PETALING JAYA: The oil and gas (O&G) sector is expected to show strong earnings momentum this year driven by robust domestic upstream activity, according to CIMB Securities Research.
It said the tight market supply also presented opportunities for new floating production storage and offloading and offshore supply vessel builds in 2025.
The PETRONAS Activity Outlook (PAO) 2025 to 2027 report dated Jan 29 is broadly in line with the research house’s expectations and it is positive about O&G players involved in well services, plant turnarounds, and decommissioning cycle.
It pointed out that PETRONAS’ 2024 activity levels fell short of targets across most key segments with engineering and construction registering the most significant shortfall.
This was mainly due to no pipeline and fixed structure projects being executed, while plant turnarounds reached only 28.6% of the target. Well services, floaters, and support vessels for drilling operations were on track.
Rig count, hook-up and commissioning (HUC), offshore maintenance, construction and modification (MCM), and support vessels for production operations, achieved 83% of their targets. This contrasted with 2023, when overall performance was considered satisfactory at 95.6% of the target.
The report is based on PETRONAS’ long-term oil price projection of between US$70 and US$80 per barrel.
It provides insights into industry trends, demand projections, and PETRONAS’ forecast activities for the next three years, covering its upstream, downstream, gas, maritime, and clean energy businesses.
“Dayang Enterprise Holdings Bhd
and Dialog Group Bhd stand to benefit, given their track records in the maintenance space, solid execution, and strong financial position,” CIMB Securities said.
Dayang was seen as a prime beneficiary, supported by its market leadership in the maintenance sector and solid financial footing with a net cash position of RM152.7mil as of the third quarter ended Sept 30, 2024.“Dayang is well-positioned for onshore maintenance and is actively bidding for offshore decommissioning contracts worth RM2.5bil. It is a leading contender for the RM1.1bil Sarawak package,” it said.
Meanwhile, it said Dialog would benefit from plant turnaround activities through its master service agreement for integrated plant turnarounds with PETRONAS.
CIMB Securities pointed out that Dialog, which is backed by its strong track record, has an established presence in key turnaround hubs including Kertih, Melaka, and Gebeng, Pahang.According to the research house, a surge in plant turnaround activities is expected, particularly in Sabah, Sarawak, Labuan, Kertih and Pengerang, following significant underinvestment in 2024.
MCM and HUC activity remained robust, with all Pan Malaysia MCM-HUC contracts awarded in 2024, ensuring steady activity into 2025.
MIDF Research also maintained a “positive” outlook on the O&G sector despite the possibility of volatile crude oil prices given the external geopolitical influences and the expected increased productions in North America and the Middle East
“We believe that Malaysia’s O&G services and equipment companies would continue to benefit from PETRONAS’ priorities in the upstream and decarbonisation solutions, with much emphasis on exploration and production, development and carbon capture and storage.
Its top picks were Deleum Bhd with a target price (TP) of RM1.62 and Dialog with a TP of RM2.72.
“With its positive track record in providing equipment and services for the upstream division, coupled with its strong financial performance, we believe Deleum would benefit from the upsurge of upstream activities expected in 2025,” MIDF Research said.
It liked Dialog for its integrated nature besides its contribution to decarbonisation solutions and sustainability efforts.
