Anyone is holding any O&G counters?

News article from The Edge.

https://www.theedgemarkets.com/article/oil-...-or-false-start



Here are some in my watchlist/portfolio

Dayang - The most "hyped" O&G counter recently due to the fact it gotten recommendation from KYY, an explosive quarterly report (10cents EPS) and huge meteoric rise following it. However I read there could be right issue soon, so I feeling abit cautious it.

Hibiscus - This is probably the best "pure" O&G counter, as it an exploration and production (E&P) company with net cash asset.

Reach / Perdana - Both companies are E&P companies with debt problems. I will need to see stronger/more consistent earning in the next 1, 2 quarter and oil price to stabilise.

Deleum - Quite an underrated O&G counter imo. It has managed to profit every quarter and declare dividend every 6 months consistently. One negative is that the last two QR is below expectation, but I assume this is just temporary weakness/chance to buy at a low. And the trading volume can be very low at times, but that to me says that this is a very unknown counter.

Dialog - A very safe counter, but the dividends are too skinny for my taste. There was an opportunity to collect earlier this year when it dropped below RM3, so I guess if its drop back, I would consider another look at it.

Serba Dynamik - A big & stable O&G company that is giving dividend. However the dividends feels abit low because the price has jumped alot since 2017, but who knows if it won't continue to rise?

Anyone got any opinion on the above mentioned O&G counters or any other oil counters?

Website I use to monitor oil price - http://www.livecharts.co.uk/MarketCharts/brent.php

This post has been edited by changejob: May 19 2019, 03:54 PM

https://themalaysianreserve.com/2019/04/29/...ing-oil-prices/

THE bulls have stormed the oil market as tightening supply and production disruptions coupled with renewed demand prospects have sent crude oil prices to six-month highs.

Brent oil rallied approximately 37% this year alone to above US$74 (RM303.40) per barrel, sending the much needed adrenalin to oil producers like Malaysia and pulling many oil and gas (O&G) players out of the doldrums.

Prior to the 2014 oil price rout, O&G firms capitalised on the high crude prices of above US$100 per barrel to expand, raising billions to finance more projects.

The subsequent rout which saw oil prices plunging 57.5% in just six months from June 2014 to January a year later, had trimmed spendings from major producers, leaving O&G companies saddled with billions of debts.

The prospects for the oil sector have improved significantly on OPEC-led production cuts and further bolstered by oil disruptions at a few major producers.

But risks continued to linger, especially questions about global economic growth, the key to higher oil consumption.

SPI Asset Management managing partner and head of trading Stephen Innes said there is a “technical overhang” from overextended bullish bets on both Brent and West Texas Intermediate oil contracts.

“Any breakdown on the technical or fundamental landscape can trigger a reasonably aggressive market response as weaker longs head for the exits,” he said in a research note last Friday.

While the Chinese economy — the world’s second-largest oil consumer — is showing signs of stabilising, the dovishness of central banks worldwide are indicating that the global economy could be due for a correction.

But, recession fears have largely been ruled out and presently there is sufficient support from the supply side of the market for crude oil to make further strides towards the US$80 per barrel mark in 2019.

The Malaysian Reserve looks at benefactors from the higher oil prices and companies, which shiver with every US$1 increase of the commodity.

Govt Coffers Versus Consumer Pressures

The Malaysian government based its 2019 budget on an average Brent of US$70 per barrel for the year.

Crude oil only surpassed this threshold earlier this month, but it is estimated that the government will gain RM300 million in additional revenue for every US$1 increase above the US$70 per barrel average.

While the inverse also holds true, the additional income is a welcome relief to the current government who is working towards paring down its over RM1 trillion in debt.

Higher oil prices also bodes well for the ringgit, which performance is generally correlated to the movement of the commodity. The local unit remains bogged down by external risks, but such threats are being cushioned by the strengthening oil prices. The ringgit is expected to be on a stronger footing this year.

While high oil prices benefit the government, its subsidies for fuel will also rise in tandem. Any removal of the subsidies would impact the consumers at the pump and increase inflation.

