炼油行业2020年展望：下调DK与MPC评级

1、Refining 2020 OutlookIMO 2020 Largely Priced In, Downgrading DK & MPCNorth America Equity Research09 December 20192019 has been a relatively positive year for refiners versus the rest of Energy and not too dissimilar to our call for: (1) “a tale of two halves” (i.e. 2H 1H) with (2) a positive coasta

2、l bias. For 2020, we think that a fair amount of the IMO 2020 upside potential now feels priced in, with the group trading at a near “normal”11.5x P/E and 9% FCF on a “peak” IMO 2020 earnings. a result, a 15% total return potential, including dividends, YE20 and would prefer to see a pullback to get

3、 more interested. While still expect a positive rate change on earnings, this remains isolated to Coastal refiners, while Inland refiner earnings could decline tighter crude differentials. This keeps us relatively positive on Overweight-rated and We have downgraded MPC to Neutral from Overweight com

4、pany-specific dynamics (SOTP upside now seems more priced in, with now being key to further upside). We also downgrade DK to Underweight from Neutral on building FCF headwinds from the aforementioned inland crude dynamics. We remain Underweight HFC (similar inland crude headwinds to DK) and (IMO 202

5、0 expectations now seem much higher following recent run in the stock). we provide our top ten predictions for 2020 and our latest thoughts on eachstock.2019 recap: Tale of two halves with a positive coastal skew largely out. From our 2019 report, our macro was that 2019 would be a tale two halves,

6、with a softer 1H driven gasoline margin weakness and a stronger 2H on IMO 2020. This played out with the refining group5% in 1H (underperforming the XLE up 11% and S&P up 17%) and up 5% in 2HTD (outperforming XLE down 6% and slightly underperforming the S&P up 7%). Our second sector theme was to fav

7、or coastal inland exposure, given a combination changing light crude (more inland pipes leading to tighter inland crude differentials) and the impending IMO 2020 regulation (which favors complex coastal refiners). This also played out, coastal refiners +13% versus inland +3 YTD (2H coastal +9%, inla

8、nd-3%).Table 1: Quarterly Performance Heat Map% performanceIntegrated Oils & Refining Phil Gresh, CFA AC(1-212) 622-4861 HYPERLINK mailto:phil.m.gresh phil.m.greshBloomberg JPMA GRESH John M Royall, CFA(1-212)622-6406 HYPERLINK mailto:john.m.royall john.m.royall Nicholas J Lampman (1-212)622-9515 HY

9、PERLINK mailto:nicholas.lampman nicholas.lampmanJ.P. Morgan Securities LLC1Q182Q183Q184Q1820181Q192Q193Q194Q19TD2019YTDDK16.5%23.3%(15.4%)(23.4%)(7.0%)12.0%11.3%(10.4%)(5.5%)5.5%HFC(4.6%)40.1%2.1%(26.9%)(0.2%)(3.6%)(6.1%)15.9%(5.0%)(0.4%)MPC10.8%(4.0%)14.0%(26.2%)(10.6%)1.4%(6.6%)8.7%(0.9%)2.0%PBF(4

10、.4%)23.7%19.0%(34.5%)(7.8%)(4.7%)0.5%(13.1%)13.9%(5.2%)PSX(5.2%)17.1%0.4%(23.6%)(14.8%)10.5%(1.7%)9.5%10.9%31.8%VLO0.9%19.5%2.6%(34.1%)(18.4%)13.2%0.9%(0.4%)9.8%24.9%Group Avg2.3% 19.9%3.8%(28.1%)(9.8%)4.8%(0.3%)1.7%3.9%9.8%5.9%0.5%5.9%0.5%31.7%(6.6%)(25.1%)(3.6%)4.2%2.6%2.7%(5.3%)2.6%14.1%9.0%(29.6

11、%)(12.9%)5.1%(1.7%)1.2%8.4%13.4%S&P500(1.2%)2.9%7.2%(14.0%)(6.2%)13.1%3.8%1.2%5.7%25.5%XLE(6.7%)12.7%(0.3%)(24.3%)(20.6%)15.3%(3.6%)(7.1%)0.9%4.1%Source: Bloomberg. Inland = DK/HFC, Coastal = MPC/PBF/PSX/VLO.See page 118 for analyst certification and important disclosures.J.P. Morgan does and seeks

