PETALING JAYA: Premised on expectation that oil prices are likely to remain stable, RHB Research favours oil and gas (O&G) companies with exposure to upstream and those that have international diversification.
This followed increasing talk about a potential capital expenditure (capex) cut by Petroliam Nasional Bhd (PETRONAS) following the news of Petroleum Sarawak Bhd taking over the buying and selling of natural gas produced in the state from the former.
This transition will start from the second half of 2024 (2H24), according to the research firm.
“The earnings impact to PETRONAS remains uncertain but may affect its ability to spend notwithstanding that it has committed to pay sizeable dividend to the federal government.”
“While we may see some potential operational disruption in the near term, we assume a resolution to be achieved between the two parties without jeopardising existing productions and future domestic investments to capture the rising global gas demand,” RHB Research said in a regional O&G report yesterday.
Capex-wise, PETRONAS had guided to spend RM300bil between 2023 and 2027 or RM50bil per year.
“We prefer upstream services players with greater exposure in the maintenance-related space, as they provide greater earnings resilience coupled with corporations with international diversification.”
Its stock picks are Dialog Group Bhd
and Dayang Enterprise Holdings Bhd, while it likes Thailand’s PTT Exploration & Production and Indonesia’s PT Elnusa Tbk for exposure in the region.
RHB Research maintained Brent crude oil price forecasts for 2024, 2025, and 2026 at US$88, US$83, and US$80 per barrel.
This is based on an optimistic outlook for the global economy in the third quarter of 2024 driven by a continued economic recovery momentum in the key markets such as the United States, China and selected Asean economies.
Overall, it noted that the Organisation of the Petroleum Exporting Countries and allies’ compliance remained fairly good, at 105% in June 2024, as the cartel has been producing 5% less than the required production.
The theoretical supply deficit is estimated at 0.9 thousands of barrels per day in 2024 and 0.3 million barrels per day in 2025.