Currently, retail fuel prices are determined by a weekly float mechanism with RON95 and diesel capped at RM2.08 and RM2.18 per litre respectively.

The system was introduced early in January this year. But, it could make way for a targeted petrol subsidy mechanism which could see the cap lifted for RON95.

Petronas’ Gain, Airlines’ Pain

The 2014-2015 oil crisis taught national oil companies a proverbial lesson: The need to be lean in managing cost, while avoiding exuberant spending amid a market that swings to a downturn as easily as it goes on a bull run.

Petroliam Nasional Bhd (Petronas) had emerged stronger and leaner from the 2014 oil rout and providing RM19 billion in impairments in 2015, eroding its profits that year.

Malaysia’s national energy company had reduced billions in spending and trimmed some 1,000 staff in 2016.

The leaner base allowed Petronas to announce its highest profit since 2013 when it grew its profit after tax by 22% year-on-year (YoY) to RM55.3 billion last year as revenue rose 12% to RM251 billion.

This allowed the company to allocate a higher upstream spend of RM30 billion in 2019 — half of which will be spent domestically. But, Petronas continues with a conservative outlook for the year with projects budgeted at a Brent of US$66 per barrel.

Crude oil trending above US$70 per barrel bodes well for the company’s upstream business, which is the main revenue generator of the state-owned company.

The higher margins will also help the company to meet its dividend commitments to the government — its sole shareholder — which totals RM54 billion in respect to its 2018 fiscal year.

However, airlines will incur additional costs as higher crude oil means higher fuel jet prices and will shave a sizeable amount from their profits. Malaysia Airlines Bhd, FlyFirefly Sdn Bhd, MASwings Sdn Bhd, AirAsia Group Bhd, AirAsia X Bhd and Malindo Airways Sdn Bhd will be feeling the pinch from the current oil rally. Listed AirAsia and AirAsia X recognised RM394.97 million and RM99.27 million in losses respectively, for the quarter ended Dec 31 last year on higher fuel and other expenses. Airlines are known to introduce a surcharge on fares or pass on the additional cost to passengers to protect their bottom line. However, this was historically done during peak oil price levels of above US$100 per barrel. At about US$74 per barrel today, Malaysian airline operators are expected to bear the additional costs rather than risk deterring passenger traffic due to higher fares.

The O&G Value Chain

The bulk of listed O&G companies in Malaysia are service providers who are engaged in the upstream sector and are predominantly dependent on Petronas for work.

This includes companies such as Dayang Enterprise Holdings Bhd, Uzma Bhd and Velesto Energy Bhd, while Sapura Energy Bhd and Serba Dinamik Holdings Bhd have an international base to support their domestic business.

Petronas upping its upstream expenditure to RM30 billion, coupled with a brighter activity outlook over the next three years, bodes well for local O&G service providers as a whole. The company foresees higher activities and demand for drilling, marine and maintenance works from 2019 to 2021 with double the capacity needed for jack-up rigs. An industry analyst said the latter will benefit rig owners such as Velesto who recently secured RM432.33 million worth of contracts from Petronas Carigali Sdn Bhd — Petronas’ upstream vehicle — for jack-up drilling rig services. “The contracts will translate into better utilisation for Velesto’s assets, while service providers such as Dayang are expected to see higher work orders this year,” said the industry analyst.

Meanwhile, global upstream activity will be supported by the development of new fields, particularly in the Middle East where the majority of the final investment decisions will be concentrated in, the source added. “This will benefit companies with larger international exposures such as Sapura Energy and Serba Dinamik,” said the analyst.

Hibiscus Petroleum Bhd and Reach Energy Bhd are also set to profit with the current rise as they have a direct leverage on oil prices as pure-play exploration and production (E&P) players. E&P companies extract oil at a fixed or averaged operating expenditure per barrel, so higher oil means better averaged prices realised when sold. In contrast, rising crude oil means higher input costs for downstream players.

