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Kenanga Research: Domestic oil and gas activity to pick up gradually

01/06/2022 11:37 AM

KUALA LUMPUR, June 1 (Bernama) -- Domestic oil and gas activity level is expected to gradually pick up in the coming quarters, with key beneficiaries to include those in the maintenance, construction and modification (MCM) and hook-up and commissioning (HUC) space as well as the brownfield space, said Kenanga Research today. 

In a note today, the research house said with an anticipated pick up in Petronas’ capital expenditure (capex) going forward, local activity levels are also expected to see some mild recovery.

“Earlier in our read-through of Petronas’ latest activity outlook, we have highlighted Dayang Enterprise Holdings Bhd to be one of the key beneficiaries, given the planned increase in offshore MCM and HUC works.

“Meanwhile, we believe Uzma Bhd could also benefit from the increased level of brownfield activities – especially in an environment of higher oil prices as producers would be more incentivised to enhance well productions,” it said. 

Petronas reported a 154.15 per cent jump in profit after tax for the first quarter ended March 31, 2022, to RM23.44 billion from RM9.22 billion a year earlier, as operating profit more than doubled following upward trend in prices offset by higher product costs and taxation.

Quarterly revenue rose 49.87 per cent to RM78.75 billion from RM52.55 billion previously, which it said was predominantly due to price impact for major products, in line with higher benchmark prices.

It is Petronas’ strongest bottom-line performance in at least a decade, on the back of higher crude oil prices as average dated Brent rose to US$102.23 per barrel in the first quarter. 

Kenanga Research said Petronas incurred a capex of RM7.4 billion during the first quarter, which was an increase of 12 per cent year-on-year (y-o-y) but represented a 48 per cent decline quarter-on-quarter – albeit with a seasonally higher capex during the fourth quarter. 

“Although the increased y-o-y capex is a welcomed positive, we believe more capital investments must be incurred in the coming quarters in order to meet expectations of a full-year capex of at least RM40 billion-RM50 billion, backed by the group’s healthy net-cash position of about RM91 billion,” it added.

Kenanga Research is maintaining an “overweight” call on the oil and gas sector, with Petronas Chemicals Group Bhd and Hibiscus Petroleum Bhd highlighted as the best oil price proxies, while Dayang Enterprise and Uzma were picked as beneficiaries of the recovery in local activity levels.


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