Which companies will benefit from rising oil prices?

Oil prices escalated, contributing to the increase in profit of oil and gas enterprises, especially downstream ones.

2Q21 oil prices escalated although the COVID-19 pandemic had just broken out, contributing to the increase in profit of oil and gas enterprises, especially downstream ones. Petrolimex (PLX) recorded a gross profit of VND4,154 billion (52% YoY). PV Oil Corporation (OIL) posted a net profit of VND218 billion (20% YoY), PV Gas’s (GAS) earnings increased by 45%, Binh Son Refinery (BSR) announced its impressive earnings of VND3,543 billion.

However, upstream businesses like PV Technical (PVS) and PV Drilling (PVD) still face many difficulties. PVS recorded net revenue of VND3,063 billion (-44% YoY) and PVD had to make provisions for its partner KrisEnergy (Apsara) Company Limited from Cambodia.

On 5 October 2021, crude prices settled higher because renewed supply concerns OPEC producers rebuffed a U.S. call to accelerate output even as demand nears pre-pandemic levels. Namely, they agreed to stick to their plan to raise oil output by 400,000 barrels per day from December. In particular, U.S. President Joe Biden had called for extra output to cool rising prices.

Brent crude rose $2.20 to settle at $82.74 per barrel, while U.S. West Texas Intermediate crude (WTI) gained $2.46 to $81.27.

Many organizations and experts raised their oil price forecast due to a lack of supply among growing oil and gas demand worldwide to recover the economy despite concerns about the Delta variant. In which, Fitch Solutions expected Brent prices to average $71.5 per barrel this year, $72 per barrel in 2022, $73 per barrel in 2023, $75 per barrel in 2024, and $78 per barrel in 2025.

High oil prices would play an important role in the business performance of oil and gas enterprises in 4Q21, making up for the 3Q results worsened by the negative effects of COVID-19.

Movements of oil prices 

KB Securities preferred GAS shares which can be strongly beneficial from the uptrend of world oil prices as well as the prospect from the imports and domestic distribution of LNG products in 2022. This stock company is also optimistic about PV Trans (PVT) and BSR in the context of increasing energy consumption and import demand in Vietnam, of which PVT can take advantage of the low ship prices in recent years to complete its fleet expansion plan, opening up opportunities for more sustainable growth at the end of the year and in the following years.

Concerning two upstream companies PVD and PVS, oil prices remained at high levels of above USD55 per barrel, the breakeven level of the industry in the region, making the outlook brighter. Although 1H21 business results were not so impressive, the demand is expected to increase, helping the performance and rental prices of PVD's self-elevating rigs back to positive levels. PVS is bidding for Engineering, procurement, and construction (EPC) contracts with positive progress. Besides, high oil prices also help increase the profit for Floating Production Storage and Offloading (FPSO) and Floating Storage and Offloading (FSO) joint ventures.

KB Securities assessed Vietnam’s oil and gas industry to be positive in 4Q21 thanks to recovering oil prices. Notable investment opportunities include GAS, PVT, BSR.