Goldman lists 5 reasons traders should load up on energy stocks following oil's historic plunge

https://markets.businessinsider.com/commodities/news/oil-price-buy-energy-stocks-why-goldman-lists-reasons-plunge-2020-4-1029139451

Here are the five reasons Goldman Sachs is bullish on energy stocks.

1. "Oil prices are at/below cash costs."

West Texas Intermediate oil is below the $20- to $25-per-barrel prices often seen as "typical cash cost floors." Goldman thinks the current low prices and even the negative oil prices seen last week are warranted because of the level of oversupply in oil markets. At the same time, these ultra-low prices should force a reduction in production, thus reducing supply and helping put a floor in oil prices.
Read more: Goldman Sachs recommends investors buy 'quality at a reasonable price.' Here are the firm's top 10 stock picks that fit the bill.

2. "Shut-in announcements are becoming material."

"The combination of OPEC+ supply cut and US/Canada shut-ins should reduce the need for prolonged low shale activity needed to rebalance oil prices," Goldman said.


3. "Demand appears to be at a trough."

Goldman expects global demand in oil to improve off trough levels before the end of the quarter and "gradually recover over the next two years." Goldman's commodities-research team sees a transition from building oil inventories to drawing on oil inventories by June.
4. "Valuation near 25-year lows on EV/gross cash invested basis."
"E&P stocks are trading near $0.50 cents on the dollar per dollar invested adjusted for longer-term degradation in corporate returns — this is slightly above troughs seen since 1995," Goldman said.
Read more: Meet the 20-year-old day-trading phenom who's turned $20,000 into more than $1 million. He details his precise strategy — and shares how he made $11,400 in 2 minutes.

5. "Stocks on average have stopped falling on recent bad micro news."

Between dividend cuts, production shut-ins, and lower front-month oil prices, oil stocks no longer appear to be harmed by the poor headlines coming out of the oil industry. Goldman said that "as producer announcements shift from capex/dividend cuts to shut-ins, we expect equity response to inflect more positively."

Post removed.Why?

In my opinion, more than the oil price, government's declaration today that almost all business can resume operation will have significant boost to Dayang share price performance.

https://www.aa.com.tr/en/asia-pacific/malaysia-to-reopen-almost-all-economic-sectors-may-4/1825334


(1) Petronas repeated said that they are maintaining local Capex of 28 Billion for 2020.

The company forecast 2020 domestic capital expenditure of 26 billion ringgit ($6 billion) to 28 billion ringgit, higher than last year.

https://www.thestar.com.my/business/business-news/2020/04/14/petronas-warns-of-project-delays-aims-to-keep-local-capex


(2) Petroliam Nasional Bhd may maintain its net cash position over the next four years albeit with narrowing net cash balances, Fitch Ratings said.

https://www.nst.com.my/business/2020/04/584489/petronas-cash-position-remain-net-next-four-years-fitch


(3) Petronas also secured a US$ 6 Billion bond to cushion temporary strain on cash if it all happens

https://www.petronas.com/media/press-release/petronas-successfully-prices-us6-billion-bond-offering


(4) Petronas clearly refuted that none of its rigs were shutdown.

https://www.petronas.com/media/press-release/petronas-refutes-claims-new-straits-times-it-deactivated-14-oil-rigs-has-shut


Refer extract below:
....................

"Petronas also wishes to clarify that there was temporary suspension of projects at some worksites due to the movement control order (MCO) implemented by the government.

"Currently, most of these projects have either resumed their work activities or will be resuming soon upon securing the necessary approval from the government," it said.

Petronas added that it is striving to minimise the pandemic’s impact to its planned domestic capital expenditure programme.

"However, we do expect that some projects will naturally be delayed due to the prolonged lockdowns implemented globally and the MCO in Malaysia, and further anticipated disruptions to the global supply chain," it added.

Ok, very good article then - thumbs up!

Now, from myside, i am left with the fuel costs of JAKS which will definitely (for certain) be higher than Vinh Tan 1 by 20% (due to efficiency difference between subcritical and supercritical coal fired boilers).

I am not sure how that will effect JAKS profitability compared to Vinh Tan 1 at the moment..

