Oil - Service, Equipment, Pipelines etc

[winston]

not vested

For traders scoping for market bounces, we prefer stocks with good earnings visibility.

These can be found in the O&M sector, which continues to enjoy a steady flow of contract wins in recent weeks despite rising macro economic uncertainties.

Keppel Corp, SembCorp Marine, STX OSV and Kreuz have won contacts in recent weeks.

Our picks for O&M stocks with good earnings visibility are Keppel Corp, Ezion and ASL Marine.


Source: DBS

[winston]

not vested

OIR BITES: Gains in rigbuilders' stocks recently

Stocks of rigbuilders Keppel Corporation (KEP) and Sembcorp Marine (SMM) have risen by 6.3% and 11.6% (based on current prices of S$10.61 and S$4.91, respectively), since we raised our fair value estimate for SMM and switched our preference from KEP to SMM on 27 Jun 2012.

This compares with the STI’s 3.2% gain over the same period.

This is on the back of a surge in oil prices recently on:
1) optimism that the Eurozone crisis may be contained after leaders agreed to ease repayment rules for emergency loans to Spanish banks and looser conditions on help for Italy, as well as
2) EU sanctions on Iran going into full force.

According to the IEA, the reduction in Iranian exports may become the biggest supply disruption from a member of OPEC since Libya last year. Brent oil is also supported by a strike by Norwegian workers which has curbed flows from the North Sea.

To recap, we switched our preference to SMM as
1) we still hold a positive view on the premium offshore rig market in which SMM is a purer play,
2) SMM is likely to catch up in the orders front in the months ahead (partly due to Petrobras orders),
3) SMM’s earnings are expected to pick up in 2H12, and
4) so-called “speculative builds” at SMM are probably better-termed “opportunistic builds”.

However, given the recent outperformance of the stock over KEP, we may see some catch up from the latter in the short term.

Maintain BUY with fair value estimates of S$13.38 on KEP and S$5.71 on SMM.


Source: OCBC

[winston]

not vested

SINGAPORE-Barclays favours Ezra, Keppel for next earnings

Barclays said it prefers oil and gas services firm Ezra Holdings and Keppel Corp going into the next results season, as it sees earnings growth and potential catalysts such as possible financing resolutions for Ezra and further contract wins for Keppel.

By 0428 GMT, Ezra shares were 0.5 percent lower at S$1.085, and have jumped 29 percent so far this year. Keppel, the world's largest rig builder, was up 0.2 percent at S$10.80 and has risen 16 percent since the start of 2012, compared with the FT ST Oil & Gas Index's <.FTFSTAS0001> 21 percent gain.

Ezra is expected to deliver the highest year-on-year earnings growth in the April-June period out of the oil services and rig builders Barclays covers due to an increase in activity in its subsea business and utilisation of its offshore support segment, it said.

Barclays estimates Ezra's earnings per share in the third quarter to jump 196 percent from a year ago, compared to Keppel's 9 percent rise and Sembcorp Marine's 4 percent gain.

"The key focus of the upcoming results will likely be on the operating margins...Ezra is expected to deliver sequentially better margins, the Singapore rig-builders are also expected to at least maintain their operating margins," said Barclays.

It has an 'overweight' rating on Ezra with a target price of S$1.70.

Barclays said the recent pullback in Keppel and Sembcorp Marine shares are an attractive entry point for investors.

It rates Keppel at 'equal weight' with a target price of S$13.30, and Sembcorp Marine at 'overweight' with S$7.00 target price.


Source: Reuters

[winston]

Petrobras FPSOs in the bag

OVERWEIGHT - Maintained

--------------------------------------------------------------------------------

Petrobras is procrastinating no more as it approves the signing of contracts for the first six of its eight FPSO topside module and integration packages.

These could be signed in the next few days with engineering consortiums/construction yards, worth US$4.5bn.

We believe Keppel and Sembmarine could each bring home more than US$750m of orders.

We upgrade our orders/EPS to account for these potential wins.

We now expect S$10.2bn of contracts for Keppel and S$11.2bn for Sembmarine this year.

Maintain Overweight in view of the sector’s strong contract pipeline.

SCI is our top pick for its valuations.


