Member Info for hey_arnold

Momentum remains in a downward direction. The next sell off will be when Trump increases tariffs on China again.

America is great, the rest of the world isn't so great.

Silverfern the whole market is coming off as its pricing in a slow down in global growth driven by emerging markets stalling. For as long as everything else keeps getting sold, so will Petrofac. The share price should be viewed relative to the FTSE, so unless that goes up to where it was, I think it is unlikely that Petrofac will for now.

Think we have a few more red days to come.

Just seen this:

Morgan Stanley upgraded BP to “overweight” from “equal weight” in an oil and gas sector review, which predicted another capital expenditure cycle beginning next year. It forecast project spending by the majors to rise at least 25 per cent over the next three years, compared with a consensus expectation of budgets holding steady.

The oil price collapse, investor pressure and a growing awareness of peak oil scenarios have resulted in capital expenditure (capex) on upstream exploration halving since 2013, its fastest collapse since the mid 1980s, said Morgan Stanley.

It said: “By now, however, reserve life is declining, new project approvals have been trailing production levels for four consecutive years, and mature field decline rates are increasing. Costs have bottomed out and there are tentative signs of inflation returning. Also, capex is close to its all-time low relative to dividends, suggesting it may be hard to maintain current dividend capacity with capex at such low levels. Finally, historical evidence shows that rising operating cash flow consistently leads to rising capex, and this seems likely once again.”

Morgan Stanley’s top picks to play the trend were oil services companies: it upgraded Subsea 7 to “overweight” and repeated positive ratings on TechnipFMC, Tenaris, Saipem, and Petroleum Geo-Services.

Correct me if I am wrong,

But the market has already priced in the 10p dividend and it will drop after the ex div date by the same amount so I dont understand that argument, surely the result is that you are net flat?

Oh and I have bought some shares in petrofac with a 6-12 month view.

No offence taken. My posting here is to promote discussion and learn what other people think. Yes I'm new to petrofac. IMO the SFO will continue to be an overhang on the stock and whilst they may have improved their governance since the the start of the investigation, there is still the risk of a fine. Apart from rising oil prices there is currently no newsflow that should cause the stock to re-rate. Rising oil prices should provide some support but I think until Petrofac win any contracts or next results, then I think the stock is unlikely to move up in the short term.

The macro outlook is certainly a concern although I believe this is probably overstated. Without modelling it, I guess it is difficult to work out what is priced in to petrofac share price, however I think it's difficult to overlook what Ayman Asfari said: "We are well-positioned on several bids and tendering activity remains high with around $20bn of bid opportunities due for award in the second half of the year.

What are the prospects for mergers and acquisitions in the sector? Could Petrofac be a target for a takeover?

Hi All, Fundamentally what is driving people to short this stock? SFO investigation and poor margins?

Surely with current oil prices brent >$70 for what looks to be a sustained period should see a pick up in the sector (assume this is already priced into the past six months stock prices rise), but with this pickup isn't the the next stage of the story, that companies like petrofac will be able to raise their prices as demand for more services are required by Oil majors etc? I know we aren't currently seeing margins increase, but providing oil prices stay buoyant I would have thought this is inevitable. Also, would you want to short a stock that could announce contract wins over the next six months? I would have thought the probability of this happening increases the longer oil stays above 70?