1. Petronas bags third block in Mexico with Block 6
Petroliam Nasional Bhd (Petronas) continues to grow its footprint in Mexico, as its subsidiary PC Carigali Mexico Operations, SA de CV, has been awarded shallow water Block 6 in the Gulf of Mexico’s Salina Basin.
In a statement today, Petronas said Block 6 — covering an area of 559 sq km in water depths of between 30m and 80m — will be operated in a 50:50 partnership with Colombian national oil company Ecopetrol.
Petronas was previously awarded Block 4 and Block 5 in 2016, following Mexico’s first ever auction of its deep water exploration areas.
“I am pleased with our new partnership with Ecopetrol and I am confident this will bring together our capabilities and expertise for a successful collaboration in the Mexico waters,” said Petronas executive vice-president and chief executive officer of upstream Datuk Anuar Taib.
Petronas vice-president of exploration, upstream Emeliana Rice-Oxley said Mexico holds substantial material opportunities, but has been largely underexplored.
“We are very pleased to add Block 6 to our growing exploration portfolio in Mexico, and be one of the early movers in this basin. This is aligned with our strategy to explore for material oil in largely underexplored prospective regions,” Emeliana said.
The group will continue to chart its growth strategy in Mexico, to be supported by an office in Mexico City, which will commence operations in the third quarter of this year.
2. Puncak Niaga’s unit faces adjudication for RM25.41 million owed to former contractor
Puncak Niaga Holdings Bhd announced that its wholly-owned unit Puncak Niaga Construction Sdn Bhd (PNCSB) is facing a notice of adjudication for an alleged payment of RM25.41 million to its former sub-contractor Genbina Sdn Bhd.
The notice was received by PNCSB on July 31, the same day it was issued by Genbina, Puncak Niaga said in a filing today
The notice, said Puncak Niaga, was issued by Genbina on disputes arising from the alleged payment claim for a design and build contract relating to the construction of sewerage piping in Bunus, Kuala Lumpur (D44 Project).
The value of RM25.41 million excludes interests, costs and any other relief by Genbina against PNCSB in relation to the payment claim, added the company.
“PNCSB has instructed its solicitors to contest the matter and Puncak will make the relevant announcements to the exchange in relation to the same in due course,” it said.
At 5pm, shares of Puncak Niaga closed 1.5 sen or 1.73% lower at 85 sen, giving it a market capitalisation of RM384.63 million.
3. Prestariang gets RM10m contract extension by ministry
Prestariang Bhd has been awarded a RM10 million contract extension for the distribution and management of Microsoft software licenses to public higher education institutions in Malaysia from the higher education ministry.
In a filing with Bursa Malaysia today, Prestariang said its wholly-owned subsidiary Prestariang Systems Sdn Bhd (PSSB) has received a letter of award dated July 17 from the ministry for the contract extension for a period of one year, starting July 3 this year to July 2, 2018.
“The extension of contract is expected to contribute positively to the group’s future earnings, net assets per share and gearing,” the filing added.
Prestariang shares fell one sen or 0.52% to close at RM1.90 today, with 820,200 shares done, giving it a market capitalisation of RM916.37 million.
1. Emerging stocks at near 3-year highs, Venezuelan bonds fall
Emerging market stocks flirted with near three-year highs on Wednesday but Venezuelan bonds sold off further as polling data cast doubt on a weekend election and opposition leaders were jailed, raising the risk of fresh US sanctions.
MSCI’s benchmark emerging markets stocks index rose 0.2% to just below a near three-year high hit at end-July, helped by Asian tech stocks hitting 17-year peaks.
Stellar earnings from Apple lifted component makers globally after shares in the world’s most valuable company surged to a record of more than US$159.
In South Korea, Apple suppliers LG Innnotek jumped 10% and SK Hynix, the world’s second-biggest memory chip maker, rose 3.8%, helping the index gain 0.2%.
Hong Kong shares also rose 0.2% and index heavyweight Taiwan gained 0.8%.
Emerging Europe also opened stronger with the Turkish market up 0.4%, Poland up 0.3% to 2½-month highs and Hungary stocks up 0.5%.
William Jackson, a senior emerging markets economist at Capital Economics, said the broader market was supported by a recent run of relatively strong growth data and positive global risk sentiment, with developed markets pulling emerging markets higher.
But Chinese mainland shares slipped 0.2% after US President Donald Trump was said to be close to a decision on how to respond to what he considers China’s unfair trade practices.
In debt markets Venezuelan state oil firm PDVSA bonds fell to 16-month lows, with the 2037 bond dipping below 30 US cents in the US dollar.
Venezuelan sovereign bonds also sold off across the curve as investors eyed the ongoing crisis triggered by the creation of a controversial legislative body, which has prompted the United States to slap sanctions on President Nicolas Maduro.
The election of the new assembly has been decried by critics as illegitimate with data reviewed by Reuters suggesting a much lower turnout than that claimed by the authorities. Venezuela has jailed two leading critics of Maduro.
Investors fear US sanctions could be widened, putting further strains on the oil-dependent economy and raising the risk of default.
