Hi Pavillion, Most Oil majors including PETRONAS are cutting CAPEX. So visibility is rather murky and most likely one can reasonably expect more earnings disappointment from players in the UPSTREAM sector especially those with high gearing. I will avoid upstream at the moment as crude oil is in process of bottoming and there is little visibility on how long this bottoming process will take. I will look at their cash position, cashflows, whether they continue to receive contracts but then again future cash flows may disappoint in an environment when CAPEX are being cut which leads to reduced earning and potential losses.

However the Refineries had turnaround since beginning 2015.Both are showing positive EPS as of YTD Q3R 2015. PETRONM and SHELL delivered cumulative Q3R 2015 of 75.7 cents/share and 85.1 cents/share respectively. Based on cumulative EPS , both companies are in single digit PEs.

The beneficiaries of low crude oil prices for an extended period will be refineries plus the export sectors on proviso that they are not near or fully valued

Saudi Arabia being the lowest cost producer is waging war against the higher cost producers but this war of attrition will be long and protracted before Saudi Arabia emerge victorious. Saudi Arabia's shocking strategy is game changing to the Global Oil & Gas industry.

Meanwhile the other Oil majors will be under tremendous pressures to stay afloat let alone stay competitive and will resort to drastic cost cutting, cutting CAPEX, retrenching its workforce , re-strategize, restructure its business operations and/or downsize to lower its business operating costs. There will be some who could not hack it and they will go under.

At this moment none of the Oil Majors had gone bankrupt.Once that happens, we can safely say that Crude Oil price has bottomed.

Oil dropped after Saudi Arabia, the world’s biggest crude exporter, said low prices won’t reduce its spending on energy projects and China’s diesel consumption dropped for a fourth consecutive month.

Futures dropped as much as 4.6 percent in New York. Saudi Arabian Oil Co., also known as Saudi Aramco, is maintaining its investment plans despite the rout in the crude market, Chairman Khalid Al-Falih said Monday. Diesel use in China dropped 5.6 percent in December compared with a year earlier and gasoline consumption grew at the slowest pace in more than two years.

Saudi Aramco is spending as much now as it did before the crash in crude prices, signaling no surrender in Saudi Arabia’s battle with rivals. It’s formulated a new strategy in response to cheaper crude, Al-Falih said at a conference in Riyadh. The state-run producer can sustain low oil prices for “a long, long time,” he said.

http://www.investing.com/news/commodities-news/oil-prices-tumble-3-as-focus-shifts-back-to-global-supply-glut-381563

Crude Oil price is back to Fundamentals again of SUPPLY VS DEMAND after covering of the shorts. Renewed concerns on GLOBAL SUPPLY GLUT...AND... SLOWING GLOBAL DEMAND

If a refinery has
- good cost management
- a management culture that empowers productivity increase
- selling refined products with strong moat
- a readily available captive market to sell the refined products, no need to find new customers and incur incremental expenses
- forward PE in single digits
- prospect of low crude oil prices for extended periods of time

Why hesitate to buy? WB did not hesitate..He just made the decision to BUY!!!

Oil price most likely will oscillate between USD 20/bbl to USD 60/bbl over the next few years before it chose its new direction
- stay where it is
- go down further
- or go up

Those that believe that Oil price will recover and go up believe that China will continue to continually rise..

Those who are skeptical about oil price going up are indeed fearing China's continuing its continual fall...

Low Oil price for extended period of say 2-3 years is good for DOWNSTREAM players such as Oil refineries ie. PETRONM and SHELL...Both have shown earnings improvement since beginning 2015 but it is not good for UPSTREAM sector companies as majority have shown earnings decrease if not loss.

Both JTIASA and TAANN will continue to deliver better Earnings..their QR is already showing this and its share price had responded in tandem with better earnings.

Is Jaya Tiasa and TAANN near the TOP now? Has their Earnings PEAKED?

Iran had been selling oil even during the embargo era...however all its pipelines are really old and need to be replaced to facilitate higher exports. Iran has Gas but no LNG technology..so it will invest in LNG technology and export OIL & LNG.