Source: CIMB

[winston]

not vested

Despite the outperformance of oil and gas stocks on a 3-month basis, the sector remains undervalued at 9.5x PE, offering recovery prospects with the offshore support supply fleet reaching equilibrium.

Top picks are SembCorp Marine, Ezion, STX OSV and Nam Cheong.

Source: DBS

[winston]

Offshore & Marine: Keeping the momentum (Overweight)

2012 would be remembered as the year of record contract wins for many offshore & marine players. A key highlight was the award of the Petrobras-related contracts to the rigbuilders. Even when those are excluded, the latter secured a respectable amount of new contracts, affirming our view of an ongoing rigbuiding upcycle. Smaller-cap O&M players also benefitted from the flow of orders down the value chain.

Oil prices remained at healthy levels to sustain E&P spending which we expect to grow by 7-10% in 2013, a fourth year of consecutive increase. Against this backdrop, we expect contracting activities in the offshore sector to remain robust this year.

To ride the offshore upcycle, we prefer players with good earnings visibility such as Keppel, Sembcorp Marine and Ezion which has shored up record orderbooks. We also see opportunities for upside surprises among these picks.

Source: Kim Eng

[winston]

Firing up Oil and Gas stocks.

Oil and Gas stocks have lagged the STI since April, triggered by the dip in oil prices and disappointing 1Q results, except for Ezion and Kreuz which sparkled amid a lackluster reporting season.

The sector offers the highest return of 16% vs average market return of 5%, with value found in small caps trading at 9x PE vs 2-yr CAGR of 12.6%.

With oil prices rebounding, and jack up market tightening, we expect interest in the sector to return.

Pemex in the Gulf of Mexico has revealed plans to expand its operations at its fastest rate in 75 years, with a US$450bn 15-year plan, to acquire more than 40 modern jack-ups and modular drilling rigs for its offshore operations.

Socar is reportedly close to signing a contract with Keppel Corp for one of four semi-subs to be deployed in the Caspian Sea.

Nam Cheong’s recent contract wins will support stronger quarterly earnings going forward, and should underpin re-rating of the stock.

CSE is a bombed out cyclical, trading at 8x PE, offering growth of 12% and dividend yield of 5%.

Source: DBS

[winston]

Offshore and marine likely to shine.

The offshore and marine stocks should continue to bask in more order wins with our preferred picks being SembCorp Marine, Ezion, Mermaid Maritime and Nam Cheong.
We are sceptical of a recovery in China’s shipbuilding sector and would recommend SELLs on Cosco and Yangzijiang.

Source: Kim Eng

[winston]

Offshore drillers are working on a new uptrend… Noble Corp. and Ensco break out to four-month highs.

[winston]

Malaysia O&G

AmResearch Overweight on O&G sector

KUALA LUMPUR: AmResearch is maintaining its “Overweight” recommendation for the oil and gas sector with the ‘Buy’ call for SapuraKencana Petroleum, Malaysia Marine and Heavy Engineering Holdings (MMHE), Bumi Armada, Yinson Holdings and Alam Maritim Resources.

The research house is keeping its “Hold” recommendations for Petronas Gas and Dialog Group.

There are three consortiums involving SapuraKencana and MMHE competing for Kasawari front-end engineering and design (FEED) tender, which involves a turnkey contract for Petronas Kasawari natural gas development in Sarawak.

“This huge project involves a 30,000-tonne 8-legged central processing platform (CPP), which has topsides weighing 19,000 tonnes, a 9-slot wellhead platform, a bridge link, a flare tower, and an over 7,000 tonne central collection platform,”it said.

Petronas has bid out the CPP as some projects had sparked speculation of a similar approach for the Kasawari tender.

The winner of this tender would secure an engineering, procurement, construction and commissioning (EPCIC) contract planned to be awarded in late 2015 or early 2016.

The winner of the Kasawari FEED tender will also secure an engineering, procurement, construction and commissioning (EPCIC) contract, scheduled to be awarded in late 2015 or early 2016.

The research house believes that most likely the joint venture between Technip and MMHE would secure this project.

There are various EOR projects in the pipeline involving other CPP projects such as Bardegg2-Baronia, Sepat and Guntong fields.

“Together with the construction of the Refinery and Petrochemical Integrated Development (RAPID) in Pengerang, Johor, we expect the upward re-rating cycle for the sector to remain intact,”it said.

Source: The Star