Rising oil prices lifting prospects of oil, gas companies

October 25, 2023 - 14:54
Soaring crude oil prices positively affects production and business activities of many oil and gas enterprises.
Jack-up rig PV DRILLING I. — Photo courtesy of PVDrilling.com.vn

HÀ NỘI — Soaring crude oil prices positively affect the production and business activities of many oil and gas enterprises.

The conflict between Hamas and Israel is fuelling oil supply disruption fears, pushing Brent crude to higher levels.

Brent crude futures were traded at US$87.61 a barrel at 13:10 (local time) on Wednesday, up 22.2 per cent from the bottom hit in June. Brent rose over 1 per cent last week, a second straight weekly gain.

Brent crude's movements in the last five months. Source: Investing.com

Previously, Brent crude fell below $75 per barrel in June.

According to MB Securities Company (MBS), crude oil demand is expected to grow during 2023 - 2024, while supplies are tightening as the Organisation of the Petroleum Exporting Countries (OPEC) extended production cuts and inventories in member countries remained at low levels.

On the other hand, other economic and geopolitical factors can keep oil prices hovering at high levels. Brent oil prices could reach $93 a barrel in the fourth quarter of 2023 and $92 per barrel in 2024.

Domestically, shares of many oil and gas companies reacted positively to the rallies of the international oil prices.

However, strong corrections that recently weighed on the market negatively affected the stock group.

“Recently, oil prices have been trending higher due to the conflict between Hamas and Israel. However, given the current macro situation and stock market fluctuations, I think it will be difficult for oil and gas stocks to break out in the short term,” Lê Xuân, a HCM-based independent trader, told Việt Nam News.

“In the medium and long term, it will depend on many factors such as the foundation of the business, the recovery of the oil market, and the progress of projects.”

On Tuesday, most of the ticker symbols in the oil and gas group, except for PV Gas (GAS), closed lower, down in a range of 0.18-1.47 per cent, but they gained from the beginning of the year.

Particularly, PetroVietnam Drilling & Well Services Corporation (PVD) jumped 50 per cent from the beginning of the year to trade at VNĐ27,600 a share on Tuesday. Shares of PetroVietnam Technical Services Corporation (PVS) also soared nearly 66.4 per cent to VNĐ38,100 per share, while Petrovietnam Transportation Corporation (PVT) and Bình Sơn Refining and Petrochemical Company Limited (BSR) increased by 44 per cent and 43.3 per cent, respectively.

GAS was the only ticker symbol that saw a slight decline of 3.6 per cent from the beginning of 2023 to VNĐ81,200 a share.

Bright prospects

Higher oil prices are seen as a driving force for upstream activities and support the uptrend of transport costs, gas selling prices, and crack spread.

Crack spread refers to the pricing difference between a barrel of crude oil and its finished products.

PVD is expected to continue to witness a stable source of work until the end of 2024, as the supply of jack-up drilling rigs in Southeast Asia is likely to remain low, while demand gradually increases and domestic oil and gas upstream projects progress.

The mobilisation rate of jack-up rigs in the region is currently at a 3-year high.

Rising Brent oil prices also boost rig rental prices in newly renewed contracts for 2023 - 2024.

MBS forecasts that PV Drilling's profit after tax could reach VNĐ441 billion this year and continue to increase in 2024. It posted a loss of VNĐ155 billion last year.

Similarly, higher prices are expected to help PVS raise daily rental prices for FSO/FPSO floating storage services. The company’s profits are anticipated to grow in double digits in 2023 - 2024.

PV Gas also benefits from rising oil prices as they would push gas selling prices and reduce its loss this year. The company’s profit after tax is expected to decrease by 10 per cent from 2022’s highs in 2023 and could grow by 11 per cent in 2024.

PVGas plays a crucial role in providing liquefied natural gas (LNG) for gas power plants and the Block B - Ô Môn gas power projects.

On the oil and gas transportation front, global oil price developments positively impact the re-signing of crude oil transportation contracts this November but adversely affect shipping costs.

PVT's profit after tax is forecasted to increase by 7.7 per cent year-on-year in 2023. The business is expanding its fleet to accommodate more long-term growth.

Meanwhile, BSR’s business results in the fourth quarter of 2023 are expected to be positive due to increased demand for aviation gasoline and high crack spreads in Asia.

However, rising crude oil prices will boost the company's cost of capital, which might affect the gross profit margin if the selling price of oil products isn't adjusted promptly. — VNS