Export stocks was a good buy in 2014 when Crude Oil price was high and price of export stocks was undervalued..now when crude oil price is low...export stocks may be nearing full valued unless there is further weakness in the RM vs USD say 1USD =RM 4.80 or other fundamental drivers such as productivity improvement, production volume increase,new customers who buy in big quantities etc

Current rebound rally is due to covering of the massive shorts. Base on chart trends, it is a rebound off its low but NOT REVERSAL.

Fundamentals of Supply vs Demand has not changed. The high volume at low price indicate bottoming...looks like it will go into sideways consolidation after shorts had been covered and thereafter choose a future new direction.

Lets take a look into the decision to purchase Hybrid/battery powered cars. If crude oil price is high say USD 100/bbl, there will be enormous cost savings to motivate the car consumer to go for Hybrid or battery powered cars. If Oil price remain at USD 30/bbl to 40 USD/bbl then the cost savings may not be that significant and the new car consumer may not readily switch over to Hybrid/battery powered cars even though there is active govt subsidy.

Do u think that Saudi Arabia as the major producer of Crude Oil is totally oblivious to the threats from alternative energy source to power cars that could potentially reduce demand for Crude Oil?

My wager is Saudi knows very well the threats from alternative energy source and their strategy is intentional in knocking off the US shale oil producers and to delay the switch over to alternative energy source for cars. As long as crude oil price is cheap at say USD 30 to 40/bbl, there will not be a powerful motivator for the car consumer to switch over to alternative energy power to power the cars unless the cost to produce hybrid/battery powered cars is as competitive if not lower cost than the petrol/diesel engine powered cars.

Lets take a look into the decision to purchase Hybrid/battery powered cars. If crude oil price is high say USD 100/bbl, there will be enormous cost savings to motivate the car consumer to go for Hybrid or battery powered cars. If Oil price remain at USD 30/bbl to 40 USD/bbl then the cost savings may not be that significant and the new car consumer may not readily switch over to Hybrid/battery powered cars even though there is active govt subsidy.

Well that was the expectation before the last OPEC meeting and Oil price meandered up in expectation but Saudi did not cut. Saudi kept on its game plan to knock off the higher cost producers mainly from USA.

The fundamental driver of Oil price is Supply vs Demand. Demand had not kept pace with the increase in supply. Moreover there is alternative energy source that will eat into crude oil market share over time particularly the petrol/diesel consumers such as cars.

US govt is giving good subsidy to promote Battery powered cars..heard that Tesla will come up with a new model at USD 30,000 per unit and it will outperform the performance cars.

Well it may be interesting to have alternative views from the feng shui angle but it is better to focus on the fundamental drivers for crude oil price (SUPPLY VS DEMAND) and the current/future potential trends that may dampen the DEMAND or SUPPLY of Crude Oil/petrol/diesel.

Saudi Arabia is a low cost producer..if not already the lowest cost producer by now. Saudi's game plan is to produce more crude oil at lower prices to kill off the Shale Oil producers and when supplies from the higher cost producers are knocked off because of a sustained low price biz environment and by then most surviving Oil majors had already cut CAPEX and had downsized. PETRONAS is going to downsize soon.

As you all know it takes time for oil majors, engineering coys to rehire, train new personnel, propose new CAPEX, get it approved, appoint engineering coys, award contracts to EPC, fabricate structures etc etc..It will take minimum time of 3 to 3.5 years to bring new fields into production.

So Saudi and its allies have a lead time of minimum 3 years to reap the financial windfall should crude oil demand spike up. I wont be surprised that they r also shorting the Crude Oil futures while selling at lower prices.

Saudi Arabia is now experiencing large fiscal deficits and large trade deficits and this situation is not sustainable. They may just depeg its currency against the USD to reduce its twin deficits and unleash another financial tsunami. So be prepared and be vigilant.

It was Saudi Arabia who decided not to cut production n instead single handedly waged a war of attrition against the shale oil producers in USA by increasing more production n selling cheaper with the sole objective of killing off the shale oil producers.Saudi Arabia had not changed its stance since then.

Alan Greenspan when interviewed by Bloomberg TV in late 2014 foresaw the long term implications of Saudi's belligerent stance n stated then that this was the game changer to the Oil n Gas industry then. Since late 2014 the Crude Oil price had steadily plummeted.

