Market Capitalization $92.7 Billion

Transcription

1 BUY HOLD SELL A+ A A- B+ B B- C+ C C- D+ D D- E+ E E- F HOLD December 20, 2015 HOLD RATING SINCE 07/23/2015 BUSINESS DESCRIPTION p.l.c. operates as an integrated oil and gas company worldwide. It operates in three segments: Upstream, Downstream, and Rosneft. STOCK PERFORMANCE (%) 3 Mo. 1 Yr. 3 Yr (Ann) Price Change GROWTH (%) Last Qtr 12 Mo. 3 Yr CAGR Revenues Net Income NA EPS NA RETURN ON EQUITY (%) Ind Avg S&P 500 Q Q Q P/E COMPARISON Sector: Energy Sub-Industry: Integrated Oil & Gas Source: S&P Weekly Price: (US$) SMA (50) SMA (100) 1 Year 2 Years Rating History BUY HOLD BUY HOLD Volume in Millions COMPUSTAT for Price and Volume, TheStreet Ratings, Inc. for Rating History n/m EPS ANALYSIS¹ ($) Ind Avg S&P 500 RECOMMENDATION We rate () a HOLD. The primary factors that have impacted our rating are mixed - some indicating strength, some showing nesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. Among the primary strengths of the company is its solid financial position based on a variety of debt and liquidity measures that we have evaluated. At the same time, however, we also find nesses including deteriorating net income, disappointing return on equity and operating cash flow. HIGHLIGHTS, with its decline in revenue, slightly underperformed the industry average of 36.9%. Since the same quarter one year prior, revenues fell by 41.7%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share. Q Q Q Q Q Q Q NA = not available NM = not meaningful Q Q Q Q Compustat fiscal year convention is used for all fundamental data items. Despite currently having a low debt-to-equity ratio of 0.57, it is higher than that of the industry average, inferring that management of debt levels may need to be evaluated further. Regardless of the somewhat mixed results with the debt-to-equity ratio, the company's quick ratio of 1.01 is sturdy. has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. The company has reported a trend of declining earnings per share over the past two years. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, reported lower earnings of $1.21 versus $7.34 in the prior year. This year, the market expects an improvement in earnings ($2.18 versus $1.21). The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed against the S&P 500 and did not exceed that of the Oil, Gas & Consumable Fuels industry. The net income has significantly decreased by 96.4% when compared to the same quarter one year ago, falling from $1, million to $46.00 million. Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major ness within the corporation. Compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market, 's return on equity significantly trails that of both the industry average and the S&P 500. PAGE 1

2 PEER GROUP ANALYSIS REVENUE GROWTH AND EBITDA MARGIN* Revenue Growth (TTM) -50% -20% OXY UNFAVORABLE -70% EBITDA Margin (TTM) FAVORABLE PBR.A SU TOT RDS.B RDS.A XOM CVX STO 30% Companies with higher EBITDA margins and revenue growth rates are outperforming companies with lower EBITDA margins and revenue growth rates. Companies for this scatter plot have a market capitalization between $26.7 Billion and $324.5 Billion. Companies with NA or NM values do not appear. *EBITDA Earnings Before Interest, Taxes, Depreciation and Amortization. REVENUE GROWTH AND EARNINGS YIELD Revenue Growth (TTM) -50% -20% PBR.A PBR UNFAVORABLE -40% Earnings Yield (TTM) OXY STO SU FAVORABLE TOT CVX XOM RDS.B RDS.A 10% Companies that exhibit both a high earnings yield and high revenue growth are generally more attractive than companies with low revenue growth and low earnings yield. Companies for this scatter plot have revenue growth rates between -45.8% and -22.5%. Companies with NA or NM values do not appear. INDUSTRY ANALYSIS The Oil, Gas & Consumable Fuels industry is cyclical in nature and is one of the most important globally because it touches so many others. It is broken down into its component parts by the nature of activity performed. Upstream activities are related to finding and producing commodities; midstream refers to the transportation of product from the wellhead to intermediate customers; and, downstream includes the refining, transformation and marketing of related products. Coal producers are integrated, much like the players in alternative fuels like uranium. Some of the largest players in the industry are the integrated oil & gas producers (aka Big Oil). Close to two-thirds of the world s energyneeds are satisfied by hydrocarbons (crude oil and natural gas). Althoughconservation, increased efficiency and substitutes are gaining in prominence,they are not likely to significantly reduce this dependence in the near future.crude oil prices have moderated at present due to lagging economies and newsupplies coming online. In 2004, West Texas Intermediate (WTI) crude oil brokeout of its historic trading range of $10 to $40 per barrel on a steady climb tomore than $145 per barrel in June 2008 before crashing to under $40 by the endof Since then the price of spot crude has climbed back near the $90 to$110 range before falling again. Natural gas prices, responding to excesssupply, have retreated to the $2 to $4 range per million BTU (British thermalunit). Coal prices are dependent on the energy content of the type of coalconsidered and its location, but it, too, has climbed significantly over thepast few years. Following nearly 20 years of underinvestment,the supply of crude oil is barely keeping pace with demand. Longer term demandshould grow at about 1.8% per year, meaning it is expected to grow more than40% over the next 20 years. Natural gas demand is expected to rise over time,according to the American Petroleum Institute, as its cleaner-burningproperties increase in value for industry. Coal consumption is projected togrow at about 1.7% per year over the next 20 years, based on US EnergyInformation Administration forecasts. Analysis of companies in this industry beginsby forming a view of the global economy and geopolitics, which is combined witha supply and demand analysis that leads to commodity price forecasts. At theindividual firm level, how efficiently a company operates goes a long way indetermining its profitability. Supply management is an important factor, too,as high commodity prices are affected by how much supply the industry as awhole produces. Geographic positioning can also be important, as regionaleconomic cycles may not synch up well with each other. The so-called supermajor integrated oilcompanies include Exxon Mobil (XOM), Plc (), Chevron (CVX), Total SA(TOT), and ConocoPhillips (COP). Some of the other major Exploration &Production firms include Norsk Hydro (NHYDY), Anadarko Petroleum (APC), DevonEnergy (DVN) and Apache (APA). On the Refining & Marketing level, majorplayers include Valero Energy (VLO), Sunoco (SUN), and Tesoro (TSO). The majoruranium producer is Cameco (CCJ). PEER GROUP: Oil, Gas & Consumable Fuels Recent Market Price/ Net Sales Net Income Ticker Company Name Price ($) Cap ($M) Earnings TTM ($M) TTM ($M) ,651 NM 243, , OXY OCCIDENTAL PETROLEUM CORP ,727 NM 13, , STO STATOIL ASA ,716 NM 51, , SU SUNCOR ENERGY INC , , XOM EXXON MOBIL CORP , , , PBR PETROLEO BRASILEIRO SA- PETR ,736 NM 108, , PBR.A PETROLEO BRASILEIRO SA- PETR ,736 NM 108, , CVX CHEVRON CORP , , , RDS.B ROYAL DUTCH SHELL PLC , , , RDS.A ROYAL DUTCH SHELL PLC , , , TOT TOTAL SA , , , The peer group comparison is based on Major Integrated Oil & Gas companies of comparable size. PAGE 2

3 COMPANY DESCRIPTION p.l.c. operates as an integrated oil and gas company worldwide. It operates in three segments: Upstream, Downstream, and Rosneft. The Upstream segment engages in the oil and natural gas exploration, field development, and production; midstream transportation, and storage and processing; and marketing and trade of natural gas, including liquefied natural gas (LNG), and power and natural gas liquids (NGL). It also owns and manages crude oil and natural gas pipelines; processing facilities and export terminals; and LNG processing facilities and transportation, as well as NGL extraction business. The Downstream segment refines, manufactures, markets, transports, supplies, and trades in crude oil, petroleum, and petrochemicals products and related services to wholesale and retail customers. It offers lubricants and related products under the Castrol,, and Aral brands to the automotive, industrial, marine, and energy markets; and petrochemicals products, such as purified terephthalic acid, paraxylene, acetic acid, olefins and derivatives, and specialty petrochemicals products. This segment also sells gasoline, diesel, and aviation fuel. The Rosneft segment engages in the exploration and production of hydrocarbons in the United States, Canada, Vietnam, Venezuela, Brazil, Algeria, the United Arab Emirates, Turkmenistan, and Norway; and offers jet fuel, bunkering, bitumen, and lubricants. This segment also owns and operates 10 refineries in Russia; and has an interest in 4 refineries in Germany. As of December 31, 2014, this segment owned and operated approximately 2,500 retail service stations in Russia. The company also produces bioethanol, sugar, and biobutanol; exports power to the local grid; transports hydrocarbon products through shipping and chartering services; and holds interests in 16 operating wind farms with a generation capacity of 2,585 megawatts. p.l.c. was founded in 1889 and is headquartered in London, the United Kingdom. 