Kuala Lumpur: Maybank Investment Bank (IB) is maintaining its positive call on the Malaysian oil and gas (O&G) sector amid a more positive picture painted in the Petroliam Nasional Bhd (Petronas) Activity Outlook (PAO) 2023-2025.
It said five segments—drilling, fabrication, offshore support vessel (OSV), pipelines, and maintenance operations—are expected to see an increase in activities this year.
“All in, we expect Petronas to meet our RM100 billion core net profit estimate for 2022,” Maybank IB said in a research note.
The bank maintained its US$100 per barrel (dated Brent) oil price estimate for 2023, with an upside bias.
“We do not rule out a higher oil price outlook in financial year 2023 considering the continued tightness in the global supply market due to the prolonged structural under-investment since 2015 and OPEC+’s (the Organisation of the Petroleum Exporting Countries and its allies) discipline as a swing producer to meet output and price expectations,” said Maybank IB.
Meanwhile, it said, demand for oil is projected to pick up in 2023, fuelled by the re-opening of China’s economy and increased flight travels worldwide. A widening imbalance would lead to a higher oil price scenario.
Based on the latest PAO 2023-25 outlook, Maybank IB said the key beneficiaries of Petronas’ domestic activities over the next three years in the five segments poised for increased activities are Velesto Energy Bhd, Malaysia Marine and Heavy Engineering Holdings Bhd, Icon Offshore Bhd, Wah Seong Corporation Bhd and Dialog Group Bhd.
Meanwhile, Kenanga Research in its Sector Update maintained its overweight stance on the O&G sector.
It retained its 2023 average Brent crude oil price assumption at US$80 per barrel, adding that global demand is still expected to stay healthy above 100 million barrels per day throughout the year.
“We expect activity levels to stay robust locally on sustained capital expenditure (capex) spending by Petronas.
“Similarly, we expect global exploration and production capex spending to continue its upwards trend in 2023, well surpassing pre-pandemic levels, on the heels of the massive under-investment throughout the past few years,” it said.
The research house said the sector valuations have lagged the significant improvement in both underlying fundamentals and earnings of O&G players underpinned by sustained high oil prices over the last 12 months.
Its top picks in the sector are Petronas Chemicals Group Bhd with a target price (TP) of RM11.00 and Bumi Armada Bhd with a TP of 63 sen.