Refineries will be a better bet in a benign crude oil biz environment in Msia relative to the upstream sector especially so when there is readily available local captive market for the refined petrol, diesel ,lubricants etc.

SHELL and PETRONM will deliver better performance in the future relative to the upstream players. Their financial QR since beginning 2015 is already indicating this and I wont be surprised that once the QR for the 4th quarter 2015 is out by Feb 2016 , both will have PE below 10 based on its closing market price last Friday.

When USA exports more and more Crude Oil in the future , the USD will strengthen. USD had a problem in the past because USA was importing almost all its crude oil needs and running huge trade deficits..so the USD weakened then.

Now USA had been producing shale oil aggressively over the past 10 years and the financial position of USA had improved and will improve further.

USA has easily 2X Reserves of Crude Oil over Saudi reserves. So the Tai Kor for Crude Oil is USA..NOT SAUDI ARABIA...

Congress approved USA to export Crude Oil. Iran will soon export Crude Oil but Global demand had not increased to match the increase in supply.

Fossil fuel consuming Equipment are getting more fuel efficient and consuming less petrol/diesel.Largest consumer of petrol and diesel are cars, trucks, earth moving equipment, ships etc.

Hybrids and battery powered cars are making inroads into the traditional market of petrol and diesel.Renewable energy had gained market share against fossil fuel energy. Gas will also eat into petrol/diesel market share.

So how can crude oil price rise to USD 100? Most likely it will hover around USD 40-50 when the high cost producers drops off arising from a sustained period of low crude oil price around USD 25 to USD 35 per bbl.

Lets look at the reported earnings since beginning 2015 from upstream players and downstream player such as refineries in Malaysia, PETRONM and SHELL. Bursa announcement of reported QR had shown that majority of UPSTREAM players had decreasing QR earnings since beginning 2015 whereas downstream players such as Refineries had shown improvement in earnings.

Russia is sitting pretty...its main export is GAS to EUROPE and it has the leverage over Europe as the sole supplier.It had reduced budget deficit and is in trade surplus. Saudi is running large current account deficit and large fiscal deficit and its not sustainable in the medium to long term. Saudi could potentially depeg its Currency against the USD and cause another financial meltdown.

Global Petroleum and Other Liquids
2014 2015 2016 2017
a Weighted by oil consumption.
b Foreign currency per U.S. dollar.
Supply & Consumption (million barrels per day)
Non-OPEC Production 56.09 57.41 56.77 56.68
OPEC Production 37.24 38.30 39.16 40.01
OPEC Crude Oil Portion 30.77 31.65 32.16 32.72
Total World Production 93.33 95.71 95.93 96.69
OECD Commercial Inventory (end-of-year)
2721 3061 3132 3131
Total OPEC surplus crude oil production capacity
2.07 1.59 1.97 1.91
OECD Consumption 45.73 46.28 46.63 46.99
Non-OECD Consumption 46.69 47.49 48.56 49.63
Total World Consumption 92.42 93.77 95.19 96.61

EXCESS PRODUCTION OVER DEMAND
+0.91 +1.94 +0.74 +0.08

NOTE: GLOBAL PRODUCTION EXCEED GLOBAL DEMAND UP TO 2017 AS FORCASTED BY EIA. CURRENT PRICE REBOUND RALLY IS DUE TO MASSIVE COVERING OF SHORTS AND IS INDICATIVE OF BOTTOMING OF CRUDE OIL BUT IS IT INDICATIVE OF TREND REVERSAL?

WILL CRUDE OIL SPIKE UP TO USD 100 OR WILL IT LANGUISH AT USD 25 to USD 40 FOR A LONG TIME? WHAT WAS CRUDE OIL PRICE BEFORE OPEC CURBED PRODUCTION AND SENT CRUDE OIL PRICE UP TO USD 140 ??

WHO R THE MAJOR CONSUMERS OF PETROL N DIESEL? CARS,TRUCKS,SHIPS RIGHT?

