We upgrade 2008, 2009 and 2010 WTI oil
price forecasts to USD81/bbl (+27%),
USD76/bbl (+36%) and USD61/bbl (+7%).
Our long-term normalised WTI price is
raised to USD61/bbl (+9%)
􀀗 As a result, we lift our DCF estimates for
the sector by an average of 10%, but
keep earnings largely unchanged due to
higher cost assumptions
􀀗 Current valuations of Asian oil stocks
do not fully reflect higher oil price
assumption. Risk appears on the
upside. Top picks: CNOOC Ltd, ONGC

Oil prices to remain high near term
We expect the oil price to revert to a lower mean in the long
run (i.e. USD61/bbl). Yet, strong Chinese demand and
global supply disruptions should support a strong oil price
near term. Oil is a hedge against inflation and currency risk.
Only USD48/bbl priced in for Asian oils
We believe Asian oil equities do not fully reflect the current
high oil price environment and are currently only pricing in a
USD48/bbl long-term oil price. Consistently underestimated
oil price leads to underestimated DCF estimates and
dividend yield. We see on average 25% upside in the sector.
Investment implications
Our top picks are CNOOC Ltd and ONGC. While CNOOC
Ltd shows the highest earnings leverage to oil price changes
over 2008-09 among the Chinese oil patch, ONGC remains
the value buy with current market price not reflecting even
the core value. We keep our ratings but our target prices
increase only 3% on average after applying HSBC’s lower
FY08e PE multiples for MSCI China and India.

目录

What’s new? 3
Summary 4
China oils 7
Indian oils 14
Valuations 16
Macro view 18
Company profiles 24
CNOOC Ltd 25
Sinopec Corp 29
PetroChina 33
Oil & Natural Gas Corp 37
Cairn India Limited 40
GAIL 43
Bharat Petroleum 46
Hindustan Petroleum 48
Reliance Industries 50
Reliance Petroleum 53
Disclosure appendix 56
Disclaimer 59