RETAINING its “overweight” outlook on the oil & gas (O&G) sector, AmResearch has maintained its “buy” call on eight O&G stocks under its universe with Serba Dinamik Holdings Bhd being the only counter under a “sell” rating.
The eight companies include Bumi Armada Bhd, Dialog Group Bhd, Hibiscus Petroleum Bhd, MISC Bhd, Petronas Chemicals Group Bhd, Petronas Gas Bhd, Sapura Energy Bhd and Yinson Holdings Bhd.
Excluding Serba Dinamik Holdings Bhd’s 2Q 2021 results which have yet to be announced, AmResearch said the 1H FY2021 earnings delivery of the eight companies under its universe were mixed with three being above expectations, three within expectations while another two underperformed.
This compared to four outperformers, in line (two) and underperformers (two) in 1Q 2021.
Excluding Serba Dinamik’s RM7.7 bil civil project award in 2Q 2020 to build an innovation hub in the United Arab Emirates (UAE) in light of its accounting issues raised by its former auditor, AmResearch said new contract awards in 1H 2021 to Malaysian oil & gas operators rebounded 2.6 times year-on-year (yoy) to RM5.6 bil, largely from multiple jobs awarded to Sapura Energy.
“The sharp recovery stems from the spending collapse to only RM569 mil in 1Q 2020 due to the earlier Saudi-Russia price war and onset of the COVID-19 pandemic,” observed analyst Alex Goh in an O&G sector update.
“Even so, we note that contract rollouts are still being impacted by the global pandemic, movement restrictions and energy transition policies which caused 2Q 2021 awards to decrease 33% qoq to RM2.2 bil.”
The research house further maintained its 2021-2022 oil price projection at US$65-70/barrel as Brent crude oil prices have recovered above US$70/barrel currently after falling to US$65/barrel on Aug 20 on concerns that the COVID-19 Delta variant could dampen global demand.
“As US inventories slid 15% from the YTD (year-to-date) peak of 502 million barrels on March 26 to below pre-pandemic levels at 425 million barrels currently (5% below the 2019 average of 448mil barrels), we maintain our 2021–2022 price projection at US$65–70/barrel vs the EIA’s (Energy Information Administration) short-term energy outlook of US$69/barrel for 2021 and US$66/barrel for 2022,” projected AmResearch.
While US shale production could rebound and OPEC may continue to raise production quotas against the backdrop of the brighter oil price environment, the research house added that this could be mitigated by rising global demand on the back of COVID-19 vaccine rollouts in 2H 2021. – Sept 7, 2021
