Petronas activities set to support sector recovery - MIDA | Malaysian Investment Development Authority
contrastBtngrayscaleBtn oku-icon


plusBtn crossBtn minusBtn


This site
is mobile


Petronas activities set to support sector recovery

Petronas activities set to support sector recovery

30 Dec 2021

The potential improvement in most of Petroliam Nasional Bhd’s (Petronas) key value chains in 2022-2024 is expected to lend support for a recovery in the local oil and gas services and equipment (OGSE) sector in 2022, say analysts.

The national oil company, in its newly released Activity Outlook 2022-2024 report, outlined a cautiously optimistic outlook for an on-track recovery, which still remained fragile given the uncertainties in the oil market.

Going into 2022, Kenanga Research described the activity level outlook from Petronas to be rather mixed.

“While some sub-segments are expected to see improved activities as compared to 2021, others are expected to see flattish activities or just marginal bump ups.

“That said, as compared to last year’s activity outlook report, Petronas had raised its 2022 activity forecasts for most of the sub-segments.

“Although this could just be a reflection of the delayed jobs in 2021, most sub-segments saw actual activities failing to meet last year’s forecasts,” the research house said in its latest report.

On the balance, Kenanga Research foresees no particularly strong winners emerging from Petronas’ activity outlook report.

However, it envisaged hook-up and commissioning (HUC) and offshore maintenance, construction and modification (MCM) players as partial winners, given the expected increase in work orders.

HUC and MCM players that are expected to be beneficiaries include Dayang Enterprise Holdings Bhd, Sapura Energy Bhd, Petra Energy Bhd and Carimin Petroleum Bhd, said Kenanga Research.

Uzma Bhd is also poised to benefit from the expected huge increase in Petronas’ decommissioning works in the next three years.

On the other hand, Kenanga Research said Velesto Energy Bhd is slated to be a partial loser.

The research house noted that fabricators such as Sapura Energy and Malaysia Marine Heavy Engineering Bhd (MMHE) may also be partial losers, given the lower number of jobs available locally.

For plant turnaround, Kenanga Research said the 2022 levels largely remain flat versus 2021.

“As such, players in this space namely Dialog Group Bhd, Serba Dinamik Bhd and MMHE should expect to see stable work orders,” it noted.

Similarly, supporting vessels will likely see a flattish outlook in 2022 from 2021.

The offshore support vessel (OSV) players in this space include Alam Maritim Resources Bhd, Icon Offshore Bhd and Perdana Petroleum Bhd, said Kenanga Research.

On Petronas’ capex spending, the research house expects the group to maintain prudent spending around RM40bil to RM45bil per year for the next five years.

“While this is a welcomed improvement from RM20.4bil in the first nine months of 2021 and RM33.4bil in 2020, this would still be below pre-pandemic levels of 2018-2019 capex at RM47bil to RM48bil.”

While pressure for the adoption of renewable energy is ever increasing, Kenanga Research also believed that the upstream segment would remain as the group’s largest area of investment.

The research house has maintained an “overweight” call on the oil and gas (O&G) sector given the discounted valuations, especially on selective big caps.

“We opt to go defensive on our stock picks this quarter and have selected Dialog with a target price (TP) of RM3.50 and MISC Bhd with a TP of RM8.05,” it added.

Hong Leong Investment Bank (HLIB) Research pointed out that the clear winners under the key value chains of Petronas activity outlook report are the HUC, MCM and OSV players, which include Perdana, Dayang and Carimin.

It also sees the losers to be the value chains exposed to well-head platforms and central processing platforms which will likely impact the job flows for Sapura Energy and MMHE.

HLIB Research noted that it was “slightly positive on Petronas Activity Outlook 2022-2024 report, as most of the value chains are expected to see improved activity levels in 2022 from 2021.”

“This will be sufficient to help the local OGSE sector recover in 2022.”

The research unit in its report also expects Petronas’ capex spending to be maintained at RM40bil to RM45bil annually over the next five years, with progressive increase in allocation towards renewable energy initiatives.

Its Brent crude oil price forecast is maintained at US$70 to US$75 (RM292.78 to RM313.69) per barrel for 2022. It also added that the Organisation of the Petroleum Exporting Countries+ is likely committed to provide a good equilibrium for oil prices.

HLIB Research also has an “overweight” call on the sector with top picks of Bumi Armada Bhd and Dialog with TP of RM0.84 and RM3.38, respectively.

It favours Bumi Armada given the company’s foothold in the floating production, storage and offloading business, which provides steady recurring income, coupled with speedy enhancement in its debt profile.

Dialog has a recurring income type of business mode, which “we deem it as one of the only listed secular growth stocks in the local O&G space,” it added.

Source: The Star