PETRONAS ACTIVITY OUTLOOK (2026-2028) NEUTRAL ABOUT UPSTREAM ACTIVITIES - KENANGA IB

KUALA LUMPUR, Jan 30 (Bernama) -- Kenanga Investment Bank Bhd (Kenanga IB) said the recently released Petronas Activity Outlook (2026-2028) is largely neutral about the upstream services sector due to ageing vessels and rig supply in the local market.

The investment bank, however, said rig and offshore support vessel (OSV) undersupply dynamics will partially negate the overall weakening of activities compared to a previous outlook report released a year ago.

“We maintain our neutral call on the sector despite Petronas’ weaker forward guidance. Upstream service providers’ valuations have largely been priced in. The overall subsector’s balance sheet is in a much better shape versus previous cycles, and the risk of asset impairment is low,” Kenanga IB said in a research note today.

The investment bank expects exploration activities to ramp up significantly in 2026, setting up more upside potential for service providers such as Dayang Enterprise Holdings Bhd, Velesto Energy Bhd and Keyfield International Bhd in 2027 and beyond. 

However, upstream maintenance, drilling and OSV requirement guidance have declined for 2026 compared with the 2025-2027 outlook, indicating weaker activities.

Meanwhile, Hong Leong Investment Bank (HLIB) said the 2026-2028 report is positive about hook-up and commissioning activities and expects plant maintenance providers to be winners, while drilling rig players may see weaker activities this year.

HLIB said this may mean mild headwinds for Dayang’s topside maintenance activities, while resilient hook-up and commissioning activities are expected to underpin contractors with stronger exposure to commissioning works, such as Deleum Bhd.

Malaysia’s dominant pipe-coating player, Wasco Bhd, stands to benefit from the ramp-up in activity once projects move into the execution phase, it added.

HLIB said turnaround activities remain robust in 2026, largely driven by higher activity at Peninsular Malaysia and East Malaysia facilities, particularly in larger-scale turnarounds that require over 350,000 manhours.

Gas plant turnaround activities, however, appear to be on a declining trajectory. 

The report also said Petronas has guided a relatively flat OSV demand of 106 vessels annually across 2026-2028, moderating from the higher OSV utilisation levels seen in 2025.

“We believe OSV demand is likely to remain muted in 2026, amid softer upstream activity levels, partly impacted by the ongoing Petronas-Petros dispute, and softer oil price environment,” HLIB said.

Fleet use is expected to moderate for OSV operators such as Keyfield and Perdana Petroleum, with daily charter rate falling in 2026, HLIB said.

-- BERNAMA