Which stocks will benefit from the Block B-O-Mon project?

Oil and gas companies are categorized into upstream, midstream, and downstream based on their core activities. Likewise, oil and gas stocks are classified into groups according to the nature of the enterprises.

Thus, PVD and PVS are the most common upstream oil and gas equities. This section comprises oil and gas contractors, as well as organizations that provide exploratory services to them. Upstream firms' business outcomes are derived from service orders placed during periods of high oil prices and are delayed in comparison to crude oil prices in the short term.

According to TPS, PVD stock has a promising future because of favorable worldwide rig supply and demand, which maintain charter prices. In addition, a new rig is projected to become operational, and the domestic market is predicted to be active beginning in 2024, encouraging the expansion of well engineering services.

PVS benefits from the M&C segment's development owing to large projects between 2024 and 2028, with possible contracts for forthcoming domestic projects as well as the likelihood of an increasing backlog and improved profit margins for offshore wind power projects.

PVD and PVS equities continue to trade at market values that do not fully represent their growth potential. The two firms' value measures will be evaluated when the global and Vietnamese oil and gas sectors begin a new development cycle following a decade of stagnation.

The midstream category comprises GAS and PVT stocks. This section includes firms that transfer oil and gas from offshore fields to the mainland, as well as those that use marine transportation. GAS, in particular, is the sole provider of gas to power plants, urea factories, and industrial zones. PVT concentrates on marine transport, including Vietnam's largest oil tanker fleet and a 100% market share in oil transport for the Dung Quat Refinery.

According to the consolidated financial report for Q2/2024, GAS had over VND 43,900 billion in cash (cash, cash equivalents, and short-term deposits) as of June 30, an increase of over VND 3,000 billion compared to the beginning of the year. This is the largest cash reserve GAS has ever held at the end of a quarter since its inception.

With such a large cash reserve, GAS earns hundreds of billions of dong in deposit interest each quarter. In Q2/2024, the company's financial revenue reached nearly VND 445 billion, primarily from deposit interest. Regarding quarterly business results, GAS recorded net revenue of VND 30,052 billion, up 25% compared to the same period last year. Net profit after tax reached VND 3,416 billion, up nearly 7% compared to Q2/2023. Of this, net profit attributable to parent company shareholders was VND 3,321 billion, also up 5% compared to the same period last year. For the first half of the year, GAS recorded net revenue of VND 53,367 billion and net profit after tax of VND 5,960 billion. With these results, GAS has achieved 75% of its revenue target and surpassed its annual profit goal.

GAS just issued a Board decision that approves the cash dividend plan for 2023. As a result, the Corporation will pay a 60% dividend in 2023, which amounts to VND 6,000 per share. This is the highest dividend rate in GAS history.

PVT concentrates on marine transport, including Vietnam's largest oil tanker fleet and a 100% market share in oil transport for the Dung Quat Refinery. As demand rises and OPEC tightens oil supply, gas prices, which are linked to oil prices, are projected to climb.

The downstream group's business results, including BSR and PLX, show no meaningful improvement in 2024. Major maintenance at the Dung Quat Refinery, which cut consumption by around 12%, has had a negative impact on BSR, as has a drop in the refining margin of important products compared to the same period last year. However, the Dung Quat Refinery's potential to optimize capacity to 114% after maintenance, along with the poor business performance base in 2024, promises to drive considerable growth for BSR from 2025 onward.

Evaluating the prospects of oil and gas stocks, experts forecast that the demand for natural gas will increase significantly during the transition from fossil fuels to renewable energy, especially the demand for gas for power and industrial production, which is expected to grow. Petroleum demand is forecast to maintain an average growth rate of 5% per year until 2030. With the energy transition trend, the world and Vietnam will move towards clean, green energy sources with low emissions, limit  ing the use of fossil fuels such as coal and petroleum.

Furthermore, the Block B - O Mon project is a large gas-to-power production chain that is expected to supply 5.06 billion cubic meters of natural gas per year for 23 years (with the first gas flow expected in 2026) to a complex of four gas power plants (O Mon 1, 2, 3, and 4) with a combined capacity of 3.8 GW. The project consists of three segments: upstream (extraction and processing of Block B gas), midstream (gas pipeline transmission), and downstream (4 power units). Currently, the projects are being implemented. Three sets of stocks with typical codes, as described above, will profit directly when the scheme goes live.