Lucas Herrmann, ACA 4Q15 Results...

Deutsche Bank Markets Research

Europe

Oil & Gas

Integrated Oils

Industry

European Integrated Oils

Date

1 February 2016

Industry Update

4Q15 Results Preview

It's really tough out there

________________________________________________________________________________________________________________

Deutsche Bank AG/London

Deutsche Bank does and seeks to do business with companies covered in its research reports. Thus, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision. DISCLOSURES AND ANALYST CERTIFICATIONS ARE LOCATED IN APPENDIX 1. MCI (P) 124/04/2015.

Lucas Herrmann, ACA

Research Analyst

(+44) 20 754-73636

[email protected]

Tom Robinson

Research Analyst

(+44) 20 754-52468

[email protected]

Top picks

BP (BP.L),GBP376.10 Buy

Royal Dutch Shell Plc (RDSb.L),GBP1,521.00

Buy

Total SA (TOTF.PA),EUR40.92 Buy

Source: Deutsche Bank

4Q15E Net Income Expectations

4Q15e Y/Y Q/Q

BP ($m) 02 Feb 1041 -53% -43%

Shell ($m) 04 Feb 1789 -45% 1%

Statoil (NKm) 04 Feb 3034 -29% -18%

BG ($m) 05 Feb 318 -68% 14%

Galp (€m) 08 Feb 74 -45% -59%

Total (€m) 11 Feb 1729 -38% -37%

OMV (€m) 18 Feb 162 -53% -56%

Repsol (€m) 25 Feb 164 -56% 3%

Eni (€m) 26 Feb 215 -54% -183%


4QE YoY Net Income Expectations (%)

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Statoil Total Shell Galp OMV BP ENI Repsol BG

Y/Y Net Income Reported Currency


There can be little doubt that this will prove another reporting season that serves to emphasize just how much damage oil prices of $50/bbl and below can inflict. Moreover, with refining margins also seasonally weak, sequential earnings are unlikely to be rescued by downstream strength. The positive, to the extent that there is one, is that the benefits of restructuring should be starting to feed through and it is here that we suspect upside, if it is to be seen, may arise. This observation aside we expect little cheer with guidance for 2017 unlikely to see material alteration, and weak reserve replacement ratios and asset write-downs, serving to further emphasize the extent of the current pain.

Different quarter, same words (well almost) With 4Q/3Q commodity moves showing Brent -14% and Hub down 24%, we expect the strong negative momentum in Upstream earnings (-20% sequentially in USD) evidenced throughout the year to have continued, with cash flow remaining under intense pressure. The difference this quarter will, however, be that the previously positive support from refining, not least in Europe, has sharply faded with sequential R&M profits seen down some 35% in $ terms (but modestly ahead y-o-y). Taken in aggregate our expectations for the group in this quarter look towards a 17% decline in sequential earnings at the group level, with earnings year-on-year essentially halved.

Look across the Atlantic for news flow that may influence the S/D debate As was the case in Q3, the paucity of upstream earnings at current oil prices mean that scope for forecasting error remains very high. This in our view is only likely to be made the more so by the challenges faced in modeling the impact of the major restructuring initiatives taking place across the industry. If anything the risk here must, however, be that upstream earnings prove stronger than anticipated albeit that absolute benefit on a quarterly basis is still expected to be modest in the extreme. Headline earnings aside, with several companies having already laid down targets for the rebalancing of 2017 cash cycles, it is not our expectation that outlook statements will see a dramatic alteration in intent or tone. Of course reference will be made to a challenging 2016 with greater effort shown to contain near term costs. At this early stage in the 2016 year capex guidance and cycle balance targets for 2017 are, however, unlikely to see significant alteration, in our view.

Valuation & Risk As confidence builds in the view that a mid-cycle Brent price of c$60-70/bbl is not unrealistic, free cash and dividend multiples argue that there is further upside. But with near term trading results, not least the impending quarter but also likely the next, almost certain to emphasize that cash and profit cycles at this time simply do not work, we are loath to chase the names. Our preferred names remain BP (Buy 445p) the c7% DY for which we believe will come in materially as investors gain confidence in the company’s ability to rebalance its cash flows to a $60/bbl forward view and Shell (Buy 2035p), which whilst entailing disposal dependent balance sheet risk post the BG deal, also sits at a now significant valuation discount on near every metric to peer.

1 February 2016

Integrated Oils


Page 2 Deutsche Bank AG/London

The quarter in six charts

Figure 1: With Brent c. 45% below prior year, net income

is set to test $5bn, its lowest in over a decade

Figure 2: Production growth remains robust as a record

number of project sanctions in 2011/12 ramp-up

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Libya outages

Libya recovery

ADCO contract loss

Repsol/Talisman effect



Figure 3: Downstream: Refining margins down 35-45%

from Q3 highs should see EBIT lower to ~$6bn

Figure 4: Upstream earnings decimated, albeit broadly in

line with prior quarter on higher growth and lower tax

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$/bbl$ mnE&P EBIT Brent



Figure 5: Production estimate by company Figure 6: Q4 15 earnings estimates by company (Y/Y)

Production (kboe/d) Q4 14 Q3 15 Q4 15 Q4/Q3 Q4/Q4

BP (ex-Rosneft) 2,210 2,242 2,253 0% 2%

Shell 3,213 2,879 3,245 13% 1%

Total 2,229 2,342 2,336 0% 5%

ENI 1,640 1,702 1,846 8% 13%

Repsol 370 653 675 3% 82%

Statoil 1,932 1,741 1,826 5% -5%

BG 648 716 765 7% 18%

OMV 318 292 307 5% -4%

Galp 33 44 46 5% 39%

TOTAL 12,593 12,612 13,299 5% 6%

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Total Statoil Shell Galp OMV BP ENI BG Repsol




1 February 2016

Integrated Oils


Deutsche Bank AG/London Page 3

4Q15 Results

Macro Indicators

Figure 7: Macro Assumptions: Crude oil, natural gas, refining markers and main trading currencies

$/bbl 2013 1Q14 2Q14 3Q14 4Q14 2014 1Q15 2Q15 3Q15 4Q15 2015 2016E 2017E

Commodity Prices

WTI 97.98 98.65 103.15 97.69 73.03 93.13 48.74 57.68 46.63 42.00 48.76 40.75 52.00

Brent 108.80 107.96 109.84 102.14 76.01 98.99 54.09 62.08 50.18 43.41 52.44 42.50 55.00

Natural Gas ($/mmbtu) 3.70 5.06 4.58 3.93 3.74 4.33 2.86 2.72 2.74 2.08 2.60 2.51 3.10

UK NBP (p/therm) 67.05 60.81 45.19 43.86 54.73 51.15 47.55 43.32 41.36 37.85 42.52 39.00 40.00

Refining Margins

Northwest Europe 2.43 1.64 2.32 3.99 4.03 2.99 5.75 6.34 6.75 3.78 5.65 4.24 3.89

Mediterranean 0.25 -0.16 0.74 2.49 2.11 1.30 4.91 5.12 5.16 2.97 4.54

US East Coast 2-1-1 11.73 13.03 11.36 12.69 13.23 12.58 14.20 15.21 15.15 11.19 13.94

US Midcontinent 6-3-2-1 17.25 13.59 13.11 12.50 10.40 12.40 13.91 14.94 16.92 9.58 13.84

US Gulf Coast 19.30 16.40 16.40 15.63 9.20 14.41 17.40 19.79 19.48 10.77 16.86

Fx rates

$/£ 1.56 1.66 1.68 1.67 1.58 1.65 1.51 1.53 1.55 1.52 1.53 1.50 1.50

$/Euro 1.33 1.37 1.37 1.33 1.25 1.33 1.13 1.11 1.11 1.10 1.11 1.05 1.05

$/Nok 5.88 6.09 5.99 6.25 6.90 6.31 7.76 7.75 8.21 8.53 8.06 8.50 7.90

Source: Bloomberg Finance L.P, Deutsche Bank

Figure 8: Price and FX Movements – Q/q and Y/Y

l 4Q14 3Q15 4Q15 4Q/4Q 4Q/3Q

Commodity Prices

Brent ($/bbl) 76.01 50.18 43.41 -43% -14%

WTI ($/bbl) 73.03 46.63 42.00 -42% -10%

Henry Hub ($/mscf) 3.74 2.74 2.08 -44% -24%

UK NBP (p/therm) 54.73 41.36 37.85 -31% -8%

Refining Margins

NW European ($/bbl) 4.03 6.75 3.78 -6% -44%

Med ($/bbl) 2.11 5.16 2.97 41% -42%

US Gulf Coast ($/bbl) 9.20 19.48 10.77 17% -45%

US Midcon ($/bbl) 13.27 22.15 13.83 4% -38%

Fx Rates

$/€ 1.25 1.11 1.10 -12% -2%

NKr/$ 6.90 8.21 8.53 24% 4%

$/£ 1.58 1.55 1.52 -4% -2% Source: Bloomberg Finance L.P, Deutsche Bank

Key Observations

Oil price – Negative: Negative sequentially and year-on-year.

US gas – Negative: Henry Hub -24% Q-o-Q and -44% Y-o-Y.

Euro gas – Negative: NBP -8% Q-o-Q and -31% Y-o-Y.

Refining Margins – Mixed: Negative sequentially and broadly positive Y-o-Y.

FX – negative y-o-y Euro and sterling; positive Norwegian Krone.

