UOBKayhian on 2 Jul 2015
We set our Brent oil price estimates for 2015 and 2016 at US$61/bbl and US$72/bbl
respectively. We change our house estimates for average Brent crude oil price
(Brent) to US$61/bbl (from US$65/bbl) for 2015 and to US$72/bbl (from US$70/bbl) for
2016. Our estimates are derived from the mean forecast of 38 agencies, comprising
37 international brokers/banks and one US oil agency. We have only included
forecasts published in 2015 as estimates prior to 2015 do not reflect the current
environment and would have skewed our average. Our estimates will be updated at the
end of each month going forward and be raised/lowered accordingly if the deviation
exceeds 5%. Oil prices appear to have found some stability with Brent at above
US$50/bbl.
Oil price up 12% ytd on product demand. Brent has risen 12% ytd, touching a low of
US$46.59/bbl in Jan 15 before rebounding to close at US$63.59/bbl on 30 June.
According to the International Energy Agency (IEA), demand was due to three
temporary factors - economic growth, colder-than-year-earlier winter conditions in
Europe and lower prices. Oil analysts shared similar sentiments, commenting that the
“surging demand” seen was not what it was. They highlighted China’s crude imports for
May, which fell 1.9 million barrels per day (mb/d) from its April record-high of 7.4mb/d,
was potentially opportunistic stockpiling.
Maintain MARKET WEIGHT. We retain our stock recommendations and maintain
MARKET WEIGHT on the sector. The global O&G industry faces poor earnings visibility
as capex and operating costs are being cut. An austerity drive now permeates the entire
industry − among oil companies, service providers and shipyards. 4Q14 and 1Q15 saw
a fall off the cliff. While activities are returning, oilfield services companies are expected
to post poor earnings performance for 2Q15. A meaningful recovery might be seen only
in 2H15. In the meantime, stock prices of mid- and small-cap oil service stocks have
fallen close to cyclical trough valuations of 0.5x. Our top stock picks in the Singapore
offshore & marine sector remain Sembcorp Industries (SCI), Ezion and Triyards
No comments:
Post a Comment