The company had just released its Activity Outlook report for 2023-2025, providing insights on demand outlook and forecasted activities for the next few years

by RUPINDER SINGH / pic TMR FILE

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,” Kenanga 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.

Kenanga Research has identified the key winners following Petronas’ report namely drilling providers notably Uzma Bhd and more prominently, Velesto Energy Bhd 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).

The detailed breakdown of Petronas’ Activity Outlook for 2023-2024 report for several notable value chains are as follows:

Drilling Rigs

Activities in 2022 went as planned, with the actual number of rigs utilised falling short of only one, with 20 rigs utilised versus 21 initially planned. In 2023, Petronas is expected to utilise 26 drilling rigs.

More encouragingly, the number of jack-up rigs is expected to jump from nine to 12, while hydraulic workout units (HWU) are expected to rise from six to eight.

This is expected to benefit jack-up rig provider Velesto as well as Uzma which also operates in the HWU space.

Offshore Fabrication

Next year will see a total of 9 fixed structures fabrication versus the actual 7 in 2022 (higher than the initially planned five. This will benefit fabricators like Sapura Energy Bhd and Malaysia Marine and Heavy Engineering Holdings Bhd.

Floating Structures

No floating structure projects were executed in 2022, and that remains the case for 2023. No impact on any listed companies.

HUC

2023 is expected to see five million man-hours from a jump of only 3.4 million in 2022. This falls short of the initially planned 4.5 million due to lockdown activities earlier in the year.

This is expected to benefit Dayang.

Offshore MCM

The coming year is expected to see the number of man-hours jump to 11.9 million, from 8.7 million in 2022 which is almost in line with planned figures.

Again, this would benefit Dayang seeing that it is the largest player in the maintenance, construction and modification (MCM) and hook-up and commissioning (HUC) spaces.

OSVs

Demand for offshore support vessels (OSVs) is expected to remain steady going into 2023, especially for vessels supporting drilling and wells projects.

It was also reported in the press that Petronas is looking to increase its cut-off age for vessels to 20 years, from the existing 15 years. This will benefit the likes of Icon Offshore Bhd, Perdana Petroleum Bhd and Alam Maritim Resources Bhd.