PETALING JAYA: More contracts are expected to be awarded in the oil and gas (O&G) sector in the second half of this year despite crude oil price rallying more than 75% since last November to above US$64 per barrel.
AmInvestment Bank said it expected improving prospects in the O&G sector despite weak order flows in the fourth quarter of 2020.
It said new contract awards for Malaysian operators tumbled 42% year-on-year (y-o-y) to RM6.6bil in the period between October and December last year.
“New project rollouts were still sluggish in the fourth quarter of 2020, as fresh jobs fell 32% y-o-y to only RM1.5bil.
“Nevertheless, we note that this was still better than the three-year low of RM569mil in the first quarter of 2020, which underpins our view that the worst of the Covid-19 impact is behind us amid prospects of stronger order flows in second the half of this year, ” it said in a report.
Last week, Petroliam Nasional Bhd (Petronas) said it planned to allocate the bigger chunk of its annual capital expenditure (capex) for Malaysian O&G activities to help boost the economy.
The national oil company is targeting to allocate capex of between RM22bil and RM25bil to its Malaysian operations, which is higher than the RM17bil it spent last year.
AmInvest said that in the fourth quarter of 2020, five O&G companies under its coverage reported financial performance “within its expectations”, three companies “above” and only Hibiscus Petroleum Bhd “underperformed” due to an increase in non-cash provisions for amortisation and decommissioning charges.
The research house said Bumi Armada Bhd’s commendable performance stemmed from peak production at the floating production, storage and offloading (FPSO) vessel Armada Kraken, which has resolved its recurring technical problems in the North Sea.
“Serba Dinamik Holdings Bhd posted an impressive fourth-quarter FY20 earnings surge largely from its Malaysian-based operations despite the conditional movement control order while Yinson Holdings Bhd benefited from lumpy one-off construction earnings from its FPSO Abigail-Joseph, ” it said.
AmInvest said although Sapura Energy Bhd’s first nine-month FY21 earnings appeared to be above its and consensus’ loss expectations, the company’s engineering and construction division’s “surprisingly strong” performance and EBITDA margins were boosted by lumpy contract adjustments and cost reversals, which could normalise in fourth-quarter FY21.