DK66, there is still an element of uncertainty if the Profit attributable to Minority interest was solely contributed by Vinh Tan 1 right?

Was the cash flow also derived similarly?

I am unable to translate the chinese

They are using the borrowing cost for establishing EIRR of 10% with PIRR of 7.1% compared against WACC of 6.4%.

PIRR is for comparing against WACC. If you include interest cost in PIRR than its meaningless to compare against WACC right?



Posted by DK66 > May 1, 2020 3:36 PM | Report Abuse

Page 21 (summary 9)
https://www.meti.go.jp/meti_lib/report/H29FY/000594.pdf

You notice that the Presumptions used in calculation the IRR include allowance for borrowing costs.

the return will be like what the management said to Public Bank IB of ~120M (profit) for 30% stake then

since the capital and interest payment is secured by EVN, its like a having a Bond level return perhaps...

just speculating

Posted by DK66 > May 1, 2020 3:28 PM | Report Abuse

Meanwhile, icon8888 may like to take out the borrowing costs and determine the return. I m sure the return will look miserable and not feasible for investment.

No issues DK66, look forward on that for my knowledge.

Below some reference related to LNG Thermal power plant using Project IRR less than 12% :


https://www.meti.go.jp/meti_lib/report/H29FY/000594.pdf

Posted by DK66 > May 1, 2020 3:14 PM | Report Abuse

Probabilty, I shall prove my point later. I m in the middle of my next article "Jaks Resources - The Most Reliable Earnings Guidance for JHDP"

http://ecapslock.com/project-irr-vs-equity-irr/

Project IRR vs Equity IRR
..........................

By CA Amit Bansal | 19/11/201844 Comments

Internal Rate of Return (IRR) and Net Present Value (NPV) are the two methods which are widely accepted method throughout the industries for evaluation of any Long Term Projects.

Calculation of IRR is little tricky. In this post we will understand what is IRR, difference between project IRR and Equity IRR and whether Project IRR can be lesser than Equity IRR or not?

Internal Rate of Return (IRR)
.............................

Internal Rate of Return (IRR) is a rate on which NPV of the project equals to zero i.e. value arriving by discounting all the cash flows of the project with IRR rate will be zero.

Project IRR (PIRR) and Equity IRR (EIRR)
........................................

The project is generally financed in some proportion of Debt and Equity.

The project IRR gives the rate of return from the whole project. It is calculated presuming that there is no debt portion in the project financing. It calculates the rate of return considering the cash flows from the project only (i.e. except financing cost). Project IRR will remain same irrespective of capital mix of the project.

@DK66, its the Dividend distribution you are saying here right?

They can take that out from their huge depreciation / capital payment i suppose..

what certainty is there that it will be a continuous stream of dividend every quarter?

Mong Duong 2 did not even declare dividend last quarter.

If thats the case for JAKS - will that result as a zero income on a particular quarter where they did not receive cash distribution from Hai Duong power plant?



Posted by DK66 > May 1, 2020 2:57 PM | Report Abuse

Mong duong II and vinh Tan 1 reported profit immediately upon COD

@DK66, i have seen many articles on the vietnam power plant IRR, they always exclude the Interest when calculating the project IRR which most say only 12%.

anyway, i am not from financial background to assert this.


http://infrastructure-projectfinance.blogspot.com/2013/11/project-irr-vs-equity-irr.html

Project IRR vs Equity IRR

The project IRR takes as its inflows the full amount(s) of money that are needed in the project. The outflows are the cash generated by the project. The IRR is the internal rate of return of these cash flows. The calculation assumes that no debt is used for the project.

Equity IRR assumes that you use debt for the project, so the inflows are the cash flows required minus any debt that was raised for the project. The outflows are cash flows from the project minus any interest and debt repayments. Hence, equity IRR is essentially the “leveraged” version of project IRR.

Generally Equity IRR is more than project IRR and the equity IRR will be lower than the project IRR whenever the cost of debt exceeds the project IRR.

Posted by DK66 > May 1, 2020 2:48 PM | Report Abuse

Icon8888 is right to include interest expense as Project IRR is working on Net cash flow based on the planned debt equity structure.

