1、Global Research3 February 2019UBS IndustrialsPower, Energy & Chemical Capex Outlook: Is Energy Spending Reaching a Steady State?2019 capex expected to be +2% YoYWe analyzed pre-Q4 data for 513 energy, utility and chemical companies (see HYPERLINK l _bookmark0 Figure 3), of which 436 are covered by U

2、BS analysts. Overall, the capex analysis shows YoY capex growth of 2% in 19. Our analysis indicates: 1) Overall capex growth is expected to moderate in 19, with Major and Secondary Oil leading the way as offshore comes back, LNG projects move forward and increased fracking activity continues. 2) Wat

3、er and Electric utilities spending is expected to be flat in 19, while Chemicals is expected to increase +3%. 3) Gas Utilities capex is expected to grow +5% mainly due to Russian utilities expanding spending on pipelines and petrochemical facilities.Oil-related capex growth not as robust in 2019, bu

4、t still growing steadilyUBS analysts expect 19 capex for the 157 oil sector companies covered in our analysis to grow 4% YoY vs 18, less than the 12% YoY estimated growth in 18. That said, the comp in 18 was easier as oil sector capex declined 24% in 15 and 29% in 16 and only recovered 8% in 2017. W

5、e believe oil prices are setting up for moderately higher oil-related capex in 19, with possible upside if prices recover further. We see Major and Secondary Oil capex growth of 6% in 19 as the most favorable for our E&C coverage in the short-term.Estimated 16% Mining and metals capex growth in 18;

6、2% for 19Mining & metals capex spending is estimated to have grown 16% in 2018 after growing 6% in 2017. UBS analysts expect 2019 capex to grow 2% for the 109 mining & metals sector companies covered in our analysis. Continued growth in mining & metals capex is consistent with our outlook for the se

7、ctor and CAT, and we see the cycle extending given our expectation for continued global economic growth.Machinery, EEMI, and Engineering & Construction implicationsWe see a capex increase as a modest tailwind for Machinery, EEMI, and E&C in 2019. In Machinery, CAT, CMI, CNHI, HEES, KMT, MTW, TEX, an

8、d URI are the most exposed, while in EEMI, GE, SPXC, ROK, and PNR carry the most exposure. For E&C, FLR, FLS, JEC, KBR, MDR, and PWR are the most exposed. We expect machinery demand from Oil and mining related activities to continue to improve, albeit at a slower pace in 2019, and we expect E&C back

9、logs to be up in 2019.IndustrialAmericasEquitiesSteven Fisher, CFAAnalyst HYPERLINK mailto:steven.fisher steven.fisher+1-212-713 8634Damian Karas, CFAAnalyst HYPERLINK mailto:damian.karas damian.karas+1-212-713 2267Erika Jackson Associate Analyst HYPERLINK mailto:erika.jackson erika.jackson+1-212-71

10、3 1426Nicholas Amicucci Associate Analyst HYPERLINK mailto:nicholas.amicucci nicholas.amicucci+1-212-882 5036Figure 1: Estimated Capex for 513 energy, chemical and utility companies (2013-2020E)Figure 2: UBS Est. Capex (2018-2019E) By Category$1,200$1,100$1,000$ billions$900$800$700$600$500$400Coal

11、Pipeline Water UtilitiesMajor Oil Global Oil Drilling Mining & Metals Secondary Oil Chemicals Electric Utilities Gas Utilities2020E-20%-10%0%10%20%30%YoY Change2018E 2019E201320142015201620172018E2019ESource: UBS, FactSet estimatesSource: UBS, FactSet estimates HYPERLINK /investmentresearch /investm

12、entresearchThis report has been prepared by UBS Securities LLC. ANALYST CERTIFICATION AND REQUIRED DISCLOSURES BEGIN ON PAGE 16. UBS does and seeks 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

13、 could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision.Machinery, Engineering & ConstructionUBS Research THESIS MAPPIVOTAL QUESTIONSQ: Will energy related capex grow in 2019?Yes, we believe so. Our analysis indi

