CIMB Oil and Gas

Sector Note - Turning point? - by Itphong Saengtubtim ( - )

We have raised our oil-price assumptions by 33-42% for FY09-12, to US$60/bbl for FY09, US$75 for FY10, US$80 for FY11, and US$85 for the long term. With an improving demand outlook, we expect crude oil prices to trend higher over the next few years. Our new assumptions are based on: 1) a continued recovery in the global economy; 2) US$ weakness; 3) speculators' premiums on general commodity prices; and 4) continued tight supply from OPEC and non-OPEC producers. We have raised our EPS forecasts for oil and gas companies for FY10-11 as well as our target prices. Upgrade the sector to OVERWEIGHT from UNDERWEIGHT. Maintain OUTPERFORM on PTTEP and PGAS; upgrade PTT to OUTPERFORM from Neutral.

CIMB Oil and Gas

Sector Note - Lower oil price assumptions - by Itphong Saengtubtim

We are cutting our crude oil price assumptions following downgrades in our regional economic growth forecasts. We have cut our average Brent crude price forecasts to US$45/bbl (from US$60/bbl) for FY09, to US$55 (from US$65/bbl) for FY10, and to US$60/bbl (from US$70/bbl) for FY11 onwards. Key reasons are poorer global economic conditions as well as lower GDP growth forecasts for Asian countries. Crude oil prices could ease below US$40.00/bbl in 2Q09. Our top pick remains PGAS, which should be less affected by weak oil prices given its strong volume growth and sustained high margins. Maintain UNDERPEFORM on PTT and PTTEP. Maintain UNDERWEIGHT on the sector.