1 St James's Square London SW1Y4PD GBR Phone: Fax: Employees: STOCK-AT-A-GLANCE Below is a summary of the major fundamental and technical factors we consider when determining our overall recommendation of shares. It is provided in order to give you a deeper understanding of our rating methodology as well as to paint a more complete picture of a stock's strengths and nesses. It is important to note, however, that these factors only tell part of the story. To gain an even more comprehensive understanding of our stance on the stock, these factors must be assessed in combination with the stock s valuation. Please refer to our Valuation section on page 5 for further information. FACTOR SCORE Growth 0.5 out of 5 stars Measures the growth of both the company's income statement and cash flow. On this factor, has a growth score better than virtually none of the stocks we rate Total Return 1.5 out of 5 stars Measures the historical price movement of the stock. The stock performance of this company has beaten 20% of the companies we cover. Efficiency 2.0 out of 5 stars Measures the strength and historic growth of a company's return on invested capital. The company has generated more income per dollar of capital than 30% of the companies we review. Price volatility 2.0 out of 5 stars Measures the volatility of the company's stock price historically. The stock is less volatile than 30% of the stocks we monitor. Solvency 3.5 out of 5 stars Measures the solvency of the company based on several ratios. The company is more solvent than 60% of the companies we analyze. Income 5.0 out of 5 stars Measures dividend yield and payouts to shareholders. The company's dividend is higher than 90% of the companies we track. THESTREET RATINGS RESEARCH METHODOLOGY TheStreet Ratings' stock model projects a stock's total return potential over a 12-month period including both price appreciation and dividends. Our Buy, Hold or Sell ratings designate how we expect these stocks to perform against a general benchmark of the equities market and interest rates. While our model is quantitative, it utilizes both subjective and objective elements. For instance, subjective elements include expected equities market returns, future interest rates, implied industry outlook and forecasted company earnings. Objective elements include volatility of past operating revenues, financial strength, and company cash flows. Our model gauges the relationship between risk and reward in several ways, including: the pricing drawdown as compared to potential profit volatility, i.e.how much one is willing to risk in order to earn profits; the level of acceptable volatility for highly performing stocks; the current valuation as compared to projected earnings growth; and the financial strength of the underlying company as compared to its stock's valuation as compared to projected earnings growth; and the financial strength of the underlying company as compared to its stock's performance. These and many more derived observations are then combined, ranked, weighted, and scenario-tested to create a more complete analysis. The result is a systematic and disciplined method of selecting stocks. PAGE 3

4 Consensus EPS Estimates² ($) IBES consensus estimates are provided by Thomson Financial 0.28 Q4 FY E 2015(E) 1.83 E 2016(E) INCOME STATEMENT Net Sales ($mil) 54, , EBITDA ($mil) 4, , EBIT ($mil) , Net Income ($mil) , FINANCIAL ANALYSIS 's gross profit margin for the third quarter of its fiscal year 2015 has increased when compared to the same period a year ago. Sales and net income fell significantly, but still managed to outperform when compared to the average company in its industry. has average liquidity. Currently, the Quick Ratio is 1.01 which shows that technically this company has the ability to cover short-term cash needs. The company's liquidity has increased from the same period last year. During the same period, stockholders' equity ("net worth") has decreased by 19.42% from the same quarter last year. Together, the key liquidity measurements indicate that it is relatively unlikely that the company will face financial difficulties in the near future. STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12-months. To learn more visit BALANCE SHEET Cash & Equiv. ($mil) 31, , Total Assets ($mil) 273, , Total Debt ($mil) 57, , Equity ($mil) 101, , PROFITABILITY Gross Profit Margin 13.40% 11.86% EBITDA Margin 7.67% 7.35% Operating Margin 0.85% 3.14% Sales Turnover Return on Assets -2.77% 2.98% Return on Equity -7.48% 7.33% DEBT Current Ratio Debt/Capital Interest Expense Interest Coverage SHARE DATA Shares outstanding (mil) 3,058 3,052 Div / share EPS Book value / share Institutional Own % NA NA Avg Daily Volume 7,816,209 7,553,439 2 Sum of quarterly figures may not match annual estimates due to use of median consensus estimates. PAGE 4

