Positive outlook for many oil and gas companies

The oil supply shortage has led to oil price surges over the past months, which have positively impacted the earnings of oil companies.

From KB Securities’ observations, Brent crude will likely stay around USD90-100/barrel until the end of this year.

In 1Q22, Brent crude oil prices touched fresh all-time highs due to geopolitical tensions between Russia and Ukraine and concerns over Western sanctions against Russia - the world's third largest oil exporter with output accounting for 10% of the total supply. Russia has an export turnover of USD142 billion, or 9% of the total global export value. The fact that the US and its allies banned the import of Russian fossil fuels would further tighten global oil supplies, resulting in higher oil prices.

Besides, OPEC output rose in March 2022, but fell short of its target, negatively impacting global oil supplies and prices. From KB Securities’ observations, Brent crude will likely stay around USD90-100/barrel until the end of this year due to: (1) the escalating Russia-Ukraine conflict; (2) rising oil demand to accelerate economic recovery amid limit ed production.

KB Securities’s top pick is PV Gas (GAS), since Vietnam is shifting to natural gas and importing LNG for power generation to make up for electricity shortages. GAS's earnings in FY22 should rebound thanks to high world oil prices, assuming USD90/barrel compared to the average of USD70/barrel in 2021.

Petrolimex’s (PLX) business results will continue to recover given rising gasoline demand and surging prices in 1Q22, supported by the regulation to reduce the number of required days in inventory for petroleum businesses from 30 to 20 days and adjust oil and petrol prices every 10 days instead of 15.

Binh Son Refinery (BSR) would continue to benefit from the crack spreads in line with oil price rallies and increase operating capacity to make up for Nghi Son Refinery’s reduced capacity as a result of financial distress.

Meanwhile, PV Transportation’s (PVT) business performance should be underpinned by soaring tanker freight rates in the context of the Russia-Ukraine conflict and an ambitious fleet expansion plan promising high efficiency.

In addition, the outlook for two upstream enterprises, PV Drilling & Well Services (PVD) and PV Technical Services (PVS), is bright, backed by high oil prices above the USD55/barrel breakeven point. For PVD, in KB Securities, high oil prices may boost investment in oil production, helping the day rate to be higher. In particular, the TAD rig should start a long-term drilling contract in Brunei, which will be a driving force for PVD. For PVS, it is bidding for engineering, procurement, and construction (EPC) projects with encouraging progress. Also, KB Securities expects spiraling oil prices to drive profits of FPSO/FSO joint ventures.