European Integrated Oils
4Q08 results and 2009 strategy previews: What to
look for
Integrated Oils
Kim FustierAC
(44-20) 7325-1719
kim.a.fustier@jpmorgan.com
Amy Wong
(44-20) 7325-9460
amy.wong@jpmorgan.com
J.P. Morgan Securities Ltd.
See page 29 for analyst certification and important disclosures, including non-US analyst disclosures.
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investment decision.
For Specialist Sales advice, please
contact:
Hamish Clegg
(44-20) 7325-0878
hamish.w.clegg@jpmorgan.com
Figure 1: 4Q08E y/y change in $-EPS
(84%)
(46%)
(34%)
(31%)
(29%)
(29%)
(24%)
(23%)
(100%) (50%) 0%
STL
REP
ENI
OMV
BP
RDS
BG
TOT
Source: J.P. Morgan estimates
In this report, we preview the 4Q08 results of the European integrated oils
and discuss the companies’ forthcoming 2009 strategy presentations.
• Poor macro backdrop, little relief from R&M: 4Q08 saw an
unprecedented collapse in crude prices, which fell by $60/bbl q/q and
$33/bbl y/y to c.$57/bbl in the quarter. The downstream did not provide
much shelter as downward pressures on refining margins outweighed any
temporary relief from good marketing earnings.
• Weak 4Q results a negative catalyst: in our view, the European oils’ 4Q08
results could provide a stark dose of reality, as the extent of the q/q fall in
earnings may not be fully factored in. We see avg $-EPS declines of 38%
y/y and 54% q/q. The best y/y comparison should be at BG and Total (-23-
24% y/y) while the worst (excl STL) should come from Repsol (-46% y/y).
• Strategy updates could disappoint: we think the strategy presentations
could contain negative surprises, in particular lower growth targets as a
result of capex cuts (see our Dec 3rd 2008 and Jan 12th reports). Beyond the
near-term impact of OPEC cuts, longer-term E&P production targets should
be hit by project delays and lower reinvestment. Moreover, SEC reserve
replacement data could be affected by write-downs at lower y/e oil prices.
• Still cautious on the sector: we do not see an attractive risk/reward balance
for the sector at present. We think current valuations are expensive and see
big downside risks to consensus, notably from cyclical pressures on R&M
earnings. We have trimmed 08E EPS estimates by 2% to reflect 4Q effects.
We remain 33% below consensus in 09E and 20% below on avg in 10-11E.
• Top picks/least preferred: Going into the earnings season, BG (OW) remains
our top pick for solid 4Q results, peer-leading volume growth and E&P
catalysts. We remain cautious on Shell (UW), where 4Q marketing results are
unlikely to offset weaker refining profits. We expect Repsol’s (UW) results to
be hit badly by poor results in E&P and YPF, despite a resilient downstream.

Table of Contents
European oils – recap of our views ........................................3
4Q08 results previews..............................................................5
4Q08 at a glance ..........................................................................................................5
Production: 2008 disappoints, 2009 rebounds (in theory) ...........................................7
2009 Strategy presentations – What to look for...........................................................8
EPS estimate changes ................................................................................................10
Valuation summary....................................................................................................10
Quarterly previews .................................................................11
4Q08 commodity review............................................................................................11
Shell: reports January 29............................................................................................12
BP: reports February 3...............................................................................................14
BG: reports February 5 ..............................................................................................16
Total: reports February 12 .........................................................................................18
ENI: reports February 13 ...........................................................................................20
Statoil: reports February 17 .......................................................................................22
OMV: reports February 25.........................................................................................24
Repsol: reports February 26.......................................................................................26
Summary of recommendations and price targets .......................................................28