O&M sector: is the worst over?

THE recent gains in oil prices from the rock-bottom US$20s in February have led to advances in offshore and marine (O&M) stocks as investor interest return to a sector - the offshore drilling and offshore support vessel (OSV) sub-sectors, in particular - that has been badly bruised.

CIMB Securities has proclaimed that "the worst may be over" for the O&M sector, although with Brent oil seen dipping to under US$40 this week, other brokerages have subsequently begged to differ. But even CIMB's more optimistically headlined research note released prior to the latest oil prices pullback was tempered with caution that the "upcycle (has) not started yet". The March 8 research note also warned investors against trading on "blind faith" fuelled by expectations that oil prices have hit the trough and are set to normalise at US$50.

Seasoned O&M broker Mike Meade of M3 Marine noted that oil prices had recovered to only the November 2015 levels and were still 30 per cent down from March 2015 levels.