by RUPINDER SINGH / pic BLOOMBERG

KENANGA Research is positive for Petroliam Nasional Bhd (Petronas) activity outlook in line with the continued recovery seen in the oil and gas (O&G) sector throughout 2022. 

The research house also maintained an ‘Overweight’ on the sector premised on oil prices remaining elevated at current levels, the recovery in investment spending and activity levels from oil majors, and lastly undemanding valuations as well as buying opportunities throughout the sector.

In a report today, Kenanga Research made no changes to its 2023 average Brent crude oil assumption of US$80 (RM353.60) per barrel.

“We are overall positive from our read-through of Petronas’ Activity Outlook for 2023-2025, and have identified no losers,” Kenanaga said.

Petronas had just released its Activity Outlook report for 2023-2025, providing insights on demand outlook and forecasted activities for the next few years. In the report, Petronas highlighted that uncertainty in the energy market is still expected to continue, hence, industry players need to be more agile. 

Petronas also emphasised on embracing the energy transition trend and reiterated its commitment to accelerate efforts to decarbonise operations to meet its projected net-zero carbon goals by 2050.

“Nonetheless, the activity outlook for Petronas remains positive, in line with the continued recovery that we have seen throughout 2022. Specifically, Petronas mentioned that this is positive for drilling rigs, well services activities and underwater services due to repair and maintenance activities required to maintain the integrity of offshore facilities,” Kenanga said.

Following the report, Kenanga Research has identified the key winners following Petronas’ report are drilling providers namely Uzma Bhd and more prominently, Velesto Energy Berhad and Dayang Enterprise Holdings Bhd.

Going into 2023, Kenanga Research expects Petronas capital expenditure (capex) to stay at 2022 level or estimated at RM60 billion, with the O&G upstream segment remaining the largest area of investment, and as such, we should see sustained activity levels.

It also noted that Petronas’ current net cash position remains strong at RM103 billion, the highest it has ever been since the end financial year of 2018, further boosted by the current strong oil prices.

“Therefore, we see little difficulty 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’s RM50 billion).