WHERE R THE BIGGEST MARKETS FOR CARS? WHAT R THE FUTURE TRENDS IN THESE MARKETS?
CHINA, USA, EUROPE R THE LARGEST CONSUMERS OF CARS, TRUCKS ETC...WHAT IS THE FUTURE TREND OF CARS IN THESE MARKETS? WILL HYBRIDS AND BATTERY POWERED CARS EAT MORE INTO THE MARKET SHARE OF PETROL N DIESEL CARS ????
-----------------------------------------------------

U.S. crude oil production averaged an estimated 9.4 million barrels per day (b/d) in 2015, and it is forecast to average 8.7 million b/d in 2016 and 8.5 million b/d in 2017. EIA estimates that crude oil production in December fell 80,000 b/d from the November level.

Natural gas working inventories were 3,643 billion cubic feet (Bcf) on January 1, which was 17% higher than during the same week last year and 15% higher than the previous five-year average (2011-15) for that week. EIA forecasts that inventories will end the winter heating season (March 31) at 2,043 Bcf, which would be 38% above the level at the same time last year. Forecast Henry Hub spot prices average $2.65/million British thermal units (MMBtu) in 2016 and $3.22/MMBtu in 2017, compared with an average of $2.63/MMBtu in 2015.

A decline in power generation from fossil fuels in the forecast period is offset by an increase from renewable sources. The share of generation from natural gas falls from 33% in 2015 to 31% in 2017, and coal falls from 34% to 33%. For renewables, the forecast share of total generation supplied by hydropower rises from 6% in 2015 to 7% in 2017, and the forecast share for other renewables increases from 7% in 2015 to 9% in 2017.
---------------------------------------------------
NOTE: POWER GENERATION FROM FOSSIL FUELS HAD DECLINED BUT POWER GENERATION FROM RENEWABLE ENERGY HAD INCREASED.


IS REFINERY A BETTER BET FOR BENIGN CRUDE OIL PRICE VERSUS THE UPSTREAM SECTOR? WHY IS WARREN BUFFET BUYING INTO REFINERY?? WHAT DOES HE SEE THAT MOST DO NOT???

Global Petroleum and Other Liquids
2014 2015 2016 2017
a Weighted by oil consumption.
b Foreign currency per U.S. dollar.
Supply & Consumption (million barrels per day)
Non-OPEC Production 56.09 57.41 56.77 56.68
OPEC Production 37.24 38.30 39.16 40.01
OPEC Crude Oil Portion 30.77 31.65 32.16 32.72
Total World Production 93.33 95.71 95.93 96.69
OECD Commercial Inventory (end-of-year)
2721 3061 3132 3131
Total OPEC surplus crude oil production capacity
2.07 1.59 1.97 1.91
OECD Consumption 45.73 46.28 46.63 46.99
Non-OECD Consumption 46.69 47.49 48.56 49.63
Total World Consumption 92.42 93.77 95.19 96.61

EXCESS PRODUCTION OVER DEMAND
+0.91 +1.94 +0.74 +0.08

NOTE: GLOBAL PRODUCTION EXCEED GLOBAL DEMAND UP TO 2017. CURRENT PRICE RALLY IS DUE TO MASSIVE COVERING OF SHORTS AND IS INDICATIVE OF BOTTOMING OF CRUDE OIL BUT IS IT INDICATIVE OF TREND REVERSAL AS SOME OF U HAD WISHED FOR???

WILL CRUDE OIL SPIKE UP TO USD 100 OR WILL IT LANGUISH AT USD 30 to USD 40 FOR A LONG TIME? WHAT WAS CRUDE OIL PRICE BEFORE OPEC CURB PRODUCTION AND SENT CRUDE OIL PRICE UP TO USD 140 ??

WHO R THE MAJOR CONSUMERS OF PETROL N DIESEL? CARS RIGHT?

WHERE R THE BIGGEST MARKETS FOR CARS?
CHINA, USA, EUROPE R THE LARGEST CONSUMERS OF CARS, TRUCKS ETC...WHAT IS THE FUTURE TREND OF CARS IN THESE MARKETS? WILL HYBRIDS AND BATTERY POWERED CARS EAT MORE INTO THE MARKET SHARE OF PETROL N DIESEL CARS ????
-----------------------------------------------------

U.S. crude oil production averaged an estimated 9.4 million barrels per day (b/d) in 2015, and it is forecast to average 8.7 million b/d in 2016 and 8.5 million b/d in 2017. EIA estimates that crude oil production in December fell 80,000 b/d from the November level.

