PETALING JAYA: The oil and gas (O&G) industry continues to be buffeted by factors across the value chain, from war in the Middle East to the move towards greener alternatives, that affect costs and operations.
MBSB Research, which maintained a “positive” call on O&G stocks, has also maintained a “buy” recommendation on Dialog Group Bhd
with a target price of RM2.22.
Its forecast for Brent crude has been maintained at US$90 to US$100 per barrel this year and US$80 to US$90 for 2027.
The research house said Dialog continues to be the top pick for crude oil exposure, with the company on track for yet another record high year for its financial year ending June 30, 2027 (FY27) on structural growth underpinned by upstream-producing assets.
It added more assets would join the company’s stable to ensure earnings-per-share growth in FY28.
For Brent crude, its in-house base case assumes that the Iran war de-escalates in the first quarter of FY27 (1Q27), with crude oil and product flows to normalise by mid-2027.
“This is broadly in line with the Energy Information Administration, which forecasts Brent at US$84/barrel in 2027 as Gulf production returns to pre-conflict levels by end-2Q27 and a supply surplus of about 4.9 million barrels per day will be sufficient to rebuild depleted inventories,” it said.
UOB Kay Hian Research noted that there were several key shifts in market conditions for offshore support vessels (OSVs).
It said that “ageing OSV fleets are becoming a more critical issue due to a lack of incentives for newbuild orders and fleet replacement”.
“Another shifting trend is environmental, social and governance (ESG)-focused, that is, the increasing acceptance of alternative fuels and next generation hybrid designs over conventional models,” it said.
The brokerage shared that “the average age of the global OSV fleet is 16 years, and based on the current order book, “young” OSVs (that is, OSVs below 15 years of age) will comprise merely 17% of the global fleet by 2030.
Platform supply vessel (PSV) fleet now averages 17.5 years old.”
In Malaysia, the OSV fleet age averages 13.2 to 14 years, with the newbuild numbers unlikely to be exciting.
Globally, there would only be 178 newbuilds, or 6% of the global fleet.
“This scarcity was a primary reason for the OSV utilisation upcycle in 2022 to 2024, leading to daily charter rate (DCR) for anchor handling tug/supply (AHTS) and subsea vessels, and ultimately cashflow turnaround for many OSV owners,” it pointed out.
It said there were a number of considerations for the newbuilds, with the high cost being one.
“Also, since 2025, AHTS and PSV DCRs have softened despite high oil prices, and the outlook suggests a DCR cap that reflects the conservative cash flow and capital expenditure (capex) generation from upstream asset owners,” it said.
Other factors for the lacklustre number of newbuild orders include longer lead times to complete tenders (from six to 12 months) despite upstream budget approved, selective bank financing, and wider acceptance of alternative fuels.
“Nevertheless, OSV demand should be resilient in the Asean region even if DCR remains subdued,” it added.
It has maintained “market weight” on O&G services stocks.
While there were more “buy” calls on valuation grounds, it remains “neutral” until more clarity can be seen from the Petroliam Nasional Bhd-Petroleum Sarawak Bhd political impasse, a key derating factor since the second half of 2024.
Despite high oil prices, earnings for O&G stocks remain inhibited by near-term risks, such as delayed plant maintenance and turnaround, and short-term work order disruptions due to PETRONAS Carigali portfolio restructuring.