5 RATINGS HISTORY Our rating for has not changed since 7/23/2015. As of 12/17/2015, the stock was trading at a price of which is 30.8% below its 52-week high of $43.85 and 3.4% above its 52-week low of $ Year Chart BUY: $ HOLD: $42.90 BUY: $42.78 HOLD: $37.30 $60 $50 $40 MOST RECENT RATINGS CHANGES Date Price Action From To 7/23/15 $37.30 Downgrade Buy Hold 4/21/15 $42.78 Upgrade Hold Buy 10/29/14 $42.90 Downgrade Buy Hold 12/17/13 $45.52 No Change Buy Buy Price reflects the closing price as of the date listed, if available RATINGS DEFINITIONS & DISTRIBUTION OF THESTREET RATINGS (as of 12/17/2015) 39.49% Buy - We believe that this stock has the opportunity to appreciate and produce a total return of more than 10% over the next 12 months % Hold - We do not believe this stock offers conclusive evidence to warrant the purchase or sale of shares at this time and that its likelihood of positive total return is roughly in balance with the risk of loss % Sell - We believe that this stock is likely to decline by more than 10% over the next 12 months, with the risk involved too great to compensate for any possible returns. TheStreet Ratings 14 Wall Street, 15th Floor New York, NY Research Contact: Sales Contact: VALUATION HOLD. The current P/E ratio is negative, which has no meaningful value in the assessment of premium or discount valuation, it simply displays that the company has negative earnings. For additional comparison, its price-to-book ratio of 0.92 indicates a significant discount versus the S&P 500 average of 2.71 and a significant discount versus the industry average of The price-to-sales ratio is well below both the S&P 500 average and the industry average, indicating a discount. After reviewing these and other key valuation criteria, proves to trade at a discount to investment alternatives within the industry. Price/Earnings NM Peers Neutral. The absence of a valid P/E ratio happens when a stock can not be valued on the basis of a negative stream of earnings. 's P/E is negative making this valuation measure meaningless. Price/Projected Earnings Peers Discount. A lower price-to-projected earnings ratio than its peers can signify a less expensive stock or lower future growth expectations. is trading at a significant discount to its peers. Price/Book 0.92 Peers 6.36 Discount. A lower price-to-book ratio makes a stock more attractive to investors seeking stocks with lower market values per dollar of equity on the balance sheet. is trading at a significant discount to its peers. Price/Sales 0.38 Peers 1.67 Discount. In the absence of P/E and P/B multiples, the price-to-sales ratio can display the value investors are placing on each dollar of sales. is trading at a significant discount to its industry on this measurement. DISCLAIMER: Price/CashFlow 4.46 Peers 7.42 Discount. The P/CF ratio, a stock s price divided by the company's cash flow from operations, is useful for comparing companies with different capital requirements or financing structures. is trading at a significant discount to its peers. Price to Earnings/Growth NA Peers 1.79 Neutral. The PEG ratio is the stock s P/E divided by the consensus estimate of long-term earnings growth. Faster growth can justify higher price multiples. Ratio not available. Earnings Growth lower higher Peers Higher. Elevated earnings growth rates can lead to capital appreciation and justify higher price-to-earnings ratios. is expected to have an earnings growth rate that significantly exceeds its peers. Sales Growth lower higher Peers Lower. A sales growth rate that trails the industry implies that a company is losing market share. significantly trails its peers on the basis of sales growth The opinions and information contained herein have been obtained or derived from sources believed to be reliable, but TheStreet Ratings cannot guarantee its accuracy and completeness, and that of the opinions based thereon. Data is provided via the COMPUSTAT Xpressfeed product from Standard &Poor's, a division of The McGraw-Hill Companies, Inc., as well as other third-party data providers. TheStreet Ratings is a division of TheStreet, Inc., which is a publisher. This research report contains opinions and is provided for informational purposes only. You should not rely solely upon the research herein for purposes of transacting securities or other investments, and you are encouraged to conduct your own research and due diligence, and to seek the advice of a qualified securities professional, before you make any investment. None of the information contained in this report constitutes, or is intended to constitute a recommendation by TheStreet Ratings of any particular security or trading strategy or a determination by TheStreet Ratings that any security or trading strategy is suitable for any specific person. To the extent any of the information contained herein may be deemed to be investment advice, such information is impersonal and not tailored to the investment needs of any specific person. Your use of this report is governed by TheStreet, Inc.'s Terms of Use found at PAGE 5