The industry source said this would have a downward impact on refineries’ margins, namely Hengyuan Refining Co Bhd and Petron Malaysia Refining and Marketing Bhd.

Petrochemical producer Lotte Chemical Titan Holding Bhd will also face cost pressure as feedstock prices (its main raw material cost) is positively correlated to crude oil prices. The South Korean-controlled company saw its net profit contract 25.8% YoY to RM786.23 million in 2018 on higher feedstock costs incurred and lower product prices recognised that year.

Some analysts have even predicted oil prices will hit US$80 this year, a scenario which will be applauded by some, but also a bane to others.

This post has been edited by changejob: Apr 30 2019, 11:43 AM

ts must have invested heavily in o&g.

Both Dayang and Hibiscus has good FA for now, but too bad US mad now drop, keeping for long term

is hibiscus a great counter to masuk ?

Heavily? No. But of course, I definitely am holding some shares in O&G and looking add more O&G companies to my portfolio.

To me it is, but you should always do your own analysis.

I would argue that Hibiscus won't need that long for you to profit.

This post has been edited by changejob: May 19 2019, 02:50 PM

Potential rights issue from Dayang

https://www.theedgemarkets.com/article/daya...e-perdanas-rcps

KUALA LUMPUR (May 17): Dayang Enterprise Holdings Bhd is proposing to restructure its debt with an RM682.5 million sukuk issuance.

From the money raised, RM365 million will be advanced to its subsidiary Perdana Petroleum Bhd to settle the latter’s existing borrowings.

“Upon completion of the aforesaid advance, Perdana is expected to have a total debt of RM645.66 million owing to Dayang,” the group said in a stock exchange filing today.

Dayang, which owns a 60.48% stake in Perdana, will then subscribe to RM455 million worth of redeemable convertible preference shares (RCPS) under a renounceable rights issue that Perdana is proposing to undertake.

This will set off the RM455 million debt that Perdana owes Dayang, both companies said in filings with Bursa Malaysia today.

Dayang said the remaining RM317.5 million raised from its sukuk issue will be used to repay its existing borrowings.

Dayang also proposed a rights issue on the basis of one rights share for every 10 existing shares, and a private placement of 96.48 million new shares, equivalent to 10% of the group’s issued shares.

Assuming a rights issue price of 80 sen per Dayang share, the group expects to raise up to RM77.18 million, of which RM70 million will be used to repay its existing bank borrowings within three months.

“Such part repayment of bank borrowings is expected to result in interest savings of approximately RM6.6 million per annum,” Dayang said.

Meanwhile, the proposed private placement is intended to be placed out to third party investors to be identified at a later date. It is expected to raise some RM109.99 million, of which RM75 million will be used to build up a sinking fund for the proposed sukuk issue.

This will be used to repay part of the principal amount and interest due in the first three years of the sukuk’s tenure, Dayang said.

Of the remaining funds, RM15 million will be used for capital expenditure, while RM17.5 million will be used for working capital, it added.

According to its 2018 financial statements, the group has net borrowings of RM867.4 million with a gearing ratio of 0.77 times. The proposed rights issue and proposed private placement may lower Dayang’s gearing ratio to 0.61 times.

Meanwhile, Perdana hopes to raise as much as RM506 million via its rights issue, which has an illustrative price of 26 sen per RCPS.

The RCPS will have a tenure of 10 years and are convertible into new Perdana shares on a one-for-one basis, Perdana said.

Both parties hope to complete the sukuk issuance and rights issue by the fourth quarter of this year. The proposals are not expected to affect the major shareholders’ holdings of Dayang and Perdana.

Meanwhile, Perdana's gearing is expected to be lowered from 1.37 times currently to 0.18 times after the proposed RCPS and assuming full conversion.

It hopes to raise as much as RM506 million from the proposed issuance, which has an illustrative price of 26 sen per RCPS.

Shares in Dayang rose 2 sen or 1.77% to close at RM1.15 today, leaving the group with a RM1.11 billion market capitalisation.

