Singapore Business Review
NEWS ECONOMY, ENERGY & OFFSHORE | Staff Reporter, Singapore
Published: - 20 Oct 14
Everyone took a painful beating this month.
The crash in oil prices, alongside slowing growth in the global economy, have set the stage for an edgy year-end for corporate Singapore.
According to a report by CIMB, the combined impact of Europe’s decrepitude and China’s investment slowdown meant that the engines of demand were not very strong to begin with. Add the talk of Saudi Arabia is acting unilaterally and dumping oil, plus a rising shale gas output in the US, they are not hopeful of a sustained rebound in oil prices.
CIMB’s theories attributed to the recent drastic fall in oil price include: 1) slowdown in Europe and China industrial production, 2) the US shale production boom and cut in OPEC imports, 3) OPEC infighting and Saudi Arabia acting unilaterally to flood the market, 4) a conspiracy theory that Saudi is acting as a pawn for the US to bring down oil prices and hurt Russia, and 5) Libya’s production re-entering the market after a period of internal strife.
CIMB adds that the likely effect is reduced offshore capex, which would not be good for rig order flow. That is not new but could get more ugly. If the new normal for oil price is now US$80/bbl, order flow for KEP and SMM deepwater vessels will struggle. Smaller O&M business model that use refurbished vessels ismore sustainable but day rates will also fall.
Ultimately, as for CPO stocks, biodiesel demand will cease to be viable and CPO prices will stay soft. These sectors have fallen the most, but have reasons for caution. Transport plays looks increasingly attractive.
-end-
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greengiraffe (aka Sillinvestor) commented in valuebuddies.com under SembCorp Marine thread :-
22 Sept 14
"Sembmarine is a pure CONcentrated bet that will bear the full brunt of bearish shortist. KepCorp is a CONglomerate that will leave slightly more CONfusion before hard reality sets in. On a more realistic mode, the specialised OSV segment will bear the brunt of lower oil prices just like what Jaya experienced during the GFC. "
3 Oct 14
"I would avoid all O&G support industry players. The O&G replacement cycle has been over extended and I think too many take for granted that it may continue.
Kep Corp, Semb Corp (formerly Sembawang Shipyard) and Semb Marine (Jurong Shipyard) went through a very bad patch in the 90s.
While oil prices are unlikely to revisit those dark ages, I suspect that equipment should be quite adequate to support ongoing E&P for at least the next 15 - 20 years after all these years of renewal.
I used to be covering FELS and they were into power barges in Philippines when they had practically nothing to do back then. It was due to their forays into Philippines power that I shot down VD Horst, an high flying Indonesian back counters backed by Peter Lim and fronted by Kotjo.
Competition is certainly very high in the O&G sector globally now. It is not as safe as it what it protrayed based on last 10 years of excellent track record that happened to coincide with the golden era. If one extend beyond that era, then you will see nothing but hope against unknown.
I have no doubt with the quality of Kep and Semb. However, one should not be too blinded by the global force and headwinds vs an golden era of track record."
(HM : A very golden piece of advice by Sillyinvestor / greengiraffe. Thank You GG / SI.)
NEWS ECONOMY, ENERGY & OFFSHORE | Staff Reporter, Singapore
Published: - 20 Oct 14
Everyone took a painful beating this month.
The crash in oil prices, alongside slowing growth in the global economy, have set the stage for an edgy year-end for corporate Singapore.
According to a report by CIMB, the combined impact of Europe’s decrepitude and China’s investment slowdown meant that the engines of demand were not very strong to begin with. Add the talk of Saudi Arabia is acting unilaterally and dumping oil, plus a rising shale gas output in the US, they are not hopeful of a sustained rebound in oil prices.
CIMB’s theories attributed to the recent drastic fall in oil price include: 1) slowdown in Europe and China industrial production, 2) the US shale production boom and cut in OPEC imports, 3) OPEC infighting and Saudi Arabia acting unilaterally to flood the market, 4) a conspiracy theory that Saudi is acting as a pawn for the US to bring down oil prices and hurt Russia, and 5) Libya’s production re-entering the market after a period of internal strife.
CIMB adds that the likely effect is reduced offshore capex, which would not be good for rig order flow. That is not new but could get more ugly. If the new normal for oil price is now US$80/bbl, order flow for KEP and SMM deepwater vessels will struggle. Smaller O&M business model that use refurbished vessels ismore sustainable but day rates will also fall.
Ultimately, as for CPO stocks, biodiesel demand will cease to be viable and CPO prices will stay soft. These sectors have fallen the most, but have reasons for caution. Transport plays looks increasingly attractive.
-end-
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
greengiraffe (aka Sillinvestor) commented in valuebuddies.com under SembCorp Marine thread :-
22 Sept 14
"Sembmarine is a pure CONcentrated bet that will bear the full brunt of bearish shortist. KepCorp is a CONglomerate that will leave slightly more CONfusion before hard reality sets in. On a more realistic mode, the specialised OSV segment will bear the brunt of lower oil prices just like what Jaya experienced during the GFC. "
3 Oct 14
"I would avoid all O&G support industry players. The O&G replacement cycle has been over extended and I think too many take for granted that it may continue.
Kep Corp, Semb Corp (formerly Sembawang Shipyard) and Semb Marine (Jurong Shipyard) went through a very bad patch in the 90s.
While oil prices are unlikely to revisit those dark ages, I suspect that equipment should be quite adequate to support ongoing E&P for at least the next 15 - 20 years after all these years of renewal.
I used to be covering FELS and they were into power barges in Philippines when they had practically nothing to do back then. It was due to their forays into Philippines power that I shot down VD Horst, an high flying Indonesian back counters backed by Peter Lim and fronted by Kotjo.
Competition is certainly very high in the O&G sector globally now. It is not as safe as it what it protrayed based on last 10 years of excellent track record that happened to coincide with the golden era. If one extend beyond that era, then you will see nothing but hope against unknown.
I have no doubt with the quality of Kep and Semb. However, one should not be too blinded by the global force and headwinds vs an golden era of track record."
(HM : A very golden piece of advice by Sillyinvestor / greengiraffe. Thank You GG / SI.)
Thanks for sharing this analysis. Oil is just one of many commodities to fall. Gold, silver, wheat, etc. have all fallen from all time highs as well. I think something more fundamental is happening here.
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