Natural gas working inventories were 3,643 billion cubic feet (Bcf) on January 1, which was 17% higher than during the same week last year and 15% higher than the previous five-year average (2011-15) for that week. EIA forecasts that inventories will end the winter heating season (March 31) at 2,043 Bcf, which would be 38% above the level at the same time last year. Forecast Henry Hub spot prices average $2.65/million British thermal units (MMBtu) in 2016 and $3.22/MMBtu in 2017, compared with an average of $2.63/MMBtu in 2015.

A decline in power generation from fossil fuels in the forecast period is offset by an increase from renewable sources. The share of generation from natural gas falls from 33% in 2015 to 31% in 2017, and coal falls from 34% to 33%. For renewables, the forecast share of total generation supplied by hydropower rises from 6% in 2015 to 7% in 2017, and the forecast share for other renewables increases from 7% in 2015 to 9% in 2017.
---------------------------------------------------
NOTE: POWER GENERATION FROM FOSSIL FUELS HAD DECLINED BUT POWER GENERATION FROM RENEWABLE ENERGY HAD INCREASED.

THAT BEING SO, WHY IS WARREN BUFFET BUYING INTO REFINERY?? DOES HE SEE WHAT MOST DO NOT SEE???

IS REFINERY A BETTER BET FOR BENIGN CRUDE OIL PRICE OR THE UPSTREAM SECTOR???

Funny...most retail investors still think rolling 4 QR is the future forecast....SHELL's Rolling 4 QR is negative no doubt but the reality is SHELL had turned around in 2015 but they r still blinded by the negative EPS of the Rolling 4QR..and they shied away ....When price Gaps UP,they jump in at higher prices...LOL

0.10 inch dick..LOL...

BERKSHIRE, Look at the Risk Reward...Your Risk now is 50 cents but your potential reward is say RM 1.50(1st TP at RM 7). So the risk reward ratio is 1:3..When market re-rates SHELL, your risk reward will exceed 1:3 easily. So it pays to stay invested and to have patience.
If SHELL retrace further to below RM 5.0, u may want to collect some more and I too intend to buy more if it goes below RM 5.00...

LACHARSINGH, U r absolutely correct..a lot of people are still blinded by the Rolling 4 quarters rolling EPS of -RM 2.2 per share due to a big loss in Q4 2014 of -RM 3.05 per share.

SHELL had turnaround-ed in beginning 2015. The Q3R 2015 loss of -50 cents per share was due to plant shutdown for maintenance.

BERKSHIRE, Even at 5.50 it is still very much undervalued if the upcoming Q4R 2015 to be released on 4th Feb confirms FY 2015 EPS to be RM 1.35 per share. At RM 5.50 , the PE is only 4.07. When SHELL starts to pay dividends, the market PE is easily 10, so u r looking at TP RM 13.50. When Q1R 2016 confirms it can deliver better earnings performance relative to 2015, this stock will be rerated upward.

Even at current price it is still very undervalued.

I collected yesterday afternoon.

Big strong hands r bashing SHELL down to collect at tremendous undervalued prices..Join them to buy..not sell out when they r on buying spree...especially so before the impending release of its Q4R 2015

SHELL closed at 4.98. Its prospective EPS for FY 2015 is RM 1.33/share assuming its delivers Q4R 2015 EPS of 48 cents/share with PE of 3.75.

Market now doubts SHELL tremendously and therefore there is a huge margin of safety at price of RM4.98.

Once the impending Q4R 2015 confirmed a full year EPS of RM 1.33 per share or just about ... the market will re-rate SHELL and its price rise will be explosive.

From TA perspective, Shell had hit higher highs and higher lows since it hit its lowest price of RM 4.60 on 8/7/2015. It was oversold yesterday, is at short term support and is due for a rebound.

