Analysts expect recovery in Petronas’ spending and activity

KUCHING: After a prolonged period of under-investment over the past two years, analysts are expecting Petroliam Nasional Bhd (Petronas) capital expenditure (capex) to normalise back to the range of RM40 billion to RM50 billion per annum for the coming few years.

The research arm of Kenanga Investment Bank Bhd (Kenanga Research) recapped that Petronas had fallen short of expectations in capex spending previously, with 2021 capex coming in at only RM30.5 billion versus its initial guidance of approximately RM40 billion.

“Local upstream is still expected to remain as the group’s largest area of investment, although increased emphasis will also be placed on renewable energy,” Kenanga Research gathered.

“The prolonged lockdowns and movement restrictions had impacted the group’s ability in sanction capex activities as a result of logistical disruptions.

“Nonetheless, with the reopening of borders and resumption of economic activities, local activity levels are expected to recover throughout 2022-2023.”

In a readthrough of Petronas’ latest Activity Outlook, Kenanga Research highlighted the offshore maintenance, construction and modification (MCM), as well as the hookup and commissioning (HUC) subsectors as potential winners – which may stand to benefit Dayang Enterprise Holdings Bhd especially given its position as a market leader within these spaces.

“Globally, 2022 to 2023 is expected to see the continued trend of ramp-up in offshore exploration and production (E&P) capex since the low in 2020.”

The research arm also highlighted that all three of its Bursa-listed floating production storage and offloading (FPSO) players (Yinson Holdings Bhd, MISC Bhd and Bumi Armada Bhd) are seen to have been in active participation in international job bids, with job opportunities emerging from Latin America, Asia Pacific and Africa.

“The FPSO space is starting to see a supply squeeze – that is, many global FPSO players are already pre-occupied with jobs developing at hand, and hence, more recent bids have started to see very limited bidders, making it very much an operator’s market.”

Local upstream is still expected to remain as the group’s largest area of investment, although increased emphasis will also be placed on renewable energy.

Kenanga Research