Is that the reason why Vinh Tan 1 can only generate profit after 18 years?


https://www.vir.com.vn/vinh-tan-1-gearing-up-for-operation-61958.html


When will the Vinh Tan 1 thermal power plant start generating profits?

Operating under the BOT format, the project boasts around $1.75 billion in total investment capital, 80 per cent of which is sourced from a consortium of several international banks. If the project runs smoothly without any hitches, Vinh Tan 1 Power Co., Ltd. will be able to pay off all debts and start generating profits 18 years after the plant starts commercial operation.


Posted by popo92 > May 1, 2020 2:25 PM | Report Abuse

icon8888 sifu, your assumptions on depreciation is very wrong. Depreciation costs are usually higher at first and decreasing year by year. suggest you may look for some info on IFRIC 12. Basically when factor in Depreciation & amortisation you will get a completely different figure, but i am not sure we can able to see them one day since jaks only have 30% minority stake in this power plant. Track record of integrity is not on the right side for jaks management.

I think you should exclude the Interest deduction on your FCF used to show the IRR of 12%.

Project IRR is assuming the whole asset is funded without Debt - 100% equity.
....

Will go through in detail and find out why its not matching my derivation of about 140M profit/annum with 2 units operating.

The more i study Serba's business..the more i feel they will actually benefit from temporary reduced demand from oil, power, chemicals etc...

Cause these plants will use reduced demand as an opportunity for shutdown maintenance

Post removed.Why?

https://e-serbadk.com/market-sectors/operation-maintenance/

MRO of Rotating Equipment
.......................

Rotating equipment is used in many different industries, including O&G (upstream and downstream), power generation, mining, agriculture, manufacturing, transportation and construction. Rotating equipment is also used in commercial applications, including for heating, ventilation and air-conditioning, escalators, elevators and travellators and back-up power generators.

We are a MRO specialist for various types of rotating equipment, including gas and steam turbines, engines, motors, generators, pumps, compressors and industrial fans. Our MRO services are currently focused on rotating equipment used in the energy industry, including O&G production and refineries and power plants.

REFINERIES & POWER PLANT TOO..

meaning they are really not dependent on oil price.

Mideast Gulf April gasoil exports at year-to-date high

Published date: 28 April 2020

https://www.argusmedia.com/en/news/2100441-mideast-gulf-april-gasoil-exports-at-yeartodate-high

Mideast Gulf gasoil exports look likely to reach a year-to-date high this month, with loadings from Saudi Arabia up significantly following an extensive refinery maintenance programme in the first quarter.

Exports from the Gulf region have averaged 949,000 b/d so far in April, 57pc of which are from Saudi Arabia. The regional total is up by 60pc from 594,000 b/d in March and by 3pc from 925,000 b/d in April last year, according to data from oil analytics firm Vortexa. The extensive maintenance programme, in Saudi Arabia and elsewhere in the Gulf, curtailed the region's middle distillate exports to around 657,000 b/d in the first quarter, down by at least 37pc from a year earlier.

Exports have risen as refineries ramp up production and as regional demand fell earlier because of lockdowns to contain the spread of the Covid-19 pandemic.

.............


guess Maintenance activities was high on the first quarter due refineries halt production - shutdown for maintenance

and now they are back in Operation

no wonder Karim kept saying unaffected

@DK66, hope you will revert with the table giving cash flow and earnings for 25 years as i had requested earlier using IRR of 12%.

That will be the Occam's razor to cut all the craps..once and for all.

For a person from a non-financial background that would be really helpful.

LOL!

Posted by DK66 > Apr 30, 2020 2:06 PM | Report Abuse

Everyone is here with an interest. Hng33 is most obvious. His flip flop remarks depends on his current position.

For JAKS, the pressing issue for me is that even if its cash flow projected is 200 M/yr...

what is the earnings?

and that is assuming 2 units running full swing

practically, conservatively... i think it will be at least end of next year before it can show its full potential

as they will ramp up power generation gradually according to consumption

till then, its very likely to have choppy earnings..