14、cates that capex across 276 Major Oil, Secondary Oil, Drilling,Pipeline, Coal and Mining & Metals companies (see HYPERLINK l _bookmark0 Figure 3) is expected to be $510b in 2019, up 4% from 2018s estimated $492b. That said, this is 35% lower than 2013s peak capex spending of$784b.Q: What will drive

15、further revisions in 2019 capex guidance?Capital efficiency and flexibility in capital spending programs are some of the themes highlighted by management teams at select companies in our analysis with larger capex budgets. However, stable oil prices will be required for energy companies to maintain

16、or expand their capex plans.WHATS PRICED IN?We think E&C companies are pricing in execution challenges and lower oil prices.We think E&Cs trade on oil prices, backlogs and themes. With oil prices declining, and multiples contracting, we believe valuation multiples are pricing in the challenges some

17、E&Cs have had with executing large projects and increased balance sheet risk.UBS VIEWWe see 2019 as a year of stability for overall (energy, utility and chemical) capex.Our Oil & Gas team expects 2019 to bring more capital discipline to the sector, and assumes a recovery in Brent crude prices to $70

18、/bbl from the sharp price decline in late 2018. We believe investors will focus on two key areas going forward: 1) Oil prices and the direction of capex revisions in 2019 if oil stabilizes at a higher level and 2) FIDs on long-term projects that could drive the next up cycle (2019 and beyond).EVIDEN

19、CEEnergy capex is expected to be up 4% YoY in 2019 (led by Secondary Oil; +7% YoY), and overall capex (including Utilities and Chemicals) is expected to be up 2% YoY, led by Major and Secondary Oil (+6% YoY) and Gas Utilities (5% YoY). Overall capex is therefore expected to have troughed in 2016 wit

20、h 3% growth in 2017 and estimated growth of 11% in 2018. Estimated 2019 and 2020 energy capex (+4% and 1% YoY respectively) could be revised higher if WTI crude oil continues its upward trend off a multi-year low of $42/bbl on 12/24/18.Annual Capex EstimatesFigure 3: UBS estimates of Total Spending

21、Plans (2013-2020E)Capex $ BillionsYear-Over-Year Change# Companies201320142015201620172018E2019E2020E20142015201620172018E2019E2020EMajor Oil Companies30428393314235241266281292-8%-20%-25%2%10%6%4%Secondary Oil Companies701621741116887991061137%-36%-39%29%14%7%6%Global Oil Drilling273033211110111113

22、10%-36%-48%-6%7%1%15%Pipeline30313638313441362614%6%-18%9%22%-14%-27%Coal1017141078988-18%-31%-26%16%4%-6%-6%Mining & Metals10911692715457666863-21%-23%-23%6%16%2%-7%Energy276784742565407438492510514-5%-24%-28%8%12%4%1%Electric Utilities1051831861852021902082051972%-1%10%-6%9%-1%-4%Gas Utilities3480

23、75564950565956-7%-25%-12%2%12%5%-5%Water Utilitie15%-7%31%-13%0%3%Utilities156269267248258249272272261-1%-7%4%-3%9%0%-4%Chemicals8155565553525961623%-2%-5%-1%12%3%3%Total51311081066869718740823843837-4%-18%-17%3%11%2%-1%Source: UBS estimates, FactSet estimates. Note: All 513 companies h

24、ave data from 2013-2020EFigure 4: Estimated Capex for 513 energy, chemical and utility companies (2013-2020E)$1,200$1,100$1,000$ billions$900$800$700$600$500201320142015201620172018E2019E2020E$400Source: UBS, FactSet estimatesWe also extended the data series back to 2005 to better frame how capex sp

25、ending has changed over time. We note, fewer companies appear in the below data set as all 375 companies have data from 2005-2020E.Figure 5: UBS estimates of Total Spending Plans (2005-2020E)# Companies20052006200720082009201020112012201320142015201620172018E2019E2020EMajor Oil Companies231281551932

