O&G stocks in bullish momentum

April 9, 2019 @ 2:40PM
By Zarina Zakariah
With more prospective O&G contracts to be dished out by national oil company Petroliam Nasional Bhd (Petronas) to local O&G players, and further cushioned by higher oil price which hit US$70 a barrel, the industry is already setting course for upward trend.

KUALA LUMPUR: Oil and gas (O&G) counters such Icon Offshore Bhd (IOB), Hibiscus Petroleum Bhd (HPB) and Sapura Energy Bhd (SEB) has been showing positive upward trend over the past week, revealing solid bullish share price momentum for local players.

With more prospective O&G contracts to be dished out by national oil company Petroliam Nasional Bhd (Petronas) to local O&G players, and further cushioned by higher oil price which hit US$70 a barrel, the industry is already setting course for upward trend.

More jobs are expected to be given by Petronas to local service providers as a preference over foreign-flagged vessels, Maybank Investment Bank Research (Maybank IB) noted.

Shares of IOB rose as much as 8.7 per cent in active trade yesterday morning after the company announced it secured five contracts and a work order for provision of vessels last Friday (April 5).

The contract entails offshore support vessels for the production operations of three Petroleum Arrangement Contractors (PAC) and a work order for the provision of a straight support vessel to Petronas Carigali Sdn Bhd.

HPB Bhd shares rose 7.08 per cent to RM1.210 after it announced its jointly‐controlled operating company, Anasuria Operating Company Ltd is on track to execute the Guillemot A GUA‐P1 side‐track well.

SEB which saw its share price breaching RM0.37 yesterday, continue to improve earnings due to its cleaner financial slate.

Maybank IB said SEB, with its order backlog now standing at RM17.2 billion and is still growing, has earned the stock a target price of 50 sen from the current price.

Other positive O&G counters are Uzma Bhd which rose 1.01 per cent to RM0.995, Barakah Offshore Petroleum Bhd which was up 5 per cent to RM0.105 while Bumi Armada Bhd was up 2.56 per cent to RM0.20 at closing yesterday.

Oil prices has shown positive uptrend in the first quarter this year, with both West Texas Intermediate (WTI) and Brent posting best quarterly performance in a decade—since the second quarter of 2009.

The price of Brent crude oil opened above US$70 per barrel at trading start on Monday, sustaining its five-month highs as global oil supply tightens with The Organization of the Petroleum Exporting Countries (OPEC) cuts and with sanctions on Iran and Venezuela.

On the corporate side, IOB new management with commendable track record gives confidence to the market and eliminates past negative perception on corporate governance, cost management.

While IOB is in the Corporate Debt Restructuring Committee (CDRC) scheme to address its balance sheet such as to de-gear/refinance and restructure its debts, will announce its restructuring results in the third quarter of this year.

Maybank IB also noted that the urgent need to restructure takes precedence over any prospect of an earnings turnaround or fleet rejuvenation exercise.

As for HPB, the planned production enhancement project will be at the Guillemot A GUA-P1 side-track well in the UK North Sea, which is targeted to unlock approximately 1.7 million barrels of oil from its current net 2P (proven and probable) oil reserves.

The GUA‐P1 side‐track project is an opportunity to re‐enter the existing GUA‐P1 wellbore and potentially drain additional volumes of hydrocarbons.

The drilling of the GUA‐P1 side‐track well is estimated to commence by the first half of calendar year 2019.