Guys, i think its fair to update earnings forecast based on the latest information and developments..

most important is sharing them sincerely without bias / hidden interests

I admit, its not an easy task for OTB to balance the interest of subscribers and the constant change in factors that affect the market

Its such a dynamic thing

Overall, beyond doubt, OTB had been consistently providing his subscribers with exceptional returns

Thanks OTB

@freetospeak, excellent info there. Land transportation would have increased much ahead than air above...

Dubai eases Covid-19 lockdown restrictions, allows movement during the day

https://www.arabianbusiness.com/culture-society/445618-dubai-eases-lockdown-restrictions-allows-movement-during-the-day

Dubai announced a partial reduction in the restrictions on movement in the emirate, starting from today, Friday 24 April.

Qatar, UAE, Bahrain, Malaysia

all four countries has very small population and oil is their lifeline

its their lifeline
..................

whether Oil price low or high ..Operation & Maintenance will go on (full stop)

Serba's earning was not even pinched by the Qatar isolation in 2018 by UAE and Saudi earlier

Karim repeatedly said business is unaffected

and they just secured a 7 Billion order

what else do you all want?

Most of the middle eastern countries has indeed released the lockdown presently. Surprisingly the cars in the road is almost back to normal there.

Sabah gives Petronas O&G terminal, ammonia plant permission to restart

https://www.thestar.com.my/news/nation/2020/04/29/sabah-gives-petronas-og-terminal-ammonia-plant-permission-to-restart

He said they had also given the greenlight for Petronas to begin their offshore operations in the state.

Sabah gives Petronas O&G terminal, ammonia plant permission to restart

https://www.thestar.com.my/news/nation/2020/04/29/sabah-gives-petronas-og-terminal-ammonia-plant-permission-to-restart

He said they had also given the greenlight for Petronas to begin their offshore operations in the state.

@888next, a big thank you

Notion VTec to ramp up full capacity

https://www.thestar.com.my/business/business-news/2020/04/28/notion-vtec-to-ramp-up-full-capacity

https://apicms.thestar.com.my/uploads/images/2020/04/28/660950.JPG

Businesses allowed to operate during MCO can go full capacity tomorrow

April 28, 2020 16:52 pm

https://www.theedgemarkets.com/article/businesses-allowed-operate-during-mco-go-full-capacity-tomorrow

Businesses allowed to operate during MCO can go full capacity tomorrow

April 28, 2020

https://www.theedgemarkets.com/article/businesses-allowed-operate-during-mco-go-full-capacity-tomorrow

Further, since businesses are linked internationally via supply chain, opening it up locally will not derive any significant economic benefit at early stage.....

might as well just extend the MCO a little more and get a full grip

I would actually recommend another full month MCO till the Covid cases becomes Nil.

With the above and 100% rapid test for covid on all passenger entering Malaysia at the Int. Airports will ensure Malaysia remains free of the virus forever.

........

You will save billions more by eliminating it once and for all, than living with a relapse..like cancer

@TrippleZ, I absolutely agree.

And, they are sustained and encouraged to reproduce for the benefit of the 5% super-rich.

A lot of people do not understand that 'profit' in a nation/world-wide collective sense can only be made by real gdp-growth.

All other profit is a zero-sum and attained by competitive advantage by competion where the capitalism lures.

Capitalism is 100 people competing for the same jackpot where only 2 or 3 people gets it from their skills and 90% works hard in the hope of getting it, and fails.


Posted by TrippleZ > Apr 26, 2020 11:51 AM | Report Abuse

@probability, half of these billions keep alive because of capitalism. Without capitalism, we really don't need these people.

If one study the billions of people who are poor in the world, they are constantly working much harder than ever before from our ancestors ...even just to have the basic primitive life we humans used to have before the capitalism economy was invented.

All we need is basic food which almost all of them can be grown from fertile land from bare hands from the physical energy we have...like our ancestors did with barter system under agricultural village life...

and yet you will have plenty of time with your family and kids with an excellent health.

Look at these people who had everything, but capitalism tricks them to sacrifice needlessly:

............

Why Are Millions of Chinese Kids Parenting Themselves?

https://www.youtube.com/watch?v=gG9YHMcLK2Q

reason could be:

- we have developed many clusters from the mosque attendees earlier...

- foreign workers living in groups hidden everywhere..

