Mabel Maintaining 2019–2020 crude oil forecast at US$65–70/barrel amid high volatility.
Amid the recent disruption to Saudi Arabia’s production from drone attacks purportedly launched by Iran-backed Yemeni Houthis, Brent crude oil prices have rebounded by US$4/barrel from last week to US$65/barrel, which is the YTD 2019 average. With US crude inventories declining by 14% to 417mil barrels since the 1-year peak of 485mil in June this year, we retain our 2019–2020 price forecast at US$65– US$70/barrel which has been maintained since 3 December last year. Since the beginning of 2019, the EIA Short-Term Energy Outlook has continuously revised its crude oil projections, moving its Brent oil projection between US$60/barrel and US$70/barrel and currently settling at US$63/barrel for 2019 and US$62/barrel for 2020.
We maintain OVERWEIGHT on the sector as prospects have begun to brighten with rising asset utilization globally which supported service providers’ improving results. While we have BUY calls for Bumi Armada, MISC, Sapura Energy and Velesto Energy, our top picks are still companies with stable and recurring earnings such as Serba Dinamik and Dialog Group. We like the recurring income business model of Dialog and Serba Dinamik, which are involved in operation and maintenance services while Dialog’s earnings visibility is further secured by the Pengerang Deepwater Terminal project with its enlarged buffer zone. As Bumi Armada’s share price has risen by 50% since our recommendation upgrade last month, we have raised its fair value further to RM0.42/share, further reducing our sum-of-parts discount of 20%.
Petronas's large-scale water supply in the second half of the year is expected to exceed 35 billion yuan. Sinchew Mon, Sep 23, 2019 05:34pm - 19 hours ago
KUALA LUMPUR (Aug 23): Petronas will open a large water pipe in the second half of the year, with potential capital expenditures exceeding RM35 billion. Oil and gas stocks are expected to usher in the capital of China National Capital.
Petronas announced last week that capital spending fell 21% to RM15.7 billion in the first six months of this year, mainly because the Bianjialan project has completed 99.7%, so the downstream spending of Petronas has also decreased by 26% to RM4.7 billion.
The oil and gas industry contracted a year-on-year decrease of 6% to RM5.8 billion, but the overall performance has started to improve slightly. The oil and gas industry was awarded a 59% year-on-year increase in contracts in the second quarter. To RM4 billion.
Petronas' management hopes that the annual capital expenditure will reach RM50 billion, and it is expected that there will be more capital expenditure in the second half of the year.
Da Securities expects that the national capital expenditure at home and abroad will reach a balance.
Hong Leong Research believes that as of the first half of this year, the Bianjialan Comprehensive Center (PIC) has completed 99.7%. It is believed that the fourth quarter of this year can be put into operation, and Petronas will implement the capital expenditure commitment as scheduled.
The bank added that from the performance of Petronas in the first half of the year, production and output increased by 1.5% and 4.5% respectively. In addition, the Malaysian Ringgit weakened from RM3,94 to RM4,12, year-on-year, pushing up the performance of Petronas. It is believed that Petronas will allocate RM17.5 billion to capital expenditure in the second half of the year.
According to Kenanga research, 43% of Petronas' total capital expenditure in the first half of the year is for upstream use, 61% of which is for local use. It is believed that drilling and processing oil and gas companies can benefit from it, such as VELESTO Energy (VELESTO, 5243, Main Board) Energy Group) and Shabra Energy (SAPNRG, 5218, Main Board Energy Group).
Malaysia Investment Bank said that the oil and gas sector has a bright future, and global asset utilization can support service providers to improve performance. This move is beneficial to a number of upstream operators, VELESTO Energy, Shabra Energy, International Shipping (MISC, 3816, Main Board) Traffic and logistics group) and so on as "buy"
Rating, but more inclined to Dai Le Group (DIALOG, 7277, main board energy group) and Shiba Power (SERBADK, 5279, main board energy group), because the latter business nature is based on recurring income, providing operation and maintenance services.
Malaysia Investment Bank and Da Securities believe that the oil and gas sector is bright and maintain an “plus” rating. Kennag and Hong Leong are more cautious, standing on the same front and maintaining a “neutral” rating.
Amanad started Buying Direct from Open market --today( very long time didn't buy direct) Both Armada and KNM Debt cannot be sustained longer than End 2020. I think IB are pushing to liquidate position only
Velesto will need to show few more qtr of black ink before seeing more upward trend. But the upward trend won’t be significant due to the large number of share in the market.
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Mabel
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Posted by Mabel > 2019-09-23 11:51 | Report Abuse
Mabel Maintaining 2019–2020 crude oil forecast at US$65–70/barrel amid high volatility.
Amid the recent disruption to Saudi Arabia’s production from drone attacks purportedly launched by Iran-backed Yemeni Houthis, Brent crude oil prices have rebounded by US$4/barrel from last week to US$65/barrel, which is the YTD 2019 average. With US crude inventories declining by 14% to 417mil barrels since the 1-year peak of 485mil in June this year, we retain our 2019–2020 price forecast at US$65– US$70/barrel which has been maintained since 3 December last year. Since the beginning of 2019, the EIA Short-Term Energy Outlook has continuously revised its crude oil projections, moving its Brent oil projection between US$60/barrel and US$70/barrel and currently settling at US$63/barrel for 2019 and US$62/barrel for 2020.
We maintain OVERWEIGHT on the sector as prospects have begun to brighten with rising asset utilization globally which supported service providers’ improving results. While we have BUY calls for Bumi Armada, MISC, Sapura Energy and Velesto Energy, our top picks are still companies with stable and recurring earnings such as Serba Dinamik and Dialog Group. We like the recurring income business model of Dialog and Serba Dinamik, which are involved in operation and maintenance services while Dialog’s earnings visibility is further secured by the Pengerang Deepwater Terminal project with its enlarged buffer zone. As Bumi Armada’s share price has risen by 50% since our recommendation upgrade last month, we have raised its fair value further to RM0.42/share, further reducing our sum-of-parts discount of 20%.
Source: AmInvest Research - 23 Sept 2019