Abstract: In the next 20 years, oil and gas will still be the world's main consumption of energy, global oil capital expenditure in recent years is sluggish, supply increase is limited, and the demand side of steady growth in the background, oil prices are expected to remain high, domestic oil company profits and dividends are expected to improve in the long run, the current sector can be attacked, retreated and defended.
Oil and gas will continue to be the world's main energy source for the next 20 years
Over the past decade, the share of oil consumption in global energy consumption has remained largely stable, accounting for 30 percent in 202195%, down 2 in 10 years18pct；The share of natural gas consumption has steadily increased, accounting for 24% of total energy consumption in 202142%, up 2 in 10 years07pct。
Due to the limited rate of substitution of renewable energy, and the development of natural gas as a clean energy source, oil and natural gas will continue to be the world's two major consumption energy sources in the next 20 years. OPEC estimates that oil and gas are still expected to account for a whopping 28 percent of energy consumption by 204566% and 2430%, down 2 percent from 202125 and 106 percentage points.
2.Global oil capital expenditure has been sluggish in recent years, and the increase in supply has been limited
The capital expenditure of new oilfields is greatly affected by oil prices, and oil companies are more willing to increase capital expenditure on upstream exploration activities during the oil price period. In 2022, global upstream capital expenditure was US$499 billion, with an annual growth rate of 39%, which is the largest capex and annual growth rate since 2015, of which exploration investment expenditure was US$64.9 billion, accounting for 13% of upstream investment. 2010-2014 was a period of high oil prices, and exploration investment was driven by high oil prices in the high range of 60 billion to 100 billion US dollars, accounting for about 14-15% of the total upstream investment. 2015-2019 was a period of low oil prices, and exploration investment decreased by about 4% compared to 2010-2014, with an investment of about 30 billion to 50 billion US dollars, accounting for 10-12% of total upstream investment. From 2020 to 2021, due to the impact of the new crown pneumonia epidemic, oil prices fell further, and oil and gas upstream exploration investment remained at a low level of $31.3 billion for two consecutive years.
In the context of the old and new energy transition, the strategic focus of international oil majors has shifted, and we believe that insufficient capital expenditure will become the new normal. Around 2027, the first demand may reach its peak, based on the traditional oilfield development and production cycle of 3-5 years, if the investment is increased now, the demand will decline after production, and there is a high uncertainty in the long-term return rate of traditional ** projects. Faced with this problem, European companies (such as Shell) are accelerating their transformation into integrated energy service providers, and oil and gas production is decliningAlthough U.S. companies are mainly engaged in traditional energy, their oil and gas production has only remained stable, and they are not willing to increase production significantly.
Global oil production capacity is still growing, but the elasticity of supply is low. Global oil supply faces great uncertainty in 2022: the geopolitical landscape changes caused by the conflict between Russia and Ukraine, the changes in the global increase caused by the progress of the Iran nuclear negotiations, and the **market** volatility caused by OPEC+ production cuts have caused supply instability. Total global production in 2022 was 93.95 million barrels per day, up 42pct。Among them, OPEC output was 34.04 million barrels per day, an increase of 72pct；Non-OPEC countries produced 59.91 million barrels per day, up 2 percent year-on-year5pct。Since 2000, OPEC's share of global oil production has been gradually decreasing: in the past 20 years, OPEC's oil production accounted for an average of 40% of the world's output, and in the past three years, OPEC has cut production significantly, and in 2022, the proportion of production has dropped to 36%, and as OPEC deepens production cuts, the proportion of production will further decline. Entering 2023, OPEC+ will further deepen the reduction of oil**, Biden** has set a goal of producing 100% zero-carbon and zero-pollution electricity in the United States by 2035, limiting fossil energy extraction, and the growth of shale oil production in the United States is facing resistance, and it may be difficult for global ** production to rise significantly in the short and medium term.
3.On the demand side: global consumption is stable and improving
Global** consumption is still recovering, largely returning to pre-pandemic levels by the end of 2022. From 1990 to 2022, global consumption showed an exponential trend, and the recession caused by the subprime mortgage machine in the United States in 2008 and the global coronavirus pandemic in 2020 interrupted the trend of consumption continuity. The global spread of the pandemic has hit demand hard, with consumption seen a significant decrease in 2020, by 9 million b/d from 2019, or about 1 10 of total global consumption. From 2020 to 2022, with the advent of vaccines and widespread vaccination, effectively controlling the spread of the virus, countries around the world relaxed border lockdowns and actively resumed work and production, ** demand rebounded, recovering to 97.31 million b/d by the end of 2022, a difference of only 650,000 b/d from 2019. In terms of refined oil, gasoline and diesel consumption has basically recovered, and there is still a gap between aviation kerosene and pre-epidemic consumption. Global gasoline and diesel consumption in 2022 was 238960,000 barrels per day and 282110,000 barrels per day, recovering and surpassing pre-pandemic levels. Jet fuel consumption is only 62270,000 b/d, up 173 from 201970,000 b/d difference.