From FA perspective, SHELL cumulative 3QR showed an EPS of 85 cents/share. Once its Q4R 2015 confirms an EPS of 48 cents per share with a full year EPS of RM 1.33 per share,SHELL will most likely hit its best ever profit and best ever EPS since 2008 and the market will re-rate SHELL UPWARD.

Its PE will be further boosted when it starts to pay out dividends again.

Shell paid out dividends ranging from 15 cents to 50 cents a share up to year 2013. It stopped dividend payment in 2014 due to its huge loss over RM 1.223 billion.

Based on its cumulative 3QR 2015 it made an EPS of 85 cents/share or a Profit before tax of RM 256 million for cumulative 3QR 2015.

The Q4R will be due soon. Looks like SHELL is on track to register its best ever profit and best ever EPS since year 2008.

Chartwise it started its long term decline since May 2012. It bottomed out in Jan 2015. Last 3 weeks price action was its second attempt to breakout of sideways consolidation. Since it hit its lowest price of RM 4.60 on 8/7/2015, SHELL had hit higher highs and higher lows

FBMPALMOIL is still bullish. It retraced to touched the 200 day SMA but bounced off it.

JTIASA touched the Fibonacci 61.8% suppport at 1.35 but bounced off it. It was oversold for the past 2 days.

Fundamentally its yield per hectare will continue to improve whilst on a longer term basis Timber will be a major revenue and profit contributor.

With improving fundamentals coupled to the severe correction over the past 2 trading days, JTIASA is due for a Rebound.

Dow futures up +100 points as Draghi hints of more easing...KLCI closed today at 1600.92 which is above the Fibonacci 61.8% retracement of 1590. KLCI geometric candle today is a long bodied black candle with no lower shadows indicating sellers in total control and could possibly indicate selling exhaustion in the offing.

SHELL candlestick ends with extreme black candle(without lower shadow) which indicates sellers in total control and the oscillators indicate oversold status. So risk of further significant downside as witnessed over the past 7 trading days is very limited and the extreme bodied long black candle without any lower shadow seem to indicate selling exhaustion.

my estimate is shell q4r 2015 eps is about 50 cents per share ..Full year 2015 eps is estimated to be rm1.35 per share.

from pairsblue source

Be a contrarian ..bet against the bearish sentiments with stocks that can improve further on their EPS in 2016.

kahhoeng,
Based on 400 million earnings for 2015, Q4R EPS is 48.3 cents which is slightly above your estimate of 45 cents/share..Going forward with benign crude oil price, SHELL's EPS for FY 2016 will be better than FY 2015.

pairsblue, RM 400 million for whole 2015 means Q4R is just about 48.3 cents per share which is within my estimate. So EPS for 2015 is RM 1.33 /share with TP of say RM 13.30

hahahaha..that's a good one aliiman...on..erm... " when EPF BOYS SELLING ..WE WERE BUYInG"

Window of opportunity to buy at a bargain price may be closing very soon....

but you wont get the quantity u wanted to buy...hahaha

Unless you key in at 3 bids higher..hahaha

Relatively small paid up capital of 300 million shares...it will be very EXPLOSIVE BOOM that will be heard very loud and very far!!!! It will a challenge to chase after a price that spirals up very quickly..better buy when the price retreats as it was in the past few days.

The window of opportunity to buy at undervalued price may indeed be narrowing fast....

When SHELL makes good profits which it already had started to do in 2015, the controlling shareholder will love to declare good dividend payouts..and SHELL will make better profits in 2016 than 2015 assuming of course crude oil price is benign for an extended period and SHELL management continue to focus on its cost reduction and productivity improvement objectives.

At closing price of RM 5.15, the downside risk is very limited but Reward is tremendous going into 2016!!!

With high oil price of USD 100 /bbl its difficult for refinery to make profits. In the scenario of falling crude oil price from say USD 100/bbl to USD 40 /bbl..it is also a challenge for refinery to make profits. However in a scenario where crude oil price had bottomed and remains benign for an extended period, a well managed Refinery like SHELL can make good profits and also declare dividend payout. With dividend payout policy the Market will give it a PE of 12.5

With PE 12.5, TP range ranges from RM 14.10 to RM 16.90...I suppose with a declared dividend payout..