26、42242235271314352332270206213232248263YoY Change21%24%25%0%-3%15%16%12%-6%-19%-24%3%9%7%6%Secondary Oil Companies4752738211276103103130137150985775849095YoY Change40%12%37%-32%35%1%26%5%10%-35%-42%32%12%7%6%Global Oil Drilling23814192421192628273019109101011YoY Change86%35%25%-11%-8%36%5%-2%11%-35%-

27、48%-8%6%-2%16%Pipeline195111419161618232832332729353122YoY Change116%38%32%-18%1%17%26%22%12%4%-17%8%20%-13%-27%Coal74678810141717141078988YoY Change33%22%26%-9%24%47%21%-2%-18%-30%-26%16%4%-6%-6%Mining & Metals8124324257495681959375594445535351YoY Change36%31%36%-15%15%46%16%-2%-19%-21%-25%1%17%1%-

28、4%Energy200220290357462411438514607653632489352380423439450YoY ChangeElectric Utilities7978107158196159143157129155159154179170179178171YoY Change37%47%24%-19%-11%10%-17%20%2%-3%16%-5%6%-1%-4%Gas Utilities2729464156566686787671534547535653YoY Change59%-11%38%0%18%30%-9%-1%-7%-25%-15%5%13%5%-4%Water

29、Utilities144455556666666666YoY Change0%19%15%-12%7%11%3%-2%8%6%-9%11%-4%-6%-2%Utilities120111157203258220213248213238236213229223238240230YoY Change42%30%27%-15%-3%16%-14%12%-1%-10%8%-3%7%1%-4%Chemicals5521273036293140474546454240424348YoY Change24%13%18%-19%6%30%17%-3%1%-1%-7%-4%5%2%10%Total3753524

30、73590756660682802866936914748624643703722728YoY Change34%25%28%-13%3%18%8%8%-2%-18%-17%3%9%3%1%Source: UBS estimates, FactSet estimates. Note: All 375 companies have data from 2005-2020EFigure 6: Estimated Capex for 375 energy, chemical and utility companies (2005-2020E)$1,000$900$800$ billions$700$

31、600$500$40020052006200720082009201020112012201320142015201620172018E2019E2020E$300Source: UBS, FactSet estimatesContinued growth expected in Major and Secondary Oil capex in 2019, while Driller capex is expected to be flattishOur analysis indicates that spending at major and secondary oil companies

32、is expected to increase by 6% in 2019 (following estimated growth of 11% in 2018), with the bottom in major and secondary spending in 2016 corresponding to the oil price trough. Offshore projects coming back and expected increases in LNG project sanctions are expected to drive the Majors capex spend

33、ing, while Secondaries are expected to grow spending due to increased fracking activity.On the other hand, our analysis shows that drilling company capex is expected to only increase 1% in 2019 (following estimated growth of 7% in 2018), remaining67% below peak spending levels reached in 2014. In th

34、eir HYPERLINK /shared/d2k0C1Z39Ke 2019 outlook note, the UBS Oilfield Services team highlighted that they sharply lowered their E&P capex forecasts for 2019 due to the recent plunge in crude prices. Their new expectation is that US-based E&P budgets will be flat-to down 5% YoY in 2019, while interna

35、tional E&P capex budgets will be up 5-8% YoY. Our estimate of 1% growth for oil drilling capex in 2019 is consistent with our Oilfield Services Teams flattish overall outlook.Figure 7: Major & Secondary Oil company capexFigure 8: Drilling company capex600500400$ in billions3002001000Oil (annual aver

36、age)$12080$1007060Brent Crude Prices$8050$ in billions$6040$403020$20102020E201020112012201320142015201620172018E2019E2020E$00201020112012201320142015201620172018E2019EMajor OilSecondary Oil Brent Crude PricesSource: UBS, FactSetSource: UBS, FactSetPipeline capex expected to decline 15% in 2019 as F

