Low valuations spell consolidation for O&M sector

Singapore

PLUNGING oil prices have made 2014 a year to forget for offshore and marine (O&M) companies but industry players and observers do not expect things to dramatically improve in 2015, as the industry braces itself for a period of consolidation.

With the price of Brent crude oil falling below the psychological barrier of US$60 per barrel, investors have had a run on O&M stocks in recent months. The Business Times had previously reported that the market capitalisation of 23 O&M firms listed on the Singapore Exchange (SGX) fell 15.7 per cent in a month, as they lost S$5.77 billion over the period from Nov 4 to Dec 4.

"We downgraded the sector to 'neutral' on 2 Sept 2014, and the FTSE Oil and Gas index has lost about 20 per cent of its value ever since," Low Pei Han, investment analyst at OCBC Investment Research, told BT, as she po…