Oil & gas industry has been hit hard by the black swan event, i.e. pandemic COVID-19 and oil glut. We have seen the stocks moved to its lowest in March 2020, then move up with the sentiment of recovery by 500% then went down almost similar to March 2020 period.
Q2 result hits hard for most of the oil and gas companies not only Malaysia, but globally. For most of the companies, this is a good phase for "A Great Reset". A time where you can do impairment exercise, take it to the bottom and starts again. I have a firm believe that Q2 results are all at the very bottom, thus triggering my contrarian beliefs. This is driven by few factors:
1) The Brent, as of now still lingering sideways at 40-46usd per barrel is not so good but better than 30usd per barrel obviously. As some of you know, most of the oil and gas companies cost require average of 30USD per barrel to stay afloat. So if you ask me, will the oil price goes down? Yes, there is probability but not very likely that it will go down below 20usd again like Q1 2020 last time.
2) Financial impact has been absorbed through its performance and impairment exercise last quarter. Yes it is a bad news, PETRONAS in fact lose about 16 billion. On the bright side, it brings the performance lever down where it should be, giving a lot more room for improvement in the next phase.
3) Most of oil and gas companies are taking step to pivot their business to 2 main areas:
3a) Renewables energy. The structure of energy demand is likely to change over time: declining role of fossil fuels, offset by an increasing share of renewable energy and a growing role for electricity. These changes underpin core beliefs about how the structure of energy demand may change. I do believe now is the time to look at alternative energy sources. Renewable energy players are likely to be rewarded handsomely.
3b) Technology. Moving on with trend now, we can see a lot of oil and gas companies pivot their business to Technology. DNEX, and latest is Serbadinamik. That is potentially a cash cow waiting to be unlocked.
Latest news on HIBISCS includes: - Kenanga Research stays neutral on O&G sector — but believes worst is over - Hibiscus Petroleum's unit wins three licences to mature, producing blocks in offshore UK
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100% since the date i published the post. We can hold it longer