atans1

Relooking at 2 of Temasek’s Fab 5/ Whither oil prices

In Energy, Temasek, Uncategorized on 05/06/2015 at 6:51 am

I’ve advised since 2013 that investing in Temasek’s Fab 5 is a no-brainer for conservative, KS types. https://atans1.wordpress.com/2013/10/03/temaseks-fab-5-spore-blue-chips/

Here’s looking  at major problems at two of them.

Problems in the Brazilian and Mexican oil industries caused by the fall in oil prices are not good for Keppel and SembCorp Marine. They have received massive orders for rigs from Latin America in recent years.

But new orders will be weak and existing contracts will renegotiated.

Both have also been forced to deny allegations of corruption in winning Brazilian biz. There is a big  political and financial corruption scandal in Brazil, centred around Petrobas, its national oil champion. Petrobas has been a big player in the rig market.

But recorded order books are huge (billions of USD) and both have weathered storms. Both have experienced, internally promoted CEOs

Time to cut and run is when scholar, ex-SAF general is parachuted in as  CEO (like in SMRT, NOL).

On oil prices: views are very mixed

Big Oil is too confident about crude prices. After a 40 percent rally from January’s six-year low, the momentum has been on the upside. But the current prices – $65 a barrel for Brent and $60 for WTI – look more like a ceiling than a floor.

That is not what many insiders seem to think. Some oil service companies expect mid-$70s Brent by the end of this year. Anglo-Dutch Shell assumed oil will rebound to $90 by 2018 in its $70 billion takeover of the UK’s BG Group. Some believe that the steep cut in capex costs will affect supply, including shale, and boost prices again.

http://blogs.reuters.com/breakingviews/2015/06/01/why-the-oil-price-will-fall-again/

Just this week, the head of BP said he doesn’t expect the glut to clear until at least 2016. The Shell view would be a good excuse to hold onto these two Fab5 shares.

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