1 February 2016

Integrated Oils



4Q 15 earnings expectations

The table below summarizes our earnings expectations for the upcoming Q4

reporting season

Figure 9: Summary of reported results for Upstream and Downstream activities for Q4 2015E

E&P R&M

Q4 14 Q3 15 Q4 15 Q4/Q3 Q4/Q4 Q4 14 Q3 15 Q4 15 Q4/Q3 Q4/Q4

BP ($m) 2,246 823 664 -19% -70% 1,213 2,302 1,352 -41% 11%

Shell ($m)* 1,730 -425 414 197% -76% 1,550 2,616 1,554 -41% 0%

Statoil (NKr m) 21,400 11,300 7,173 -37% -66% n/a n/a n/a n/a n/a

BG ($m) 714 253 251 -1% -65% n/a n/a n/a n/a n/a

Galp (€m) 65 33 13 -59% -79% 105 173 116 -33% 11%

Total (€m) 2,174 994 544 -45% -75% 1,531 2,210 1,675 -24% 9%

OMV (€m) 262 52 -17 -133% -106% 228 402 231 -43% 1%

Repsol (€m) 68 -395 -291 26% -528% 581 963 488 -49% -16%

ENI (€m) 2,032 757 415 -45% -80% 192 163 81 -50% -58%

USD Avg -20% -79% -36% 4% Source: Deutsche Bank, Note Company reports, *Shell reports divisional Net Income;

Figure 10: Summary of local currency Net Income and EPS estimates for Q4 2015E

Forecast (Net Income Reporting Currency) Forecast EPS (Reporting Currency)

Report Date Q4 14 Q3 15 Q4 15 Q4/Q3 Q4/Q4 Q4 14 Q3 15 Q4 15 Q4/Q3 Q4/Q4

BP ($m) 02-Feb 2,239 1,819 1,041 -43% -53% BP ($m) 0.12 0.10 0.06 -43% -53%

Shell ($m) 04-Feb 3,262 1,769 1,789 1% -45% Shell ($m) 0.52 0.28 0.28 1% -46%

Statoil (NKr m) 04-Feb 4,300 3,700 3,034 -30% -40% Statoil (NKr m) 1.35 1.16 0.95 -30% -40%

BG ($m) 05-Feb 983 280 318 14% -68% BG ($m) 28.66 8.18 9.29 14% -68%

Galp (€m) 08-Feb 135 180 74 -61% -48% Galp (€m) 0.16 0.22 0.09 -61% -48%

Total (€m) 11-Feb 2,801 2,756 1,729 -37% -38% Total (€m) 1.23 1.18 0.70 -40% -43%

OMV (€m) 18-Feb 348 367 162 -56% -53% OMV (€m) 1.07 1.13 0.50 -56% -53%

Repsol (€m) 25-Feb 370 159 164 -94% -97% Repsol (€m)* 0.27 0.11 0.12 -94% -98%

ENI (€m) 26-Feb 464 -257 215 183% -54% ENI (€m) 0.13 -0.07 0.06 183% -54%

Weighted Avg -14% -46% Weighted Avg -15% -47% Source: Deutsche Bank

Figure 11: Net income estimates (y-o-y movement %)

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Statoil Total Shell Galp OMV BP ENI Repsol BG



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Figure 12: DB Valuation Summary European Oils

28-Jan-16

Company Price Target Rec CCY M .Cap US$ 2015e 2016e 2017e 2018e 2015e 2016e 2017e 2018e 2015e 2016e 2017e 2018e

DB Oil Price $/bbl 55.5 42.5 55.0 70.0 55.5 42.5 55.0 70.0 55.5 42.5 55.0 70.0

Shell 1387 2035 Buy US$ 129.3 1.71 1.41 2.27 3.09 12.2 14.8 9.1 6.7 6.6 6.5 4.7 3.8

BP 353 445 Buy US$ 93.3 0.37 0.24 0.45 0.71 14.2 22.2 11.9 7.4 6.0 6.2 5.2 4.3

Total 39.26 49.00 Buy EUR 101.9 3.72 2.99 4.22 5.74 10.5 13.1 9.3 6.8 5.5 5.8 5.0 4.1

Eni 12.97 15.00 Hold EUR 50.5 0.21 0.26 0.67 1.28 62.7 50.3 19.3 10.1 7.6 5.7 5.1 4.2

Statoil 109.9 125.0 Hold NOK 39.9 5.32 4.10 5.99 9.13 20.6 26.8 18.3 12.0 4.3 4.7 4.2 3.5

BG 980 1290 Buy US$ 48.1 0.48 0.21 0.64 1.30 30.5 70.6 23.0 11.3 12.6 12.0 9.1 6.4

Repsol 8.94 12.0 Hold EUR 14.1 1.12 0.46 0.86 2.03 8.0 19.6 10.4 4.4 6.3 4.5 4.0 3.4

OMV 22.47 23.00 Hold EUR 7.9 3.47 1.27 1.84 2.71 6.5 17.8 12.2 8.3 4.1 5.7 5.4 4.8

Galp 9.86 10.25 Hold EUR 8.9 0.68 0.29 0.29 0.65 14.5 33.5 33.8 15.3 15.6 17.8 14.4 9.9

Sector 493.9 -29% -34% 82% 76% 19.7 26.4 13.3 8.2 6.9 6.7 5.4 4.3

Majors 414.9 -48% -14% 80% 55% 19.2 21.5 11.9 7.8 6.1 6.0 4.9 4.0

28-Jan-16 DY ND/ND+E

Company Price Target Rec CCY M .Cap US$ 2015e 2016e 2017e 2018e 2015e 2016e 2017e 2018e 2015e 17e EPS 17e FCF 2015e

Shell 1387 2035 Buy US$ 129.3 2.6% 1.3% 7.7% 12.3% 5.4% 4.0% 11.1% 15.6% 9.0% 83% 117% 14%

BP 353 445 Buy US$ 93.3 1.5% 4.4% 5.1% 9.2% 6.4% 8.3% 7.3% 11.1% 7.6% 90% 147% 19%

Total 39.26 49.00 Buy EUR 101.9 -2.7% 0.8% 5.4% 9.7% 0.3% 3.4% 6.7% 11.3% 6.2% 58% 116% 24%

Eni 12.97 15.00 Hold EUR 50.5 -3.7% 3.8% 5.5% 11.3% -3.7% 3.8% 5.5% 11.3% 6.2% 121% 114% 25%

Statoil 109.9 125.0 Hold NOK 39.9 -4.0% -4.1% 4.6% 11.0% 3.8% -5.4% 4.6% 11.0% 6.6% 120% 144% 25%

BG 980 1290 Buy US$ 48.1 -2.7% 0.3% 3.4% 8.5% 7.2% 1.1% 4.0% 8.9% 1.3% 45% 38% 24%

Repsol 8.94 12.00 Hold EUR 14.1 -12.4% 0.5% 5.1% 11.5% -68.9% 5.6% 5.1% 11.5% 11.2% 119% 91% 30%

OMV 22.47 23.00 Hold EUR 7.9 5.1% -2.9% 3.4% 7.8% 7.0% -2.9% 3.4% 7.8% 5.6% 68% 164% 32%

Galp 9.86 10.25 Hold EUR 8.9 1.5% -2.1% -0.4% 4.3% 1.5% -2.1% -0.4% 4.3% 4.2% 205% na 34%

Sector 493.9 -0.8% 1.3% 5.6% 10.4% 1.5% 3.5% 7.2% 11.9% 6.8% 85% 115% 21%

Majors 414.9 -0.3% 1.7% 6.0% 10.7% 3.1% 3.9% 7.9% 12.6% 7.4% 86% 126% 20%

28-Jan-16 NAV

Company Price Target Rec CCY M .Cap US$ 2015e 2016e 2017e 2018e 2015e 2016e 2017e 2018e $75/bbl x Pm/(Disc)

Shell 1387 2035 Buy US$ 129.3 4.6% 3.8% 5.8% 7.7% -2.4% 2.5% 3.6% 1.4% 2690 0.52 -21%

BP 353 445 Buy US$ 93.3 6.1% 4.2% 7.3% 10.8% 5.6% 3.7% 1.6% 1.6% 543 0.65 0%

Total 39.26 49.00 Buy EUR 101.9 7.2% 5.8% 7.6% 9.9% 9.2% 6.2% 6.8% 2.4% 50.18 0.78 20%

Eni 12.97 15.00 Hold EUR 50.5 1.2% 2.0% 3.9% 6.8% 9.1% 3.2% 0.2% 2.5% 19.39 0.67 3%

Statoil 109.9 125.0 Hold NOK 39.9 3.9% 2.9% 4.1% 6.1% 3.4% 1.4% 0.7% 2.7% 177 0.62 -5%

BG 980 1290 Buy US$ 48.1 3.0% 1.0% 4.0% 8.4% 16.2% 17.4% 9.2% 10.9% 1232 0.80 23%

Repsol 8.94 12.00 Hold EUR 14.1 4.1% 2.4% 3.7% 5.7% 56.3% 29.2% 4.2% 1.5% 18.56 0.48 -26%

OMV 22.47 23.00 Hold EUR 7.9 4.6% 2.1% 3.3% 4.9% -2.5% 4.9% 2.5% 5.7% 43.77 0.51 -21%

Galp 9.86 10.25 Hold EUR 8.9 6.7% 5.1% 5.7% 8.8% 60.0% 36.2% 47.0% 34.1% 14.24 0.69 7%

Sector 493.9 4.9% 3.7% 5.8% 8.5% 7.8% 6.3% 4.6% 3.4% 0.65

Majors 414.9 5.1% 4.1% 6.2% 8.7% 4.2% 3.6% 3.2% 1.9% 0.64

EPS

FCFY (ex A&D)

ROACE

FCFY (cum A&D)

PE

Divi Payout

P/NAV ($75/bbl)

EV/DACF

Prod Growth


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Figure 13: DB cash flow forecasts 2015-8E assuming $42.5, $55, $70 in 2016, ’17, ‘18

29-Jan-16 29-Jan-16

Company 2015e 2016e 2017e 2018e 2015e 2016e 2017e 2018e 2015e 2016e 2017e 2018e 2015e 2016e 2017e 2018e

DB Oil Price 52.4 42.5 55.0 70.0 52.4 42.5 55.0 70.0 52.4 42.5 55.0 70.0 DB Oil Price 52.4 42.5 55.0 70.0

CFFO 22.2 21.5 25.7 30.8 27.7 28.9 39.0 45.9 20.2 20.3 24.5 28.8 CFFO 32.1 45.1 55.4

Working Capital -0.2 1.7 -1.9 -2.8 5.3 -0.5 -2.9 -3.3 -0.3 0.6 -1.1 -0.9 Working Capital -0.1 -3.0 -3.4

Inv CF -19.6 -17.8 -17.6 -18.3 -29.7 -26.7 -25.6 -25.9 -22.7 -20.0 -18.1 -18.3 Inv CF -31.6 -29.4 -29.7

