In a statement, the research house said it bodes well for local oil and gas services and equipment (OGSE) players with oil prices hovering above US$80 (RM375.58) per barrel, in view of buoyant upstream activities around the globe coupled with Petronas’s capital expenditure (capex) drive to sustain local production.
“Petronas’s first quarter of 2024 (Q1 2024) capex amounted to RM10.7 billion versus RM10.4 billion in Q1 2023, which we believe will gradually ramp up in the coming quarters to total RM60 billion by end-2024,” it said.
HLIB has also maintained its Brent crude oil forecast at US$85 (RM399.08) per barrel for 2024 and 2025 with downside risks to include the reactivation of spare capacity from OPEC in the near-term, higher-than-expected growth from non-OPEC producers, slower-than-expected oil demand growth from China and India, and de-escalation of geopolitical conflicts.
Similarly, Kenanga Research has also maintained an “overweight” stance for the sector.
It continues to be positive on upstream service providers due to the expected increase in upstream capex in 2024, which coincides with the tight availability of contractors and offshore support vessels (OSV).
“As long as crude oil prices remain above US$70 (RM328.67) per barrel, we believe that Petronas will increase its capex, particularly in the upstream segment to enhance crude oil and natural gas production and prevent natural production decline,” it noted.
Kenanga’s top picks are Dialog Group for its engineering, procurement, construction, and commissioning contracts and its recovery in tank terminal business; Yinson Holdings for its strong floating production storage and offloading order book pipeline; and Keyfield Group as a proxy to the anticipated upcycle in the local OSV market.
Meanwhile, Maybank Investment Bank said Petronas’s domestic capex will likely be higher in 2024, given a lower targeted dividend commitment of RM32 billion for 2024, with the expectation of a stable average Brent crude oil price for the year.
As at end of March 2024, Petronas is in a net cash position of RM98.2 billion from RM96.9 billion as at end of December 2023.