‘BETTER YEAR FOR

But modest recovery already reflected in market value of shares under coverage, say HLIB

KUALA LUMPUR

HONG Leong Investment Bank Bhd (HLIB) expects 2017 to be a better year for oil and gas (O&G) stocks, but says a moderate recovery in the sector seems to have been priced in by investors at the current level.

HLIB also does not anticipate a major capital expenditure (capex) upcycle by Petroliam Nasional Bhd (Petronas) this year due to the lingering uncertainty in oil prices.

Improvements in the sector had already been reflected in the market value of stocks under its coverage, it said in a note.

HLIB said Petronas’s core net profit (excluding asset impairments) rose 79.4 per cent year-on-year to RM15.1 billion last year, mainly attributed by better upstream performance due to higher gas production and sales and improved downstream contribution on higher international refining and marketing margins.

Petronas spent RM59.4 billion last year mainly on domestic upstream exploration and production (E&P) projects, the Refinery and Petrochemical Integrated Development (Rapid) and the Sabah Ammonia Urea projects.

The amount was down by 22.1 per cent due to a reduction in domestic upstream capex.

“At this juncture, the group is slightly over midway through the progress of US$29 billion (RM129 billion) Rapid project with targeted operational start-up in the first quarter of 2019,” it said.

HLIB said Petronas’s recent deal with Saudi Aramco to inject US$7 billion into the project would help relieve its cashflow commitments.

“Our back of the envelop calculations