RHB SEES GOOD YEAR FOR O&G SECTOR IN 2023, KEEPS OVERWEIGHT CALL

KUALA LUMPUR, Dec 21 (Bernama) -- RHB Investment Bank Bhd has projected a good year ahead for the oil and gas industry, backed by the Petroliam Nasional Bhd (Petronas) Activity Outlook (PAO) 2023-2025, which suggests upstream activities will remain robust in 2023.

The investment bank estimated Petronas would set aside RM45 billion to RM50 billion next year for capital expenditure (capex), with a 20 per cent allocation to clean energy solutions.

It said upward revisions for activities in 2023 are expected under the PAO 2023-2025, but more downward tweaks to 2024 projections due to an overflow of uncompleted jobs this year to 2023.

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“Petronas is also remaining fairly prudent in its spending in the longer run. A greater emphasis on the energy transition is also on the cards as Gentari Sdn Bhd is taking a greater role with ambitious targets being outlined,” it said in a research note today.

RHB Investment said possible sub-segments with higher activities in 2023 are drilling (jack-up rig, tender assisted drilling rig, and hydraulic workover unit), fixed structure fabrications, offshore support vessels (OSV) supporting drilling and projects, hook-up and commissioning (HUC) and maintenance, construction and modification (MCM).

“Meanwhile, well decommissioning, underwater services, plant turnarounds, and OSV-supporting production operations could be lower year-on-year in 2023.

“Sub-segments with a positive outlook over the medium term (post-2025) are drilling and well and underwater services, an upgrade from steady previously. Most sub-segments remained on steady or modest outlooks,” it said.

RHB Investment said it is maintaining the oil price outlook at US$90 per barrel in 2023, with US$80 per barrel and US$80 per barrel for 2024 and 2025, respectively.

It is also keeping an overweight call on the industry, staying positive over the outlook of upstream maintenance-related players such as Dayang Enterprises Holdings Bhd, Carimin Petroleum Bhd and Petra Energy Bhd for higher HUC and MCM projections in 2023 and domestic drillers like Velesto Energy Bhd.

“Higher total OSV demand in 2023 is likely to result in better vessel utilisation, benefitting such as Perdana Petroleum Bhd and Icon Offshore Bhd,” it said.

Nevertheless, RHB Investment said the sharp reduction in well-decommissioning projections might not bode well for Uzma Bhd.

“That said, one possible explanation could be that Petronas is looking to extend the life of the wells in order to leverage current high oil prices.

“This may eventually benefit Uzma as the company also focuses on brownfield rejuvenation,” it added.

-- BERNAMA