Saudi Arabian stocks lower as weak banks outweigh rising petrochems

Saudi Arabian shares fell on Sunday as weakness in banks more than offset a rise in petrochemicals after Brent crude oil rebounded. (REUTERS)
Updated 25 February 2018
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Saudi Arabian stocks lower as weak banks outweigh rising petrochems

DUBAI: Saudi Arabian shares fell on Sunday as weakness in banks more than offset a rise in petrochemicals after Brent crude oil rebounded to around $67 a barrel at the end of last week.
The Saudi stock index fell 0.4 percent. Ten of 14 petchems climbed, with the biggest, Saudi Basic Industries , adding 0.6 percent.
Saudi Kayan Petrochemical gained 0.3 percent after swinging to a fourth-quarter loss of 220 million riyals ($58.7 million) due to scheduled maintenance at its plants. The loss was larger than 90 million riyals forecast by SICO Bahrain but much smaller than 417 million riyals predicted by NCB Capital.
Nine of 12 banks fell. Reuters reported on Thursday about rising Islamic tax liabilities at Saudi banks. In the last couple of weeks, several major banks have disclosed that the government is seeking additional zakat — or alms-giving — payments from them for years going back as far as 2002.
In some cases, the demands exceed half of a bank’s annual net profit, and analysts expect more banks to disclose additional zakat demands in coming weeks.
Abdulmohsen Al Hokair Group for Tourism and Development sank 6.1 percent after reporting annual net profit fell to 8.7 million riyals from 126.3‍ million riyals. The figures implied a 23.1 million riyal loss in the fourth quarter.
Dubai’s index added 0.6 percent as Dubai Islamic Bank rose 1.2 percent after saying its planned issue of up to 1.65 billion new shares would be offered at a discount of 45 percent to the market price.
DP World edged down 0.2 percent after saying on Thursday it would take legal action after Djibouti ended a contract with the company to run its Doraleh Container Terminal, a move which DP World called an illegal seizure.
The company said terminating the contract would have no material financial impact on it. The terminal has annual capacity of 1.25 million twenty-foot equivalent units, compared to 70.1 million TEU handled across DP World’s global portfolio of container terminals in 2017. ‍​
In Manama, Bahrain Telecommunications Co. jumped 4.9 percent to 0.216 dinar, rising above technical resistance on its February peak.
The company reported a 21.7 million dinar ($57.6 million) loss during the fourth quarter, compared to a net profit of 5.2 million dinars a year ago, because of impairment losses related to its investments in Yemen and Jordan.
But executives predicted profit of 40 to 45 million dinars in 2018 and said they were on the lookout for acquisition opportunities in the telecommunications and digital spaces.
Egypt’s index climbed 1.0 percent as Qalaa Holdings surged 3.6 percent after saying its unit Egyptian Refining Co. had obtained about $500 million of additional financing for a refinery project.


New oil, gas projects to accelerate next year

Updated 2 min 15 sec ago
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New oil, gas projects to accelerate next year

  • Global investment in oil and gas production is expected to reach around $425 billion next year
  • Many of the new projects will be around gas, with a record number of liquefied natural gas (LNG) projects

LONDON: The number of new oil and gas projects will rise five-fold next year from a 2015 trough but overall spending is still unlikely to be enough to meet future demand, consultancy Wood Mackenzie said in a report.
Shaken by a sharp drop in oil prices in recent months, boards are generally expected to stick to spending discipline imposed following the 2014 price crash.
Global investment in oil and gas production, known as upstream, is expected to reach around $425 billion next year, according to WoodMac analyst Angus Rodger.
That compares with a total spending of $770 billion in 2014, which dropped to $400 billion in 2016 and 2017.
Although spending levels have slightly recovered since then, next year’s capital expenditure will still fall short of the $600 billion required to meet demand growth and to offset the natural decline of output from fields, Rodger told Reuters.
A handful of the world’s top oil companies, including US giants Exxon Mobil and Chevron, said they would boost spending next year as they accelerate developments of highly-productive shale fields.
But overall, companies will seek to maintain spending largely flat in order to return cash to investors after years of pain, Rodger said.
Still, deep cost cuts introduced in recent years and lower rates for drilling rigs and services mean that companies can do more with their money.
In 2019, the number of large new oil and gas projects is expected to reach up to 50, compared with 40 in 2018, and around 10 in 2015, according to WoodMac’s 2019 outlook. Large projects hold over 50 million barrels of oil or gas equivalent.
Many of the new projects will be around gas, with a record number of liquefied natural gas (LNG) projects set to get the green light in 2019.
Those include the Arctic LNG-2 in Russia, at least one project in Mozambique and three in the United States, which would together require $50 billion, according to the report.
“The stars are aligning on LNG sales contracts, corporate appetite, long-term demand and costs. But these are huge investments, and investor confidence could waver if we see signs of cost inflation, global recession and falling prices.”
The LNG projects will target 100 trillion cubic feet of gas, up from 80 tcf in 2019 and 32 tcf in 2017.
Spending could see a strong increase in 2020 if oil prices continue rising steadily and as rig costs are expected to rise, Rodger said.