4.The marginal increase of key oil-producing countries is limited, and it is expected to maintain a medium and high level
Throughout 2022, the United States continued to maintain a state of destocking, the United States continued to release strategic inventories to improve and suppress oil prices, and the United States** strategic inventories fell to the lowest point in nearly 39 years (December 1983 to the present), but *** began to decline in the second half of 2022 due to the market's pessimistic expectations for a demand recession, resulting in a continuous decline, and from the end of 2022 to the beginning of 2023, due to the staggered supply and demand fundamentals, **continued**, and was affected by SVB from March to May However, with the continuous production and price reduction of OPEC+ key countries, the replenishment of strategic inventories in the United States and the continuous recovery of China's refined oil demand, the second half of 2023*** will be repaired and maintained at a medium and high level compared with the first half of the year.
OPEC+ will voluntarily cut production by 2.2 million barrels per day in 24Q1, and oil prices are expected to tighten in the medium to long term. On November 30, 2023, OPEC+ member countries each announced voluntary production cuts in the first quarter of next year, with a total size of 21960,000 barrels per day. In April 2023, the implementation rate of OPEC+ voluntary production cuts was only 28%, and the market was concerned that the "voluntary" production cuts of member countries were limited and the OPEC+ production cut agreement lacked effect, and Brent oil prices were ** on November 30 and December 1 respectively after the voluntary production cut agreement was introduced98%。With the gradual improvement of the global macro economy, ** demand is expected to gradually improve, and the IEA predicted that global ** demand will grow by 930,000 barrels per day in 24 years in its November monthly report. As OPEC+ continues to constrain production, the supply-demand pattern for oil prices is expected to continue to improve. In the long term, oil prices are expected to remain high due to insufficient global upstream investment in the medium to long term.
In the first three quarters, the performance of the "three barrels of oil" was excellent, and the value of steady growth + high dividends was highlighted
In the first three quarters of 2023, international oil prices fell year-on-year, global ** demand recovered slowly, and the performance of international oil giants was generally under pressure, according to the performance disclosed by each company, the net profit attributable to the parent company of overseas oil giants ExxonMobil, Chevron, Shell and Total in the first three quarters was -34%, -34%, -41% and -7% year-on-year respectively. Compared with overseas oil giants, PetroChina, Sinopec and CNOOC net profit attributable to the parent company in the first three quarters were +10%, -7% and -10% year-on-year respectively, reflecting strong performance resilience.
Interim dividends have become the highlight of the "three barrels of oil", and the dividend distribution rate has remained stable. According to China Securities Index Company, the average number of dividends in the Chinese mainland market is once a year, and semi-annual dividend companies are relatively scarce. Since its listing, PetroChina, Sinopec and CNOOC have adhered to semi-annual dividends, and have maintained a dividend frequency of twice a year for a long time in history. In 2023H1, PetroChina, Sinopec, and CNOOC will be distributed respectively. The interim dividend of 54 yuan shares, the dividend distribution ratio is respectively. 5%, the dividend distribution ratio remained at a historically stable level, reflecting the company's steady development and the concept of attaching importance to shareholder returns. With the deepening of the upstream and downstream integration of the three barrels of oil, the ability to resist risks may be improved, and the correlation between performance and oil price fluctuations will gradually weaken. The sustained and stable performance ensures that the three barrels of oil continue to maintain a high dividend policy and have a strong return on investment for shareholders.
6.The investment logic of the oil exploitation industry is sorted out
In 2023, the increase in oil supply will be smaller than the increase in demand, ** is expected to remain high, corporate earnings are expected to maintain a high boom, and domestic oil companies have strong risk resistance and high dividend yields, but whether it is PE or PB, domestic oil companies are significantly lower than foreign oil companies, and their valuations are undervalued. The rise in oil prices highlights the scarcity of oil and gas assets in the context of medium- to long-term low capex, and the sector is expected to usher in a valuation reshaping. It is recommended to pay attention to: PetroChina, Sinopec, CNOOC.
Reference Material**:
1.2023-1-2People's livelihood**—The tide did not recede yesterday, and the wind is rising today.
2.2023-10-23Guolian** - The "warm wind" of the oil industry has arrived, and the offshore oil and gas boom has recovered.
3.2023-12-16Soochow** - Oil prices are high, and three barrels of oil + oil services are taking off.
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