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Regional Oil & Gas Summary - 08 May 2014

Core Content

This document provides a comprehensive overview of the regional oil and gas market as of 08 May 2014, including price movements, key news, and investment reports from Maybank Kim Eng and Bloomberg. It covers major oil and gas prices, recent developments in the Asian region, and valuation comparisons of various companies in the oil and gas sector.

Key Market Movements

• Crude Oil Prices:

  • Brent Crude Oil: Closed at $108.04, down 0.1% in the last day and up 0.4% in the last month.
  • WTI Crude Oil: Closed at $100.26, down 0.5% in the last day and down 1.5% in the last month.
  • Henry Hub Natural Gas: Closed at $4.57, down 3.5% in the last week and 3.1% in the last month.
  • LNG Northeast Asia CFR: Closed at $13.85, with a 0.0% change in the last day, -4.5% in the last week, and -9.5% in the last month.

• Crude Imports and Refinery Utilization:

  • China increased crude oil imports in April, reaching 27.88m mt, boosting its daily import rate to 6.81mmbpd.
  • Major Chinese refineries operated at an average loading rate of 79.93%, slightly below the 80.12% from two weeks prior.
  • Independent refineries in Shandong operated at 38.2%, up 3.8% from two weeks ago and 7% from a year ago.

• Regional Tensions:

  • South China Sea tensions increased with clashes between Chinese and Vietnamese vessels.
  • Philippine police intercepted Chinese vessels carrying sea turtles in disputed waters.

• Bunker Fuel Oil Blending Losses:

  • Blending losses for 180cst bunker fuel oil deepened in China due to rising blendstock costs while prices remained stable.

• Japan's Ethylene Exports:

  • Japan's March ethylene exports dropped by 17% YoY to 57,270t, but ethylene derivatives exports increased, resulting in a 31% YoY rise in overall ethylene-equivalent exports.

Key Investment Reports

• Malaysia Marine And Heavy Engineering:

  • 1Q14 net profit was MYR35m, within expectations but below consensus.
  • Expected to see new job flows in 2H14.
  • Maintain BUY with a target price of MYR4.20.

• Ezion Holdings:

  • 1Q14 results were in line, with PATMI of USD45.2m.
  • PATMI grew by 62% YoY after excluding a one-off gain.
  • Secured a USD63.9m rig supply contract in the Middle East.
  • Maintain BUY with a target price of SGD2.70.

• Petronas Gas:

  • 1Q14 net profit was in line with expectations.
  • 2Q14 will reflect a more stable and marginally more accretive GPTA.
  • Maintain HOLD with a target price of MYR23.50.

• Sembcorp Marine:

  • Another disappointing quarter with flat operating margins.
  • New Tuas yard benefits may take longer to materialize.
  • Downgraded to HOLD with a target price of SGD4.36.

• FPSO and Drilling Rigs Outlook:

  • The FPSO and jack-up (JU) rig markets remain robust, but deepwater rig rates are experiencing short-term weakness.
  • OVERWEIGHT rating with a focus on local content and cost management.

Valuation Comparison Table

Main Points

• Crude Oil and Gas Prices:

  • Crude oil prices in the region were generally stable or slightly declining.
  • Natural gas prices, especially Henry Hub, saw more significant declines.

• China's Activities:

  • Increased crude oil imports to replenish inventories and support new refineries.
  • Refinery utilization rates were mixed, with major refineries slightly below previous levels but independent ones showing improvement.
  • Blending losses for bunker fuel oil worsened due to rising costs.
  • Tensions in the South China Sea and Philippines increased due to maritime disputes.

• Investment Insights:

  • The report includes investment ratings and target prices for several companies in the oil and gas sector.
  • Some companies are rated as BUY, while others are HOLD or SELL based on performance and outlook.

• Market Outlook:

  • The FPSO and drilling rig markets are robust, but deepwater rates are under pressure.
  • Local content and cost management are growing trends in the sector.

Key Information

• The report highlights the regional dynamics and market performance in the oil and gas industry, particularly in Asia.
• It includes detailed financial data and market analysis for several companies.
• Analysts from Maybank Kim Eng provide insights into the performance and future outlook of the sector.