Leading Independent Investment Research, Morningstar, Inc.

Morningstar

Leading Independent Investment Research

Morningstar, Inc.

Morningstar, Inc. is a leading provider of independent investment research in North America, Europe, Australia, and Asia. We offer an extensive line of products and services for individual investors, financial advisors, asset managers, and retirement plan providers and sponsors. 

Morningstar provides data on more than 500,000 investment offerings, including stocks, mutual funds, and similar vehicles, along with real-time global market data on more than 16 million equities, indexes, futures, options, commodities, and precious metals, in addition to foreign exchange and Treasury markets. Morningstar also offers investment management services through its investment advisory subsidiaries, with more than $180 billion in assets under advisement or management as of June 30, 2015. We have operations in 27 countries.

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Thematic (Sector/Industry)

Australia Materials / Thematic (Sector/Industry)

<ul><li>The precipitous slide in oil prices since fall 2014 has eroded the financial health of most exploration and production, or E&amp;P, firms.</li><li>Natural gas has been no safe haven either, with prices entrenched near 10- year lows.</li><li>Near-term fundamentals remain challenged for both commodities, and investors should be prepared for weak pricing to persist for much if not all of 2016&ndash;17.</li><li>As a result, many operators&mdash;who outspend cash flows even during the best of times&mdash;are currently hemorrhaging cash and seeing leverage rise to uncomfortable levels.</li><li>Investors are right to be concerned about whether the upstream space has the financial wherewithal to endure this sustained period of low oil and natural prices, and which firms might be casualties of such an environment.</li><li>Having analyzed the balance sheets, cost structures, and operations of our E&amp;P coverage list, we found that in the vast majority of cases, the E&amp;P firms we cover are well-equipped to cope with multiple years of low prices.</li><li>That's partly due to cost deflation and efficiency gains but most critically from the prompt utilization of capital markets earlier this year to prop up liquidity reserves.</li><li>To be sure, even within our coverage there exists a handful of firms that entered the downturn with too much leverage and hold lower quality assets&mdash;these are the few that may not emerge from the current environment unscathed.</li><li>But as a group, our E&amp;P universe seems more financially sound than headlines and investor sentiment might otherwise suggest.</li></ul>Analysts: David Meats, Mark Hanson CFA, Stephen Simko CFA, Brandon Hurst.Full report below the fold....

The precipitous slide in oil prices since fall 2014 has eroded the financial health of most exploration and production, or E&amp;P, firms.Natural gas has been no safe haven either, with prices entrenched near 10- year lows.Near-term fundamentals remain challenged for both commodities, and investors should be prepared for weak pricing to persist for much if not all of 2016&ndash;17.As a result, many operators&mdash;who outspend cash flows even during the best of times&mdash;are currently hemorrhaging cash and seeing leverage rise to uncomfortable levels.Investors are right to be concerned about whether the upstream space has the financial wherewithal to endure this sustained period of low oil and natural prices, and which firms might be casualties of such an environment.Having analyzed the balance sheets, cost structures, and operations of our E&amp;P coverage list, we found that in the vast majority of cases, the E&amp;P firms we cover are well-equipped to cope with multiple years of low prices.That's partly due to cost deflation and efficiency gains but most critically from the prompt utilization of capital markets earlier this year to prop up liquidity reserves.To be sure, even within our coverage there exists a handful of firms that entered the downturn with too much leverage and hold lower quality assets&mdash;these are the few that may not emerge from the current environment unscathed.But as a group, our E&amp;P universe seems more financially sound than headlines and investor sentiment might otherwise suggest.Analysts: David Meats, Mark Hanson CFA, Stephen Simko CFA, Brandon Hurst.Full report below the fold....

China National Building Material (3323 HK)

Zhejiang Longsheng Group Co., (600352 CH)

Graphic Packaging Holding Company (GPK US)

Inner Mongolia Baotou Steel Union (600010 CH)

Jiangsu Protruly Technology Group (600074 CH)

Inner Mngl Jnzhng Eng & Cmci Gp (601216 CH)

Tongling Nonferrous Metals Group (000630 CH)

China Northern Rare Earth Group High-Tech (600111 CH)

China Northern Rare Earth Group High-Tech

Packaging Corporation of America (PKG US)

Kingenta Ecological Enginering Gp (002470 CH)

Jiangsu Kangde Xin Composite Mtrl Co (002450 CH)

Zhejiang Zhongcheng Packing Mtrl (002522 CH)

E&P Financial Health: Better Than You Think. Liquidity Reserves Will See Most Firms Through Downturn