“They left open the option of increasing the sanctions, either halting oil imports from Venezuela or halting the export of refined oil products back to Venezuela, either of which could harm the economy,” said Jackson.
Emerging currencies were mainly weaker, with the Russian rouble down 0.4% against the US dollar, and at its lowest against the euro since November. The rouble has been hit by lower oil prices and concerns about US sanctions.
US Congress voted last week for sanctions to punish the Russian government over interference in the 2016 presidential election and the annexation of Crimea.
The Kazakhstan tenge also took a pounding, falling 1.3% against the US dollar to its weakest since December 2016.
The South African rand slipped 0.2%, trading at a three-week low having sold off in the wake of a warning from ratings agency Moody’s on Monday, which still ranks South African debt as investment grade.
The Turkish lira was flat after the trade deficit widened by 80.4% year-on-year in July.
But the Indian rupee bucked the trend, firming 0.5% to a two-year high after a central bank rate cut that was widely expected as inflation has slumped.
The Reserve Bank of India cut the repo rate by 25 basis points to 6%, a more than 6½-year low.
2. StanChart shares slide on lack of dividend, revenue recovery
Standard Chartered reported a 93% rise in half-year underlying pretax profit to US$1.8 billion, but the bank’s shares fell as it failed to resume dividends, highlighting the scale of the challenge it faces to increase revenues.
The profits jumped partly because the bank avoided the hefty losses from its private equity business and bad loans that blighted its results in the same period a year ago.
StanChart’s underlying loan impairments of US$583 million for the first half, were down from US$1.1 billion in the same period a year ago. These are closely watched by investors in the Asia-focused bank, which has had a glut of bad debts in the past few years following over-exuberant lending.
“We are positioned to resume growth, and we have shown early encouraging signs we can do that,” Chief Executive Bill Winters told reporters on a conference call.
The bank said it would not resume paying dividends, as some investors had hoped for following its stronger profits and capital position. StanChart said it would revisit the issue at the end of the year.
Standard Chartered shares fell as much as 5% in London by 0915 GMT following the results announcement.
Having slashed costs and stamped out riskier behaviour at the bank, Winters’ biggest problem now is growing revenues to boost profits.
In the two years since he took up his job at StanChart, former JPMorgan banker Winters has announced over 15,000 job cuts, raised more than US$5 billion in capital and overhauled how the bank makes loan decisions in an effort to make it sturdier.
StanChart delivered an underlying return on equity of just 0.3% in 2016, far below even the 8% target that it last year abandoned in a sign of the challenges it faces to grow income.
Low global interest rates, lost income from axed businesses and rising competition from regional players in its main markets have combined to temper hopes of an income recovery at the bank.
StanChart rival HSBC on Monday reported rising profits and the return of a further US$2 billion to shareholders via a stock buy-back, in a sign that StanChart’s bigger rival is much further ahead in its turnaround plan.
HSBC has paid out around US$10 billion a year in dividends in the last four years, while StanChart cut payouts since November 2015 to focus on restructuring.
The bank said its core capital ratio, a key measure of financial strength, rose to 13.8% at the end of June on improving profits.
3. Bearish cocktail knocks oil prices off recent highs
Oil retreated from this week’s eight-week highs above US$52 a barrel on Wednesday, following a bearish combination of rising US inventories, an outage at a major European refinery and increasing OPEC production.
Brent crude futures were down 11 US cents at US$51.67 a barrel by 0856 GMT, having touched a session low of US$51.18. The price hit US$52.93 on Monday, its highest since late May.
US West Texas Intermediate crude also fell 11 US cents, to US$49.05 a barrel.
Both contracts dropped sharply the previous day after Royal Dutch Shell said its 400,000-barrels-per-day (bpd) Pernis refinery in the Netherlands would remain offline for at least the next couple of weeks following a fire.
Adding to the pressure from Europe’s largest refinery being out of action was an unexpected rise of 1.8 million barrels in US crude inventories, which dented bulls’ hopes that recent inventory draws signified a tightening US market.
“Along with a bout of profit-taking, the fresh slide in prices was triggered by reports that Europe’s largest refinery will be shut until at least the second half of August,” PVM Oil Associates strategist Stephen Brennock said.
Production from the Organization of the Petroleum Exporting Countries hit a 2017 high of 33 million bpd in July, despite the group’s pledge to restrict output along with other non-OPEC producers, including Russia, by 1.8 million bpd between January this year and March 2018.
“OPEC output numbers in July were at eight-month highs — not good,” said Matt Stanley, a fuel broker at Freight Investor Services in Dubai.
The Economist Intelligence Unit said “there is no guarantee that further cuts will be sufficient to rebalance the oversupplied global oil market”.
Energy consultancy Douglas Westwood reckons this year’s oil market will be slightly undersupplied but that the glut will return next year, and last to 2021.
“Oversupply will actually return in 2018. This is due to the start-up of fields sanctioned prior to the downturn,” said Steve Robertson, head of research for the firm’s Global Oilfield Services.
Likely acting as a further lid on prices is that, according to US bank Goldman Sachs, second-quarter company results had shown that oil majors “are adapting to US$50 per barrel oil prices and can afford to pay dividends in cash” at that level.