Low as­set util­i­sa­tion lev­els a drag on oil & gas sec­tor

The Sun (Malaysia) - - SUNBIZ -

PE­TAL­ING JAYA: AmBank Re­search is main­tain­ing a neu­tral view on the oil and gas sec­tor as low as­set util­i­sa­tion lev­els will trans­late into per­sis­tent neg­a­tive cash out­flows and height­ened credit de­fault risks.

The re­search house said this means that for Malaysian op­er­a­tors, which op­er­ate wholly off­shore, weak cap­i­tal ex­pen­di­ture (capex) roll­out prospects, the worst is yet to come for those strug­gling with high gear­ing such as Sa­pu­raKen­cana Petroeleum Bhd, Bumi Ar­mada Bhd, Alam Mar­itim Resources Bhd and UMW Oil & Gas Corp Bhd.

“We pre­fer com­pa­nies with sta­ble and re­cur­ring earn­ings such as Dia­log Group Bhd and Yin­son Hold­ings Bhd.

“Our hold calls are for Petronas Gas Bhd, Sa­pu­raKen­cana, MISC Bhd, Bumi Ar­mada and UMW Oil & Gas,” AmBank Re­search said in a re­port yes­ter­day.

It said as Petro­liam Na­sional Bhd (Petronas) has not re­vised its crude oil price out­look at US$30 a bar­rel for 2016 and US$40 a bar­rel for 2017, it does not ex­pect any sig­nif­i­cant change in the group’s cau­tious ap­proach to up­stream ex­plo­ration and de­vel­op­ment ex­pen­di­tures.

HLIB Re­search also main­tained a neu­tral stance on the oil and gas in­dus­try.

“As Petronas is still up­tight in its capex spend­ing given the sub­dued oil price en­vi­ron­ment, we still ad­vo­cate to avoid as­set-heavy play­ers whereby the cur­rent oil prices would not solve the over­sup­ply is­sues in that space. Our top pick re­mains Bumi Ar­mada,” said HLIB Re­search.

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