Oil stocks expected to remain positive as prices holding high in 2022

PV Drilling I, a floating offshore drilling rig, of PetroVietnam Drilling & Well Services Corporation. — Photo pvdrilling.com.vn

The country's stock market faced another strong correction on December 25 with the VN-Index posting a loss of nearly 21 points. The market’s breadth was negative as up to 706 stocks declined, equivalent to nearly two-thirds of stocks on all three stock exchanges.

Despite the downtrend of the general market, oil stocks still recorded a positive session with a series of stocks posting big rises.

Of which, PetroVietnam Drilling & Well Services Corporation (PVD) led the rally after hitting the maximum daily gain of 7 per cent. The company's shares continued the uptrend on Friday, up 1.75 per cent at 13:53 (local time).

Even though PVD had fallen 11 per cent from the five-year high hit on November 16, it still jumped more than 76 per cent compared the beginning of the year.

Trading on the Ha Noi Stock Exchange (HNX) a wide range, PetroVietNam Chemical And Services JSC (PVC) closed Thursday's session at a historical high of VND16,000 a share, up 8.8 per cent. During the session, PVC even rose 9.5 per cent. It extended gains on the last trading session of the week, up 5 per cent.

Binh Son Refining and Petrochemical Company Limited (BRS), PetroVietnam Technical Services Corporation (PVS), PetroVietnam Oil Corporation (OIL) and PetroViet Nam Coating JSC (PVB) also witnessed outstanding performance, up more than 3 per cent.

There will likely be correction pressure at the year-end period and investors should restructure to some basic stocks that are expected to have positive business results, such as oil and gas, fertiliser, electricity, insurance, and pharmaceuticals, said Do Trung Thanh, head of corporate analysis at Analyst at Petro Capital Securities.

For oil and gas stocks, Thanh said that a driver for growth is the forecast higher price in 2022.

Goldman Sachs predicts that oil price is likely to hit $100 per barrel next year, as oil demand was already at record levels before the latest outbreak of the Omicron variant.

The expert from Petroleum Securities said that the average price of oil is unlikely to reach US$100 a barrel in 2022, it may hover above the break-even price of exploitation in Viet Nam, which is around $60 per barrel, boosted by both supply and demand sides.

Thanh expects that the activities of upstream and midstream enterprises in the industry have a bright outlook, while exploration and production activities resume.

Of which enterprises providing drilling services, offshore engineering, floating production storage and offloading (FSO/FPSO), gas and oil product transportation will get new jobs with higher service prices, improving both revenue and profit of these companies, then positively reflecting in stock prices.

Similarly, in its 2020 outlook report, VNDIRECT Securities Corporation said the possibility of reaching $75 barrel in 2022 of Brent oil will be the driving force for the oil and gas industry as global demand is on track to recover to pre-pandemic levels and supply appears to remain tight due to OPEC's caution in increasing output and the slow recovery of the US oil industry.

In the upstream group, VNDIRECT believes that exploration and production (E&P) activities in Southeast Asia will also be boosted by the strong rise in oil prices, helping to revive the drilling market in the region in the medium term and bring benefits to drilling service providers like PVD.

Meanwhile, natural gas exploitation will be a bright spot in Viet Nam thanks to huge projects in the next few years. This will be a major growth force for companies in the oil and gas value chain in the country in the long term, strengthening the industry's fundamentals and providing opportunities for contractors and domestic upstream services providers such as PVS and PVD.

In the midstream group, VNDIRECT realises the great potential of the LNG sector thanks to the stability in the power generation process and the ability to increase capacity through imports.

The downstream group is expected to benefit from demand recovering in the “new normal”. VNDIRECT expects these changes will help petroleum distributors such as Petrolimex (PLX) and OIL reduce the negative impact of the fall in inventory price.