KUALA LUMPUR, June 8 — Hong Leong Investment Bank (HLIB) is projecting Petroliam Nasional Bhd’s (Petronas) capital expenditure (capex) to increase to RM50 billion this year.

In the first quarter of 2023 (1Q FY2023), the national oil company’s capex rose by 47 per cent year-on-year (y-o-y) to RM10.5 billion.

“We believe that this would augur well for the local oil and gas (O&G) sector as most of the listed service providers in the oil and gas services and equipment (OGSE) space are heavily reliant on Petronas as a major client and would serve to be direct beneficiaries of this development,” it said.

HLIB has also lowered the Brent crude oil forecast to US$75 to US$80 per barrel for 2023 from US$85 to US$90 per barrel previously.

Additionally, Petronas also expects O&G prices to moderate further due to prolonged economic uncertainties.

Hence, HLIB has maintained ‘Neutral’ on the O&G sector and believes that 2023 would be a golden year for the OGSE players.

Meanwhile, RHB Research expects Petronas’s capex spending to ramp up in the next few quarters, especially in the second half of 2023.

It said domestic capex increased by 44 per cent y-o-y to strengthen the OGSE system and activities are likely to ramp up in the coming quarters.

“Petronas is now targeting a 30 per cent revenue contribution from non-traditional businesses by the end of this decade while continually investing in its core portfolio – as hydrocarbon usage is expected to remain relevant in the longer run.

“Its commitment to grow non-traditional sources of income was evidenced by a higher allocation of 25 per cent (from 20 per cent previously) of the total amount for its five-year spending, according to its Annual Report 2022,” it said.

RHB Research said Petronas has guided that it would spend about RM113 billion or an average RM22.6 billion per annum between 2023 and 2027, which is a 12 per cent increase from RM101 billion over the previous five years.

The research house has maintained ‘Overweight’ on the oil and gas sector.

Meanwhile, MIDF Research remained positive on the sector and expects the upstream and midstream segments to remain robust, in the consideration that most of contracts had been signed and agreed upon until the coming years.

The downside risks remained to be contractual risks and unforeseen maintenance or shutdown season, it said.

The downstream posed a short-term risk of an imbalance in the supply-demand, although locally, demand for petroleum products has been increasing since the complete end of lockdowns from COVID-19 and the return of travellers and labourers.

“We continue to favour the upstream and midstream segments with MISC Bhd (Buy; target price (TP): RM8.16) and Petronas Gas Bhd (Buy; TP: RM18.43) as our top pick, respectively.

“The decrease in Covid-19 severity led to the recovery in demand, especially for the upstream and midstream segments,” it added.

At the lunch break, MISC went up 10 sen to RM7.22, while Petronas Gas slipped 16 sen to RM16.50 and Petronas Dagangan fell 56 sen to RM21.74.

Meanwhile, Bumi Armada added half-a-sen to 46 sen, while Hibiscus Petroleum lost one sen to 90.5 sen. — Bernama