KUALA LUMPUR: AmInvestment Bank has maintained its overweight call on the oil and gas sector as prospects have brightened radically with rising global asset utilisation which supported service providers’ improving results.
However, given the high volatility in crude oil prices, the investment bank said it might downgrade the sector to neutral due to several factors.
These factors include higher-than-expected production from US shale, Brazil and other growing producers as well as increasing exit from oil and gas stocks by environmental, social and governance-compliant global funds.
Malaysia’s 2019 contract awards slid 6% year-on-year to RM11.5 bil due to slower order flows in the fourth quarter of 2019.
“In our view, the slower order flows could be temporary given that award timelines tend to be lumpy in the first and fourth quarters of the year,” said AmInvestment Bank in its sector report on oil and gas today.
Petronas’ third-quarter 2019 (3Q19) capital expenditure (capex) rebounded by 78% quarter-on-quarter and 59% year-on-year to RM13 bil, largely from upstream projects against the backdrop of the dwindling tail-end development of the Pengerang Integrated Complex in Johor.
However, international spending has accelerated at a faster pace, which led to the proportion of overseas projects rising to 54% in 3Q19 from 44% in the same quarter in 2018.
“Nevertheless, 3Q19 domestic spending still increased by 39% quarter-on-quarter and 29% year-on-year to RM6 bil, which supports our view of a gradually rising capex trend,” said AmInvestment Bank. – Jan 3, 2020, Bernama
