Dropping oil prices slam stocks

Dropping oil prices slam stocks

Amid forecasts of a global economic downturn due to the COVID-19 epidemic, the prices of many assets and commodities across the world have dropped sharply, including oil.

During the last month, Brent decreased by 29.1 per cent and crude slumped by 28.6 per cent.

These falls hurt oil stocks on the local market.

PetroVietnam Drilling and Well Services Co (PVD), an oil drilling services provider, saw its stocks fall 16 per cent last month.

Currently, PVD operates four oil rigs, three of which serve the Malaysian market.

Last year, the average lease price for a drilling rig was US$57,000-58,000 per day with Brent oil ranging from $59-66 per barrel. However, at present, the oil price has dropped to $51.8 per barrel.

If oil prices do not rise sharply, Malaysian investors may delay hiring oil rigs and this will greatly impact PVD's business.

PetroVietnam Technical Services Corporation (PVS), meanwhile, witnessed its stock price plunge by 12 per cent last month.

In 2019, the company recorded a gross profit of VND993.5 billion ($42.8 million).

Revenue from maintenance services has helped stabilise PVS's business. By the end of 2019 PVS had VND6.8 trillion in cash, corresponding to a book value of VND26,217 per share, while the current market stock price is some VND15,000 per share.

Other firms, like PetroVietnam Gas JSC (GAS) and Viet Nam National Petroleum Stock (PLX), whose’s main business is petrol retail and gas distribution, were less affected by the fall of oil prices. Therefore, profit margins in recent years have remained stable.

Regarding PLX, the profit margin in 2017 was 2.55 per cent, in 2018 it was 2.11 per cent and in 2019 the figure was 2.52 per cent.

PLX has VND16.7 trillion of cash, accounting for 26.95 per cent of its total assets. Thanks to stable business operations, PLX paid a cash dividend of 30 per cent in 2017, 26 per cent in 2018 and at least 12 per cent in 2019.

At the end of 2019, PLX completed 110 per cent of its pre-tax profit plan.

At GAS, its monopoly of gas distribution ensures a steady cash flow of more than VND12 trillion per year.

If in 2016, the firm had VND19.4 trillion in cash, accounting for 34.25 per cent of total assets, then by 2019, it increased to VND29.4 trillion, accounting for 47.21 per cent of total assets.

GAS paid a cash dividend at a rate of 40 per cent in 2017, 53 per cent in 2018 and expects a higher rate for 2019.

Share prices of PLX and GAS both decreased by 11.7 per cent and 16.6 per cent last month and are currently trading at around ​​VND50,800 per share VND79,000 per share, respectively.

OPEC's output-cutting policies and the stimulus of governments around the world will also impact oil prices.

bizhub