Organic FCF 2.4 5.4 6.1 9.6 3.4 1.7 10.5 16.7 -2.7 0.8 5.3 9.6 Organic FCF 0.4 12.8 22.3

Dividend -7.5 -7.6 -7.6 -7.7 -12.1 -12.3 -12.4 -12.6 -6.2 -6.2 -6.2 -6.2 Dividend -15.2 -15.2 -15.5

Scrip 1.1 1.1 1.1 0.0 4.5 4.0 0.0 0.0 3.1 3.2 0.0 0.0 Scrip Buyback 6.1 6.1 0.0

Organic Net CF -4.0 -1.1 -0.4 2.0 -4.2 -6.6 -1.9 4.1 -5.8 -2.1 -0.9 3.4 Organic Net CF -8.8 3.6 6.8

Net A&D 3.8 2.7 1.0 1.3 3.8 3.7 4.6 4.5 3.0 2.5 1.4 1.6 Net A&D 8.0 11.0 11.0

Buyback 0.0 0.0 0.0 -0.5 -0.5 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Buyback 0.0 0.0 0.0

Net CF -0.2 1.7 0.6 2.7 -0.9 -2.9 2.8 8.6 -2.8 0.4 0.5 5.0 Net CF -0.8 14.6 17.8

ND/ND+E 19% 19% 18% 16% 14% 16% 14% 11% 24% 22% 21% 16% ND/ND+E 20% 16% 10%

CFFO Sensitivity CFFO Sensitivity

Organic dividend b/even $78 $53 $62 $60 $79 $75 $61 $58 $97 $69 $60 $53 Organic dividend b/e $57 $76 $61 $55

29-Jan-16

Company 2015e 2016e 2017e 2018e 2015e 2016e 2017e 2018e 2015e 2016e 2017e 2018e

CFFO 9.0 12.2 14.1 16.8 11.2 13.3 16.0 18.8 3.3 2.6 3.0 3.6

Working Capital 1.0 0.0 0.0 0.0 4.1 0.0 0.0 0.0 -0.2 0.0 0.0 0.0

Inv CF -11.7 -10.4 -11.5 -11.5 -17.1 -15.0 -14.0 -13.9 -3.0 -2.9 -2.8 -3.0

Organic FCF -1.7 1.8 2.6 5.3 -1.8 -1.7 2.0 4.9 0.2 -0.2 0.2 0.6

Dividend -5.0 -3.2 -3.3 -3.3 -2.9 -2.7 -2.9 -3.0 -0.5 -0.5 -0.5 -0.5

Organic Net CF -6.7 -1.5 -0.7 2.0 -4.7 -4.4 -0.9 1.9 -0.3 -0.7 -0.2 0.1

Net A&D 0.0 0.0 0.0 0.0 3.5 -0.6 0.0 0.0 0.1 0.0 0.0 0.0

Buyback 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Net CF -6.7 -1.5 -0.7 2.0 -1.2 -4.9 -0.9 1.9 -0.2 -0.7 -0.2 0.1

ND/ND+E 25% 27% 28% 26% 25% 31% 33% 30% 32% 35% 35% 33%

CFFO Sensitivity

Organic dividend b/even $119 $57 $62 $50 $88 $76 $62 $56 $61 $61 $61 $68

29-Jan-16 Aggregated

Company 2015e 2016e 2017e 2018e 2015e 2016e 2017e 2018e 2015e 2016e 2017e 2018e Sector 2015e 2016e 2017e 2018e

CFFO 3.9 5.0 7.0 9.6 3.5 4.5 5.4 6.4 1.0 1.0 1.2 1.7 CFFO 104.0 110.4 137.0 163.7

Working Capital 1.1 0.4 0.0 -0.1 0.1 0.0 0.0 0.0 0.3 0.0 0.0 0.0 Working Capital 11.4 2.1 -5.9 -7.1

Inv CF -6.4 -5.3 -5.3 -5.3 -5.2 -4.4 -4.8 -4.8 -1.2 -1.1 -1.2 -1.3 Inv CF -118.7 -104.6 -101.8 -103.4

Organic FCF -1.4 0.1 1.7 4.2 -1.6 0.1 0.7 1.6 0.1 -0.2 0.0 0.4 Organic FCF -3.3 7.9 29.3 53.3

Dividend -1.0 -1.0 -1.0 -1.0 -0.5 -0.5 -0.5 -0.6 -0.3 -0.4 -0.5 -0.5 Dividend -36.7 -34.6 -35.0 -35.7

Organic Net CF -2.4 -0.9 0.7 3.2 -2.0 -0.4 0.2 1.0 -0.2 -0.6 -0.5 -0.2 Scrip Dividends 8.7 8.3 1.1 0.0

Net A&D 5.0 0.4 0.3 0.2 -7.1 0.7 0.0 0.0 0.0 0.0 0.0 0.0 Organic Net CF -31.3 -18.4 -4.6 17.6

Buyback 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Net A&D 11.4 9.5 7.3 7.6

Net CF 2.6 -0.5 1.0 3.4 -9.1 0.2 0.2 1.0 -0.2 -0.6 -0.5 -0.2 Buyback -0.5 0.0 0.0 -0.5

ND/ND+E 24% 26% 24% 16% 30% 29% 29% 29% 34% 40% 45% 46% Net CF -20.4 -8.9 2.7 24.7

CFFO Sensitivity CFFO Sensitivity

Organic dividend b/even $80 $52 $49 $41 $155 $64 $47 $18 $84 $135 $137 $102 Organic dividend b/e $91 $68 $61 $53

$10/bbl => DBe $4.4bn '15 CFFO

Assume scrip issue continues 1 year longer than guidance

Shell (USD)


BG/Shell Pro-forma (USD)BP (USD) ex DWH

$10/bbl => DBe $2.0bn '15 CFFO $10/bbl => DBe $2.0bn '15 CFFO

Galp (EUR)

Total (USD)

$10/bbl => DBe $0.85bn '15 CFFO $10/bbl => DBe €0.2bn '15 CFFO $10/bbl => DBe €0.06bn '15 CFFO

$10/bbl => DBe €0.4bn '15 CFFO

$10/bbl => DBe $10.3bn '15 CFFO


OMV (EUR)

USD

Eni (EUR)

$10/bbl => DBe €1.5bn '15 CFFO

BG (USD) Repsol (EUR)

Statoil (USD)


Eu

rop

ean

Inte

gra

ted

Oils

Inte

gra

ted

Oils

1 F

eb

ruary

20

16

Deu

tsch

e B

an

k A

G/L

on

do

n

Pag

e 7

Company Guidance and medium-term targets

Figure 14: Guidance pre-4Q15 results

Company

GuidanceBP RDS TOTAL ENI Repsol Statoil OMV Galp Energia

Financial

framework

• Balance cash flows

at $60 (2017, ex DWH

payments)

• Gearing: 15-25%

(ND/ND+E)

• Dividend:

- 2015 $1.88/sh

- 2016 at least

$1.88/sh

• Buyback:

- $25bn (2017-20)

• Organic dividend

coverage at $60

(2017)

• Gearing: <30%

(ND/ND+E)

• Cash neutrality at:

- $60 in 2016

(including disposals)

- <$75 organic in

2017

• Gearing: <30%

(ND/E)

• FCF breakeven:

- $60 (2016-17)

- $50 (2016/20)

• Balance Sheet:

- FFO/ND > 30%

• Organic dividend

coverage:

- $100 (2016)

- $80 (2017)

- $60 (2018)

• Gearing: 15-30%

(ND/CE)

• Broadly FCF neutral

post dividend

• Dividend: Payout

ratio 30% net income

• Gearing <= 30%

(ND/E)

• FCF positive in

2018

• Leverage <2.0x

ND/EBITDA

Disposals• $3-5bn (2016);

• $2-3bn (2017+)• $30bn (2016-18) • $10bn (2015-17) • EUR 8bn (2015-18)

• EUR 3.1bn (2016-17)

• EUR1bn (18m post TLM)• N/A • N/A • N/A

Capex

• $19bn in 2015

• $17-19bn (2015-17)

• $29bn in 2015

• $33bn in 2016

(BG/Shell pro-forma)

• $23-24bn (2015);

• $20-21bn (2016);

• $17-19bn (2017-

19)

• Capex: EUR 48bn

(2015-18)

• Exploration: EUR

5bn (2015-18)

• Group: EUR 4.8bn (2016)

• 2016-20 guidance:

- Upstream: $4.1bn

- Downstream: EUR 0.8bn

• 2015 guidance:

- Group: $16.5bn

- Exploration: $3bn

• $5-7bn flex by 2017-18

• EUR 2.7bn (2015)


- Group: EUR 2.5-3.0bn

- Upstream: EUR 2.0-

2.4bn

• Group: EUR 1.3bn

(2015)


- Group: EUR 1.2-

1.4bn

Cost

• $6bn of cash cost

savings (2017/14)

• $3bn delivered

(9m15)

• $3.5bn synergies

(BG/Shell pro-forma)

• Shell stand-alone:

- $5bn in 2015, $3bn

2016

• $3bn opex

reduction

(by 2017)

• $1.2bn in 2015

• 25% reduction vs

plan

• EUR2bn cumulative

G&A savings (2015-

18)

• EUR 1.5bn opex/synergies

savings (2016-17)

• $5bn cumulative

(by 2016)

• $1.7bn absolute in 2016

($1.3bn capex, $0.4bn

opex)

• Fit4fifty cost saving

programme

• Lifting costs below

$6/boe (by 2019)

Production

• 800kboe/d from

new projects (by

2020)

• 3-5% base decline

(to 2018)

• N/A

• 6-7% per year

(2014-17)

• 5% per year (2014-

19)

• 3.5% organic

(2014-18 p.a.)

• 700-750kboe/d (2020)

• 900kboe/d (Organic

potential)

• 3% organic

(2015-18 p.a.)

