Thailand
Malaysia’s oil, gas sector to see faster order flows from high crude oil prices: AmBank
AMINVESTMENT Bank (AmBank) on Thursday (Mar 3) maintained “overweight” on Malaysia’s oil and gas sector, as rising global demand and oil prices could catalyse faster order flows across the value chain.
However, AmBank analyst Alex Goh expects selected segments in said value chain to be better positioned to benefit from higher oil prices and projects sanctioned by national oil companies.
He highlighted the segments where operators like Hibiscus Petroleum are directly exposed to upstream production, and the floating production storage and offloading sub-sector, which both have a lower number of operators due to the downturn in 2015-2017.
Higher oil prices are also likely to persist with the current uncertain geopolitical impact from the Russia-Ukraine conflict, which has resulted in Brent oil prices crossing US$110 per barrel, said Goh, although he believes the current prices could soften from inflation in 2023.
AmBank’s forecast of US$90-95 per barrel for 2022 and US$80-85 for 2023 are nonetheless higher than the US Energy Information Administration’s estimates of US$83 per barrel for 2022 and US$68 for 2023.
Overall, the Malaysian oil and gas sector saw mixed earnings and a slow season for fresh fabrication job awards in the fourth quarter of FY2021, mainly due to impairments arising from Covid-19 restrictions, said Goh.
Certain asset-heavy companies like Sapura Energy, Velesto and Alam Maritim Resources are still struggling with heavy debt shouldered from past acquisitions during the pre-2014 uptrend, Goh added.
However, there was a stronger sector core net profit for the quarter both year on year and quarter on quarter, as the FY2021 earnings of 5 of the 8 companies AmBank covers were largely in line with Hibiscus Petroleum as the sole outperformer.
Among the 8 companies, Goh continues to like Hibiscus Petroleum for its direct upstream exposure to higher crude oil prices, and Dialog Group for its expanding non-cyclical tank terminal and maintenance-based earnings base.
Meanwhile, Petronas Gas offers “highly compelling” dividend yields from its optimal capital structure strategy, Goh added.
Source: https://www.businesstimes.com.sg/asean-business/malaysias-oil-gas-sector-to-see-faster-order-flows-from-high-crude-oil-prices-ambank