12、to do business with companies covered in its research reports. As a result, 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. HYP

13、ERLINK / Prediction 1: Global capacity additions accelerate in 2020. While had expected 2019 to see accelerating capacity additions versus 2018, a combination of start-up delays (e.g. Saudi Jizan 400kbd pushed to YE19) and the unexpected closure of the 335kbd PES refinery in Philadelphia led to a mo

14、re balanced picture in (despite softer demand). For 2020, however, still see the capacity addition acceleration scenario that described last year as most likely. The wildcard 2020 will be demand, IMO 2020 (positive diesel), possible trade resolution (pent-up demand potential) and seasonal factors (l

15、apping a poor US agriculture season) all being possibletailwinds.Figure 1: Global Capacity AdditionsKbd growthFigure 2: Global Capacity UtilizationKbd growth% utilization02014 2015 2016 2017 2018 2019E 2020E 2021E 2022EAPACME/AfricaAmericasEurope/EurasiaTotal Net Additions0(500)200020002002200420062

16、008201020122014201620182020ECapacity2002200420062008201020122014201620182020E90%85%80%75%Source: Bloomberg and J.P. Morgan estimates.Source: Bloomberg and J.P. Morgan estimates.Prediction 2: Modestly better year for US gasoline cracks, but upside limited by high utilization. In 2019, feared that gas

17、oline crack weakness would lead to concerns that gasoline could the next “associate gas” trade. While this happened in 1Q19 (negative cracks), Spring maintenance and the mid-year PES refinery explosion altered the gasoline supply/demand balance, necessitating stronger cracks to encourage imports. 20

18、20, lap 1Q19 inventory/crack spread comps; however, higher runs to capture IMO 2020 distillate benefits thereafter could limit upsidepotential.Figure 3: US Gasoline Inventory Outlookmm bbls270250230210190Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov DecFigure 4: East Coast Gasoline Cracks$/bbl (EC Gas

19、oline - Brent)35302520151050(5)Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec35302520151050(5)5-yearrange201820192020E5-yr range201820192020ESource: EIA and J.P. Morgan estimates. Includes finished gasoline +blendingcomponents.Source: Bloomberg and J.P. Morganestimates.Prediction 3: Diesel cracks r

20、emain healthy on low global inventories IMO 2020 demand. Despite weaker ag/energy demand, diesel inventories have trended to the low-end five-year ranges in 2019, especially in 4Q, aided maintenance, the Saudi attack in September and strong export demand in advance IMO 2020. We expect 2020 to remain

21、 solid for diesel, but are forecasting any major spikes from IMO 2020. Weather will be a key wildcard this winter, given low inventories and IMO-relateddemand.Figure 5: US Diesel Inventory Outlookmm bbls180170160150140130120110100Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov DecFigure 6: East Coast Di

22、esel Cracks$/bbl (EC Diesel - Brent)404035353030252520201515101055Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec5-yearrange201820192020E5-yrrange201820192020ESource: EIA and J.P.Morganestimates.Source: Bloomberg and J.P. Morgan estimates.Prediction 4: Diesel exports to remain strong, while more gas

23、oline may stay in the the product export markets, think that exports diesel will continue to grow in 2020, driven the global need distillate blending to meet the IMO 2020 standards. Meanwhile, we think that more gasoline will at home in order to backfill lost from the PES shut. Increased gasoline ex

24、port competition could also be a factor to watch, given capacity increases in Asia, particularlyChina.Figure 7: US Gasoline Net ExportsKbpd1,0000Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec8006004002000(200)(400)Figure 8: US Diesel Net ExportsKbpd1,7001,5001,3001,100Jan Feb Mar Apr May Jun Jul Au

25、g Sep Oct Nov Dec1,7001,5001,3001,1009007005003005-yearrange201820195-yearrange201820192020ESource:EIAandJ.P.Morganestimates.Includesfinishedgasoline+ blendingcomponents.Source: EIA and J.P. Morganestimates.Prediction 5: HSFO/LSFO spreads to remain at record wide levels, with LSFO trading more like

26、gasoline. The biggest impact of IMO 2020 will continue to be on fuel oil spreads. cracks spreads have fallen sharply in 4Q19, as expected, while LSFO prices have strengthened to trading at a level closer to gasoline crack spreads. We think that this trend should continue in 2020, with LSFO pricing a