• 300kboe/d (2015 ex

Libya/Yemen)

• Up to 4% decline in

Romania/Austria

• 25-30% CAGR

(2014-2020)

Earnings/

Cash flow• N/A

BG/Shell breakeven:

• NAV in low $60/bbl

• FCF accretive at

$50/bbl (2016)

• N/A


- G&P: EUR3bn

- R&M: >EUR1.5bn

- Chems: EUR0.4bn

• 2015 EBITDA guidance:

- Group: EUR 5.0-5.5bn

- Downstream: EUR 3.2-

3.4bn

• Downstream FCF: EUR

1.7bn p.a. (2016-20)

• Group: N/A

• MPR: NOK3bn

'normalised' quarter

• N/A

• Group: N/A

• G&P EBITDA: EUR

350-400m p.a.


1 February 2016

Integrated Oils



The Companies

BP (2nd February) Page 10

Royal Dutch Shell (4th February) Page 12

Statoil (4th February) Page 14

BG Group (5th February) Page 16

GALP (8th February) Page 18

Total (11th February) Page 20

OMV (18th February) Page 22

Repsol (25th February) Page 24

ENI (26th February) Page 26

1 February 2016

Integrated Oils



Reuters Bloomberg

BP.L BP/ LN

Forecasts and ratios

Year End Dec 31 2013A 2014A 2015E 2016E 2017E

DB EPS (USD) 0.72 0.66 0.37 0.24 0.45

P/E (x) 10.0 11.9 15.8 21.8 11.7

DPS (USD) 0.37 0.40 0.40 0.40 0.40

Dividend Yield (%) 5.2 5.1 7.2 7.2 7.2

Source: Deutsche Bank estimates, company data

How are we doing with those costs?

Having set out its plan to move to a $60/bbl breakeven position by end 2017 it

is not our expectation that BP will significantly alter forward guidance at this

stage on capex or opex. Rather, we expect the company to re-iterate that

capex will run at c$17-19bn for this year and next and that it is seeking some

$6bn of cash opex cuts by end 2017. Central to performance is likely to be the

pace at which costs are coming out the business, with Q3 ‘15 if anything a

positive indicator. Given management’s focus on cost and high-grading

returns our view is that the shares overstate the risks, on DB deck at least, and

continue to suggest material upside.

Upstream: Cost benefits starting to show

In its Upstream we expect that variation around consensus is likely to depend

critically on the pace at which costs are coming out of the BP business. Our

expectations look to continuing losses in the US and a modest deterioration in

profits elsewhere, our assumption being that a material chunk of the c$350m

or so price drag on quarterly income will have been offset by withering costs.

At Rosneft we assume a challenging quarter but one in which the company

has still managed to deliver positive net income of $270m.

Downstream: Seasonal weakness anticipated

In BP’s downstream the seasonal erosion of margins is expected to impinge

materially on reported profits with results further affected by a reduction in

trading income. Chemicals profits should in our view show some modest

improvement across the polyester chain but this may be undermined by

evidence of destocking across the quarter.

Value & Risk

Our valuation of BP is increasingly shifting to a focus on DCF. Assuming

forward development costs of c$15/bbl, 0.5% of annual growth, $65/bbl oil

from 2020 and a 9.4% WACC we see fair value at 445p, implying a fair

dividend yield of c6%. Risks to our valuation include an ill-conceived

acquisition.

Rating

Buy Europe

United Kingdom

Oil & Gas

Integrated Oils

Company

BP

Q4 results due 2nd February

Lucas Herrmann

Research Analyst

(+44) 20 754-73636

[email protected]

Price at 13 Jan 2016 (GBP)

335.85

Price Target (GBP) 445.00

52-week range (GBP) 484.15 - 322.90

Price/price relative

320

360

400

440

480

520

560

1/13 7/13 1/14 7/14 1/15 7/15

BP

FTSE 100 INDEX (Rebased)

Performance (%) 1m 3m 12m

Absolute -0.6 -12.3 -15.3

FTSE 100 INDEX 0.1 -6.0 -8.9


Stock & option liquidity data

Market cap (GBP)(m) 61,488.8

Shares outstanding (m) 18,308

Free float (%) 100

Option volume (und. shrs., 1M avg.)

95,336,842


Implied & Realized Volatility (3M)

0%

20%

40%

60%

80%

Jan 10 Jul 10 Jan 11 Jul 11 Jan 12 Jul 12

Realized Vol Implied Vol (ATM)


Implied Volatility (3M, ATM) vs. Peers

18.5%

18.5%

15.9%

13.2%

BP.L

ENI.MI

TOTF.PA

RDSa.L

*Weighted-avg. of index components*Data as of 22-Jan-13


1 February 2016

Integrated Oils



Figure 15: BP: Summary of Q4 15E profit expectations

By business ($m) Q4 14 Q3 15E Q4 15E CONS Q4 15A Q4/Q3 Q4/Q4

Brent Crude 76.58 50.47 44.97 -11% -41%

FX rate $/£ 1.55 1.55 1.50 -3% -3%

Production cum Rosneft 3236 3246 3295 2% 2%

Production ex Rosneft 2210 2242 2253 0% 2%

Upstream 2246 823 664 -19% -70%

US 1007 -152 -186 -22% -118%

Non-US ex Russia 1239 975 850 -13% -31%

Rosneft 470 382 268 -30% -43%

Refining and Marketing 1213 2302 1352 -41% 11%

US 338 885 377 -57% 12%

Non-US 875 1417 975 -31% 11%

Other businesses -120 -231 -418 -81% -248%

US -167 -126 -262 -108% -57%

Non-US 47 -105 -156 -49% -432%

Consolidation adjustment 257 67 110 64% -57%

Total RCOP 4066 3343 1976 -41% -51%

Interest expense -290 -283 -280 1% 3%

Other Finance costs -82 -76 -76 0% 7%

Replacement Cost Profit Pre-tax 3694 2984 1620 -46% -56%

Taxation -1421 -1155 -559 52% 61%

Tax Rate 38% 39% 35% -11% -10%

Minorities & others -34 -10 -20 -98% 42%

Replacement Cost NI 2239 1819 1041 -43% -53%

Shares (m) 18332 18308 18316 0% 0%

EPS c (clean pre-Macondo) - RC 12.21 9.94 5.68 -43% -53%

DPS p 6.45 6.45 6.67 3% 3%

DPS ($c) 10.00 10.00 10.00 0% 0% Source: Deutsche Bank

1 February 2016

Integrated Oils



Reuters Bloomberg

RDSb.L RDSB LN



DB EPS (USD) 3.10 3.57 1.71 1.41 2.27

P/E (x) 11.1 11.0 11.4 13.8 8.7

DPS (USD) 1.80 1.88 1.88 1.88 1.88

Dividend Yield (%) 5.2 4.8 9.7 9.7 10.1


Adding colour to the headlines

Having already pre-released, Shell’s full year statement will be more about

detail than the absolute. Our forecasts reflect essentially a mid-point relative to

Shell guidance for 2015 NI of $1.6-1.9bn, with the absolute being very much in

line with our expectations pre the headline release but the mix somewhat

different. Looking ahead key to the results will be comments made on capex

and opex given the sterner operating environment but in truth Shell we expect

little new pre an update baked for later this year on BG. In the interim, what

Shell need’s to convince on is that it can attain the disposals necessary to

relieve market concerns on balance sheet. Our preferred IOC major.

Upstream: better than we had feared

In the Upstream Shell guided to net income of $0.4-0.5bn, somewhat better

than Street expectations for breakeven. We suspect that part of the uplift

reflected lower charges for deferred tax but also a solid performance by the

Integrated Gas business given the price lag. Having indicated that it had

stripped $4bn from costs in 2015 the company has suggested savings of $3bn

pre-BG this year. More is likely to be required.

Downstream: Clarity sought on Chemicals

In its downstream Shell guided towards $1.4-1.6bn with oil products expected

to deliver $1.3-1.4bn and Chemicals $0.1-0.2bn. Surprising to us was the very

weak performance of the Chemicals business not least given the return of

Moerdyck to full operation. We assume some material degree of final quarter

destocking and margin pressure.

Valuation & Risk

Our target price of 2035p is driven by our DCF model and assumes long run

Shell standalone capex of $26bn, 0.5% growth and an 8.4% CoC. Risks to the

downside for the shares which remain our preferred name are predominantly

that it underwhelms on divestments with the dividend consequently falling

victim to spend.

Rating

Buy Europe

United Kingdom

Oil & Gas

Integrated Oils

Company

Royal Dutch Shell Plc

Q4 results due 4th February

Lucas Herrmann

Research Analyst

(+44) 20 754-73636

[email protected]


1,345.50

Price Target (GBP) 2,035.00

52-week range (GBP) 2,304.00 - 1,345.50


1200

1600

2000

2400

2800

1/13 7/13 1/14 7/14 1/15 7/15

Royal Dutch Shell Pl



Absolute -7.8 -25.1 -36.7

FTSE 100 INDEX 0.1 -6.0 -8.9





Free float (%) –


7,852,632



0%

10%

20%

30%

40%





18.5%

15.9%

13.2%

12.1%

ENI.MI

TOTF.PA

RDSa.L

RDSB.L



1 February 2016

Integrated Oils



Figure 16: Royal Dutch Shell: Summary Q4 15E forecasts

Year to December ($m) Q4 14 Q3 15 Q4 15E Cons Q4 15A Q4/Q3 Q4/Q4

Average Brent Oil Price ($/bbl) 76.58 50.47 44.97 -11% -41%

Production (kboe/d) 3213 2879 3245 13% 1%

FX rate 1.58 1.50 1.50 0% -5%

$ million

Upstream 1730 -425 414 197% -76%

International 2256 696 1465 110% -35%

Americas -526 -1121 -1051 6% -100%

Of which integrated gas 1581 824 1557 -8% -52%

Downstream 1550 2616 1554 -41% 0%

Oil Products 1504 2084 1398 -33% -7%

Chemicals 46 532 156 -71% 240%

Other industry segments

Total operating income 3280 2191 1967 -10% -40%

Corporate items:

