Be Wary, Be Cautious, Be Vigilant

More bad news in the Oil & Gas (O&G) sector?

We have seen so many worrying news relating to the O&G sector flowing out of Singapore.

http://www.straitstimes.com/business/companies-markets/singapore-seen-at-risk-of-cascading-oil-service-bond-defaults

Will we see more credit defaults in the O&G sector? In Singapore or other countries?

Although the Malaysian O&G sector appears resilient (probably due to presence of Malaysia’s national oil company, Petronas), there was an update announcement relating to the maturing debt of Perisai Petroleum:

Perisai.png

For Perisai, we can only hope that the outcome of the discussion between Management and notes holders will be favourable to the company.

What about bigger oil major company in Malaysia such as Sapurakencana Petroleum? It has since rallied fair a bit in tandem with the recent rebound in the oil price:

Skpetro TS.png

Is the current rally in crude oil sustainable?

Analysts at Citi also warned of the risks of a price rally based largely on potential future talks on freezing crude output levels given that similar meetings earlier this year failed to produce any such agreement.

“OPEC cooperation hopes should be treated with caution, as this is shaky ground to base a bull rally on,” the bank said.

http://www.cnbc.com/2016/08/17/brent-crude-oil-prices-dip-on-prospect-of-record-saudi-output.html

How does movement in SKPetro compare to movement in brent crude oil since 2012?

Since 2012, SKPetro’s share price appears to have advanced ahead of movement in the brent crude oil. The divergence in movement appears to be relatively higher in the period of between year 2013 and 2014. Nevertheless, we are seeing a declining divergence of which SKPetro has fallen to 71% of its initial base (2012) whilst brent crude is 45% of its initial base (2012).

SKPetro vs Crude.png

It is important to closely monitor the latest reported results of O&G companies including SKPetro. Everyone must continuously stay vigilant at all times. Apply commonsense and do not follow the bandwagon blindly. Rallies without underlying fundamentals will not last.

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Author: Ken Utau

Data Scientist, Markets Analyst and Food Lover

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