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Is The Oil & Gas Sector Recovering? Oil And Gas Stocks Continue To Grow

Oil and gas (O&G) counters continued to extend gains after oil price rose to its highest in three months with Brent crude climbing to US$53.28 per barrel sealing analysts' positive feel on the sector's recovery in the final quarter of 2015.

At 11.28am, KNM Group Bhd ( Valuation: 1.70, Fundamental: 0.85) topped the most active counter having risen 4.67% or 2.5 sen to 56 sen after paring gains at 56.5 sen with 78,544,000 shares done for a market capitalisation of RM1.04 billion.

Also riding high were Sumatec Resources Bhd ( Valuation: 1.50, Fundamental: 2.00), up 6.45% or one sen to 16.5 sen; Perisai Petroleum Teknologi Bhd ( Valuation: 1.70, Fundamental: 0.30), up 4.11% or 1.5 sen to 38.5; SapuraKencana Petroleum Bhd ( Valuation: 0.80, Fundamental: 0.65), up 4.23% or nine sen to RM2.22; Borneo Oil Bhd ( Valuation: 1.50, Fundamental: 1.25), up 3.6% or two sen to 57.5 sen; Uzma Bhd ( Valuation: 1.50, Fundamental: 1.10), up 3.52% or eight sen to RM2.35; and Petra Energy Bhd ( Valuation: 2.00, Fundamental: 1.00), up 4.03% or five sen to RM1.29.

The breadth in the gains in local bourse lifted FBM KLCI to expand 19.59 points to 1,711.79, breaking the 1,700 psychological level today.

Rises in O&G stocks came hot on the heels of US crude increase of 0.5% to US$49.66 with forecaster Pira Energy Group predicting crude prices to soar to US$70 per barrel by the end of 2016, Reuters reported.

It also said the crude oil futures went up in early Asian trade on thin volumes after Pira's forecast and a US Federal Reserve minutes revelation that suggested there was no hurry to raise interest rates.

In Malaysia, MIDF Amanah Investment Bank Bhd remained positive on the sector as there were some fundamentally sound stocks that were undervalued and potential to appreciate.

"As such, moving forward up to the end of 2015 given the subdued crude oil price, we are advocating stocks with strong order books and long contract duration, commendable dividend yield.

"Apart from that, we are advocating stocks with strong international exposure (geographical risk diversification) as well stocks with a stable (long-term contracts with recurring income) businesses in Malaysia which are easier to monitor," it said in its note on the fourth quarter 2015 outlook yesterday.

MIDF placed "buy" calls on SapuraKencana with a target price of RM2.89 and Gas Malaysia Bhd ( Valuation: 1.10, Fundamental: 2.10) at RM2.87 while maintaining its Brent crude oil price forecast for 2016 at US$60 per barrel.

Public Investment Bank Bhd (PIVB) maintained an "overweight" call on the sector with a view that oil price would gradually recover to US$60/bbl levels.

"Coupled with the ongoing activities, the industry seems determined to find solutions and growth opportunities amid this low oil price environment.

"We continue to stay positive on our 'overweight' recommendation for the longer term as oil price is predicted to gradually strengthen, but this time by a stronger platform of O&G development," it said in note to clients.

PIVB made "outperform" calls on Uzma with a target price of RM2.26 and Petra Energy with a target price of RM1.25.

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