Analysts Mixed On Oil And Gas After Petronas Releases Activity Outlook 2025-2027

KUALA LUMPUR, Jan 31 (Bernama) -- Analysts are divided in their outlook for Malaysia’s oil and gas (O&G) sector following the release of the Petronas Activity Outlook (PAO) 2025-2027, which forecasts a general reduction in upstream activities and a focus on maintenance services.

Despite some concern over the slowdown in drilling and offshore support vessel (OSV) demand, analysts see opportunities in specific sub-sectors such as floating production storage and offloading (FPSO) and maintenance-related services.

RHB Investment Bank Bhd maintained an ‘overweight’ rating on the sector, noting that the reduction in activity guidance for 2025 is in line with expectations given the ongoing spending cuts of national oil company Petroliam Nasional Bhd (Petronas).

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In a note today, it said the FPSO and maintenance players were seen as strong candidates, citing attractive valuations and a resilient pipeline of facility improvement projects (FIPs).

The investment bank said its top picks in the sector include Bumi Armada Bhd, Dayang Enterprise Holdings Bhd and Yinson Holdings Bhd, with a focus on companies likely to benefit from hook-up and commissioning (HUC) and maintenance, construction and modification (MCM) work.

Kenanga Investment Bank Bhd (Kenanga IB) remained bullish on upstream maintenance services, with a slightly more cautious outlook for drilling and engineering, procurement, construction and commissioning (EPCC) activities.

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Despite a projected dip in OSV demand, it highlighted vessel supply constraints as a potential opportunity for companies like Dayang Enterprise and Petra Energy Bhd.

Kenanga IB noted that broader geopolitical factors, including US President Donald Trump’s deregulation of federal land oil production, are set to drive higher US crude output, albeit gradually, as producers remain market-driven.

“Additionally, Trump’s policies could push Organisation of the Petroleum Exporting Countries Plus (OPEC+) to accelerate production increases, though this could be counterbalanced by a tighter stance on Iran, which may curb its oil exports and keep global supply in check,” it said in a note.

Meanwhile, Maybank Investment Bank Bhd has a more positive outlook for the sector than initially anticipated, as the PAO suggests a less significant capital expenditure reduction in 2025.

The investment bank emphasised selective stock picking, focusing on midstream and FPSO players, with its top picks including Dialog and Bumi Armada, while a long-term oil price assumption remains unchanged at US$70 per barrel for 2025.

Hong Leong Investment Bank Bhd (HLIB), however, maintained a more neutral stance, seeing the outlook as a mixed bag for the O&G services and equipment (OGSE) sector.

While MCM and HUC players are expected to benefit from a stronger activity pipeline, HLIB warned that some sub-segments, particularly OSV and drilling rig ownership, may see slightly weaker activity levels in 2025.

Nevertheless, it saw the release of the PAO as a step toward providing clarity for the sector outlook and eased the overhang concern on Petronas capital expenditure/spending cuts.

“In this respect, we reckon the blanket sell down on local OGSE players due to the Petronas-Petros saga might have been overdone, especially on counters with steady earnings outlook in 2025 such as Dayang Enterprise,” it said.

HLIB’s recommended stocks include Dialog Group Bhd and Wasco Bhd for investors seeking more resilient earnings.

-- BERNAMA