- late control/restriction at the international airport unlike Australia...

- Sabah sarawak having huge flux of foreigners...and illegals..

Dyson has said the medical ventilator it developed to help treat patients with Covid-19 is no longer required.

It began developing a device in response to a government appeal for firms to take part in a national effort to increase the number of ventilators.

But in a note to staff, founder Sir James Dyson said that demand for ventilators had been less than first envisaged.

https://www.google.com/amp/s/www.bbc.com/news/amp/business-52409359

https://www.theedgemarkets.com/article/ums-penang-factory-gets-nod-continue-operations

Genius Alex...check my blog made on 4th April...more importantly on what i wrote on the comments section... this one sure win

but sifu KC say dont listen to tips..if you lose money please forgive and forget me permanently...kiki

most likely the margin finance made the 50% gain become like 100% and shrink to 10% due to its amplifying effect

i concur with gohkimhock ...only 90% of the profit gone...

uncle made 10% profit in a year!

@888next, thank you so much. Very kind of you to take the time and guide all of us here

Basically what they are saying is, Remdesivir if used early upon infection, it completely halts progression to critical stage/point of no return

If used early, its completely effective
.......................................

https://www.nih.gov/news-events/news-releases/antiviral-remdesivir-prevents-disease-progression-monkeys-covid-19

Antiviral remdesivir prevents disease progression in monkeys with COVID-19

Study supports clinical testing under way across U.S.

What

Early treatment with the experimental antiviral drug remdesivir significantly reduced clinical disease and damage to the lungs of rhesus macaques infected with SARS-CoV-2, the coronavirus that causes COVID-19, according to National Institutes of Health scientists.

The study was designed to follow dosing and treatment procedures used for hospitalized COVID-19 patients being administered remdesivir in a large, multi-center, clinical trial led by NIH’s National Institute of Allergy and Infectious Diseases (NIAID). The scientists posted the work(link is external) on the preprint server bioRxiv. The findings are not yet peer-reviewed and should not be considered clinical advice, but are being shared to assist the public health response to COVID-19. A study detailing the development of the rhesus macaque model of mild- to-moderate human disease, conducted by the same team of NIAID scientists, was posted to bioRxiv(link is external) on March 21.

The current study of remdesivir, a drug developed by Gilead Sciences Inc. and NIAID-supported investigators, involved two groups of six rhesus macaques. One group of monkeys received remdesivir and the other animals served as an untreated comparison group. Scientists infected both groups with SARS-CoV-2. Twelve hours later the treatment group received a dose of remdesivir intravenously, and then received a daily intravenous booster dose thereafter for the next six days. The scientists timed the initial treatment to occur shortly before the virus reached its highest level in the animals’ lungs.

Twelve hours after the initial treatment, the scientists examined all animals and found the six treated animals in significantly better health than the untreated group, a trend that continued during the seven-day study. They report that one of the six treated animals showed mild breathing difficulty, whereas all six of the untreated animals showed rapid and difficult breathing. The amount of virus found in the lungs was significantly lower in the treatment group compared to the untreated group, and SARS-CoV-2 caused less damage to the lungs in treated animals than in untreated animals.

The investigators note that the data supports initiating remdesivir treatment in COVID-19 patients as early as possible to achieve maximum treatment effect. The authors, from NIAID’s Rocky Mountain Laboratories in Hamilton, Montana, also note that while remdesivir helped prevent pneumonia, it did not reduce virus shedding by the animals. “This finding is of great significance for patient management, where a clinical improvement should not be interpreted as a lack of infectiousness,” they write.

what will likely happen is that remdesivir will be combined with some physical aid like intense oxygen ventilator to reduce the fatality rate zero..

2 or 3 magic bullets combined will kill the virus

remember HIV came from ape to humans...and ape shares 96% identical genes with humans

almost like the difference between men and women..lol!

furthermore almost all the fatal cases in malaysia had prior existing health problems

while the media keep talking about vaccines 18 months away....DJIA keep going up..recovered from 18,000 to 24,300 and now we have news suddenly saying experimental drugs curing people with Covid 19

qqq3 is definitely a super spreader..and mutates rapidly!

just like desa..became stockmanmy..qq3..etc