Oil price uncertainty pulls down petchem performance

Updated 05 April 2015

Oil price uncertainty pulls down petchem performance

The Tadawul All-Share Index fell 1.65 percent to 8,589.7 points on Sunday after Iran's nuclear deal with world powers fueled concern about a further decline in oil prices, which would hurt margins at Saudi petrochemical firms.
"The petrochemical sector will remain under pressure; mainly due to lower prices of end products," Mushtaq Ahmed, a senior financial analyst at Zughaibi & Kabbani Financial Consultants, Jeddah, told Arab News, reacting to the market performance.
"There high level of uncertainty exists in oil market; the improvement in oil prices will reflect on petrochemical stocks," he added.
The petrochemical index fell on Sunday by 1.33 percent to 5,580.17 points. The index is down 4.73 percent so far this year.
The stocks of Saudi Basic Industries Corp., the biggest petrochemical maker, lost 1.5 percent on Sunday.
The value of traded shares on Sunday reached SR5.88 billion.
Brent oil plunged nearly 4.0 percent on Thursday.
Basul Al-Ghalayini, CEO of BMG Financial Group, told Arab News: “Obviously, there are several positive factors that have been affecting the market to date. They include good Q1 results, Moody’s upgrade of the Saudi sovereign risk rating to Aa3 and the anticipation to the market opening before the summer to the international institutional players.”
He added: “However, the unknown geopolitical factor in the south is still a matter of concern to some investors, which is reflected by low trading volume, especially if there are advancements by the Allied ground troops into the Houthi strongholds inside Yemen.”
According to Saudi Stock Exchange’s Statistical Report – First Quarter 2015 released this week, the TASI closed at 8,778.89 at the end of the first quarter, dropped 694.82 points or 7.33 percent over the close of the same period of the previous year.
On an YTD basis, TASI registered a positive increase of 5.35 percent or 445.59 points. The highest close level for the index during the period was 9,691.00 as on March 12, 2015.
The report said total equity market capitalization at the end of the
first quarter 2015 reached SR1.90 trillion ($506.33 billion), decreased by 1.37 percent over the same period of the previous year.
The total value of shares traded for reached SR571.19 billion ($152.32 billion) at the end of the first quarter, increased by 21.95 percent over the same period of the previous year.
The Tadawul report said total number of shares traded reached 21.91 billion shares for the first quarter 2015 compared to 17.29 billion shares traded during the first quarter 2014, increased by 26.73 percent.
The total number of transactions executed during the first quarter 2015 reached 9.67 million compared to 7.78 million trades during the first quarter 2014, increased by 24.24 percent.
Francisco Quintana, head of Research at Asiya Investments, said: “The Tadawul’s performance has been driven by investor sentiment stemming from the trend in oil prices, and rise in risk coming from developments in Yemen. In my opinion both factors will continue to weigh on performance in April.”
He said it’s unclear what could drive a recovery. Actually, a deterioration of the situation is likelier. The framework nuclear agreement that Iran signed last week will probably weaken oil prices. Markets will expect a supply increase (even though it might take years to materialize) and pay less for oil.
He said the situation in the petrochemical sector is particularly worrying. Earnings are reported in annual terms therefore this quarter will exhibit, again, substantial decreases in earnings compared to Q2, 2014.
“The evolution of stocks is not unique to Saudi Arabia, all GCC markets have suffered more or less the same correction this month.
“We do not expect a strong recovery in oil prices, rather a mild one toward the end of the year. After the summer the outlook should improve, at least superficially, because the market and firms will have absorbed the impact of the decrease in prices,” Quintana said.

Gulf Marine CEO quits after review sparks profit warning

Updated 22 August 2019

Gulf Marine CEO quits after review sparks profit warning

  • Tensions in the Arabian Gulf, a worrisome global growth outlook and uncertainty over oil prices have recently dampened investor confidence

DUBAI: Gulf Marine Services said on Wednesday Chief Executive Officer Duncan Anderson has resigned as the oilfield industry contractor warned a reassessment of its ships and contracts showed profit would fall this year, kicking its shares 12 percent down.

The Abu Dhabi-based offshore services specialist said a review by new finance chief Stephen Kersley of its large E-class vessels operating in Northwest Europe and the Middle East pointed to 2019 core earnings of between $45 million and $48 million, below $58 million that it reported last year.

A source familiar with the matter told Reuters that Anderson, who has served as CEO for 12 years, was asked to step down. Anderson could not be reached for comment.

The company, which in the past predominantly operated in the UAE, expanded operations and deployed large vessels in the North Sea and Saudi Arabia nine years ago and listed its shares in London in 2014.

Tensions in the Arabian Gulf, a worrisome global growth outlook and uncertainty over oil prices have recently dampened investor confidence.

The North Sea has seen a revival in production in recent years due to new fields coming on line and improved performance by operators following the 2014 oil price collapse.

Still, the basin’s production is expected to decline over the next decade, according to Britain’s Oil and Gas Authority.

“(The CFO’s) review has coincided with a pause in renewables-related self-propelled self-elevating support vessels activity in the North Sea, which will impact several of the higher day-rate E-Class vessels,” Investec wrote in a note.

Gulf Marine appointed industry veteran Kersley as chief financial officer in late May as it sought to halt a slide which has seen the company’s shares fall nearly 80 percent last year and another 23 percent so far this year.

The company said market conditions remained challenging and that it was still in talks with its financial advisors regarding a new capital structure.

“Management, the new board and the group’s advisors, have been in negotiation with the group’s banks on resetting its capital structure and progress has been made,” it said in a statement.

Last year, Gulf Marine said contracts were delayed into 2019 as the company was seen to be in breach of certain banking covenants at the end of 2018.

The company said it was still in talks with its banks and individual lenders with hopes of getting a waiver or an agreement to amend the concerned covenants.