Interest income (expense) -149 -382 -158 59% -6%

FX gains/(losses) -193 -826 12 101% 106%

Other - including taxation 318 853 36 -96% -89%

Total -24 -355 -110 69% -358%

Minorities 6 -67 -68 -1% -1233%

Current cost net income 3262 1769 1789 1% -45%

Exceptional (gains on sales) 901 -7890 2431 131% 170%

Stockholding gains/(losses) -3390 -1296 471 136% 114%

Historic cost income 773 -7417 4691 163% 507%

Dividends -2959 -2945 -3029 -3% -2%

Retained Income -2186 -10362 1662 116% 176%

Average shares in Issue 6301 6328 6354 0% 1%

EPS - Clean CCS ($) 0.52 0.28 0.28 1% -46%

DPS - per Ord ($) 0.47 0.47 0.47 0% 0%

EPS - Clean per ADR (US$) 1.04 0.56 0.56 1% -46%

DPS - per ADR (US$) 0.94 0.94 0.94 0% 0%

EPS - Clean CCS (p) 32.76 18.64 18.78 1% -43%

DPS - (p) 29.75 31.33 31.33 0% 5%

EPS - Clean CCS (€) 0.41 0.24 0.24 1% -40%

DPS - (€) 0.37 0.41 0.41 0% 10%

Dividend cover (%) 90.8% 168.1% 166.9% -1% 84%


1 February 2016

Integrated Oils



Reuters Bloomberg

STL.OL STL NO



DB EPS (NOK) 14.0 11.2 5.3 4.1 6.0

P/E (x) 9.8 14.9 20.6 26.8 18.3

DPS (NOK) 7.00 7.20 7.20 7.20 7.20

Dividend Yield (%) 5.1 4.3 6.9 6.9 6.9


Consensus Q4 earnings of NOK3.1bn (2% above DBe)

Group volumes should benefit from seasonality, brownfield project ramp and

lower maintenance. Norwegian production data also suggests Statoil

increased flex gas volumes in the quarter from Troll/Oseberg with internal gas

pricing staying firmer than expected. We look for group volumes at

2,006kboe/d (equity), a 5% rise on prior quarter. In International, we expect

another poor and loss-making quarter with an increased exposure to HH-

pricing (post disposal of Shah Deniz) weighing on earnings. MMP earnings

should continue to be above trend but profitability in liquids, a fillip in prior

quarters, may come under pressure from a roll-over in refining margins and

trading.

Outlook commentary – What to look for?

In a word, capex. Guidance for 2016 and beyond has the potential to come in

below expectations and positively impact cash cycle, we believe. How low can

it go? A weaker Krone, deflation on committed growth capex (i.e. Sverdrup)

and unsanctioned/exploration spend supports. While continued brownfield

capex (including Oseberg), acquisitions (Lundin, Repsol asset swap) and

upcoming sanctions (i.e. Castberg) acts against. We forecast capex coming

down to $15bn (2016) and $14bn (2017) as greater flex is exercised. Organic

dividend cover in 2017 is c. $60/bbl, in line with sector and well below Statoil’s

prior guidance of $80/bbl. Elsewhere, expect an update on (1) Dividend: We

expect the quarterly dividend to be maintained in USD-terms (22 cents); (2)

Cost: Progress update on $5bn of cumulative savings targeted by 2016; (3)

Balance sheet: Commitment to target range 15-30% (ND/CE) given our

outlook for gearing to move above range (~31%) by end 2016.

Valuation & Risk

Our valuation methodology is based on mid-cycle and longer term valuation

metrics. Targeting a mid-cycle free cash flow yield of 5.0% (in line with sector)

and target P/NAV of ~0.80x (5% sector premium) sets our blended target price

at NOK 125/sh. Downside risks: European gas pricing, dividend sustainability,

decline rates. Upside risks: Capex flexibility, FX.

Rating

Hold Europe

Norway

Oil & Gas

Exploration & Production

Company

Statoil


Tom Robinson

Research Analyst

(+44) 20 754-52468

[email protected]

Price at 13 Jan 2016 (NOK)

104.70

Price Target (NOK) 125.00

52-week range (NOK) 160.80 - 104.70


100

120

140

160

180

200

1/13 7/13 1/14 7/14 1/15 7/15

Statoil

Oslo All-Share Index (Rebased)


Absolute -13.5 -23.6 -18.9

Oslo All-Share Index -6.5 -9.6 -5.4



Market cap (NOK)(m) 333,039.5


Free float (%) –


–


1 February 2016

Integrated Oils



Figure 17: Statoil 4Q 15 earnings estimates

Statoil Quarterly Estimates Unit Q4 14 Q3 15 Q4 15 Cons Q4/Q4 Q4/Q3

Operating Data

Brent $/bbl 76.01 50.75 43.41 -43% -14%

NOK:$ exchange rate # 6.90 8.21 8.53 24% 4%

Average oil realisation $/boe 67.19 43.97 37.60 -44% -14%

Entitlement Production kboe/d 1,932 1,741 1,827 1,876 -5% 5%

- D&P Norway production kboe/d 1,331 1,174 1,252 -6% 7%

- D&P International production kboe/d 601 567 575 -4% 1%

Natural gas internal price NOK/sm3 1.64 1.56 1.54 -6% -1%

Gas Sales Bcm 14.7 12.2 13.6 -8% 11%

Adjusted Earnings

D&P Norway NOKm 24,200 15,500 15,053 14,600 -38% -3%

D&P International NOKm -2,800 -4,200 -7,879 -5,300 -181% -88%

MMP NOKm 5,100 6,000 5,213 4,900 2% -13%

Others NOKm 500 -700 -250 -400 -150% 64%

Adjusted Earnings NOKm 27,000 16,600 12,136 13,800 -55% -27%

Tax NOKm -22,700 -12,900 -9,102 -10,700 60% 29%

Adjusted Tax Rate % 84% 78% 75% -11% -3%

Adjusted Earnings After Tax NOKm 4,300 3,700 3,034 3,100 -29% -18%

Adjusted EPS NOK/sh 1.35 1.16 0.95 -29% -18%

Production detail Unit Q4 14 Q3 15 Q4 15 Cons Q4/Q4 Q4/Q3

D&P Norway (Oil) kboe/d 619 580 612 606 -1% 5%

D&P International (Oil) kboe/d 560 572 577 569 3% 1%

D&P Norway (Gas) kboe/d 712 594 640 692 -10% 8%

D&P International (Gas) kboe/d 213 163 177 170 -17% 9%

Total Equity kboe/d 2,104 1,909 2,006 2,036 -5% 5%

D&P Norway (Oil) kboe/d 619 580 612 -1% 5%

D&P International (Oil) kboe/d 426 419 435 2% 4%

D&P Norway (Gas) kboe/d 712 594 640 -10% 8%

D&P International (Gas) kboe/d 175 148 140 -20% -5%

Total Entitlement kboe/d 1,932 1,741 1,827 -5% 5% Source: Deutsche Bank

1 February 2016

Integrated Oils



Reuters Bloomberg

BG.L BG/ LN



DB EPS (GBP) 146.41 73.50 32.34 14.0 42.8

P/E (x) 8.1 15.4 38.9 22.4 16.8

DPS (GBP) 18.37 17.64 19.16 19.16 19.16

Dividend Yield (%) 1.6 1.6 2.1 2.3 2.5


End of an era

It is fitting that at the end of it all BG should go out with a bang – operationally

at least. The pre-release of FY15 results ahead of the shareholder vote on its

future combination with Shell indicated full year net income of $1.7bn on the

back of a very successful year for start-ups and operations. With headline

details released and the business shortly to disappear we expect little of

excitement around these figures.

Upstream – at long last takes a bow.

In its pre-release BG indicated that volumes had surpassed its expectations,

production of 704kboe/d exceeding guidance of 680-700kboe/d, a 16% annual

increase. Key to the uplift were the strong performance in Brazil (146kboe/d),

Australia (88kboe/d) and 2015 start-up Knarr (12kboe/d). As the assets will

change hands we do not expect the company to comment in any material way

on the outlook for its business.

LNG – Good in difficult circumstances

In LNG, full year EBITDA of at least $1.4bn is also in line with guidance at

$1.3-1.5bn. We expect the company to have seen an increased number of

spot opportunity trades through the final quarter of the year but margins will

have been under pressures as a falling oil price saw spreads between oil-

linked sales prices and Hub linked purchase costs come in.

Value & risk

With the Shell offer completing we value BG in line with our price target for

Shell. Given the offer stands at 0.4454 Shell b shares and 383p cash we see

fair value at our Shell price target of 1290p.

Rating

Buy Europe

United Kingdom

Oil & Gas

Integrated Oils

Company

BG Group


Lucas Herrmann

Research Analyst

(+44) 20 754-73636

[email protected]


926.70

Price Target (GBP) 1,290p

52-week range (GBP) 1,199.50 - 794.70


750

900

1050

1200

1350

1500

1/13 7/13 1/14 7/14 1/15 7/15

BG Group



Absolute 0.1 -14.1 12.5

FTSE 100 INDEX 0.1 -6.0 -8.9





Free float (%) 100


42,700,000



0%

10%

20%

30%

40%

50%

60%




1 February 2016

Integrated Oils



Figure 18: BG Group: Q4 15 profit Estimates

USD mln Q4 14 Q3 15 Q4 15E CONS Q4 15A Q4/Q3 Q4/Q4

Brent price ($/bbl) 76.58 50.75 44.97 -11% -41%

FX rate ($/£) 1.58 1.53 1.53 0% -3%

UK NBP (p) 52.83 41.38 37.44 -10% -29%


Production (mb) 58.3 64.4 68.8 7% 18%

EBITDA 1827 1275 1204 -6% -34%

Exploration & Production 1228 1118 1002 -10% -18%

LNG S&M 556 213 172 -19% -69%

Other 43 -56 30 154% -30%

Operating profit before associates 1229 364 404 11% -67%

Exploration and Production 664 233 229 -2% -66%

Liquefied Natural Gas 522 187 146 -22% -72%

Other activities 43 -56 30

Pre-tax share associates 62 20 45 125% -28%

E&P 49 20 22 10% -56%

LNG S&M 5 0 0 NM -100%

Other activities 8 0 23 NM 188%

Total operating profit 1292 384 449 17% -65%

Exploration and Production 714 253 251 -1% -65%

LNG S&M 527 187 146 -22% -72%

Other activities 51 -56 53 195% 4%

Finance Costs

Net finance costs -20 -55 -63 -15% -215%

Profits before Taxation 1272 329 386 17% -70%

Taxation - Group -289 -49 -68 -39% 76%

Tax rate - Consolidated Group 20% 16% 20% 26% 1%

Shareholder's Earnings 983 280 318 14% -68%

Share count

Basic (m) 3,410 3,408 3,409 0% 0%

Diluted (m) 3,429 3,424 3,425 0% 0%

Per share data

Basic Clean (USc) 28.82 8.22 9.33 14% -68%

Diluted Clean US$ 28.66 8.18 9.29 14% -68% Source: Deutsche Bank

1 February 2016

Integrated Oils



Reuters Bloomberg

GALP.LS GALP PL



DB EPS (EUR) 0.37 0.45 0.68 0.29 0.29

P/E (x) 32.8 27.1 14.5 33.5 33.8

DPS (EUR) 0.29 0.35 0.41 0.50 0.60

Dividend Yield (%) 2.4 2.9 4.4 5.3 6.3


Deutsche Q4 earnings of EUR 74m (consensus not issued)

Earnings will be highly leveraged to the roll-over in refining given our

expectations for a minimal earnings contribution from upstream. As

anticipated, Galp’s trading statement pointed to further strong volume growth

from Brazil and to a lesser extent Angola with Q4 entitlement production at

49.2kboed, up 12% on prior quarter. In refining, margin deterioration is well

understood and Galp’s benchmark margin has moved 35% lower versus Q3 in

line with the broader European benchmark. We expect Downstream EBIT of

E116m, down 33% versus Q3. In gas trading, volumes took a step down from

prior levels suggesting a continuation of downward pressure on G&P supply

profits seen in recent quarters.

