **Storage Capacity**: By the end of FY23, China's gas storage capacity is projected to reach 6% of demand, with plans to increase this to align with global averages in the medium term [1][4] - **Import Dependency**: The import dependency for natural gas is expected to decrease to 38% by FY25-26, down from 40% in FY24 [1][4] Market Dynamics - **Long-term Contracts**: China is expected to secure long-term LNG contracts from the US and Qatar, which will reduce reliance on spot imports [1][4] - **Price Stability**: Near-term gas prices are expected to stabilize, with a projected 2% year-on-year increase in average selling price (ASP) for 2H24 [1][4] - **Profitability of Major Players**: PetroChina reported a loss of RMB4 billion in its imported gas business in 1H24, while Sinopec achieved a profit of RMB380 million [4][6] Demand Forecasts - **Revised Demand Growth**: The revised forecasts for gas demand growth are 5.8% for FY24, 3.9% for FY25, and 3.0% for FY26, reflecting a downward adjustment from previous estimates [3][4] - **Apparent Demand**: In the first eight months of 2024, China's apparent gas demand was 280 bcm, representing a 9.6% year-on-year increase, with real demand growth estimated at 6-8% [4][6] Conclusion - The outlook for the China oil and gas industry indicates a mixed scenario with slower growth rates due to economic factors, but sustained demand from residential and industrial sectors, alongside strategic long-term contracts, may provide stability in the market [1][3][4]

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 ...

Cristiane Barretto - Chief Financial & Investor Relations Officer Mateus Bandeira - Chief Executive Officer Thalles Paixão - Chief Legal Officer Rogerio Takayanagi - Head of Strategy & Transformation Luis Plaster - Chief Investor Relations Officer Operator Cristiane Barretto Company Participants Leonardo Olmos - UBS During the company's presentation, all participants will be in a listen-only mode. Should you wish to ask a question, please click on the Q&A icon at the bottom of the screen and write your name ...

ask our | --- | --- | --- | |--------------------------------|------------------------------------------------------------------------------------------------|-------| | | | | | | | | | on Brazilian operations only. | This presentation includes information | | | | | | | | As of this quarter, we are presenting Oi Soluções excluding Wholesale Revenues, which are now | | | | treated as a separate line in the group of Non-Core Revenues. For comparison purposes, we are | | | compared in this presentation. | pres ...