(Sept 11): North Korea tensions and Hurricane Harvey might have a temporary impact on oil prices but, for the many offshore and marine stocks listed on the Singapore Exchange, that is not going to matter much one way or another. If anything, this depressed segment of the market is more likely to be roused by positive news flow related to their diversification efforts.

“I think the main issue with the O&M players is low cash flow, high debt loads and falling cash balance. The service rates they get depend on the oil majors’ budgets,” says Zhiwei Foo, an analyst at UOB Kay Hian. Those budgets are unlikely to increase until oil prices demonstrate stability over a period of six to nine months at a level at which the oil majors are confident of making money, he adds. “So, you’re looking at at least 2019 before they raise their budget. [In the meantime], consensus is that the smaller O&M companies don’t even have cash balances to last past the end of this year.”

The precipitous decline in oil prices from their mid-2014 peak levels of more than US$100 a barrel has been weighing on the whole O&M sector for the last couple of years. Things came to a head in July last year when Swiber Holdings said it would wind itself up. The company was subsequently placed under judicial management instead. Swissco Holdings was also subsequently placed under judicial management, while Marco Polo Marine and Nam Cheong suspended trading in their shares. More recently, on Aug 10, Ezion Holdings — which once had a market value of some $2 billion — also suspended trading in its shares.

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