Outlook commentary – What to look for?

We see potential for capex guidance to be revised lower given the high

exposure to deepwater development drilling in Brazil and unitization of BMS-

11. Our 2016 forecast is E1.1bn, ~15% lower than existing guidance (EUR 1.2-

1.4bn p.a. 2015-19). Elsewhere, we look for: (1) Dividend policy: Street

estimates for a final payout of EUR 20c/sh and ~10% growth in 2016 appear

optimistic given the leverage outlook over the next 12 months; (2) Debt:

Intentions (or otherwise) to roll-over the Sinopec loan post March 2016

maturity; (3) Refining: The extent to which utilisation over Q1 will be

negatively impacted by c. 50 days of planned maintenance at Sines; (4) G&P:

Sustainability of EBITDA guidance (E350-400m p.a.) given headwinds in

trading volumes and margins; (5) Growth: We expect a re-iteration of long

term growth targets (25-30% CAGR) given operational momentum in Brazil.

Valuation & Risk

Our valuation methodology is based on longer-term valuation metrics which

we believe best represents Galp’s growth potential. Our target price of

€10.25/sh is derived by applying a 0.80x P/NAV to our 1.1.2017 NAV (at

$75/bbl long term). Upside risks: Capex flexibility, Brazil operational

momentum; Downside risks: Dividend sustainability, Refining, G&P earnings.

Rating

Hold Europe

Portugal

Oil & Gas

Integrated Oils

Company

Galp Energia


Tom Robinson

Research Analyst

(+44) 20 754-52468

[email protected]

Price at 13 Jan 2016 (EUR)

9.48

Price Target (EUR) 10.25

52-week range (EUR) 12.36 - 7.92


4

8

12

16

20

1/13 7/13 1/14 7/14 1/15 7/15

Galp Energia

DJ (.STOXXE) (Rebased)


Absolute -2.7 -2.7 17.7

DJ (.STOXXE) -3.4 -3.3 1.6



Market cap (EUR)(m) 7,859.6

Shares outstanding (m) 829

Free float (%) –


–


1 February 2016

Integrated Oils



Figure 19: Galp Q4 15 estimates

Galp Quarterly Estimates Unit 4Q14 3Q15 4Q15 Cons Q4/Q4 Q4/Q3

Operating Data

Brent ($/bbl) $/bbl 76.01 50.59 43.41 -43% -14%

WTI ($/bbl) $/bbl 73.04 46.78 42.00 -42% -10%

$:€ exchange rate # 1.25 1.11 1.10 -12% -1%

Upstream realised price $/boe 66.4 43.8 39.1 -41% -11%

Entitlement Production kboe/d 33.4 43.9 49.2 47% 12%

Galp Refining Margin $/bbl 5.40 6.70 5.50 2% -18%

Nat Gas volumes mm3 1,885 1,909 1,692 -10% -11%

Adjusted Earnings

E&P EURm 65 33 13 -79% -59%

Downstream EURm 105 173 116 11% -33%

G&P EURm 84 54 70 -17% 29%

Others EURm 4 4 4 0% 0%

Clean adjusted EBIT EURm 258 263 203 -21% -23%

Financial charges EURm -49 -11 -56 -14% -409%

Associates/Invest EURm 14 17 4 -71% -76%

Income before tax EURm 224 269 151 -33% -44%

Tax EURm -73 -69 -51 30% 26%

Tax rate % 33% 26% 34% 4% 32%

Minority Interest EURm -16 -20 -26 -61% -29%

Clean adjusted Net Income EURm 135 180 74 -45% -59%

EPS (€) - adj EUR/sh 0.16 0.22 0.09 -45% -59% Source: Deutsche Bank

1 February 2016

Integrated Oils



Reuters Bloomberg

TOTF.PA FP FP



DB EPS (EUR) 4.73 4.24 3.72 2.99 4.22

DB EPS growth (%) -13.3 -10.4 -9.9 8.4 18.5

P/E (x) 8.5 11.3 9.9 9.1 7.7

DPS (EUR) 2.38 2.44 2.44 2.44 2.44

Dividend Yield (%) 5.9 5.1 6.4 6.4 6.4


Progressing as expected

We expect results at Total to compare relatively favourably with peer given the

greater robustness of its Upstream and the benefits of continuing production

growth. Another solid quarter for the downstream assets will also undoubtedly

help offset a halving of upstream income. Guidance we suspect will be little

changed for 2017 although with price where it is we would not be surprised to

see some additional constraint on capex expectations for 2016 (c$20bn) with

the faster than expected delivery of operating savings supporting shorter term

results. Still feels a bit of a port in a storm

Upstream progressing

Upstream we expect that the quarter will see Total deliver on its guidance of at

least 9% production growth for the full year. Sequential momentum is

however expected to moderate despite the ramp in production at GLNG, and

start up of offshore production in Angola and the Congo. Of more interest at

this time will likely be comments on the pace at which operating costs are

starting to fall out of the business, our expectation being that total is running

ahead of its $1.2bn target for the business overall in 2015. We do not expect

the company to revise its objective of $17-19bn capex for 2017.

Another solid downstream quarter

In the downstream we expect net income in R&C to be below that attained in

the very strong Q3 15, but at $1bn to remain at a very healthy run rate.

Similarly we expect the marketing business to have delivered a steady c$490m

of operating income, supportive of the overall result at this challenging time.

Value & Risk

Our use of a DCF model to value Total’s forward cash flows drives our Euro 49

price target. Assuming a 0.5% LT growth rate, 8% WACC and $65/bbl muid

cycle oil price we see fair value in total at €49/share suggestive of a 5%

dividend yield. Risks to our price target include delays on key projects not least

Yamal, Ichthys and Kashagan.

Rating

Buy Europe

France

Oil & Gas

Integrated Oils

Company

Total SA


Lucas Herrmann

Research Analyst

(+44) 20 754-73636

[email protected]


37.85


52-week range (EUR) 49.74 - 37.25


32

36

40

44

48

52

56

60

1/13 7/13 1/14 7/14 1/15 7/15

Total SA



Absolute -9.4 -15.7 -9.2

DJ (.STOXXE) -3.4 -3.3 1.6





Free float (%) 100


395,516



0%

10%

20%

30%

40%





18.5%

18.5%

15.9%

13.2%

BP.L

ENI.MI

TOTF.PA

RDSa.L



1 February 2016

Integrated Oils



Figure 20: Total 4Q15 earnings estimate

USD Mn Q4 14 Q3 15 Q4 15 Cons Q4/Q3 Q4/Q4

Dated Brent Price ($/bbl) 76.4 50.8 43.8 -14% -43%

Exchange rate ($/€) 1.25 1.11 1.08 -3% -14%

TRCV ($/T) 27.5 54.8 38.1 -31% 38%


Operating Profit $m

Upstream 2,174 994 544 -45% -75%

Refining & Chemicals 1,069 1,713 1,193 -30% 12%

Supply & Marketing 462 497 482 -3% 4%

Corporate -327 -170 -155 9% 53%

Total EBIT 3,378 3,034 2,064 -32% -39%

Other income/expense 49 31 41 32% -16%

Finance Charges -80 -223 -223 0% -179%

Income Taxes -1,469 -901 -682 24% 54%

Tax rate (%) 43.5% 29.7% 33.0% 11% -24%

Equity Income (post tax) 925 816 581 -29% -37%

- Investment income 75 23 -66 -387% -188%

- Other (LNG) 850 793 647 -18% -24%

Minority interests -2 -1 -53 NM NM

Net Income $m 2,801 2,756 1,729 -37% -38%

Split

Upstream $m 1,596 1,107 779 -30% -51%

Refining & Chemicals $m 956 1,433 1014 -29% 6%

Supply & Marketing $m 245 423 274 -35% 12%

Net Operating Income $m 2,797 2,963 2,067 -30% -26%

EPS - Clean US$ 1.23 1.18 0.70 -40% -43%

EPS - Reported (US$) -2.48 0.46 2.85 520% 215%

EPS - Clean (Euro) 0.98 1.06 0.65 -39% -34%

Shares (m) 2,277 2,345 2,465 5% 8%


Figure 21: TOTAL SA: 4Q15 production estimates

kboe/d Q4 14 Q3 15 Q4 15 Cons Q4/Q3 Q4/Q4

Europe 393 364 391 7% -1%

Africa 690 685 653 -5% -5%

N America 99 96 114 18% 15%

Far East 235 245 223 -9% -5%

Middle East 391 486 483 -1% 24%

S America 151 153 156 2% 4%

RoW 270 313 317 1% 18%

PSC effect 0 0 0

Total 2,229 2,342 2,336 0% 5% Source: Deutsche Bank

1 February 2016

Integrated Oils



Reuters Bloomberg

OMVV.VI OMV AV



DB EPS (EUR) 3.41 3.48 3.47 1.27 1.84

P/E (x) 10.0 8.5 6.5 17.8 12.2

DPS (EUR) 1.25 1.25 1.25 1.25 1.25

Dividend Yield (%) 3.7 4.2 5.4 5.4 5.4


Strategic review to provide clarity

Results are likely to play second fiddle to the unveiling of new CEO Rainer

Seele’s strategic review. The building blocks are already known: introduce

lower cost, longer life resource in the Upstream, divest regulated downstream

gas and seek to attain cash neutrality after dividends. Gearing has nonetheless

risen above 30% and substantial capex cuts have already been implemented,

adding restraints to forward options. Aside from strategic direction we look for

an update on: (1) Dividend: Given limited flex elsewhere we see potential for a

change in dividend policy; (2) Refining: Higher exposure to middle distillate

suggests downward pressure on earnings following recent deterioration in

cracks; (3) Volumes: We expect ramp in Norway to offset decline in Romania

and look for 2016 guidance of ~315kboe/d (+5% Y/Y).

