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Macquarie sees bargains in Asia oil and gas sector
[SINGAPORE] Shares of several Asian oil, gas and petrochemical companies could become bargain buys as oil prices are expected to recover later this year when supply tightens, Macquarie analysts said.
The bank expects Brent to rally to US$85 a barrel in late 2015 as low prices curb supply growth. The benchmark has plunged almost 60 per cent since June last year and is currently mired near US$46.10 per barrel, its weakest in nearly 6 years.
Macquarie's top picks from the 55 Asian oil and gas firms it covers include CNOOC Ltd, ONGC, PTT , Inpex Corp and Formosa Plastics Corp . "In 2015, we see several reasons for optimism," the bank said in a Monday note, pointing to reduction in capital and operating expenditures in the exploration and production sector and lower costs for some petrochemical producers.
"Upstream-geared names are clearly best placed to outperform as and when oil price momentum turns positive," it said. "Refining margins will likely stay range bound in the absence of any strong pickup in demand, but we expect petrochemical margins to improve on improved relative naphtha cracker economics versus coal and gas." For petrochemicals, Macquarie recommended companies with exposure to ethylene, polyvinyl chloride (PVC), polyethylene (PE) and monoethylene glycol (MEG).
The probability of defaults in the Asia oil and gas sector is low at 1.2 per cent, Macquarie said, adding that Aban Offshore Ltd, Honghua Group and Essar Oil are most at risk of default.