KUALA LUMPUR: The ongoing global offshore capital expenditure (capex) drive as well as rising local upstream activities from Petroliam Nasional Bhd (Petronas) are expected to help the performance of oil and gas services and equipment (OGSE) player into 2024, said Hong Leong Investment Bank Research (HLIB).
The firm has maintained its Overweight rating on the oil & gas sector as it believes that oil price would stay at the range of US$80-90 per barrel in 2024.
"This is premised on continued production cuts from OPEC to pre-empt a potential lower demand arising from economic risk at least until mid-2024, geopolitical uncertainties' and restocking drive of the US SPR."Our top picks are Bumi Armada Bhd (Buy; target price: 71sen), Wasco Energy Bhd (Buy; RM1.27) and Velesto Energy Bhd (Buy; 25sen)," it added.
The ongoing investment cycle of floating production storage and offloading (FPSO) projects is set to bolster the orderbook of FPSO players. With an estimated 50 new FPSOs awards by end of 2030, one of the key re-rating catalysts for FPSO players would be securing some of these jobs.
As for Petronas, HLIB research said, Petronas is expected to award about RM4-5 billion worth of works to be carried out between 2024 and 2026, due to substantial maintenance backlogs that need to be performed.
It also anticipated to dish out the multi-year Pan Malaysia maintenance construction and modification (MCM) hook-up and commissioning (HUC) packages in mid-2024, that will continue to benefit local OGSE players.
Moving forward, HLIB said despite the recent pullback in oil price to circa US$75 per barrel, it views that sector fundamentals and outlook remain intact, especially for OGSE players which are well-positioned to ride on the ongoing upstream capex upcycle.