Deutsche Q4 earnings of EUR 162m (consensus not available)

OMV’s trading statement pointed to a strong underlying quarter in Upstream

but a challenging period for the downstream business. Headline volumes were

broadly in line but an unwinding of the Q3 underlift should be supportive. We

look for a modest operating loss of EUR 17m. As flagged by the company,

losses in Downstream gas on forward contract valuations will drag. Lower

utilisation in refining despite a resilient OMV marker margin and profitability in

petchems guided to be down from an exceptional Q3 are also headwinds.

Overall, we forecast a Downstream result of EUR 231m down close to ~45%

versus prior quarter.

Valuation and Risk

Our valuation methodology is based on mid-cycle and longer term valuation

metrics. Targeting a mid-cycle free cash flow yield of 5.0% (in line with sector)

and target P/NAV of ~0.70x (10% sector discount) sets our blended target

price at EUR 23/sh. Downside risks: Dividend sustainability, decline rates.

Upside risks: Accretive disposals/deals, capex flexibility.

Rating

Hold Europe

Austria

Oil & Gas

Integrated Oils

Company

OMV


Tom Robinson

Research Analyst

(+44) 20 754-52468

[email protected]


23.16


52-week range (EUR) 30.46 - 20.70


16

20

24

28

32

36

40

44

1/13 7/13 1/14 7/14 1/15 7/15

OMV



Absolute -8.5 -5.9 7.5

DJ (.STOXXE) -3.4 -3.3 1.6




Shares outstanding (m) 326

Free float (%) –


618



0%

10%

20%

30%

40%

50%





28.5%

27.7%

25.6%

23.2%

19.2%

TECF.PA

TLW.L

LUPE.ST

SPMI.MI

OMVV.VI



1 February 2016

Integrated Oils



Figure 22: OMV Q4 earnings estimates

OMV Quarterly Estimates Unit 4Q14 3Q15 4Q15 Cons 4Q/4Q 4Q/3Q

Operating Data

Brent price $/bbl 76.01 50.75 43.41 -43% -14%

Exchange rate ($/€) # 1.25 1.11 1.10 -12% -2%

Exchange rate ($/RON) # 3.55 3.98 4.00 13% 0%

OMV realised refining margin $/bbl 5.19 7.84 5.36 3% -32%

Oil & Gas Production kboe/d 318 292 307 -4% 5%

Operating Profit

Upstream EURm 262 52 -17 -106% -133%

- OMV EURm 134 -42 -66 -150% -58%

- Petrom EURm 128 94 50 -61% -47%

Downstream EURm 228 402 231 1% -43%

- OMV EURm 172 289 174 1% -40%

- Petrom EURm 56 113 57 1% -50%

Corporate and Others EURm -15 3 -21 -40% -800%

Consolidation Adjustment EURm 71 37 0 -100% -100%

EBIT Clean EURm 546 494 193 -65% -61%

Income from associates EURm 23 98 75 231% -23%

Interest & Other income EURm -92 -89 -48 48% 47%

Net finance cost -70 9 28 140% 205%

Profit from ordinary activities EURm 476 503 221 -54% -56%

Estimated Clean Tax Charge EURm -307 -252 -44 86% 82%

Tax rate (%) 64.4% 50.1% 20.0% -69% -60%

Net income for the year EURm 169 251 176 4% -30%

Minorities EURm -179 -116 14 108% 112%

Net income after MI (Clean CCS) EURm 348 367 162 -53% -56%

EPS - Clean (Euro) EUR/sh 1.07 1.13 0.50 -53% -56% Source: Deutsche Bank

1 February 2016

Integrated Oils



Reuters Bloomberg

REP.MC REP SM



DB EPS (EUR) 1.41 1.27 1.12 0.46 0.86

P/E (x) 12.4 14.5 8.0 19.6 10.4

DPS (EUR) 1.00 1.00 1.00 1.00 1.02

Dividend Yield (%) 5.7 5.4 11.3 11.3 11.6


Pre-released Q4 earnings of EUR 450m

With earnings pre-released and strategy communicated just 3 months ago,

results day provides an early opportunity to measure progress against targets.

Top of the list, in our view, is further detail on the substantial lowering of 2016

capex indicated in Repsol’s recent trading update (E4.8bn to E4.0bn). New

guidance implies a peak-to-trough capex decline of close to 50% versus the

sector at 25%, inclusive of Talisman. Understanding the moving parts will be

key to quantifying the longer term growth impact (if any) and the extent of flex

in the outer years.

Outlook commentary – What else to look for?

Elsewhere, we look for: (1) Credit rating: With the agencies lowering price

decks we expect renewed pressure on credit metrics. Treatment of hybrid and

impact of Gas Natural’s Feb 3rd strategy update are key; (2) Cost: Scope to

upgrade synergy/efficiency target of E1.5bn (2016-17 aggregate); (3)

Venezuela: Potential pressure on cash receipt as economy deteriorates and

Repsol production ramps at Perla; (4) Growth: We see a clear line of sight to

reach 750kboe/d, a 2020 target of 900kboe/d is ambitious in our view.

Earnings – Filling in the blanks

Upstream remains loss-making but pre-released earnings were an

improvement on prior quarter and not as poor as expected (-E270m vs DBe -

E437m). With detail absent at this stage, we surmise that a combination of

stronger volumes, normalized exploration expense and lower cost/DD&A all

played a part. Unlike Q3, we expect ‘normal’ tax credits to apply below the

line. In Downstream, despite a stronger indicator margin ($7.3 vs DBe $6.3)

earnings missed our estimates (E490m vs DBe E612m) suggesting weakness

lies elsewhere (potentially Chemicals, LNG, LPG).

Valuation & risk

Targeting a mid-cycle free cash flow yield of 5.0% (in line with sector) and

target P/NAV of ~0.80x (5% sector premium) sets our blended target price at

EUR12/sh. Downside risk: Balance sheet; Upside: Disposals, crude.

Rating

Hold Europe

Spain

Oil & Gas

Integrated Oils

Company

Repsol


Tom Robinson

Research Analyst

(+44) 20 754-52468

[email protected]


8.83


52-week range (EUR) 18.54 - 8.61


8

12

16

20

24

28

1/13 7/13 1/14 7/14 1/15 7/15

Repsol



Absolute -17.2 -26.8 -39.6

DJ (.STOXXE) -3.4 -3.3 1.6





Free float (%) –


572,133



0%

20%

40%

60%

80%




1 February 2016

Integrated Oils



Figure 23: Repsol Q4 earnings estimates

Repsol Quarterly Estimates Q4 14 Q3 15 Q4 15 Cons Q/Q Y/Y

Operating Data

Brent $/bbl 76.01 50.59 43.41 -14% -43%

WTI $/bbl 73.03 46.78 42.00 -10% -42%

$:€ exchange rate # 1.25 1.11 1.10 -2% -12%

Liquids realisation $/bbl 61.3 44.4 38.6 -13% -37%

Gas realisation $/mscf 3.60 2.80 2.52 -10% -30%

Repsol Consolidated Production kboe/d 370 653 691 6% 87%

Repsol refining margin ($/bbl) $/bbl 5.50 8.80 7.30 -17% 33%

Adjusted Earnings

Upstream (incl. Talisman) EURm 68 -395 -291 -26% -528%

Downstream EURm 581 963 488 -49% -16%

Corporate and Adjustments EURm -23 -57 0 -100% -100%

Clean CCS EBIT EURm 626 511 197 -61% -68%

Financial expenses EURm -85 -223 -190 -15% 124%

PBT EURm 541 288 7 -97% -99%

Tax EURm -243 -206 23 -111% -109%

Tax rate (%) % 44.9% 71.5% -313.5% -538% -798%

Associates EURm 67 105 136 30% 104%

Minorities EURm 5 -28 -2 -93% -140%

Clean CCS Net Income EURm 370 159 164 3% -56%

Net income by division

Upstream (incl. Talisman) EURm 4 -395 -172 -57% -4393%

Downstream EURm 370 682 357 -48% -4%

Gas Natural Fenosa EURm 67 114 133 17% 99%

Corporate & Other EURm -71 -242 -154 -36% 117%

Clean CCS Net Income EURm 370 159 164 3% -56%

EPS (€) - adjusted EUR/sh 0.27 0.11 0.12 1% -57% Source: Deutsche Bank

1 February 2016

Integrated Oils



Reuters Bloomberg

ENI.MI ENI IM



DB EPS (EUR) 1.22 1.04 0.21 0.74 0.94

P/E (x) 14.5 17.2 62.5 17.3 13.6

DPS (EUR) 1.10 1.12 0.80 0.80 0.82

Dividend Yield (%) 6.3 6.3 6.2 6.2 6.4


Solid operating, less so financially

With Upstream Profits under intense pressure we expect ENI to use its results

and strategy update as an opportunity to rest the bar on capex and opex, both

have which have come in more than anticipated through 2015, and also

emphasize the progress made on the restructuring of its downstream. Despite

delays to start-ups in 2015, most significantly Goliat, the addition of material

volumes in Libyan gas (Insitar) have positioned the company to report strong

9% or so production growth for the year. Looking ahead, a cleaner and simpler

business definitely holds attraction but some greater clarity on project and

spend is likely necessary to add confidence in capital allocation. .

