LIFETIME MEMBERSHIP BREAKING NEWS: ON 24 JUNE, BOTH KEPPEL & SEMBCORP MARINE CALLED FOR TRADING HALT. GIVEN THE POTENTIAL VOLATILITY OF KEPPEL AND SEMBCORP MARINE SHARE PRICE, INVESTORS SHOULD TRADE WITH CAUTION.
Will Sembcorp Marine share price sink or swim in the coming months? In 2021, the rollout of COVID-19 vaccinations had led to gradual resumption of economic activities in various countries. While global economies had yet to recover to pre-pandemic levels, crude oil prices recently hit a 2-year high of US$73 per barrel. What is the implication of rising crude oil prices for local oil and gas stocks?
A long-time SG Wealth Builder member sought my insights on the recent recovery of crude oil prices and queried how this would affect SGX listed oil and gas stocks. The member did not specify any particular oil and gas stocks that he would like to cover, so I would share my views on Sembcorp Marine share price instead. This is because Keppel Corp and Sembcorp Marine are the top dogs in this sector. However, the former has announced its intention to exit the oil-rig building business to pivot in the renewable energy sector.
The second reason why I choose to analyze Sembcorp Marine share price is because I had a successful contra trade in this counter in April 2021. Through the volatility of Sembcorp Marine share price, I have made a small profit of $900. It is not exactly an amount to shout about. But the small win validated my thesis that there are opportunities to seize from the volatility of Sembcorp Marine share price. Due to the cyclical nature of the oil and gas industry, I do not advocate a buy-and-hold strategy for oil and gas stocks.
With the recovery of crude oil prices, the biggest question confronting investors must be whether a merger between Keppel Offshore Marine (KOM) and Sembcorp Marine would finally take place. Expectations of a merger appeared to be looming when Temasek Holdings made a partial offer for Keppel Corp in 2019. Nonetheless, the withdrawal of the partial offer in 2020 threw a spanner in the works. Even so, most investors expect the merger to take place given the potential for synergy and cost savings. In this context, what are the implications for Sembcorp Marine share price if the merger does occur?
Indeed, it is now or never for Temasek Holdings. The merger between KOM and Sembcorp Marine would be the perfect catalyst for Sembcorp Marine share price while unlocking value in KOM. Apart from these, the consolidation between the two oil rig building giants could have a positive spin for other oil and gas stocks like CSE Global and Baker Technology.
Note that this is an opinion article and not meant to be a financial advice. Please do your due diligence or engage financial advisors before investing in the stock market. I am not vested in Sembcorp Marine at the moment.
Sembcorp Marine share price at cross-roads
COVID-19 has changed the game for Singapore’s oil and gas sector. Back in April 2020, crude oil prices turned negative for the first time in history as demand dried up. In fact, West Texas Intermediate (WTI), fell to an unbelievable minus US$37.63 per barrel. Of course, the current mood is in stark contrast compared to last year. Nonetheless, the devastating meltdown of crude oil prices in 2020 surely would have forced Temasek Holdings to rethink about its strategic holdings in Keppel Corp and Sembcorp Marine.
The matter of fact is that there are a number of factors affecting the outlook of the oil and gas industry in Singapore. Since November 2020, crude oil prices had risen steadily from US$41 per barrel to the current US$63 per barrel. Most analysts deem the break-even oil prices to be within [This is a premium article. The rest of the content is blocked and can be accessible by SG Wealth Builder Members only. To read the full content, please sign up as member.]
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