PETALING JAYA: The strong recovery enjoyed by oil and gas (O&G) stocks since the start of the year seems to have come to an abrupt halt.
O&G counters have seen a sharp fall over the past few days, as investors took profit and appeared to be taking a breather from the sector while waiting for the companies to deliver their earnings.
Prior to this, some local O&G counters saw their share prices shooting up by over 200% in the past three months, boosted by the recovery in crude oil prices as well as Petroliam Nasional Bhd’s (Petronas) plans to raise its capital expenditure (capex) this year.
Among the counters that has seen a dip in recent days after recording a spectacular rise during the year-to-date period is Dayang Enterprise Holdings Bhd .
The O&G support services provider saw its share price climbing 216% until the end of last week, before dipping 17.5% over the past three days to close at RM1.41 yesterday.
Others which have seen a similar pattern include Petra Energy Bhd , which rose 191.3% to a high of RM1.18 earlier this month before dipping 12.7% since then to close at RM1.03.
Carimin Petroleum Bhd , meanwhile, fell 8.4% over the past two days to 87 sen, following a 134.5% surge in its share price.
Two other counters, Alam Maritim Resources Bhd and Velesto Energy Bhd , fell 23.3% and 4.84% in recent days, following significant increases of 87.5% and 72.2%, respectively, during the year-to-date period.
The O&G sector has been among the top performers on the stock exchange this year, with the Bursa Malaysia Energy Index having risen 26% in the year-to-date period.
Crude oil prices have been rising since December, as the Organisation of the Petroleum Exporting Countries (Opec) and its partners cut output, with Brent crude hitting a four-month high of S$67.61 per barrel on Tuesday.
Petronas, meanwhile, in its recently released Activity Outlook 2019-21 report, said it would spend slightly more than RM50bil on capex in 2019, up from RM47bil last year.
“I believe investors are taking a breather from the sector while waiting for earnings delivery,” Hong Leong Investment Bank Research analyst Sean Lim said.
He said there was a lot of expectation that the sector would do better this year compared with last year, and that earnings would pick up.
“O&G players are generally expected to do better this year. In the short term, the oil price will be key in determining sentiment surrounding the sector,” he told StarBiz.
If oil prices continue to rise towards the US$70-per-barrel mark, he said, O&G counters should pick up again.
Moving forward, MIDF Research, in its second-quarter outlook for the sector, said it has maintained its “neutral” stance on the upstream sub-segment due to the stabilising crude oil price environment, expected increase in offshore exploration and production capex, expected increase in offshore activity levels and sustained demand for petrochemical products globally.
It also reiterated its positive stance on the downstream sub-segment.
For the upstream services segment, the research house said it was bullish on Dayang, as the company is expected to benefit from rising crude oil and LNG selling prices, increased shallow-water and deep-water activities and more active offshore maintenance works.
“For the downstream sub-sector of the O&G industry, we maintain our bullish stance on Petronas Chemicals Group Bhd and Gas Malaysia Bhd , as we remain sanguine on the future prospects of the downstream business due to the robust global demand for the crude derivatives,” it said.
The research house has also maintained its Brent crude oil target of US$75 per barrel in anticipation of further production supply cuts from Opec, a positive resolution to US-China trade tensions and a full sanction on Iran to begin in May.