RHB RESEARCH POSITIVE ON PETRONAS' RM300 BLN CAPEX, MAINTAINS 'OVERWEIGHT' CALL ON O&G SECTOR

KUALA LUMPUR, March 14 (Bernama) -- RHB Research is positive over Petroliam Nasional Bhd’s (Petronas) projected RM300 billion capital expenditure (capex).

The national oil company has guided its capex spending for 2023-2027 at RM300 billion or on average RM60 billion per annum, which is a 43 per cent increase from RM208.5 billion over the previous five years, or RM41.7 billion per annum.

The increase in capex is to cater for additional investments in the core business, clean energy and lowering emissions.

“We are positive over Petronas’ guidance of the RM300 billion capex. Our 2023-2024 forecast crude oil prices are still at US$88-80 per barrel,” the research house said in a note today.

Quoting independent research and business intelligence Rystad Energy, RHB Research said on the global front, the annual greenfield capex has surpassed the US$100 billion level in 2022 and continues to grow in 2023 and 2024.

RHB Research has maintained an “overweight” call on the oil and gas (O&G) sector with top picks Yinson, Dayang Enterprise and Malaysia Marine and Heavy Engineering.

It also viewed the O&G sector outlook to remain positive with more room for services players to demand higher rates amidst tight supply.

Meanwhile, Kenanga Research has set a “neutral” call on the national oil company.

“With anticipated further ramp-up in capex by Petronas, we are expecting the upcoming quarters to see continued recovery trajectory in local activity levels.

“Earlier, in our read-through of Petronas’ latest activity outlook, we highlighted Dayang Enterprise Holdings Bhd to be one of the key beneficiaries, given the planned increase in offshore maintenance, construction and modification, and hook-up and commissioning works,” Kenanga said in a note.

It also said that 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 production.

Additionally, demand for jack-up rigs is also expected to improve in the second half of 2022 and going into 2023, benefitting rig provider Velesto Energy Bhd, it added.

Kenanga has downgraded Petronas to “neutral” from “overweight” as it sees limited upside catalysts for big-cap Petronas names, for example, PCHEM, PETDAG (MP; TP: RM24.00), MISC (MP; TP: RM7.50), although it continues to see selective opportunities in smaller equipment and service contractors (ARMADA (OP; TP: RM0.75), DAYANG, WASEONG (OP; TP: RM0.97), YINSON (OP; TP: RM3.65)).

Additionally, it is expecting oil prices to gradually trend lower over the long term from their 2022 high.

Meanwhile, HLIB believes that Petronas’ profits and cash flows would normalise in 2023, in tandem with lower average crude oil price assumptions throughout the year.

“We believe that the dividend commitment of RM40 billion is highly doable. The net cash position of Petronas continued to improve, further growing to RM97.1 billion as at end-December 2022 from RM56.7 billion as at end-December 2021,” it said in a note.

Petronas posted its strongest financial performance with a net profit of RM101.6 billion in the financial year ended Dec 31, 2022 (FY2022), up 51 per cent against RM50.9 billion a year ago, on the back of favourable market conditions last year. 

The national oil company recorded an all-time high revenue of RM375.3 billion in FY2022 from RM248.0 billion year-on-year, a jump of 100 per cent, mainly due to the favourable price impact for major products aligned with higher benchmark prices.

-- BERNAMA