37、ERC approvals drop off sharply in 2018Through Dec 2018, the FERC has approved 730 miles of natural gas pipeline projects (down 71% vs. 2017). Based on our analysis, although approval activity declined in 2018, there are an additional 2,418 miles of pipeline pending FERC approval (see HYPERLINK l _bo

38、okmark1 Figure 10). Potential increased approval activity in 2019 can provide some upside to our estimates for 2019-20 capex spending which would be positive for PWR and CATs E&T segment.Figure 9: FERC natural gas pipeline approvalsFigure 10: Natural gas pipeline projects pending approval(by filing

39、date)3,5001,4003,0001,200Miles of Gas Pipeline ApprovedMiles of Gas Pipeline Pending Approval2,5001,0002,0008001,5006001,000400500200-2009 2010 2011 2012 2013 2014 2015 2016 2017 2018*-2015201620172018*Source: FERC; *2018 data as of December 2018Source: FERC; *2018 data as of December 2018While curr

40、ent forecasts suggest a sharp capex decline in 2019 (from $42B in 2018E to $36B in 2019E), we note that the estimated level of spending for 19 will still be 14% above trough levels seen in 2016.6.5%21.9%14.4%8.7%-13.9%28.7%-18.0%25.6%-26.8%21.4%Figure 11: Pipeline company capex45403530$ in billions2

41、52015105020102011201220132014201520162017 2018E 2019E 2020ESource: UBS, FactSet estimatesE&C backlogs expected to continue upward trend in 2019We examined capex trends since 2010 for our subject companies along with oil prices and aggregate E&C backlogs over the same period. Aggregate E&C backlogs g

42、rew year over year from 2010-14, as oil prices remained at high levels. However in the subsequent period of oil price declines (2014-2016), backlog and capex both declined, but have bounced back as oil prices have come off of trough levels.Although backlogs are typically more resilient than capex or

43、 oil prices, we believe the prolonged downturn in oil prices through 2017 has led to investment uncertainty and project deferrals at major Energy and Utility end market customers.Prices bounced back during 2018 which coincided with increased capex spending and we expect backlogs to increase in 2019

44、as our Oil and Gas team estimates Brent prices at $68.50/bbl.Figure 12: Energy related E&C backlogs vs Energy & Utility capex$1,100$1,000$900End Market Capex ($bn)$800$700$600$500$4002010$300$180BacklogCapex$160Aggregate E&C Backlog ($bn)$140$120$100$80$60$40$202019E$02011201220132014201520162017201

45、8ESource: Company reports, UBS, FactSetFigure 13: Energy related E&C backlogs vs oil pricesFigure 14: Energy & Utility capex vs oil prices$160$140Aggregate E&C Backlog ($bn)$120$100$80$60$40$202010$0$100OilBacklog$80$60$40$202019E2011201220132014201520162017$0$1,200$1,000Brent Crude PriceEnd Market

46、Capex ($bn)$800$600$400$2002010$0$120Capexaverage)Oil (annual$100Brent Crude Price$80$60$40$202018E2019E$020112012201320142015201620172018ESource: Company reports, UBS, FactSetSource: UBS, FactSetForecasts for the top 10 companies by 2018 capexThe following tables list historical and forecast capex

47、for the top 10 companies (ranked by estimated 2018 capex) in various energy & utility end markets. In cases where we observed a significant capex revision we provide a short explanation.Major OilCapex for the top ten major oil companies reflects a 2.4% increase in 2017, followed by an expected 9.0%

48、and 7.1% increase in 2018 and 2019, respectively.Figure 15: Detail of changes in Major Oil company capex ($,m)Oil Companies, MajorPetroChinaAs of 8/9/18CurrentYoY ChgChg vs Prev201620172018201920202016201720182019202017C/16C18C/17C19C/18C20C/19C17C/17P18C/18P19C/19P20C/20P27,26233,93236,34435,72636,

