PETALING JAYA: Petroliam Nasional Bhd’s (PETRONAS) Activity Outlook (PAO) 2026 to 2028 does not point to a broad-based recovery but reflects increasing divergence across segments, says TA Research.
The research house said the activity mix under the latest PAO suggests limited upside to aggregate earnings, with recovery concentrated in narrow scopes rather than signalling a cyclical upturn.
“While turnaround works, pipeline activity and the improved outlook for fabrication of fixed structures provide selective pockets of support, persistent softness in offshore support vessel (OSV) demand and the downward revisions in hook-up and commissioning (HUC) man-hours are likely to weigh on sector-wide earnings momentum,” the research house said in a report recently.
TA Research said the outlook highlights plant turnaround works in 2026 as the strongest near-term catalyst, positioning Steel Hawk Bhd
as key winners given their direct exposure to this front-loaded workload.
In terms of segments, the research house said the revised 2026 to 2027 line pipe length volumes are materially higher than those outlined in PAO 2025 to 2027 (107.5km for 2026 and 14km for 2027), implying improved execution visibility and a stronger recovery in pipeline-related activity.
“The beneficiary here is Pantech Group Holdings Bhd, given its direct exposure to pipeline fabrication and pipe-related works.
“The sharp step-up in line pipe length under PAO 2026 to 2028 is expected to drive a pick-up in domestic oil and gas linepipe demand, indirectly benefiting Pantech and improving medium-term earnings visibility,” the research house said.
Meanwhile, with regards to jack-up rigs, demand has normalised from earlier expectations after peaking in prior forecasts.
Under PAO 2025 to 2027, jack-up demand was expected to peak at around 14 rigs in 2024 before moderating to 10 rigs in 2025 and 11 rigs in 2026.
PAO 2026 to 2028 indicates an actual demand of 10 rigs in 2025, followed by slightly lower revised assumptions of nine rigs in 2026 and 10 rigs in 2027, before increasing to 12 rigs in 2028.
“Overall, the outlook points to modest but relatively stable jackup rig demand, supporting utilisation but without a strong cyclical upturn in the near term,” TA Research said.
As for the fabrication segment, the research house said while the unit number in 2025 met expectations, all three structures were wellhead platforms (WHP) medium compared with the previous guidance which had indicated WHP light units.
Under PAO 2026 to 2028, fabrication activity is guided at 10 units in 2026, six in 2027, and eight in 2028, versus the earlier PAO 2025 to 2027 projection of 13 units in 2026 and six in 2027.
“Notably, the 2026 mix has shifted from predominantly WHP light structures to a higher proportion of WHP medium structures in the latest guidance.
“The beneficiary is Malaysia Marine and Heavy Engineering Holdings Bhd (MHB) given its stronger direct exposure to PETRONAS related engineering, procurement, construction, installation, and commissioning of WHP relative to peers.
“In 2025, the group secured three EPCIC contracts for WHP from Vestigo Petroleum – a wholly owned subsidiary of PETRONAS Carigali – namely Kurma Manis, Irong Timur and Berantai East, reinforcing its positioning within the PETRONAS fabrication ecosystem,” TA Research said.
As for the HUC and maintenance, construction and modification (MCM) segment, the research house said HUC has materially underperformed in 2025, with the forecast for 2026 to 2028 revised down.
Meanwhile, MCM saw a more moderate shortfall in 2025, while the outlook for 2026 was revised down slightly, with 2027’s outlook revised up, suggesting relatively steadier maintenance-driven activity compared with HUC.
TA Research said Dayang Enterprise Holdings Bhd is at risk in this regard.
Moreover, plant turnaround activity is expected to peak in 2026, with the latest PAO 2026 to 2028 indicating 12 plant turnarounds.
This represents an upward revision versus the earlier PAO 2025 to 2027, which guided for only four plant turnarounds in 2026, pointing to a stronger-than-expected maintenance and turnaround workload concentrated in that year.
The beneficiaries are Steel Hawk and Enproserve Group Bhd.
For the OSV, comparing PAO 2025 to 2027 with PAO 2026 to 2028, TA Research said there is a declining trend in vessel demand, reflecting downward revisions from earlier forecasts to actual outcomes and updated assumptions.
It added that Keyfield International Bhd and Lianson Fleet Group Bhd are at risk.
The research house downgraded the sector from “neutral” to “underweight” as PAO 2026 to 2028 does not point to a broad-based recovery but instead, reflects increasing divergence across segments.
It has “buy” calls for MHB, Steel Hawk and Keyfield with target prices of 49 sen, 41 sen and RM1.70.
Furthemore, TA Research has a “sell” call for Pantech with a target price of 63 sen and a “hold” call for Velesto Energy Bhd with a target price of 26 sen.