27、t a level to encourage VGO feedstock diversion into the marine bunker fuel market and away fromgasoline.Figure 9: HSFO vs. LSFO Brent Based Cracks$/bbl3020100(10)(20)Dec-08Dec-09Dec-10Dec-11Dec-12Dec-13Dec-14Dec-15Dec-16Dec-17Dec-18(30)Dec-08Dec-09Dec-10Dec-11Dec-12Dec-13Dec-14Dec-15Dec-16Dec-17Dec-

28、183020100Figure 10: LSFO Brent Crack vs. NYH Gasoline Brent Crack$/bbl453525155(5)Dec-08Dec-09Dec-10Dec-11Dec-12Dec-13Dec-14Dec-15Dec-16Dec-17Dec-18(15)Dec-08Dec-09Dec-10Dec-11Dec-12Dec-13Dec-14Dec-15Dec-16Dec-17Dec5)(15)LSFOBrentCrackHSFO BrentNYH GasolineBrentCrackLSFO BrentCrackSourc

29、e: Bloomberg.Source: Bloomberg.Prediction 6: Brent/WTI spreads tighten further, potentially to a $5/bbl average in 2020. Given a combination more barrels moving from Midland directly to the Gulf Coast via Permian pipeline and the prospect of decelerating crude production growth, we think that the Br

30、ent/WTI spread could tighten in 2020 versus 2019. We little opportunity for the double-digit events that happened in 2019, rather believe that there could be periods where the Brent/WTI spread is tighter than $5/bbl forecast. In 2021, further tightness could come from the Diamond expansion/Capline r

31、eversal, Seaway expansion and/or DAPL expansion.Figure 11: Cushing Inbound vs. Outbound Capacitykbpd5,0004,5004,0003,5003,0002,5002,0001,5001,0001Q104Q101Q104Q103Q112Q121Q134Q133Q142Q151Q164Q163Q172Q181Q194Q19E3Q20E2Q21E0Figure 12: Brent WTI Spread Recent History$/bbl2823181383Oct-10 Apr-11 Oct-11 A

32、pr-12 Oct-12 Apr-13 Oct-13 Apr-14 Oct-14 Apr-15 Oct-15 Apr-16 Oct-16 Apr-17 Oct-17 Apr-18 Oct-18 Apr-19 Oct-19 20-Apr 20-OctOct-10 Apr-11 Oct-11 Apr-12 Oct-12 Apr-13 Oct-13 Apr-14 Oct-14 Apr-15 Oct-15 Apr-16 Oct-16 Apr-17 Oct-17 Apr-18 Oct-18 Apr-19 Oct-19 20-Apr 20-Oct2823181383(2)TotalInboundCapac

33、ityTotal OutboundCapacity CushingInventoriesSource: J.P. Morgan estimates.Brent - WTISource: Bloomberg and J.P. Morgan estimates.Prediction 7: Bakken differentials stay tight on improved takeaway. Bakken differentials, while likely need to wait until 2021 the Capline reversal, a expansion and other

34、potential pipelines to further improve takeaway out of the Bakken, the backdrop slowing production and limited need for rail could keep differentials fairly tight to WTI in2020.Figure 13: Bakken Takeaway vs. ProductionKbpd2013201420152016201720182019E-2013201420152016201720182019E3,0002,5002,0001,50

35、01,0005002021E2022E-2021E2022EFigure 14: WTIBakken Spread Recent History$/bbl18141062Oct-10 Apr-11 Oct-11 Apr-12 Oct-12 Apr-13 Oct-13 Apr-14 Oct-14 Apr-15 Oct-15 Apr-16 Oct-16 Apr-17 Oct-17 Apr-18 Oct-18 Apr-19 Oct-19 20-Apr 20-Oct(10)Oct-10 Apr-11 Oct-11 Apr-12 Oct-12 Apr-13 Oct-13 Apr-14 Oct-14 Ap

36、r-15 Oct-15 Apr-16 Oct-16 Apr-17 Oct-17 Apr-18 Oct-18 Apr-19 Oct-19 20-Apr 20-Oct18141062(2)(6)(10)2020ENDRefineriesToGuernseyHubTo Superior Hub ToPatokaHubRailCapacityBakkenProduction2020ESource: Company reports and J.P. Morgan estimates.WTI - BakkenSource: Bloomberg and J.P. Morgan estimates.Predi

