Kuala Lumpur: Kenanga Research expects Petronas to maintain its capital expenditure (capex) in 2023 at the 2022 level, with oil and gas upstream still remaining the largest area of investment.
“As such, we should see sustained activity levels. Petronas’ current net-cash position remains strong at RM103 billion – the highest it has ever been since end-2018 financial year, further helped by the current strong oil prices,” it said in a research note Friday.
“For that, we see little difficulties in Petronas meeting both its capex and dividend commitments, even if it were to raise its dividends in 2023 from the originally intended RM35 billion, from 2022 of RM50 billion,” it added.
Kenanga Research said the prime beneficiaries of the high Petronas capex and in sustaining local activity levels include the likes of Dayang Enterprise Holdings Bhd, from higher demand for offshore maintenance and hook-up and commissioning works, as well as Uzma Bhd on higher brownfield activities production.
The research firm also expects Petronas to reach a full-year capex of RM60 billion in 2022 and anticipates back-loaded spending in the fourth quarter (Q4) of the year as the national oil firm has incurred a capex of only RM27.4 billion year-to-date, a 35 per cent jump year-on-year.
“We note that Q4 has always been the seasonally strongest quarter for Petronas capex spend over the past few years. As reference, Petronas’ Q4 2021 capex spend constituted 41 per cent of the full-year’s capex spend of RM30.5 billion,” it added.
Meanwhile, Kenanga Research has lowered its average Brent crude oil assumption in 2023 to US$80 per barrel from US$90 per barrel previously, following slower demand growth assumptions.
“Nonetheless, this is still far higher than pandemic and even pre-pandemic levels, with oil demand expected to stay steady above the 100 million barrels per day mark throughout the year,” it added.
The research outfit also expects depleting global inventories in early-2023 to push Brent prices up back to around the US$90 per barrel level, although some downward pressures could emerge in the second half of next year, barring the possibility of further supply disruptions.
“Upside risks to our assumptions include a sooner-than-expected China reopening, while possible downside risks include potential global recessionary impacts affecting demand,” it added.
