Local firms upbeat despite the falling oil price

Malaysian oil and gas-related companies remain optimistic about their prospects even with oil price dipping below US$100 per barrel.

Pantech Group Holdings said it was not too worried about the drop in oil price.

“There are still so many exploration activities going on and related projects are on track, so for now, our business is still okay,” a company spokesperson said. “(The market is) still bullish on the prospects of oil and gas companies.’’

Pantech manufactures pipes, fittings and flow control products. It is involved in both new oil and gas exploration activities as well as the maintenance of existing oil rigs.

SAAG Consolidated (M) Bhd chief executive officer Anand Subramanian said oil price had no particular impact on the company’s earnings per se, pointing out that the company’s earnings were cost-driven.

But if oil prices keep going up, the longer term contracts of service providers would be affected, he acknowledged. “Costs will rise and inflationary pressures would affect the profitability of my contracts,” he said.

However, Anand does not see oil prices dipping below US$90 per barrel.

“Even if this happens, it will only be for a short while before supply and demand come back into play (and stabilise the price),” he said.

Pipe coater Wah Seong Corp Bhd’s deputy group managing director Giancarlo Maccagno said the company’s business was not directly linked to current oil prices.

“Our business is connected to the infrastructure being built to produce and deliver oil or gas. Decision to invest in such infrastructure is normally made by exploration and production (E&P) companies based on a long projection of prices and not the present spot prices,” he said.

Even if the price of oil continues to slide, the capital expenditure committed years earlier has to continue, he added.

At levels of around US$100 per barrel, oil production was still viable, Maccagno said.

“In the short term, softer oil prices do not affect our business. In the long term, based on supply and demand, I believe that oil price will remain at a level to justify continuous E&P activities, while ultimately creating opportunities for our business,” he said.