PETALING JAYA: The oil and gas sector is expected to remain resilient amid volatile crude oil prices, with sustained upstream investment, offshore activities and recurring contract income providing support for earnings.
Opportunities could also emerge from higher tanker rates, liquefied natural gas (LNG) projects and investments in lower- carbon fuels, although funding constraints and uncertainty over the duration of geopolitical tensions remain key factors to watch.
As such, RHB Research maintained an “overweight” rating on the sector, with MISC Bhd
and Dialog Group Bhd as its top picks, while Hong Leong Investment Bank (HLIB) Research also kept an “overweight” call, naming Dialog as its preferred stock.
RHB Research said renewed tensions in the Middle East had pushed Brent crude prices back above US$100 per barrel, while shipping disruptions had driven tanker rates sharply higher.
“Although the duration of the supply shock remains uncertain, we believe Malaysia’s oil and gas sector is supported by continued upstream investments, resilient offshore activity, and recurring contract income,” it said.
The research house maintained its Brent crude price assumptions at US$89 per barrel for 2026 and US$72 per barrel for 2027, “reflecting our expectation for the current geopolitical risk premium to eventually moderate”, it explained.
This suggests that the sector’s prospects are not solely dependent on elevated oil prices, with ongoing offshore activity and recurring contracts providing additional support.
Meanwhile, one analyst told StarBiz that Malaysia’s oil and gas sector should remain supported by long-term energy demand and ongoing project development, although companies will need to manage cost pressures and changes in upstream spending.
“The outlook is increasingly shaped by the ability of oil and gas players to secure recurring contracts and diversify their revenue streams, rather than relying solely on movements in crude oil prices,” he said.
“LNG infrastructure, offshore services and lower-carbon fuel projects could provide fresh growth opportunities, but the pace of investment and contract awards will remain important drivers of earnings visibility,” he added.
In a recent report, HLIB Research cautioned that Petroliam Nasional Bhd’s (PETRONAS) increased dividend payout could limit funding available for upstream investments, potentially creating a headwind for oilfield service providers such as Dayang Enterprise Holdings Bhd, Deleum Bhd, Velesto Energy Bhd, Perdana Petroleum Bhd and Keyfield International Bhd.
It noted that PETRONAS’ dividend is projected to increase 18.5% year-on-year to RM32bil in 2027, from RM27bil expected in 2026, compared with the original Budget 2026 estimate of RM20bil.
Nevertheless, HLIB Research maintained “buy” ratings on Dayang, with a target price of RM2.20, and Deleum, at RM1.41. Velesto was rated a “hold”, with a target price of 28 sen.
Beyond upstream activity, PETRONAS’ expanded investment in Phase 2 of LNG Canada is expected to strengthen Malaysia’s position in the international LNG supply chain.
HLIB Research expects MISC to benefit from its provision of long-term chartered LNG vessels, while Wasco Bhd could gain from further project awards after securing contracts to design and supply four substations for LNG Canada in 2021.
The extension of maritime tax exemptions for qualifying Malaysian shipping companies to the year of assessment 2036 should also provide greater long-term tax certainty for MISC, MTT Shipping Bhd and Orkim Bhd.
HLIB Research also pointed to opportunities arising from the Pengerang Biorefinery, a partnership involving Enilive and Euglena to produce sustainable aviation fuel, hydrotreated vegetable oil and bio-naphtha.
Dialog’s ongoing 272,000 cu m storage expansion at Pengerang Terminals Two Sdn Bhd, scheduled for completion in the second half of financial year 2028, is expected to support the biorefinery.
HLIB Research maintained a “buy” rating on Dialog with a target price of RM2.49, citing its position to benefit from these developments.