Gaining from Libyan gas

In the Upstream we expect the business to have remained profitable,

supported in part by the very notable improvement in production. Given the

start-up of Goliat and continuation of gas deliveries at insitar we expect

another respectable year, our model looking to 3-4% growth. What will be key

however to the outlook will be revised guidance for opex (to date a target for a

12% reduction in 2015 to $7.3/bbl) and capex (guided 17% down for 2015 in

underlying terms but impacted adversely at the headline level by FX moves).

Signs of progress

Upstream aside we expect the progress see so far this year across the

downstream businesses to have continued. Results at Versalis and Refining

are expected to be below the very strong levels attained in Q3 15, but still

representative of progress on costs. In G&P, our model allows for the

attainment of guidance namely a breakeven position for the year as a whole.

Value & Risk

With cash flow over the next two years under pressure from continued soft oil

prices we marginally lower our price target to €15/share implying a c5.5%

forward dividend yield. Risks to our Hold stance include project delays to the

downside (Kashagan, Goliat) and divestments (Mozambique, Versalis) to the

up.

Rating

Hold Europe

Italy

Oil & Gas

Integrated Oils

Company

ENI


Lucas Herrmann

Research Analyst

(+44) 20 754-73636

[email protected]


12.83


52-week range (EUR) 17.43 - 12.65


12

16

20

24

28

32

1/13 7/13 1/14 7/14 1/15 7/15

ENI



Absolute -5.9 -16.9 -7.8

DJ (.STOXXE) -3.4 -3.3 1.6





Free float (%) –


2,065,324



0%

10%

20%

30%

40%

50%





18.5%

15.9%

13.2%

12.1%

ENI.MI

TOTF.PA

RDSa.L

RDSb.L



1 February 2016

Integrated Oils



Figure 24: ENI summary of profit forecasts q4 2015E

Q4 14 Q3 15 Q4 15 Cons Q3 15A Q4/Q3 Q4/Q4

Brent ($/bbl) 76.01 50.75 44.00 -13% -42%

Oil realisation ($/bbl) 66.44 43.97 39.60 -10% -40%

Gas realisation ($/mscf) 6.65 4.45 4.82 8% -28%

E&P realisation ($/boe) 53.45 34.57 33.19 -4% -38%

Production (kboe/d) 1640 1702 1846 8.5% 12.6%

$/EUR 1.25 1.10 1.08 -2% -14%

E&P 2032 757 415 -45% -80%

G&P 108 -469 148 132% 37%

R&M 192 163 81 -50% -58%

Versalis -66 172 64 -63% 198%

E&C 31 148 248 67% 699%

Other -108 -56 -125 -123% -16%

Corporate 0 0

Unrealised profit in inventory 132 37 0

Adjusted EBIT (RC) 2321 752 831 10% -64%

Operating ex Saipem 2290 604 583 -3% -75%

Net financial (expense)/income -223 -214 -336 -57% -51%

Net income from investments -287 4 182 4450% 163%

Adjusted PBT 1811 542 677 25% -63%

Adjusted income taxes -1372 -775 -440 43% 68%

Tax rate (adjusted) 76% 143% 65% -55% -14%

Due to Minorities -25 24 22 -7% 189%

Adjusted NI (RC) 464 -257 215 183% -54%

Adjusted diluted EPS (Cont Ops) 0.13 -0.07 0.06 183% -54%

DPS (€) 0.56 0.00 0.40


1 February 2016

Integrated Oils



Appendix 1

Important Disclosures

Additional information available upon request

*Prices are current as of the end of the previous trading session unless otherwise indicated and are sourced from local exchanges via Reuters, Bloomberg and other vendors . Other information is sourced from Deutsche Bank, subject companies, and other sources. For disclosures pertaining to recommendations or estimates made on securities other than the primary subject of this research, please see the most recently published company report or visit our global disclosure look-up page on our website at http://gm.db.com/ger/disclosure/DisclosureDirectory.eqsr

Analyst Certification

The views expressed in this report accurately reflect the personal views of the undersigned lead analyst about the subject issuers and the securities of those issuers. In addition, the undersigned lead analyst has not and will not receive any compensation for providing a specific recommendation or view in this report. Lucas Herrmann/Tom Robinson

Equity rating key Equity rating dispersion and banking relationships

Buy: Based on a current 12- month view of total share-holder return (TSR = percentage change in share price from current price to projected target price plus pro-jected dividend yield ) , we recommend that investors buy the stock. Sell: Based on a current 12-month view of total share-holder return, we recommend that investors sell the stock Hold: We take a neutral view on the stock 12-months out and, based on this time horizon, do not recommend either a Buy or Sell. Notes:

1. Newly issued research recommendations and target prices always supersede previously published research. 2. Ratings definitions prior to 27 January, 2007 were:

Buy: Expected total return (including dividends) of 10% or more over a 12-month period Hold: Expected total return (including dividends) between -10% and 10% over a 12-month period Sell: Expected total return (including dividends) of -10% or worse over a 12-month period

42 %

54 %

5 %

48 % 40 %

37 %

0

50

100

150

200

250

300

350

Buy Hold Sell

European Universe

Companies Covered Cos. w/ Banking Relationship

Regulatory Disclosures

1.Important Additional Conflict Disclosures

Aside from within this report, important conflict disclosures can also be found at https://gm.db.com/equities under the

"Disclosures Lookup" and "Legal" tabs. Investors are strongly encouraged to review this information before investing.

2.Short-Term Trade Ideas

Deutsche Bank equity research analysts sometimes have shorter-term trade ideas (known as SOLAR ideas) that are

consistent or inconsistent with Deutsche Bank's existing longer term ratings. These trade ideas can be found at the

SOLAR link at http://gm.db.com.

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Additional Information

The information and opinions in this report were prepared by Deutsche Bank AG or one of its affiliates (collectively

"Deutsche Bank"). Though the information herein is believed to be reliable and has been obtained from public sources

believed to be reliable, Deutsche Bank makes no representation as to its accuracy or completeness.

If you use the services of Deutsche Bank in connection with a purchase or sale of a security that is discussed in this

report, or is included or discussed in another communication (oral or written) from a Deutsche Bank analyst, Deutsche

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Deutsche Bank may consider this report in deciding to trade as principal. It may also engage in transactions, for its own

account or with customers, in a manner inconsistent with the views taken in this research report. Others within

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Macroeconomic fluctuations often account for most of the risks associated with exposures to instruments that promise

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flows), increases in interest rates naturally lift the discount factors applied to the expected cash flows and thus cause a

loss. The longer the maturity of a certain cash flow and the higher the move in the discount factor, the higher will be the

loss. Upside surprises in inflation, fiscal funding needs, and FX depreciation rates are among the most common adverse

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settlement issues related to local clearing houses are also important risk factors to be considered. The sensitivity of fixed

income instruments to macroeconomic shocks may be mitigated by indexing the contracted cash flows to inflation, to

FX depreciation, or to specified interest rates – these are common in emerging markets. It is important to note that the

index fixings may -- by construction -- lag or mis-measure the actual move in the underlying variables they are intended

to track. The choice of the proper fixing (or metric) is particularly important in swaps markets, where floating coupon

rates (i.e., coupons indexed to a typically short-dated interest rate reference index) are exchanged for fixed coupons. It is

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denominated carries FX risk. Naturally, options on swaps (swaptions) also bear the risks typical to options in addition to

the risks related to rates movements.

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Derivative transactions involve numerous risks including, among others, market, counterparty default and illiquidity risk.

The appropriateness or otherwise of these products for use by investors is dependent on the investors' own

circumstances including their tax position, their regulatory environment and the nature of their other assets and

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to or inspired by the contents of this publication. The risk of loss in futures trading and options, foreign or domestic, can

be substantial. As a result of the high degree of leverage obtainable in futures and options trading, losses may be

incurred that are greater than the amount of funds initially deposited. Trading in options involves risk and is not suitable

for all investors. Prior to buying or selling an option investors must review the "Characteristics and Risks of Standardized

Options”, at http://www.optionsclearing.com/about/publications/character-risks.jsp. If you are unable to access the

website please contact your Deutsche Bank representative for a copy of this important document.

Participants in foreign exchange transactions may incur risks arising from several factors, including the following: ( i)

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numerous market factors, including world and national economic, political and regulatory events, events in equity and

debt markets and changes in interest rates; and (iii) currencies may be subject to devaluation or government imposed

exchange controls which could affect the value of the currency. Investors in securities such as ADRs, whose values are

affected by the currency of an underlying security, effectively assume currency risk.

Unless governing law provides otherwise, all transactions should be executed through the Deutsche Bank entity in the

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and therefore not subject to FINRA regulations concerning communications with subject companies, public appearances

and securities held by analysts.

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in the Federal Republic of Germany with its principal office in Frankfurt am Main. Deutsche Bank AG is authorized under

German Banking Law (competent authority: European Central Bank) and is subject to supervision by the European

Central Bank and by BaFin, Germany’s Federal Financial Supervisory Authority.

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House, 1 Great Winchester Street, London EC2N 2DB. Deutsche Bank AG in the United Kingdom is authorised by the

Prudential Regulation Authority and is subject to limited regulation by the Prudential Regulation Authority and Financial

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losses stemming from foreign exchange fluctuations. We may also charge commissions and fees for certain categories

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1 February 2016

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Group's analysts with the coverage companies specified by DSI. Some of the foreign securities stated on this report are

not disclosed according to the Financial Instruments and Exchange Law of Japan.

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Number in South Africa: 1998/003298/10).

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defined by the Dubai Financial Services Authority.

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Copyright © 2016 Deutsche Bank AG

David Folkerts-Landau Chief Economist and Global Head of Research

Raj Hindocha Global Chief Operating Officer

Research

Marcel Cassard Global Head

FICC Research & Global Macro Economics

Steve Pollard Global Head

Equity Research

Michael Spencer Regional Head

Asia Pacific Research

Ralf Hoffmann Regional Head

Deutsche Bank Research, Germany

Andreas Neubauer Regional Head

Equity Research, Germany

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Tel: (852) 2203 8888

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Japan

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