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Regional Oil & Gas Summary - 15 May 2014

Core Content

This document provides a summary of the oil and gas market performance and key news events as of 15 May 2014, along with analysis reports from Maybank Kim Eng. It highlights price movements in key oil and gas benchmarks, corporate developments, and valuation comparisons across Asian markets.

Market Performance

• Crude Oil (Brent): Closed at $109.09, down -0.22 (or -0.2%), with a 1-week decline of -0.2% and a 1-month increase of 1.5%.
• Crude Oil (WTI): Closed at $101.50, down -0.87 (or -0.8%), with a 1-week decline of -0.8% and a 1-month drop of -1.5%.
• Dubai Fateh Spot: Closed at $105.75, up +0.36 (or +0.3%), with a 1-week increase of +2.0% and a 1-month increase of +0.3%.
• China Daqing Spot: Closed at $110.55, up +0.59 (or +0.5%), with a 1-week increase of +2.4% and a 1-month decline of -0.6%.
• NYMEX Henry Hub: Closed at $4.47, up +0.10 (or +2.3%), with a 1-week increase of +2.3% and a 1-month decline of -2.6%.
• LNG Northeast Asia CFR: Closed at $13.65, down -0.20 (or -1.4%), with a 1-week decline of -1.4% and a 1-month decline of -9.0%.
• Singapore 92 RON Spot: Closed at $116.99, down -0.10 (or -0.1%), with a 1-week increase of -0.1% and a 1-month increase of +1.6%.
• Gasoil 500 ppm SG Spot: Closed at $123.00, up +0.29 (or +0.2%), with a 1-week increase of +1.3% and a 1-month decline of -0.6%.
• 3.5% 180cst Fuel SG Spot: Closed at $606.33, down -0.77 (or -0.1%), with a 1-week increase of -0.1% and a 1-month decline of -0.3%.
• Gold: Closed at $1,296.22, down -9.75 (or -0.7%), with a 1-week decline of -0.7% and a 1-month decline of -0.5%.
• USD-CNY: Closed at 6.23, with 0.0% change in both 1-week and 1-month periods.
• Dow Jones (DJI): Closed at 16,446.81, down -167.16 (or -1.0%), with a 1-week decline of -1.0% and a 1-month increase of +1.1%.
• S&P 500: Closed at 1,870.85, down -17.68 (or -0.9%), with a 1-week decline of -0.9% and a 1-month increase of +1.5%.

Key News Headlines

1. IEA suggests OPEC needs to raise 3Q oil supply by 900mbpd: OPEC is expected to increase oil supply to meet rising global demand as OECD oil stocks reach a historical low.
2. Fuel oil import volume expected to drop 46.7% MoM in May for East China: The decline is attributed to weak bunker market demand and slow inventory digestion.
3. Former CNPC executive under investigation: Sun Weidong, former vice-manager of the Yumen Oilfield Company, is under investigation for disciplinary issues.
4. Ukraine asks Gazprom to return 2bcm of gas stored in Crimea: Ukraine seeks the return of gas stockpiled in Crimea before the Russian occupation.
5. Nido Petroleum lands initial drill off Philippines coast: The company has begun exploration drilling with estimated oil resources of 676mmboe and potential upside of 977mmboe.
6. Nam Cheong builds on previous results: The company reported a 99% increase in Q1 2014 net profit, driven by the shipbuilding segment.
7. Taiwan's Formosa Petrochemical running at 100% cracker utilisation: The company's crackers are operating at full capacity.
8. Japan expects gradual growth of petrochemical demand: The country is projected to see a gradual increase in petrochemical demand this year.
9. WorleyParsons wins work in Trinidad and Tobago: The company secured a contract for the Atlantic LNG project.

Company Reports

• Nam Cheong Ltd: Strong performance expected; 1Q14 PATMI of MYR71.1m (+98.7 YoY, +0.9% QoQ). Target price SGD0.41, based on 9x FY14E P/E.
• Petron Corp: 1Q14 net income reached PHP2.23b, representing 29% of full-year 2014 forecast. Target price PHP15.90, pending detailed financials.
• Mermaid Maritime: 2QFY9/14 PATMI dropped 60.7% QoQ to USD5.2m, below expectations. Target price SGD0.59, based on 14x FY9/14E P/E.
• MY Oil & Gas: The O&G market is expected to remain robust over the next 3 years. Companies with strong financials will benefit, but some may fall due to Shariah compliance issues. Sector remains Overweight.
• MISC Bhd: 1Q14 results were in line; petroleum operations were the key positive. Expect QoQ weakness in 2Q14. Target price MYR7.20.

Valuation Comparison

Asia Oil & Gas

Asia Oil Service

Key Takeaways

• The oil and gas market experienced mixed price movements, with WTI and gold declining, while Henry Hub rose.
• The IEA urged OPEC to increase supply to meet rising demand.
• East China saw a significant drop in fuel oil imports due to weak demand.
• Corporate developments included Nido Petroleum's exploration and Mermaid Maritime's performance concerns.
• Valuation metrics show a range of P/E and EV/EBITDA ratios across the sector, with some companies rated as buy and others as hold or sell.
• The overall outlook for the O&G sector is positive, with potential for growth and opportunities across the value chain.