Meanwhile, Perdana Petroleum edged up one sen or 2.99% to close at 34 sen, giving it a RM268.57 million market value

ts is keen on this share?

This would be an interesting case study on the matter of rights issue.

Imagine...

If one is over extended oneself in the stock market over leveraged with margin financing and carrying an extremely high stock position, won't a rights issue would simply force one to find new capital to subscribe to the stock.....

What would happen.....?

If can find new capital then ok lo...

If not..... How???

Its in my watchlist. Its last quarter profit was honestly very surprising but I want to wait another quarter (or two) to confirm that its really have turn around. But the right issue does make it kinda iffy.

Its only 1 right share for every 10 existing shares.

Also, you probably don't believe it, but I don't hold any Dayang right now.

Dude, you are speaking to one who really don't care what kind of vested interest you have and neither am I bothered if you are telling me the truth. This is a stock forum, hence it's pointless to declare your holdings nor you ask me what I am holding. Sorry to be blunt but better we get off on the right track. Are we OK on this? If no, then don't bother continuing reading.....

I only responded the way I did because it seems like you were refering to someone to with your "over leveraged with margin financing and carrying an extremely high stock position" sentence.

Never heard of the the circumstances about Axiata unexpected rights issue, however, Dayang rights issue isn't totally unexpected. Even in my first post, I wrote I heard rumours of a right issue and it turns out to be true. And if an average joe investor like me heard of it, I think most big shots would know about this.

I do agree, a right issue is always reason to be cautious with a stock.

This post has been edited by changejob: May 20 2019, 01:47 AM

Learning to search the internet is crucial if one wants to be successful in anything.

Forums in general are toxic, filled with virus ........ sad but true.

Now if it was me and someone just blurted a statement like iCapital losing money in Axiata, I would just search the key phrase... iCapital loses millions axiata or even iCapital axiata losses... Yup I would have researched instead of trusting what I read.

Or I would refer other recent cases. In fact, best one was on SAPNR. Stock was as high as 4 bucks plus before the OnG crash and the stock fell dramatically since then. Many shareholders/investors/funds carried stunning losses on SAPNRG. And when SAPNRG announced the rights issue, what did they do? Did they sell? Ask around.....

Or the rights on JAKS Resources (yeah not OnG stock) .....did the rights issue caused any shareholder/investor/fund to drastically reconsider their position in the stock?

Back to Dayang.

Not too long ago, Dayang used to be trading above 3.00. What's the possibility that there exist many shareholders/investors/funds who got caught in this stock with an average price above 2.00? Would they willing to put more money (even 10%) into a stock position which is carrying heavy losses? Some just might not, especially depending on the size of their stock holding. Oh yeah, as usual there are 2 sides to a coin and there will exist folks that might even preach value....

In price cyclic industry, company should be building up reserve during the good time. But most o&g companies in this country build up debts instead during the good time, and pare down debts with rights issue instead of income. It speaks volumes of it's management and controlling shareholders. Only punters are interested in them.

This post has been edited by icemanfx: May 20 2019, 12:32 PM

Its seems your overall message is that right issues are bad, which I don't disagree.


Well, indeed I admit I am punting on O&G shares. I don't plan on holding O&G shares for the long term as they are an cyclic industry.

Let it be if you cannot understand.

If you are merely punting on OnG shares, just punt. You dont need to go to such extremes promoting what you are punting.

Do you seriously believe promoting in such manner will help your cause? LOL.

Do you seriously believe promoting in such manner will help your cause? LOL. - No

If you are merely punting on OnG shares, just punt. You dont need to go to such extremes promoting what you are punting. - Creating a forum thread is extreme?

Buying or not nobody forcing

What is happening to Sapura Energy Berhad?? Despite receiving billions of ringgit this year yet the share price is between MYR0.13 sen. Why? Market no longer interested in SEB? SEB just announced a change of guard with the coming DMAT as MD & CEO and the departure of VA, CMM, and DKA.

Do you know debts they have?