Kunlun Energy's shared nosedived 38% since August 2013

Are investors convinced of its emerging value?

Kunlun Energy's shares have fallen by 38% since August 2013 (vs. HSI +1%) when the PetroChina investigations began and the underperformance to HSI widened following its 1H14 results announcement.

According to a research note from Barclays, with the stock trading at a 13x Barclays' 1-year forward P/E, investors have been asking whether value has finally emerged for Kunlun.

However, Barclays noted that a potential pipeline tariff cut remains an overhang, and it is unclear whether PetroChina's asset injections will resume.

Barclays continues to see headwinds across the company's businesses and reduces its earnings estimates by 13% for 2015 and by 10% for 2016.

Here's more from Barclays:

Our SOTP-based price target of HK$7.40 represents a 10% downside from the current price and with no near-term catalysts to the upside in sight, we reiterate our UW rating.

Potential pipeline tariff cut a material risk: The pipelines segment is Kunlun's most valuable business, accounting for more than 80% of the stock's value, on our estimates.

Following the surprise cut of the SJ-3 tariff in 1H2014, we are increasingly concerned that the SJ-1/2 tariff could also be cut to bring returns down to levels allowed by the government. Our analysis shows such a risk to be real and, should a tariff cut occur, we estimate the value of Kunlun's stock value could be reduced by HK$1.1/share, implying total fair value of HK$6.9/share.

Diminishing economics of the entire LNG value chain: Kunlun has been growing its liquefaction capacity in the expectation that large-scale substitution of diesel with LNG would take off in China. With oil prices some 60% lower than in mid-2014, the outlook for LNG in transportation has become even gloomier now that discount between retail LNG prices and diesel prices in China is at an all-time low.

No positive catalysts in sight: We remain bearish on Kunlun's earnings growth prospects and expect weakness across all business lines. We see no material relief in oil prices in the near term and expect the E&P and all LNG-related businesses to remain under pressure while a potential further tariff cut in SJ-2 pipeline could result in a reduction of HK$1.3bn net profit per year, or 19-28% of our 2015-17E earnings.

Lower earnings, PT; reiterate UW: We reduce our earnings estimates for 2015-16E by 10-13% to reflect our latest views of the company's operations and our revised oil price forecast. As a result, we cut our SOTP-based target price to HK$7.40.