37、ction 8: Midland differentials could stay tighter than Cushing. Midland differentials, see the potential the current Midland premium to Cushing to remain in place for 2020, given the combination of multiple Permian pipeline start-ups in 2H19/1H20 and decelerating crude production We see ample pipeli

38、ne takeaway until at least 2022, given our current expectations for Permian productiongrowth.Figure 15: Permian Takeaways versus ProductionKbpdFigure 16: Permian Pipe Utilization vs. Differentials% Utilization$/bbl1Q111Q121Q111Q121Q131Q141Q151Q161Q171Q181Q191Q20E1Q21E1Q22ESource: Company reports and

39、 J.P. Morgan estimates.Wink to WebsterEPD NGLConversion Gray OakBasin2/Sunrise Cactus 2EPICBridgeTex Expansion Permian Express Existing Pipes RefineriesProduction120%110%100%90%80%70%60%PermianUtilizationCushing - MidlandDiff16.0014.0012.0010.008.006.004.002.000.00(2.00)1Q114Q111Q114Q113Q122Q131Q144

40、Q143Q152Q161Q174Q173Q182Q191Q20E4Q20E3Q21ESource: Bloomberg and J.P. Morgan estimates.Prediction 9: differentials widen on “rail over curtail” production growth (and IMO 2020). Last year, highlighted that pipeline accessible CAD crudes should still be advantaged, even in a CAD curtailment world, tho

41、ugh railed barrels might have limited benefit. With the new “rail over curtail” deal in Alberta, think that more barrels could via rail as producers look to the positive netback impact additional volumes. This should still benefit US refiners that have pipeline access, and possibly those with rail a

42、ccess, depending on the degree to which differentials expand. With 2020 on the horizon and CAD barrels needing to compete with on the Gulf Coast, we think WTI/WCS could average in thehigh-teens.Figure 17: Western Canada Crude Takeaway Summarykbpd6,000Figure 18: Canadian Imports % of Capacity% of US

43、Refining Capacity (YTD 2019)30%0Rail1Q101Q111Q101Q111Q121Q131Q141Q151Q161Q171Q181Q191Q20E1Q21E1Q22E25%20%15%10%5%ProductionPSXHFCMPCPBFXOMCVXVLOSource:CAPPandJ.P.Morganestimates.Note:ProductionincludesBakkenvolumesutilized in the Western Canadian logistics systems. Enbridge mainline backs out 500kbp

44、d approximation of US Bakken barrelflows.Source: Company reports, EIA, Bloomberg and J.P. Morgan estimates.Prediction 10: Sweet/sour spreads widen, but still capped by global heavy crude production curtailments. sweet/sour spreads, we still expect some widening in due to IMO 2020, as evidenced the r

45、ecent widening spreads (even with the new formula). That said, despite the degradation in high-sulfur fuel oil prices, think that spreads are more likely to hover in the high-single digit range, rather than mid-double digits, mostly due to limited global heavy crude supply elsewhere (e.g. additional

46、 OPECcuts).Figure 19: Mexico/Venezuela Production vs. Heavy DifferentialkbpdArab Heavy % Discount to Brent025.0%20.0%15.0%10.0%5.0%Jan-190.0%Jan-19Jan-10Jan-11Jan-12Jan-13Jan-14Jan-15Jan-16Jan-17Jan-18MexicoProductionVene.ProductionArab Heavy % Disc. toBrentJan-10Jan-11Jan-12Jan-13Jan-14Jan-15Jan-16

47、Jan-17Jan-18Source: EIA, Bloomberg and J.P. Morgan estimates.DK (Downgrade to UW from N, Dec-20 Price Target $38): Limited near- term FCF to bridge gap to long-term Midstream mix shift. While the long- term strategy of investing in more stable Midstream EBITDA makes sense earnings stability and mult

48、iple enhancement, the near-term degradation that see in DKs FCF from tight inland crude differentials (both Permian and WTI) make it difficult to get excited about2020.HFC (UW, Dec-20 Price Target $55): While valuation improved, still cautious on inland crude fundamentals. While HFC shares have alre

