DB Oily Rag:Conference 2015,Total,Hunting/Amec Foster,Kurdistan

DB Oil & Gas Conference: Registration deadline approaching – sign up now!

    DB will host its annual global Oil & Gas in London on the 17th September 2015. Consistentwith previous years the event will include presentations from industry and consultants andopportunities for 1-1 meetings with over 25 companies from across the European integrated,E&P and service sectors. To register please follow the link below using the registrationpassword “oil2015”. http://registration.db.com/OilAndGas2015.

    Total (Hold, 48 EUR PT) – UK midstream disposals.

    DB View: Total has announced the sale of a series of UK gas pipelines for $905m. Thedivestment represents part of the $10bn programnme announced last September, $5bn ofwhich was intended for 2015, and again highlights the extent to which Big Oil holds a rangeof assets which offer decent value opportunities in current markets. The divestment bringsthe total that the company has announced for 2015 to $2.3bn (of the intended $5bn) withfurther sales indicated. This is distinct from the $4bn of cash proceeds that the company hasalso seen flow in this year from deals announced in 2014 not least the sales of Bostick toArkema for c. $2bn plus and Nigerian assets for c. $1bn. We note that our model assumes$6bn of cash inflow from sales this year which appears broadly in line with the current runrate. Importantly, the divestments see gearing move towards an estimated 19% (debt/debtplus equity) leaving decent balance sheet headroom at this time, whilst also ensuring thatincluding the scrip component of dividend Total will fully fund dividend this year from CFFOand divestments without drawing on balance sheet.

    Hunting (Buy, 600p PT) – 1H15 results reaction.

    DB View: Overall results are a touch soft of expectations but are broadly in line with guidanceas at the pre-close trading statement. Revenues are down 30% y/y to $464m and clean EBITAof $20m is down 79% y/y (vs. 75% in the year to end-May). Sequentially, EBITA is down 83%y/y. Excluding c$60m of non-cash impairments taken with results underlying EPS of 8.4cps isdown 81% y/y. As we had forecast, Hunting halved its interim dividend to 4c.

    AMEC Foster Wheeler (Hold, 815p) - 1H15 results reaction.

    DB View: We view AMFW results a touch ahead of cons and see no change to guidance as arelative positive in conjunction with a raised interim dividend, despite the challengingbackdrop. Overall, however, results are still challenging with proforma EBITA down 25% y/yand adjusted EPS down 13% y/y in spite of the deal/cost synergies; EBITA margins on aproforma basis declining from 9.3% to 7.3% with no conviction as to where/when marginsbottom will remain our primary concern going forward. While an increase in the dividend isshow of confidence with net debt also now rising to ￡1bn at period-end we expect questionson the sustainability of this going forward (incl. asbestos liability adj ND/2015E EBITDA ~3x).

    Kurdistan Oil & Gas – Government confirms September export payment.

    DB View: The Kurdistan Ministry of Natural Resources has issued a press release reiteratingthat export payments will begin in the 'first half of September'. The regional Oil & Gas Councilhas also approved allocation of $75-100m from direct export sales to be distributed inproportion to each operator's past/present export levels. There will likely be some skepticismthat the region has sufficient liquidity to sustain monthly payments at current oil prices giventhe significant cost of state salaries and Peshmerga funding. However, the decision to resumepayments appears to be born out of the reality that an absence of payments will encourageoperators to cut capex further and put 2016 production at risk. An eventuality the KRG willwant to avoid at all costs, considering the region's reliance upon oil export revenue whichsuggests a stronger commitment to honoring payments than seen historically.