PETALING JAYA: Analysts are expecting more contracts for the local oil and gas (O&G) sector going forward, particularly for the upstream sector as the national oil company Petroliam Nasional Bhd (Petronas) had raised its capital expenditure spending by 9% to RM29bil in the first nine months of 2019.
“We expect a continuation of the upward momentum next year, ” said AmInvestment Research.
The research house pointed out that Petronas had increased its domestic spending by 29% to RM6bil in the third quarter ended Sept 30 compared to a year ago, which supports its view of a gradually rising capex trend.
“This is underpinned by Petronas’ 2019–2021 Activity Outlook (PAO), which projects a gradual improvement in the utilisation of rigs, ” the research house said in a report yesterday.
Meanwhile, UOB Kay Hian Malaysia Research suggested that the local upstream capex was set to improve moderately from RM8bil to about RM15bil.
“We prefer to wait for the next PAO.
“The mixed messages from the mundane Petronas local capex spending and its continuous opex control may suggest a risk that high activity levels could remain volatile, ” i the research house said in a note to clients yesterday.
AmInvest pointed out that for the nine-month period ended Sept 30, Malaysia’s contact awards rose 14% year-on-year to RM9.2bil.
This was driven by multiple awards to SAPURA ENERGY and MALAYSIA MARINE & HEAVY ENGineering Holdings (MMHE) securing the RM2.5bil Kaswari central processing platform job while Bumi Armada secured a 30% stake in FPSO charter.
“Over the longer term, offshore projects in Brazil, Mexico, the Middle East and West Africa are poised to gain traction with Sapura Energy and MMHE being selected for Saudi Aramco’s Long Term Agreement programme.
“This would allow them to bid for the kingdom’s massive offshore projects that could reach US$150bil over the next 10 years, ” it said.
The research house added that Westwood Global Energy Group is projecting global drilling and well services expenditure to grow 19% to US$1.9 trillion for 2019–2023 from 2014–2018.
AmInvest said it has “buy” call for MISC, Sapura Energy and Velesto.
This is due to rising asset utilisation globally, which supported service providers’ improving results.
“Our top picks are still companies with stable and recurring earnings such as Serba Dinamik and Dialog Group, ” it said.
On the other hand, UOB Kay Hian reckoned that the current valuations of the oil and gas companies are reflecting the high expectations that local activity has improved.
“Despite the general activity pick-up, the industry earnings in 3Q19 had been diverse, suggesting that Petronas continues to be very uptight on contract margins, consolidation of contracts and actual work orders issued, ” it said.
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