49、ady lagged the group YTD (-40bps, group ex-HFC +12%), are sticking with Underweight rating, as remain relatively cautious on Mid-Con fundamentals in 2020, a possible further tightening the Brent/WTI, to which has high exposure. The sudden change in leadership was a bit surprising, though there appea

50、rs to be no material change in strategy, other than the announcement of more growth capital spending for a renewable dieselproject.MPC (Downgrade to N from OW, Dec-20 Target $67): Story shifts to refining execution and MPLX. We have downgraded MPC to Neutral from Overweight, as believe that shares n

51、ow more accurately reflect the value unlock potential from the spin-off. The remaining upside to captured will need to be around better refining execution and/or increased clarity around the strategy. 3Q refining execution was a in the right direction, a 94% capture rate. However, would like to see

52、more before dialing this is in as sustainable. In the meantime, share price has softened, weighing on our sum-of-the-parts valuation (all elseequal).PBF (UW, Dec-20 Price Target $32): 2020 execution needs to be strong justify current valuation. While appreciate the case around 2020, execution is now

53、 key for in our At this time in 2018, 2019E consensus EPS $4.74, but EPS might end being 200kbd on the Coast, while most other refiners will be look to fuel oil as a substitute for heavy crude. Execution and FCF generation also remain solid, a commitment to balanced capital allocation to lead to ano

54、ther healthy dividend hike in early 2020 and continuedbuybacks.Phil Gresh, CFA (1-212) 622-4861 HYPERLINK mailto:phil.m.gresh phil.m.greshNorth America Equity Research09 December 2019Table of Contents HYPERLINK l _bookmark0 Comp Sheet and Macro Forecasts10 HYPERLINK l _bookmark1 Investment Thesis14

55、HYPERLINK l _bookmark2 IndustryView14 HYPERLINK l _bookmark3 Key StockSelectionDrivers17 HYPERLINK l _bookmark4 Cycle Analysis andValuationScenarios22 HYPERLINK l _bookmark5 Sector KeyValueDrivers24 HYPERLINK l _bookmark6 US is the Most Efficient and ProfitableRefiningRegion24 HYPERLINK l _bookmark7

56、 USMarginOutlook26 HYPERLINK l _bookmark8 IMO 2020 a Positive forUSRefiners32 HYPERLINK l _bookmark9 Paths to Compliance with IMO2020Regulations32 HYPERLINK l _bookmark10 ImplicationsforRefiners33 HYPERLINK l _bookmark11 US Clean Products Outlook38 HYPERLINK l _bookmark12 Clean Product Demand Should

57、RemainHealthy38 HYPERLINK l _bookmark13 Domestic Gasoline Demand Flattish, Diesel SoftonWeather39 HYPERLINK l _bookmark14 Gasoline Exports Limited by PES, DieselExportsStrong40 HYPERLINK l _bookmark15 Utilization Should Rebound in 2020, Big Yield ShifttoDiesel41 HYPERLINK l _bookmark16 Diesel Invent

58、ories Low, Gasoline aBitHigh42 HYPERLINK l _bookmark17 US Light Products (PetChem) Outlook43 HYPERLINK l _bookmark18 PetrochemicalOutlookChallenged43 HYPERLINK l _bookmark19 USNGLProduction44 HYPERLINK l _bookmark20 Ethane Prices CouldRemainDepressed45 HYPERLINK l _bookmark21 Propane Prices Degradin

59、g ClosertoEthane47 HYPERLINK l _bookmark22 Butane Exports Also Growing, ButMarginsSoft49 HYPERLINK l _bookmark23 Oncoming LPG Export ProjectsCouldHelp50 HYPERLINK l _bookmark24 Naphtha Prices Starting to Dislocate from BrentasWell51 HYPERLINK l _bookmark25 US CrudeDifferentialsOutlook53 HYPERLINK l

60、_bookmark26 US Light Crude Production Ramping WiththePermian53 HYPERLINK l _bookmark27 Shale, Constrained Heavy Supply Leads to MaxLightRuns54 HYPERLINK l _bookmark28 Crude TransportationCost/DifferentialsOutlook55 HYPERLINK l _bookmark29 International CleanProducts Outlook56 HYPERLINK l _bookmark30