49、95627,26233,93236,23340,83444,44324.5%6.8%12.7%8.8%0.0%-0.3%14.3%20.3%Royal Dutch Shell23,44621,44023,49325,40826,17523,44621,44023,48525,15725,951-8.6%9.5%7.1%3.2%0.0%0.0%-1.0%-0.9%ExxonMobil Corp.16,16315,40219,67623,96326,64216,16315,40219,43124,26226,677-4.7%26.2%24.9%10.0%0.0%-1.2%1.2%0.1%China

50、 Petroleum and ChemicalCorp11,51214,71117,76819,23421,66311,51214,71117,71419,45521,73627.8%20.4%9.8%11.7%0.0%-0.3%1.2%0.3%Reliance Industries11,65111,4718,8746,6226,70811,65111,47117,24514,04913,508-1.5%50.3%-18.5%-3.9%0.0%94.3%112.2%101.4%Petrobras Brasileiro S.A13,88513,29114,89014,40314,53013,88

51、513,29116,09414,89811,147-4.3%21.1%-7.4%-25.2%0.0%8.1%3.4%-23.3%BP16,70116,56215,06216,85817,16116,70116,56215,00716,10816,661-0.8%-9.4%7.3%3.4%0.0%-0.4%-4.4%-2.9%Rosneft10,71016,39215,09916,83117,16410,71016,39214,93416,74816,93553.1%-8.9%12.1%1.1%0.0%-1.1%-0.5%-1.3%Chevron18,10913,40412,08813,3071

52、5,30118,10913,40413,78114,24115,495-26.0%2.8%3.3%8.8%0.0%14.0%7.0%1.3%TOTAL18,49715,42014,71415,12015,22918,49715,42013,59115,01416,101-16.6%-11.9%10.5%7.2%0.0%-7.6%-0.7%5.7%Total$ 167,937$ 172,025$ 178,008$ 187,471$ 197,529$ 167,937$ 172,025$ 187,515$ 200,766$ 208,6532.4%9.0%7.1%3.9%0.0%5.3%7.1%5.6

53、%Source: Company data, UBS estimatesRecent Major Oil company commentary:Chevron Corp. (CVX)Regarding their $20B 2019 Capital and Exploratory Spending Program, CVX said:Our 2019 budget supports a robust portfolio of upstream and downstream investments, highlighted by our world-class Permian Basin pos

54、ition, additional shale and tight development in other basins and our major capital project at TCO in Kazakhstan. (12/06/18)“Our investments are anchored in high-return short-cycle projects, with more than two-thirds of spend projected to realize cash flow within two years. We expect to continue to

55、deliver steady production growth, enabling continued free cash flow that underpins our strong dividend and share repurchase program.” (12/06/18)Exxon Mobil Corp. (XOM)Third quarter CapEx was $6.6 billion. We continue to progress investment to support our long-term growth plans, including increased a

56、ctivity in the Permian and the acquisition of additional acreage in Brazil. CapEx through the first three quarters of the year was $18.1 billion. Now if you exclude the acquisition of incremental Brazil acreage of about $1 billion, we remain on pace to meet full-year guidance of approximately $24 bi

57、llion. (11/02/18)Our current outlook for the full year is $25 billion. What weve seen though throughout the year, fortunately, is some incremental opportunities to acquire additional acreage in Brazil. And thats roughly about $1 billion above what we thought we were going to get. And so thats where

58、you get to the $25 billion. Again, thats heavily dependent on what happens in the fourth quarter. (11/02/18)BP Plc (BP)And so what I would describe in terms of the $15 billion to $17 billion is that is a range, which has a huge amount of flexibility. The $2 billion is a huge amount its a money in te

59、rms of flexibility what we can do. And certainly, as weve seen deflation continue to come through this year, surprisingly so given where oil prices are, we are still seeing, I think, technology driving a lot of deflation. But were now saying $15 billion for this year. I think at the start of the yea

60、r, were expecting to be close to the middle part of that range of $15 billion to $17 billion. (10/30/18)So weve guided $15 billion. We have a huge amount of capacity that Bernard and his team have created, particularly in the Upstream, to absorb BHP and be able to ramp their drilling program up as w