Oil prices are building strength on some speculations over the meeting of Russia and Saudi Arabia, as speculators anticipate that the giants engaged in the oil price war would finally show a white flag. Many market participants also anticipate that both the parties would bring a production cut agreement to the table; however, the chances of a production cut are estimated by many independent forecasters to remain oblique, as the prolonged production cut had cost both the oil premiers a considerable market share.
When the oil market is going through its highs and toughs, ASX-listed energy players are devoted in building a shield against the current market volatility, and fuss around the oil market, to keep the business going in stormy conditions.
Many energy companies such as Beach Energy Limited (ASX:BPT) have already made their business plan clear, suggesting stakeholders that they can sustain the low oil price environment for quite a while. Moreover, energy companies such as Viva Energy Limited (ASX:VEA) and Z Energy Limited (ASX:ZEL) are following the suite and presenting their business plan to uphold the shareholder’s confidence in these tough times.
Viva Energy Limited (ASX:VEA)
VEA Reduces Capital Expenditure, Pursing Fixed and Variable Cost Saving Initiatives
The Company presented its business update for the March 2020 quarter, impact of COVID-19 and its response.
On the retail sales counter, VEA achieved average sales volumes of 62.4 million litres per week, up by 5.1 per cent against the previous corresponding period (or pcp); however, the Company suggested that the State and Federal Government measures to curtail the coronavirus spread, resulted in a loss of ~ 30 to 40 per cent in the Alliance sales volumes.
- VEA further reported that the overall commercial sales volumes for the quarter remained in-line against pcp, but a decline in Aviation sales volumes was noticed towards the end of the period. The Company mentioned that, to date, the Resources, Transport, Marine and Specialties businesses have been relatively unaffected, but it anticipates a further decline of ~ 80 to 90 per cent in the Aviation demand amid travel restrictions currently in place.
- The actual Geelong Refining Margin (or GRM) stood at USD 2.7 per barrel during the period with an intake of 10.8 million barrels. The refining margin was considerably impacted by higher crude premiums from the purchase made by the Company during the end of the year 2019, when crude oil prices were materially higher against the present level, and due to lower regional refining margins amid soft demand.
VEA suggested that crude intake during the quarter declined slightly, as the Company optimised refinery production in line with the demand and weaker margin. The refinery reduced production of Jet fuel and took measures to reduce gasoline production to offset declines in the retail market.
- VEA is presently reviewing its plans for a major maintenance turnaround of the Residual Catalytic Cracking Unit and associated units, planned for late-August to October 2020, as the Company assesses that the current measures, which are being implemented would impact its ability to safely conduct the turnaround in the planned manner and timeframe.
- VEA further reduced its capital expenditure guidance for the year ending 31 December 2020 by $80 million, which would now stand at ~$60 to $80 million, excluding the Residual Catalytic Cracking Unit, which would enable the Company to preserve cash and minimise risk.
The stock of the Company last traded at $1.345 on 09 April 2020, up by 5.07 per cent against its previous close on ASX.
Z Energy Limited (ASX:ZEL)
ZEL Jettisons Final Dividend and Unnecessary Capital Expenditure
ZEL recently suggested that the business has been impacted by an array of market challenges, including heightened retail competition and challenging refining market over the last 18 months, and unprecedented market conditions amid the COVID-19 outbreak.
- The Company trimmed its FY20 guidance in the range of $355 million to $365 million from the previous range of $350 to $385 million, including an expected provision of $27 million related to COVID-19 costs.
- During FY20, ZEL faced a period of materially reduced retail margins and low refining margins, and in light of the uncertainty around COVID-19, the Company decided to reduce its operating expenses and preserve cash.
ZEL jettisoned the FY20 final dividend and is now accelerating several cost reduction initiatives planned for FY21. The Company further applied a brake on all unnecessary capital expenditure to maintain safe and reliable operations.
ZEL is also in discussions with its banks to increase its working capital facility amidst continued volatility in commodity prices and in the currency market.
ZEL Reveals Weekly Volume Data
ZEL disclosed its weekly volume data for bringing more clarity around current fuel market trading conditions to the shareholders. The weekly volume included retail volume, Caltex network, domestic supply arrangements volume, and all fuel volumes for the week (as on 5 April 2020).
The Company also disclosed the commercial volume data that it supplies to large commercial customers, Mini-Tankers, and Jet and Marine.
The weekly data disclosed by the Company is as below:
(Source: Company’s Report)
ZEL last traded at $2.890 on 09 April 2020, unchanged against its previous close on ASX.
This website is a service of Kalkine Media Pty. Ltd. A.C.N. 629 651 672. The website has been prepared for informational purposes only and is not intended to be used as a complete source of information on any particular company. Kalkine Media does not in any way endorse or recommend individuals, products or services that may be discussed on this site. Our publications are NOT a solicitation or recommendation to buy, sell or hold. We are neither licensed nor qualified to provide investment advice.
There is no investor left unperturbed with the ongoing trade conflicts between US-China and the devastating bushfire in Australia.
Are you wondering if the year 2020 might not have taken the right start? Dividend stocks could be the answer to that question.
As interest rates in Australia are already at record low levels, find out which dividend stocks are viewed as the most attractive investment opportunity in the current scenario in our report.